-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VFkjo2KIgTf+7cluMDCvBQESTzl/Oc7bgsEWnke/+afrB0osvewLUVJtyx7rS4al hX9JRbF3JMlAzEpbK0/2iw== 0000899243-97-001839.txt : 19970922 0000899243-97-001839.hdr.sgml : 19970922 ACCESSION NUMBER: 0000899243-97-001839 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19970918 SROS: AMEX SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SAVANNAH FOODS & INDUSTRIES INC CENTRAL INDEX KEY: 0000086941 STANDARD INDUSTRIAL CLASSIFICATION: SUGAR & CONFECTIONERY PRODUCTS [2060] IRS NUMBER: 581089367 STATE OF INCORPORATION: DE FISCAL YEAR END: 0929 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-12246 FILM NUMBER: 97682587 BUSINESS ADDRESS: STREET 1: P O BOX 339 CITY: SAVANNAH STATE: GA ZIP: 31402 BUSINESS PHONE: 9122341261 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: IMPERIAL HOLLY CORP CENTRAL INDEX KEY: 0000831327 STANDARD INDUSTRIAL CLASSIFICATION: SUGAR & CONFECTIONERY PRODUCTS [2060] IRS NUMBER: 740704500 STATE OF INCORPORATION: TX FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: ONE IMPERIAL SQ STE 200 STREET 2: P O BOX 9 CITY: SUGAR LAND STATE: TX ZIP: 77487 BUSINESS PHONE: 7134919181 FORMER COMPANY: FORMER CONFORMED NAME: IMPERIAL SUGAR CO /TX/ DATE OF NAME CHANGE: 19880606 SC 14D1 1 SCHEDULE 14D-1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________ SCHEDULE 14D-1 Tender Offer Statement Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934 _______________ SAVANNAH FOODS & INDUSTRIES,INC. (Name of Subject Company) _______________ IHK MERGER SUB CORPORATION IMPERIAL HOLLY CORPORATION (Bidders) _______________ COMMON STOCK, PAR VALUE $0.25 PER SHARE (Title of Class of Securities) _______________ 452835 10 1 (CUSIP Number of Class of Securities) _______________ WILLIAM F. SCHWER, ESQ. IMPERIAL HOLLY CORPORATION ONE IMPERIAL SQUARE, SUITE 200 8016 HIGHWAY 90-A SUGAR LAND, TEXAS 77478 (281) - 491 - 9181 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidders) with a copy to: ROBERT V. JEWELL, ESQ. ANDREWS & KURTH L.L.P. TEXAS COMMERCE TOWER 600 TRAVIS, SUITE 4200 HOUSTON, TEXAS 77002-3090 (713) 220-4200 _______________ CALCULATION OF FILING FEE - -------------------------------------------------------------------------------- Transaction Valuation:$291,556,179* Amount of Filing Fee:$58,312 - -------------------------------------------------------------------------------- * For purposes of calculating fee only. The amount assumes the purchase of 14,397,836 Shares (as defined herein) at $20.25 per Share in cash. The amount of the filing fee, calculated in accordance with Rule 0-11(d) of the Securities Exchange Act of 1934, as amended, equals 1/50 of one percent of the aggregate of the cash offered for such number of Shares. [ ] Check box if any part of the fee is offset by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: Not applicable Filing Party: Not applicable Form or Registration No.: Not applicable Date Filed: Not applicable CUSIP No. 452835 10 1 14D-1 Page 2 of 8 Pages - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON IHK Merger Sub Corporation - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCES OF FUNDS AF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) OR 2(f) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 0 - -------------------------------------------------------------------------------- 8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 0.0% - -------------------------------------------------------------------------------- 10 TYPE OF REPORTING PERSON CO 2 CUSIP No. 452835 10 1 14D-1 Page 3 of 8 Pages - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Imperial Holly Corporation - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCES OF FUNDS BK - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) OR 2(f) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Texas - -------------------------------------------------------------------------------- 7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 830,678.1 shares of common stock - -------------------------------------------------------------------------------- 8 CHECK IF THE AGGREGATE IN ROW (7) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 2.9% - -------------------------------------------------------------------------------- 10 TYPE OF REPORTING PERSON CO 3 This Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") relates to the offer by IHK Merger Sub Corporation, a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Imperial Holly Corporation, a Texas corporation ("Parent"), to purchase 14,397,836 outstanding shares (or such other amount of shares representing 50.1% of the outstanding common stock, par value $0.25 per share (the "Shares"), on a fully diluted basis on the date of purchase) of Savannah Foods & Industries, Inc., a Delaware corporation (the "Company"), upon the terms and subject to the conditions set forth in the Offer to Purchase, dated September 18, 1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer"), which are annexed to and filed with this Statement as Exhibits (a)(1) and (a)(2), respectively. ITEM 1--Security and Subject Company (a) The name of the subject company is Savannah Foods & Industries, Inc., a Delaware corporation. The principal executive offices of the Company are located at 2 East Bryan Street, Savannah, Georgia 31401. (b) The class of equity securities to which this Schedule 14D-1 relates is the common stock, par value $0.25 per share, of the Company. The information set forth in "Introduction" of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in Section 6 ("Price Range of Shares; Dividends") of the Offer to Purchase is incorporated herein by reference. ITEM 2--IDENTITY AND BACKGROUND (a)-(d) and (g) This Schedule 14D-1 is being filed by the Purchaser and Parent. The information set forth in Section 8 ("Certain Information Concerning the Purchaser and Imperial Holly") and in Schedule I ("Certain Information Concerning the Purchaser and Monterey") of the Offer to Purchase is incorporated herein by reference. (e) and (f) During the last five years, neither the Purchaser nor Parent or, to the best of their knowledge, any of the persons listed in Schedule I ("Directors and Executive Officers of the Purchaser and Imperial Holly") to the Offer to Purchase (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining further violations of, or prohibiting activities subject to, federal or state securities laws or finding any violations of such laws. ITEM 3--PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY (a)-(b) The information set forth in "Introduction," Section 8 ("Certain Information Concerning the Purchaser and Imperial Holly"), Section 10 ("Background of the Offer; Past Contacts, Transactions or Negotiations with the Company") and Section 11 ("Purpose of the Offer; the Merger; the Merger Agreement; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. ITEM 4--SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION (a)-(b) The information set forth in Section 9 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. 4 ITEM 5--PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER (a)-(e) The information set forth in "Introduction," Section 10 ("Background of the Offer; Past Contacts, Transactions or Negotiations with the Company"), Section 11 ("Purpose of the Offer; the Merger; the Merger Agreement; Plans for the Company") and Section 13 ("Dividends and Distributions") of the Offer to Purchase is incorporated herein by reference. (f)-(g) The information set forth in Section 12 ("Effect of the Offer on the Market for Shares; NYSE Listing; Registration Under the Exchange Act") of the Offer to Purchase is incorporated herein by reference. ITEM 6--INTEREST IN SECURITIES OF THE SUBJECT COMPANY (a)-(b) The information set forth in "Introduction," Section 8 ("Certain Information Concerning the Purchaser and Imperial Holly"), Section 10 ("Background of the Offer; Past Contacts, Transactions or Negotiations with the Company") and Section 11 ("Purpose of the Offer; the Merger; the Merger Agreement; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. ITEM 7--CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES The information set forth in "Introduction," Section 8 ("Certain Information Concerning the Purchaser and Monterey"), Section 10 ("Background of the Offer; Past Contacts, Transactions or Negotiations with the Company") and Section 11 ("Purpose of the Offer; the Merger; the Merger Agreement; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. ITEM 8--PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED The information set forth in "Introduction" and Section 16 ("Fees and Expenses") of the Offer to Purchase is incorporated herein by reference. ITEM 9--FINANCIAL STATEMENTS OF CERTAIN BIDDERS The information set forth in Section 8 ("Certain Information Concerning the Purchaser and Imperial Holly") is incorporated herein by reference. ITEM 10--ADDITIONAL INFORMATION (a) The information set forth in "Introduction," Section 8 ("Certain Information Concerning the Purchaser and Monterey"), Section 10 ("Background of the Offer; Past Contacts, Transactions or Negotiations with the Company") and Section 11 ("Purpose of the Offer; the Merger; the Merger Agreement; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. (b)-(c) The information set forth in Section 11 ("Purpose of the Offer; the Merger; the Merger Agreement; Plans for the Company") and Section 15 ("Certain Legal Matters; Required Regulatory Approvals") of the Offer to Purchase is incorporated herein by reference. (d) The information set forth in Section 12 ("Effect of the Offer on the Market for Shares; Nasdaq Listing; Registration Under the Exchange Act") of the Offer to Purchase is incorporated herein by reference. (e) The information set forth in Section 15 ("Certain Legal Matters; Required Regulatory Approvals") of the Offer to Purchase is incorporated herein by reference. 5 (f) The information set forth in the Offer to Purchase and the related Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively, is incorporated herein by reference in its entirety. ITEM 11--MATERIAL TO BE FILED AS EXHIBITS (a)(1) Offer to Purchase, dated September 18, 1997. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Letter from Lehman Brothers, Inc. to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees, dated September 18, 1997. (a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(6) IRS Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Summary Advertisement, dated September 18, 1997. (c)(1) Agreement and Plan of Merger, dated as of September 12, 1997, among Imperial Holly Corporation, IHK Merger Sub Corporation and Savannah Foods & Industries, Inc. (c)(2) Stockholders Agreement, dated September 12, 1997, between Imperial Holly Corporation, IHK Merger Sub Corporation and each of the executive officers and directors of Savannah Foods & Industries, Inc. listed therein. (c)(3) Form of Agreement and Irrevocable Proxy between Savannah Foods & Industries, Inc. and certain stockholders of Imperial Holly Corporation. (d) Not applicable. (e) Not applicable. (f) Not applicable. 6 SIGNATURE After due inquiry and to the best of its knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: September 18, 1997 IHK MERGER SUB CORPORATION By: /s/ James C. Kempner ------------------------------------ James C. Kempner Chief Executive Officer and Chief Financial Officer IMPERIAL HOLLY CORPORATION By: /s/ James C. Kempner ----------------------------------- James C. Kempner President, Chief Executive Officer and Chief Financial Officer 7 EXHIBIT INDEX Exhibit Exhibit Name - ------- ------------ (a)(1) Offer to Purchase, dated September 18, 1997. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Letter from Lehman Brothers, Inc. to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees, dated September 18, 1997. (a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(6) IRS Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Summary Advertisement, dated September 18, 1997. (c)(1) Agreement and Plan of Merger, dated September 12, 1997 among Imperial Holly Corporation, IHK Merger Sub Corporation and Savannah Foods & Industries, Inc. (c)(2) Stockholders Agreement, dated September 12,1997, between Imperial Holly Corporation, IHK Merger Sub Corporation and each of the executive officers and directors of Savannah Foods & Industries, Inc. listed therein. (c)(3) Form of Agreement and Irrevocable Proxy between Savannah Foods & Industries, Inc. and certain stockholders of Imperial Holly Corporation. (d) Not applicable. (e) Not applicable. (f) Not applicable. 8 EX-99.(A)(1) 2 OFFER TO PURCHASE EXHIBIT 99(a)(1) Offer to Purchase for Cash 14,397,836 Shares of Common Stock of SAVANNAH FOODS & INDUSTRIES, INC. at $20.25 Net Per Share by IHK MERGER SUB CORPORATION a wholly owned subsidiary of IMPERIAL HOLLY CORPORATION THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, OCTOBER 16, 1997, UNLESS THE OFFER IS EXTENDED. THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AT THE OFFER PRICE AND THE MERGER, AND RECOMMENDS THAT HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN BY THE EXPIRATION DATE AT LEAST 14,397,836 SHARES OR SUCH OTHER NUMBER OF SHARES REPRESENTING 50.1% OF THE COMPANY'S OUTSTANDING COMMON STOCK ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE, (II) THE EXPIRATION OF ANY APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER AND (III) IMPERIAL HOLLY HAVING OBTAINED FINANCING SUFFICIENT TO ENABLE IT (OR TO CAUSE PURCHASER) TO PURCHASE THE SHARES TENDERED PURSUANT TO THE OFFER AND TO CONSUMMATE THE MERGER. THE OFFER ALSO IS SUBJECT TO CERTAIN OTHER CONDITIONS WHICH ARE SET FORTH IN SECTION 14 OF THIS OFFER TO PURCHASE. --------------- IMPORTANT Any stockholder desiring to tender all or any portion of such stockholder's Shares should either (a) complete and sign the enclosed Letter of Transmittal (or a facsimile copy thereof) in accordance with the instructions in the Letter of Transmittal, have his signature thereon guaranteed if required by Instruction 1 of the Letter of Transmittal and mail or deliver it, together with the certificate(s) representing tendered Shares, and any other required documents, to the Paying Agent or tender such Shares pursuant to the procedure for book-entry transfer set forth in Section 3 or (b) request such stockholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such stockholder. A stockholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if such stockholder desires to tender such Shares. Any stockholder who desires to tender such stockholder's Shares and whose certificates representing such Shares are not immediately available or who cannot comply with the procedures for book-entry transfer on a timely basis may tender such Shares by following the procedures for guaranteed delivery set forth in Section 3. Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other related materials may be obtained from the Information Agent or from brokers, dealers, commercial banks and trust companies. --------------- The Dealer Manager for the Offer is: LEHMAN BROTHERS --------------- September 18, 1997 TABLE OF CONTENTS Section 1. Terms of the Offer, Proration and Expiration Date............ 3 Section 2. Acceptance for Payment and Payment........................... 5 Section 3. Procedures for Tendering Shares.............................. 6 Section 4. Withdrawal Rights............................................ 8 Section 5. Certain Tax Consequences..................................... 9 Section 6. Price Range of Shares; Dividends............................. 10 Section 7. Certain Information Concerning the Company................... 10 Certain Information Concerning the Purchaser and Imperial Section 8. Holly....................................................... 12 Section 9. Source and Amount of Funds................................... 13 Background of the Offer, Past Contacts, Transactions or Section 10. Negotiations with the Company............................... 15 Purpose of the Offer; the Merger; Merger Agreement; Plans for Section 11. the Company................................................. 16 Section 12. Effect of the Offer on the Market for Shares................. 27 Section 13. Dividends and Distributions.................................. 27 Section 14. Conditions to the Offer...................................... 27 Section 15. Certain Legal Matters; Required Regulatory Approvals......... 29 Section 16. Fees and Expenses............................................ 31 Section 17. Miscellaneous................................................ 31
SCHEDULE I--DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER AND IMPERIAL HOLLY...................................................................... S-1
(i) To Holders of Common Stock of Savannah Foods & Industries, Inc. INTRODUCTION IHK Merger Sub Corporation, a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Imperial Holly Corporation, a Texas corporation ("Imperial Holly"), hereby offers to purchase 14,397,836 shares of common stock, par value $0.25 per share (the "Shares"), of Savannah Foods & Industries, Inc., a Delaware corporation (the "Company"), or such other number of Shares representing 50.1% of the Company's outstanding common stock on a Fully Diluted Basis (as defined below) on the date of purchase, at a price of $20.25 per Share (such price, or any such higher price as may be paid in the Offer (as defined below), being referred to herein as the "Offer Price"), net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which together constitute the "Offer"). "Fully Diluted Basis" means the number of Shares (i) issued and outstanding as of the close of business on the date of purchase and (ii) issuable pursuant to the exercise of rights to purchase Shares or upon conversion or exchange of other securities, other than options to purchase shares issued under the Company's 1996 Equity Incentive Plan. Tendering stockholders will not be obligated to pay brokerage commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares by the Purchaser pursuant to the Offer. However, any tendering stockholder or other payee who fails to complete and sign the Substitute Form W-9 that is included in the Letter of Transmittal may be subject to a required backup federal income tax withholding of 31% of the gross proceeds payable to such stockholder or other payee pursuant to the Offer. See Section 3. The Purchaser will pay all charges and expenses of Lehman Brothers Inc. ("Lehman Brothers"), which is acting as Dealer Manager for the Offer (in such capacity, the "Dealer Manager"), D. F. King & Co., Inc., which is acting as the Information Agent (the "Information Agent"), and Wachovia Bank, N.A., which is acting as the Paying Agent (the "Paying Agent"), incurred in connection with the Offer. See Section 16. THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AT THE OFFER PRICE AND THE MERGER, AND RECOMMENDS THAT HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN BY THE EXPIRATION DATE AT LEAST 14,397,836 SHARES, OR SUCH OTHER NUMBER OF SHARES REPRESENTING 50.1% OF THE COMPANY'S OUTSTANDING COMMON STOCK ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE (THE "TARGET SHARE CONDITION" AND SUCH NUMBER OF SHARES BEING REFERRED TO HEREIN AS THE "TARGET NUMBER OF SHARES") , (II) THE EXPIRATION OF ANY APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT") AND THE REGULATIONS THEREUNDER (THE "HSR CONDITION") AND (III) IMPERIAL HOLLY HAVING OBTAINED FINANCING SUFFICIENT TO ENABLE IT (OR TO CAUSE THE PURCHASER) TO PURCHASE THE SHARES TENDERED PURSUANT TO THE OFFER AND TO CONSUMMATE THE MERGER (THE "FINANCING CONDITION"). THE OFFER ALSO IS SUBJECT TO CERTAIN OTHER CONDITIONS WHICH ARE SET FORTH IN SECTION 14. DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION ("DLJ"), THE COMPANY'S FINANCIAL ADVISOR, HAS DELIVERED TO THE BOARD OF DIRECTORS OF THE COMPANY ITS WRITTEN OPINION, DATED SEPTEMBER 11, 1997, THAT THE OFFER PRICE AND THE MERGER CONSIDERATION (AS DEFINED BELOW) TO BE RECEIVED BY THE STOCKHOLDERS PURSUANT 1 TO THE OFFER AND THE MERGER, TAKEN AS A WHOLE, ARE FAIR FROM A FINANCIAL POINT OF VIEW, TO SUCH STOCKHOLDERS. A COPY OF THE WRITTEN OPINION OF DLJ, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND CERTAIN LIMITATIONS ON THE SCOPE OF REVIEW UNDERTAKEN BY DLJ, IS CONTAINED IN THE COMPANY'S SOLICITATION/ RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE 14D- 9") FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") IN CONNECTION WITH THE OFFER, A COPY OF WHICH IS BEING FURNISHED TO THE STOCKHOLDERS CONCURRENTLY WITH THIS OFFER TO PURCHASE. The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of September 12, 1997 (the "Merger Agreement"), among Imperial Holly, the Purchaser and the Company, pursuant to which, as promptly as practicable following the later of the Expiration Date and the satisfaction or waiver of certain conditions, the Purchaser will be merged with and into the Company (the "Merger"), with the Company surviving as a wholly owned subsidiary of Imperial Holly (the "Surviving Corporation"). At the effective time of the Merger (the "Effective Time"), each Share issued and outstanding immediately prior thereto (other than Shares held by Imperial Holly, the Purchaser or any of their subsidiaries, or held in the treasury of the Company, all of which will be canceled and cease to exist without consideration being payable therefor (the "Excluded Shares"), and Shares held by stockholders who perfect their appraisal rights under Delaware law (the "Dissenting Shares")) will be converted into the right to receive, subject to the proration procedures described below (i) cash in the amount equal to the Offer Price, without interest thereon (the "Cash Consideration"), or (ii) Stock Consideration (as defined below, and together with the Cash Consideration, the "Merger Consideration"). The number of Shares to be converted into the right to receive the Cash Consideration in the Merger shall be equal to (x) 70% of the number of Shares issued and outstanding immediately prior to the Effective Time less (y) the sum of the Excluded Shares (which include Shares purchased in the Offer) and the Dissenting Shares (the "Cash Election Number"). Subsequent to the consummation of the Offer, each stockholder of the Company holding Shares not tendered in the Offer (other than Excluded Shares) or not accepted for payment in the Offer because of proration will be entitled to make an election to receive the Cash Consideration. If the number of Shares electing to receive the Cash Consideration exceeds the Cash Election Number, such Shares will be converted into the right to receive the Cash Consideration on a pro rata basis, with the remainder converted into the right to receive the Stock Consideration. If the number of Shares electing to receive the Cash Consideration is less than the Cash Election Number, such Shares will be converted into the right to receive the Cash Consideration while those Shares not so electing will be converted into the right to receive the Stock Consideration on a pro rata basis, with the remainder receiving the Cash Consideration. "Stock Consideration," with respect to each Share converted into the right to receive such Stock Consideration, shall mean (x) if the Closing Price (as defined below) of the shares of common stock, without par value, of Imperial Holly ("Imperial Shares") is $13.25 or lower, a number of Imperial Shares equal to the quotient of the Offer Price divided by $13.25, (y) if the Closing Price of the Imperial Shares is $17.25 or greater, a number of Imperial Shares equal to the quotient of the Offer Price divided by $17.25, or (z) if the Closing Price of the Shares is greater than $13.25 but less than $17.25, a number of Imperial Shares equal to the quotient of the Offering Price divided by the Closing Price. The Stock Consideration also includes certain rights to purchase shares of preferred stock of Imperial Holly. See Section 11 for a description of such rights. "Closing Price" means the volume weighted average of the trading prices of the Imperial Shares, rounded to three decimal places, as reported by Bloomberg Financial Markets, for each of the first 15 consecutive days upon which both the New York Stock Exchange and the American Stock Exchange are open for trading in the period commencing 20 of such trading days prior to the date of the closing of the Merger. See Section 11 for a description of the Merger Agreement. The Purchaser, Imperial Holly and each of the Directors and executive officers of the Company have entered into a stockholders agreement, dated September 12, 1997 (the "Stockholders Agreement"), whereby each of 2 such stockholders has agreed to tender all Shares owned by such stockholder into the Offer and not withdraw any of such Shares so tendered. According to the Company, as of September 1, 1997, there were (i) 28,738,196 Shares issued and outstanding, all of which were validly issued, fully paid and nonassessable, (ii) 2,568,604 Shares were held in the treasury of the Company, and (iii) 1,250,000 Shares were reserved for future issuance pursuant to the Company's 1996 Equity Incentive Plan, of which 179,844 Shares were reserved for issuance upon exercise of existing options. See Section 11 for a description of the effect of the Merger on such existing options. As of the date hereof, 1,000,000 shares of Company preferred stock are reserved for issuance pursuant to a Rights Agreement, dated as of March 31, 1989, between the Company and and Wachovia Bank, N.A., as successor rights agent to Citizens and Southern Trust Company (Georgia), N.A. (the "Company Rights Agreement"), none of which are currently issued and outstanding. The Company has amended the Company Rights Agreement so as to provide that no purchase rights under such agreement will become exercisable as a result of the authorization, execution or delivery of the Merger Agreement or the consummation of the Offer or the Merger. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH STOCKHOLDERS SHOULD READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. The statements regarding future market prices and operating results and other statements that are not historical facts contained herein are forward- looking statements. The words "expect", "project", "estimate", "believe", "anticipate", "plan", "intend", "could", "may", "predict" and similar expressions are also intended to identify forward-looking statements. Such statements involve risks, uncertainties and assumptions, including, without limitation, market factors, the effect of weather and economic conditions, farm and trade policy, the available supply of sugar, available quantity and quality of sugar beets and other factors detailed elsewhere in this Offer to Purchase and other Company filings with the Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. Section 1. Terms of the Offer, Proration and Expiration Date. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), if more than the Target Number of Shares is validly tendered and not withdrawn in accordance with Section 4 of this Offer to Purchase prior to the Expiration Date, Purchaser will accept for payment and pay for the Target Number of Shares, on a pro rata basis (with appropriate adjustments to avoid purchases of fractional Shares) based upon the number of Shares properly tendered and not withdrawn by each stockholder at or prior to the Expiration Date. In the event that proration of tendered Shares is required, because of the difficulty of determining the precise number of Shares properly tendered and not withdrawn (due in part to the guaranteed delivery procedure described in Section 3), the Purchaser does not expect to be able to announce the final results of such proration or pay for any Shares until at least five New York Stock Exchange, Inc. ("NYSE") trading days after the Expiration Date. Preliminary results of proration will be announced by press release as promptly as practicable after the Expiration Date. Stockholders may obtain such preliminary information from the Information Agent and may be able to obtain such information from their brokers. The term "Expiration Date" means 12:00 midnight, New York City time, on Thursday, October 16, 1997, unless and until Purchaser, in its sole discretion (but subject to the terms and conditions of the Merger Agreement), shall have extended the period during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. The Offer is conditioned upon, among other things, the satisfaction of each of the Target Share Condition, the HSR Condition and the Financing Condition. The Offer is also subject to certain other conditions set forth in Section 14 below. If any condition to the Purchaser's obligation to purchase Shares under the Offer is not satisfied prior to the Expiration Date, the Purchaser reserves the right (subject to the terms of the Merger Agreement and the applicable rules and regulations of the Commission) to (i) decline to purchase any of the 3 Shares tendered and terminate the Offer, (ii) waive such unsatisfied condition, and purchase the Target Number of Shares validly tendered and not withdrawn, (iii) extend the Offer and, subject to the right of stockholders to withdraw Shares as provided in Section 4 of this Offer to Purchase, retain the Shares which have been tendered during the period or periods for which the Offer is extended or (iv) amend the Offer. The Merger Agreement provides that the Purchaser reserves the right to increase the price per Share payable in the Offer or to otherwise amend the Offer; provided, however, the Purchaser will not, without the prior written consent of the Company, (i) decrease or change the form of consideration payable in the Offer, (ii) decrease the Target Number of Shares, (iii) impose conditions to the Offer in addition to those set forth in the Merger Agreement, (iv) change the conditions of the Offer (except that the Purchaser may waive any of the conditions of the Offer other than the Target Share Condition) or (v) make any other change in the terms or conditions of the Offer which is adverse to holders of Shares. If the conditions described in Section 14 are not satisfied, to the extent permitted by the Merger Agreement, the Purchaser may extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and the payment for, any Shares, by giving oral or written notice of such extension to the Paying Agent. The rights reserved by the Purchaser in this paragraph are in addition to the Purchaser's rights to amend or terminate the Offer described in Section 14. There can be no assurance, however, that the Purchaser will exercise its rights to extend the Offer. Any extension, amendment or termination will be followed as promptly as practicable by public announcement thereof, the announcement in the case of an extension to be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the announcement requirements of Rule 14d-4(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Without limiting the obligation of the Purchaser under such Rule or the manner in which the Purchaser may choose to make any public announcement, the Purchaser currently intends to make announcements by issuing a release to the Dow Jones News Service. If the Purchaser extends the Offer, or if the Purchaser (whether before or after its acceptance for payment of Shares) is delayed in its purchase of or payment for Shares or is unable to pay for Shares pursuant to the Offer for any reason, then without prejudice to the Purchaser's rights under the Offer, the Paying Agent may retain tendered Shares on behalf of the Purchaser, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described in Section 4 of this Offer to Purchase. However, the ability of the Purchaser to delay the payment for Shares which the Purchaser has accepted for payment is limited by Rule 14e- l(c) under the Exchange Act, that requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of the Offer. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer, the Purchaser will disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which the Offer must remain open following material changes in the terms of the Offer or information concerning the Offer, other than a change in price or a change in percentage of securities sought, will depend upon the facts and circumstances, including the relative materiality of the change in terms or information. With respect to a change in price or a change in percentage of securities sought (other than an increase in the number of Shares being sought that does not exceed 2% of the number of Shares outstanding), a minimum period of 10 business days is required to allow for adequate dissemination to stockholders and investor response. If, prior to the Expiration Date, the Purchaser should decide to increase the price per Share being offered in the Offer, such increase will be applicable to all stockholders whose Shares are accepted for payment pursuant to the Offer. As used in this Offer to Purchase, "business day" has the meaning set forth in Rule l4d-1 under the Exchange Act. The Company has provided to the Purchaser its list of stockholders and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal and other relevant materials will be mailed to record holders of Shares and furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, 4 appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. Section 2. Acceptance for Payment and Payment. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any extension or amendment), the Purchaser will purchase, by accepting for payment, and will pay for, the Target Number of Shares that have been validly tendered prior to the Expiration Date (and not properly withdrawn in accordance with Section 4 hereof) promptly after the Expiration Date. Any determination concerning the satisfaction of such terms and conditions shall be within the sole discretion of the Purchaser. See Section 14. The Purchaser expressly reserves the right to delay acceptance for payment of, or, subject to Rule 14e-1(c) under the Exchange Act, payment for, Shares in order to comply, in whole or in part, with any applicable law, including the HSR Act. See Sections 14 and 15. In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Paying Agent of (i) certificates for such Shares or timely confirmation of book-entry transfer (a "Book-Entry Confirmation") of such Shares into the Paying Agent's account at The Depository Trust Company or the Philadelphia Depository Trust Company (each, a "Book-Entry Transfer Facility") pursuant to the procedures set forth in Section 3, (ii) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with any required signature guarantees or an Agent's Message (as defined below) in connection with a book- entry transfer, and (iii) any other documents required by the Letter of Transmittal. The term "Agent's Message" means a message, transmitted by a Book-Entry Transfer Facility to, and received by, the Paying Agent and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares that are the subject of such Book-Entry Confirmation, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against such participant. Pursuant to the HSR Act, on September 17, 1997, Imperial Holly filed a Premerger Notification and Report Form in connection with the purchase of Shares pursuant to the Offer with the Federal Trade Commission (the "FTC") and the Antitrust Division of the Department of Justice (the "Antitrust Division"). Under the provisions of the HSR Act applicable to the Offer, the purchase of Shares pursuant to the Offer may not be consummated until the expiration of a 15-calendar day waiting period following the filing by Imperial Holly. Accordingly, the waiting period under the HSR Act applicable to the purchase of Shares pursuant to the Offer will expire at 11:59 p.m., New York City time, on October 2, 1997, unless such waiting period is earlier terminated by the FTC and the Antitrust Division or extended by a request from the FTC or the Antitrust Division for additional information or documentary material prior to the expiration of the waiting period or by the withdrawal and resubmission of the Premerger Notification and Report Form by Imperial Holly. Pursuant to the HSR Act, Imperial Holly has requested early termination of the waiting period applicable to the Offer. There can be no assurance, however, that the 15-day HSR Act waiting period will be terminated early or not extended. See Section 15. In any event, pursuant to Rule 14e-1(a) under the Exchange Act, the Expiration Date may not occur prior to October 16, 1997. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment (and thereby purchased) tendered Shares, if, as and when the Purchaser gives oral or written notice to the Paying Agent of the Purchaser's acceptance of such Shares for payment pursuant to the Offer. In all cases, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price with the Paying Agent, which will act as agent for tendering stockholders for the purpose of receiving payment from the Purchaser and transmitting payment to tendering stockholders. Under no circumstances will interest on the purchase price of the Shares be paid by the Purchaser. Upon the deposit of funds with the Paying Agent for the purpose of making payments to tendering stockholders, the Purchaser's obligation to make such payments shall be satisfied and tendering 5 stockholders must thereafter look solely to the Paying Agent for payment of amounts owed to them by reason of the acceptance for payment of Shares pursuant to the Offer. If any tendered Shares are not purchased pursuant to the Offer for any reason, or if certificates submitted represent more Shares than are tendered, certificates for such Shares not purchased or tendered will be returned, without expense to the tendering stockholder (or, in the case of Shares tendered by book-entry transfer into the Paying Agent's account at a Book- Entry Transfer Facility pursuant to the procedures set forth in Section 3, such Shares will be credited to an account maintained at such Book-Entry Transfer Facility), promptly after the expiration, termination or withdrawal of the Offer. Section 3. Procedures for Tendering Shares. For Shares to be validly tendered pursuant to the Offer, a properly completed and duly executed Letter of Transmittal or facsimile thereof, with any required signature guarantees, or an Agent's Message in connection with a book-entry delivery of Shares, and any other requirements, must be received by the Paying Agent at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date. In addition, either (i) the certificates for Shares must be received by the Paying Agent along with the Letter of Transmittal or Shares must be tendered pursuant to the procedures for book-entry transfer described below and a Book-Entry Confirmation must be received by the Paying Agent, in each case prior to the Expiration Date, or (ii) the tendering stockholder must comply with the guaranteed delivery procedures described below. The Paying Agent will establish an account with respect to the Shares at each Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in any of the Book-Entry Transfer Facilities' systems may make book-entry delivery of Shares by causing a Book- Entry Transfer Facility to transfer such Shares into the Paying Agent's account at a Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. However, although delivery of Shares may be effected through book-entry transfer at a Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other required documents, must, in any case, be transmitted to and received by the Paying Agent at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date or the tendering stockholder must comply with the guaranteed delivery procedures described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE PAYING AGENT. No signature guarantee on this Letter of Transmittal is required (a) if this Letter of Transmittal is signed by the registered holder of the Shares tendered herewith, unless such holder has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" or (b) if such Shares are tendered for the account of a bank or trust company in the United States or by a firm that is a member of the National Association of Securities Dealers, Inc. (the "NASD") or of a registered national securities exchange which is a member of a recognized member of a Medallion Signature Guarantee Program (an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 of the Letter of Transmittal. If the certificates are registered in the name of a person other than the signer of the Letter of Transmittal or if payment is to be made or certificates for Shares not accepted for payment or not tendered are to be returned to a person other than the registered holder, then the tendered certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed as described above. See Instructions 1 and 5 of the Letter of Transmittal. THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE THEREOF) AND ANY OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. 6 If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's certificates for Shares are not immediately available or time will not permit all required documents to reach the Paying Agent on or prior to the Expiration Date, or the procedure for book-entry transfer cannot be completed on a timely basis, such Shares may nevertheless be tendered if all the following conditions are satisfied: (i) the tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser herewith, is received by the Paying Agent as provided below, on or prior to the Expiration Date as provided below; and (iii) the certificates for all tendered Shares, in proper form for transfer (or a Book-Entry Confirmation), together with a Letter of Transmittal or facsimile thereof, properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and any other documents required by the Letter of Transmittal are received by the Paying Agent within three NYSE trading days after the date of execution of such Notice of Guaranteed Delivery. Stockholders may not extend the foregoing time period for delivery of Shares to the Paying Agent by providing a second Notice of Guaranteed Delivery with respect to such Shares. A "trading day" is any day on which the NYSE is open for business. The Notice of Guaranteed Delivery may be sent by hand delivery, telegram, facsimile transmission or mail to the Paying Agent and must include a guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares purchased pursuant to the Offer will in all cases be made only after timely receipt by the Paying Agent of certificates for the Shares or a timely Book-Entry Confirmation of the delivery of such Shares, and a Letter of Transmittal (or manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and any other documents required by the Letter of Transmittal. Accordingly, payment might not be made to all tendering stockholders at the same time, and will depend upon when certificates for the Shares or Book-Entry Confirmations of the delivery of such Shares are received into the Paying Agent's account at a Book-Entry Transfer Facility. UNDER THE FEDERAL INCOME TAX LAWS APPLICABLE TO CERTAIN STOCKHOLDERS (OTHER THAN CERTAIN EXEMPT STOCKHOLDERS, INCLUDING, AMONG OTHERS, ALL CORPORATIONS AND CERTAIN FOREIGN INDIVIDUALS), THE PAYING AGENT MAY BE REQUIRED TO WITHHOLD 31% OF THE AMOUNT OF ANY PAYMENTS MADE TO SUCH STOCKHOLDERS PURSUANT TO THE OFFER. TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT OF THE PURCHASE PRICE FOR SHARES PURCHASED PURSUANT TO THE OFFER, A TENDERING STOCKHOLDER MUST PROVIDE THE PAYING AGENT WITH SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH STOCKHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 9 TO THE LETTER OF TRANSMITTAL. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tendered Shares pursuant to any of the procedures described above will be determined in the sole discretion of the Purchaser, whose determination shall be final and binding. The Purchaser reserves the absolute right to reject any or all tenders of any Shares determined by it not to be in proper form if the acceptance for payment of, or payment for, such Shares may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right, in its sole discretion, subject to the Merger Agreement, to waive any of the conditions of the Offer or any defect or irregularity in any tender with respect to Shares of any particular stockholder, whether or not similar defects or irregularities are waived in the case of other stockholders. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the Instructions thereto) will be final and binding. Neither the Purchaser, Imperial Holly, the Company, the Paying Agent, the Information Agent, the Dealer Manager nor any other person or entity will be under any duty to give notification of any defects or irregularities in tenders or will incur any liability for failure to give any such notification. 7 By executing a Letter of Transmittal or by causing the transmission of an Agent's Message as set forth above, a tendering stockholder irrevocably appoints designees of the Purchaser as the stockholder's attorneys-in-fact and proxies, in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of the stockholder's rights with respect to the Shares tendered by the stockholder and accepted for payment by the Purchaser (and any and all other Shares or other securities issued or issuable in respect of such Shares on or after the date of the Merger Agreement). All such powers of attorney and proxies shall be considered to be coupled with an interest in the tendered Shares. This appointment will be effective when, and only to the extent that, the Purchaser accepts Shares for payment. Upon acceptance for payment, all prior powers of attorney and proxies given by the stockholder with respect to the Shares or other securities will, without further action, be revoked, and no subsequent powers of attorney or proxies may be given nor any subsequent written consent executed by such stockholder (and, if given or executed, will not be deemed to be effective) with respect thereto. The designees of the Purchaser will, with respect to the Shares and other securities, be empowered to exercise all voting and other rights of such stockholder as they in their sole discretion may deem proper at any annual, special or adjourned meeting of the Company's stockholders, by written consent or otherwise. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares, the Purchaser must be able to exercise full voting and other rights of a record and beneficial holder, including rights in respect of acting by written consent, with respect to such Shares. A tender of Shares pursuant to any one of the procedures described above will constitute the tendering stockholder's acceptance of the terms and conditions of the Offer. The Purchaser's acceptance for payment for Shares tendered pursuant to the Offer will constitute a binding agreement between the tendering stockholder and the Purchaser upon the terms and subject to the conditions of the Offer. Section 4. Withdrawal Rights. Except as otherwise provided in this Section 4, tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any time after November 17, 1997. For a withdrawal to be effective, a written, telegraphic, or facsimile transmission notice of withdrawal must be timely received by the Paying Agent at one of its addresses set forth on the back cover of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If certificates for Shares have been delivered or otherwise identified to the Paying Agent, then, prior to the release of such certificates, the serial numbers of the particular certificates evidencing the Shares to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an Eligible Institution, except in the case of Shares tendered for the account of an Eligible Institution, must also be furnished to the Paying Agent as described above. If Shares have been tendered pursuant to the procedures for book-entry transfer as set forth in Section 3, any notice of withdrawal must also specify the name and number of the account at the appropriate Book-Entry Transfer Facility to be credited with the withdrawn Shares. ALL QUESTIONS AS TO THE FORM AND VALIDITY (INCLUDING TIME OF RECEIPT) OF NOTICES OF WITHDRAWAL WILL BE DETERMINED BY THE PURCHASER, IN ITS SOLE DISCRETION, WHOSE DETERMINATION WILL BE FINAL AND BINDING. NEITHER THE PURCHASER, IMPERIAL HOLLY, THE COMPANY, THE DEALER MANAGER, THE PAYING AGENT, THE INFORMATION AGENT NOR ANY OTHER PERSON OR ENTITY WILL BE UNDER ANY DUTY TO GIVE NOTIFICATION OF ANY DEFECTS OR IRREGULARITIES IN ANY NOTICE OF WITHDRAWAL OR INCUR ANY LIABILITY FOR FAILURE TO GIVE ANY NOTIFICATION. Any Shares properly withdrawn will be deemed to be not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by following one of the procedures described in Section 3 at any time prior to the Expiration Date. 8 Section 5. Certain Tax Consequences. The following is a summary of certain United States federal income tax consequences of the Offer and the Merger to beneficial owners of Shares whose Shares are purchased pursuant to the Offer or whose Shares are converted to cash or Imperial Shares in the Merger. The discussion is for general information only and does not purport to consider all aspects of federal income taxation that might be relevant to beneficial owners of Shares. The discussion is based on current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing, proposed and temporary regulations promulgated thereunder and administrative and judicial interpretations thereof, all of which are subject to change. The discussion applies only to beneficial owners of Shares in whose hands Shares are capital assets within the meaning of Section 1221 of the Code, and may not apply to Shares received pursuant to the exercise of employee stock options or otherwise as compensation, or to certain types of beneficial owners of Shares (such as insurance companies, tax-exempt organizations, financial institutions and broker-dealers) who may be subject to special rules. This discussion does not discuss the federal income tax consequences to a beneficial owner of Shares who, for United States federal income tax purposes, is a non-resident alien individual, a foreign corporation, a foreign partnership or a foreign estate or trust, nor does it consider the effect of any foreign, state or local tax laws. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH BENEFICIAL OWNER OF SHARES SHOULD CONSULT SUCH BENEFICIAL OWNER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH BENEFICIAL OWNER AND THE PARTICULAR TAX EFFECTS TO SUCH BENEFICIAL OWNER OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS. The receipt of cash for Shares pursuant to the Offer or cash or Imperial Shares pursuant to the Merger will be a taxable transaction for federal income tax purposes. In general, for federal income tax purposes, a beneficial owner of Shares will recognize gain or loss equal to the difference between the beneficial owner's adjusted tax basis in the Shares sold pursuant to the Offer or converted to cash and Imperial Shares in the Merger and the amount of cash and the value of the Imperial Shares, determined as of the Effective Time, received therefor. Gain or loss must be determined separately for each block of Shares (i.e., Shares acquired at the same cost in a single transaction) sold pursuant to the Offer or converted to cash and Imperial Shares in the Merger. Such gain or loss will be capital gain or loss and will be (a) long- term capital gain or loss if the beneficial owner held the Shares for more than 18 months or (b) mid-term capital gain or loss if the beneficial owner held the Shares more than 12 months but not more than 18 months as of the date of sale (in the case of the Offer) or the Effective Time (in the case of the Merger). Long-term capital gain of individuals currently is taxed at a maximum rate of 20%. Mid-term capital gain of individuals is currently taxed at a maximum rate of 28%. Payments in connection with the Offer or the Merger may be subject to "backup withholding" at a rate of 31%, unless a beneficial owner of Shares (a) is a corporation or comes within certain exempt categories and, when required, demonstrates this fact or (b) provides a correct taxpayer identification number to the payor, certifies as to no loss of exemption from backup withholding and otherwise complies with applicable withholding rules. A beneficial owner who does not provide a correct taxpayer identification number may be subject to penalties imposed by the Internal Revenue Service. Any amount paid as backup withholding does not constitute an additional tax and will be creditable against the beneficial owner's federal income tax liability. Each beneficial owner of Shares should consult with his or her own tax advisor as to his or her qualification for exemption from backup withholding and the procedure for obtaining such exemption. Those tendering their Shares in the Offer may prevent backup withholding by completing the Substitute Form W-9 included in the Letter of Transmittal. See Section 3 hereof. Similarly, those who convert their Shares into cash and Imperial Shares in the Merger may prevent backup withholding by completing a Substitute Form W-9 and submitting it to the Paying Agent. Imperial Holly and the Purchaser will be entitled to deduct and withhold from the consideration otherwise payable pursuant to the Merger Agreement to any holder of Shares such amounts as Imperial Holly and the Purchaser is required to deduct and withhold with respect to the making of such payment. To the extent that amounts are so withheld by Imperial Holly or the Purchaser, such withheld amounts shall be treated for all purposes as having been paid to the holder of the Shares in respect of which such deduction and withholding was made by Imperial Holly and the Purchaser. 9 Section 6. Price Range of Shares; Dividends. The Shares are listed and traded on the NYSE under the symbol "SFI". The following table sets forth, for the calendar quarters indicated, the high and low closing sales price per Share on the NYSE and the dividends paid. All prices set forth below are as reported in published financial sources:
CALENDAR QUARTER HIGH LOW DIVIDEND ---------------- ---- ---- -------- 1995 First Quarter................................... $14 3/8 $10 1/2 $0.135 Second Quarter.................................. 11 3/4 9 1/8 0.025 Third Quarter................................... 13 5/8 10 1/2 0.025 Fourth Quarter.................................. 13 7/8 11 3/8 0.025 1996 First Quarter................................... $12 7/8 $10 5/8 $0.025 Second Quarter.................................. 13 1/2 10 3/4 0.025 Third Quarter................................... 14 11 3/8 0.025 Fourth Quarter.................................. 16 5/8 13 1/4 0.025 1997 First Quarter................................... $15 1/4 $12 7/8 $0.025 Second Quarter.................................. 17 3/4 12 1/2 0.0375 Third Quarter (through September 17, 1997)...... 19 13 1/16 0.0375
On August 25, 1997, the last full trading day prior to the announcement of Imperial Holly's initial offer to acquire the Company, the reported closing sales price per Share on the NYSE was 14 15/16. On September 11, 1997, the last full trading day prior to the announcement of the Merger Agreement, the reported closing sales price per Share on the NYSE was 18 1/16. On September 17, 1997, the last full trading day prior to the commencement of the Offer, the reported closing sales price per Share on the NYSE was 18 7/8. Stockholders are urged to obtain a current market quotation for the Shares. Section 7. Certain Information Concerning the Company. General. According to the Company's Annual Report on Form 10-K for the fiscal year ended September 29, 1996 (the "Company 10-K"), the Company was incorporated in Delaware on February 19, 1969, as the successor to the Savannah Sugar Refining Corporation, which was originally incorporated in New York in 1916. Its principal executive offices are located at 2 East Bryan Street, Savannah, Georgia 31401. The Company and its wholly owned subsidiaries are principally engaged in the production, marketing and distribution of food products, primarily refined sugar. Selected Consolidated Financial Data. The following selected consolidated financial data relating to the Company have been taken or derived from the audited financial statements contained in the Company 10-K and the unaudited financial statements contained in the Company's Quarterly Reports on Form 10-Q for the quarterly periods ended December 29, 1996, March 30, 1997 and June 29, 1997 (collectively, the "Company Form 10-Qs"). More comprehensive financial information (including the notes to the Company's financial statements) is included in such Company 10-K, the Company Form 10-Qs and other documents filed by the Company with the Commission, and the financial data set forth below are qualified in their entirety by reference to such reports and other documents, including the financial statements (and notes thereto) contained therein. Such reports and other documents may be examined and copies may be obtained from the offices of the Commission in the manner set forth below. 10 SELECTED CONSOLIDATED FINANCIAL DATA FOR SAVANNAH FOODS & INDUSTRIES, INC.
FISCAL YEAR ENDED(1) NINE MONTHS ENDED -------------------------------------- ------------------------ (UNAUDITED) OCTOBER 2, OCTOBER 1, SEPTEMBER 29, JUNE 30, JUNE 29, 1994 1995 1996 1996 1997 ----------- ----------- ------------- ----------- ----------- (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA Net sales............... $ 1,074,367 $ 1,098,544 $ 1,146,332 $ 842,675 $ 883,156 EBITDA.................. 48,404 35,715 49,793 40,692 70,212 Income from operations.. 19,432 7,401 21,799 19,618 52,443 Income (loss) before in- come taxes and extraor- dinary item............ 8,606 (6,078) 9,681 9,883 47,391 Extraordinary item, net of tax................. -- -- (971) (698) (376) Net income (loss)....... 5,743 (3,493) 5,972 5,528 29,003 Per share: Income (loss) before extraordinary item... $ 0.22 $ ( 0.13) $ 0.27 $ 0.24 $ 1.12 Extraordinary item.... -- -- (0.04) (0.03) (0.01) Net income (loss)..... 0.22 $ (0.13) 0.23 0.21 1.11 Dividends............. 0.54 $ 0.32 $ 0.10 0.0750 0.0875 Weighted average shares outstanding............ 26,238,196 26,238,196 26,238,196 26,238,196 26,238,196 BALANCE SHEET DATA Current assets.......... $ 197,802 $ 180,552 $ 229,931 Total assets............ 476,507 398,261 435,092 Current liabilities..... 114,740 85,946 134,144 Long-term debt.......... 106,864 59,754 26,230 Stockholders' equity.... 169,649 173,727 200,933
- -------- (1) The Company's fiscal year ends on the Sunday closest to September 30th. The Company is subject to the information and filing requirements of the Exchange Act and is required to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Information, as of particular dates, concerning the Company's directors and officers, their remuneration, options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be described in proxy statements distributed to the Company's stockholders and filed with the Commission. These reports, proxy statements and other information are available for inspection and copying at the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of these materials may also be obtained by mail, upon payment of the Commission's customary fees, from the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a World Wide Web Site on the Internet at http://www.sec.gov that contains reports, proxy statements and other information filed electronically by the Company with the Commission. Other than as set forth below, the information concerning the Company contained in this section has been taken from or based upon publicly available documents on file with the Commission and other publicly available information. Although neither the Purchaser nor Imperial Holly has any knowledge that would indicate that statements contained herein based upon such documents are untrue, neither the Purchaser nor Imperial Holly takes any responsibility for the accuracy or completeness of the information contained in such documents or for any failure by the Company to disclose events that may have occurred and may affect the significance or accuracy of any such information but which are unknown to either the Purchaser or Imperial Holly. 11 Section 8. Certain Information Concerning the Purchaser and Imperial Holly. The Purchaser is a newly incorporated Delaware corporation and a wholly owned subsidiary of Imperial Holly which to date has not conducted any business other than that incident to its formation, the execution and delivery of the Merger Agreement and the commencement of the Offer. Accordingly, no meaningful financial information with respect to the Purchaser is available. The principal executive offices of Imperial Holly and the Purchaser are located at One Imperial Square, Suite 200, 8016 Highway 90-A, Sugar Land, Texas 77478. Imperial Holly, which is a Texas corporation, and its subsidiaries are producers and marketers of refined sugar, producing both cane and beet sugar. The name, citizenship, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of the Purchaser and Imperial Holly are set forth in Schedule I hereto. Selected Consolidated Financial Data. The following selected consolidated financial data relating to Imperial Holly have been taken or derived from the audited financial statements contained in the Annual Report on Form 10-K for the fiscal year ended March 31, 1997 of Imperial Holly (the "Imperial Holly 10-K") and the unaudited financial statements contained in the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996 (the "Imperial Holly 10-Q"). More comprehensive financial information (including the notes to Imperial Holly's financial statements) is included in such Imperial Holly 10-K, Imperial Holly 10-Q and other documents filed by Imperial Holly with the SEC, and the financial data set forth below are qualified in their entirety by reference to such reports and other documents, including the financial statements (and notes thereto) contained therein. Such reports and other documents may be examined and copies may be obtained from the offices of the SEC in the manner set forth in Section 7. SELECTED CONSOLIDATED FINANCIAL DATA FOR IMPERIAL HOLLY CORPORATION
FISCAL YEAR ENDED MARCH 31, QUARTER ENDED JUNE 30, ---------------------------------- ----------------------- (UNAUDITED) 1995 1996 1997 1996 1997 ---------- ---------- ---------- ----------- ----------- (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA Net sales............... $ 586,925 $ 616,450 $ 752,595 $ 179,905 $ 197,758 EBITDA.................. 11,338 10,250 43,196 12,610 18,954 Operating income (loss). (2,091) (2,431) 28,423 8,971 14,171 Income (loss) before income taxes and extraordinary item... (8,649) (5,076) 17,688 6,618 11,574 Extraordinary item.... -- 604 -- -- -- Net income (loss)..... (5,365) (2,614) 11,518 4,149 7,294 Per share: Income (loss) before extraordinary item... (0.52) (0.31) 0.92 0.40 0.51 Extraordinary item.... -- 0.06 -- -- -- Net income (loss)..... (0.52) (0.25) 0.92 0.40 0.51 Weighted average shares outstanding............ 10,266,229 10,300,487 12,576,489 10,315,289 14,220,388 BALANCE SHEET DATA Current assets.......... $ 183,350 $ 285,147 $ 315,204 Total assets............ 325,319 449,933 481,184 Current liabilities..... 101,804 151,241 177,430 Long-term debt.......... 89,800 90,619 81,495 Shareholders' equity.... 111,043 176,956 189,936
12 Ownership of Shares, Transactions with Respect to Shares and Other Matters Imperial Holly currently owns 448 Shares. James C. Kempner, the President and Chief Executive Officer of Imperial Holly, owns 3,000 Shares. Roger W. Hill, a managing director of Imperial Holly, owns 100 Shares. P.C. Carrothers, the Senior Vice President--Operations of Imperial Holly, owns 2,200 Shares. Mr. Carrothers sold 800 Shares on July 25, 1997 at a price of $14 per Share. He initially acquired such Shares in May of 1996 at a price of $10 5/8. Mr. Carrothers effected such trades through his broker. Certain individuals and entities affiliated with Harris L. Kempner, Jr., a director of Imperial Holly, sold an aggregate amount of 5,602 Shares for an aggregate price of $15.375 per Share on July 21, 1997. Such Shares were acquired on May 20, 1996 and July 16, 1996, in each case for an aggregate price of $11.33 per Share. All of such trades were effected through a broker. Imperial Holly and its wholly owned subsidiary, Holly Sugar Corporation ("Holly Sugar") entered into several routine sales contracts to sell refined sugar to the Company for the one-year period ended September 30, 1997. For such period, Imperial Holly entered into two sales contracts to deliver refined sugar to the Company for an aggregate consideration of approximately $2,219,000. For such period, Holly Sugar entered into three sales contracts to deliver refined sugar to the Company for aggregate consideration of approximately $6,401,000. In addition, in July 1996, Holly Sugar entered into a packaging contract with Dixie Crystals Foodservices, Inc., a wholly owned subsidiary of the Company ("Dixie"), to deliver refined sugar to Dixie's facility in Visalia, California to be packaged and returned to Holly Sugar. The aggregate value of such contract to Imperial Holly for its fiscal year ended March 31, 1997 was approximately $950,000. Except as provided in the Merger Agreement, and as otherwise described in this Offer to Purchase, neither Imperial Holly nor the Purchaser, nor to the best knowledge of Imperial Holly and the Purchaser, any of the persons listed on Schedule I hereto, has any contract, arrangement, understanding, or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or the giving or withholding of proxies. Except as set forth in this Offer to Purchase, neither Imperial Holly nor the Purchaser nor, to the best knowledge of Imperial Holly and the Purchaser, any of the persons listed on Schedule I hereto, has had, since October 4, 1993, any business relationships or transactions with the Company or any of its executive officers, directors, or affiliates that would require reporting under the rules of the SEC applicable to this Offer to Purchase. Except as set forth in this Offer to Purchase, since October 4, 1993, there have been no contacts, negotiations or transactions between the Purchaser, Imperial Holly or any of its subsidiaries or, to the best knowledge of Imperial Holly and the Purchaser, any of the persons listed on Schedule I hereto, and the Company or its affiliates, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, election of directors or a sale or other transfer of a material amount of assets. Except as set forth in this Offer to Purchase, neither Imperial Holly nor the Purchaser, nor, to the best knowledge of Imperial Holly and the Purchaser, any of the persons listed on Schedule I hereto, beneficially owns any Shares or has effected any transactions in the Shares in the past 60 days. Section 9. Source and Amount of Funds. The total amount of funds required by the Purchaser to purchase 50.1% of the outstanding Shares is estimated not to exceed $295 million. The total cash compensation payable to holders of Shares in connection with the consummation of the Offer and the Merger is estimated not to exceed $408 million. The funds necessary to purchase Shares pursuant to the Offer and to pay related fees and expenses will be furnished to the Purchaser (i) by Imperial Holly as a capital contribution and (ii) through the financings described below. Imperial Holly has received a commitment letter (the "Commitment Letter"), dated September 10, 1997, as amended September 18, 1997, from Lehman Commercial Paper Inc., an affiliate of Lehman Brothers ("LCPI"), to provide senior credit facilities in the aggregate amount of $505 million (the "Tender Facilities"). Such funds will be used to finance the Offer, to repay approximately $136 million of indebtedness of Imperial Holly and certain related expenses and to provide for Imperial Holly's working capital needs pending the closing 13 of the Merger. The Tender Facilities will be comprised of a term loan facility in the amount of $295 million and a revolving credit facility in the amount of $210 million. The Tender Facilities will be guaranteed by each of Imperial Holly's direct and indirect subsidiaries (other than the Company and its subsidiaries), and will be secured by substantially all the assets of Imperial Holly and each of the guarantors. The term loan under the Tender Facilities will be available for one drawing on the date (in no event later than November 30, 1997) on which Purchaser accepts for payment the Target Number of Shares (the "Tender Date"). The term loan will be repayable on the earlier of (i) the date of the closing of the Merger and (ii) the date which is the earlier of January 31, 1998 and 90 days after the Tender Date (the "Maturity Date"). The revolving credit facility will be available on a revolving basis during the period commencing on or before the Tender Date and ending on the Maturity Date and will mature on the Maturity Date. The Tender Facilities will bear interest, at Imperial Holly's election, at either (i) the higher of (A) the prime rate of the administrative agent selected in the syndication process, (B) the secondary market rate for certificates of deposit plus 1%, or (C) the federal funds effective rate plus 0.50% (the "Base Rate") plus a margin of 1.50% or (ii) the rate for eurodollar deposits in the interbank eurodollar market (the "Eurodollar Rate") plus a margin of 2.50%. The Commitment Letter also provides for LCPI to arrange senior credit facilities (the "Merger Facilities"), which are comprised of either (i) senior credit facilities of up to $455 million (the "Alternative A Merger Facilities"), comprised of term loan facilities aggregating not more than $255 million (the "Alternative A Term Loans") and a $200 million revolving credit facility (the "Alternative A Revolver"), which will be implemented in conjunction with the issuance of $250 million in proceeds of unsecured senior subordinated notes to be issued by Imperial Holly (the "Subordinated Notes") or (ii) in the event the Subordinated Notes are not issued and sold on the date of the Merger, senior credit facilities of up to $705 million (the "Alternative B Merger Facilities"), comprised of term loan facilities aggregating not more than $505 million (the "Alternative B Term Loans") and a $200 million revolving credit facility (the "Alternative B Revolver"). The proceeds of the Merger Facilities will provide the financing necessary to repay amounts owing under the Tender Facilities, to provide a portion of the Cash Consideration payable upon consummation of the Merger and certain related expenses, and to provide financing for future working capital and other general corporate purposes. The Merger Facilities will be guaranteed by each of Imperial Holly's direct and indirect subsidiaries, and will be secured by substantially all tangible and intangible assets of Imperial Holly and each of the guarantors. The Alternative A Term Loans will be available for one drawing on the date of the closing of the Merger, and will consist of two tranches. The two tranches, in the aggregate principal amounts of $150 million and $105 million, respectively, will fully amortize over a period of six and eight years, respectively. The Alternative A Revolver will be available on a revolving basis during the period commencing on the date of the closing of the Merger and ending on the date that is five years after the date of the closing of the Merger. The Alternative A Revolver and the Alternative A Term Loans will bear interest, at Imperial Holly's election, at either the Base Rate plus a margin ranging from 0.25% to 1.00% or the Eurodollar Rate plus a margin ranging from 1.25% to 2.00%. The Alternative B Term Loans will be available for one drawing on the date of the closing of the Merger, and will consist of four tranches. The four tranches, in the aggregate principal amounts of $150 million, $127.5 million, $127.5 million and $100 million, respectively, will fully amortize over periods of five, six, seven and eight years, respectively. The Alternative B Revolver will be available on a revolving basis during the period commencing on the date of the closing of the Merger and ending on the date that is five years after the date of the closing of the Merger. The Alternative B Revolver and the Alternative B Term Loans will bear interest, at Imperial Holly's election, at either the Base Rate plus a margin ranging from 0.75% to 2.50% or the Eurodollar Rate plus a margin ranging from 1.75% to 3.50%. Although LCPI anticipates that it may syndicate all or a portion of the Tender Facilities and the Merger Facilities to other lenders, the commitment letter provides that LCPI will, subject to customary conditions, underwrite the entire amount of the Tender Facilities and the Alternative A Merger Facilities or the Alternative B Merger Facilities. 14 Section 10. Background of the Offer, Past Contacts, Transactions or Negotiations with the Company. On July 15, 1997, the Company announced that it had entered into an Agreement and Plan of Merger (the "Flo-Sun Merger Agreement"), dated as of July 14, 1997, among XSF Holdings, Inc., a Delaware corporation ("Newco"), DXE Merger Corp., a Delaware corporation and a wholly owned subsidiary of Newco, the Company and Flo-Sun Incorporated, a Florida corporation ("Flo-Sun"), pursuant to which the Company would be merged into DXE Merger Corp. and each outstanding Share would be converted into one share of Class A Common Stock of Newco, (the "Flo-Sun Merger"). Shortly after the announcement of the Flo-Sun Merger Agreement, Imperial Holly's management contacted Lehman Brothers to seek assistance in determining the feasibility of a potential offer to acquire the Company. The Imperial Holly Board of Directors (the "Imperial Holly Board") met on July 25, 1997 and considered a presentation by Lehman Brothers and Imperial Holly management of structuring and financing alternatives for the acquisition of the Company by Imperial Holly. The Imperial Holly Board authorized management and Lehman Brothers to continue to refine their financial and strategic analyses and to pursue financing alternatives for such a transaction. On August 8, 1997, the Imperial Holly Board met to consider and discuss a presentation by Imperial Holly management and Lehman Brothers of their analysis of a proposal for the acquisition of the Company by Imperial Holly for a combination of cash and Imperial Shares. The Imperial Holly Board, after consulting with its outside counsel, management and Lehman Brothers, authorized management to continue to work with Lehman Brothers and Imperial Holly's legal advisors to formulate a proposal for the acquisition of the Company and the financing required for such a transaction. The Imperial Holly Board met on August 22, 1997 and discussed with management, Lehman Brothers and Imperial Holly's outside counsel a proposal to acquire the Company in a cash and stock merger for $18.75 per Share, consisting of 70% cash and 30% Imperial Shares. The Imperial Holly Board authorized management to deliver a letter setting forth the terms of such a proposal to the Company. On August 25, 1997, James C. Kempner, the President and Chief Executive Officer of Imperial Holly, delivered a letter containing the terms of such an offer to William F. Sprague, III, the President and Chief Executive Officer of the Company. On August 26, 1997, the Company Board met and evaluated Imperial Holly's offer. After consulting with its financial and legal advisors, the Company Board instructed management of the Company to enter into discussions with Imperial Holly regarding Imperial Holly's proposed offer to acquire the Company. On August 26, 1997, Imperial Holly signed a customary confidentiality agreement with the Company relating to the information to be provided by the Company (which agreement, among other things, prohibited Imperial Holly from making an unsolicited acquisition proposal for the Company, or engaging in certain other activities relating to control of the Company, for a two year period). On August 27, 1997, Imperial Holly delivered a draft merger agreement to the Company and its financial and legal advisors, and Imperial Holly and the Company both began to conduct due diligence. On August 28, 1997, Mr. Kempner and other members of Imperial Holly's management and its financial and legal advisors met in Savannah with Messrs. Cartledge and Sprague and other members of the Company's management, and the Company's financial and legal advisors to discuss Imperial Holly's offer. The Company and Imperial Holly discussed a proposed structure for the acquisition of the Company, pursuant to which Imperial Holly would make a cash tender offer for 50.1% of the Shares followed by a merger at a price of $18.75 per Share, with 70% of the consideration being in cash and 30% in Imperial Shares. On August 30, 1997, Messrs. Kempner, Cartledge and Sprague, and other members of Imperial Holly's and the Company's management, DLJ and Lehman Brothers and the Company's and Imperial Holly's outside counsel met by telephone conference to discuss the terms of a proposed merger agreement and to resolve certain issues regarding the terms of Imperial Holly's proposed offer. 15 On September 4, 1997, the Imperial Holly Board met and reviewed in detail with Imperial Holly's management, Lehman Brothers and Imperial Holly's outside counsel the terms of the proposed transaction. Lehman Brothers delivered its opinion to the Imperial Holly Board that the consideration to be paid by Imperial Holly in the proposed transaction was fair from a financial point of view. The Imperial Holly Board unanimously approved an offer for the Shares at $18.75 per Share, consisting of 70% cash and 30% Imperial Shares. The Imperial Holly Board also directed Lehman to communicate the offer, including the copy of the proposed merger agreement signed by Imperial Holly, to DLJ, conditioned upon the Company's terminating its agreement with Flo-Sun. Also on September 4, 1997, the Company's Board met and reviewed Imperial Holly's offer with DLJ and the Company's outside counsel. DLJ rendered its opinion to the Company that the consideration to be paid in the proposed transaction by Imperial Holly to the Company's stockholders was fair to the Company's stockholders from a financial point of view, and the Company's Board approved the termination of the Flo-Sun agreement and, subject to such termination, the acceptance of the Imperial Holly offer and the execution of the proposed merger agreement tendered by Imperial Holly. On September 4, 1997, Flo-Sun contacted the Company to propose a revised offer, which the Company Board agreed to consider. DLJ notified Imperial Holly that Flo-Sun had revised its offer. From September 5, 1997 through September 9, 1997, Imperial Holly's management, Lehman Brothers and Imperial Holly's outside counsel discussed certain revisions to the terms of Imperial Holly's offer to the Company and negotiated with the Company's management, DLJ and the Company's outside counsel concerning the terms of such a revised offer. The Imperial Holly Board met on September 10, 1997 and reviewed the terms of a revised offer at $20.25 per Share, consisting of 70% cash and 30% Imperial Shares, with Imperial Holly's management, Lehman Brothers and Imperial Holly's outside counsel. Lehman Brothers rendered its revised opinion to the Imperial Holly Board that such a transaction was fair from a financial point of view to Imperial Holly, and the Imperial Holly Board unanimously approved such an offer and directed Lehman Brothers to communicate the revised offer to DLJ. On September 11, 1997, the Company Board met and reviewed the terms of the revised Flo-Sun offer and the revised Imperial Holly offer with DLJ and a second financial advisor, The Robinson-Humphrey Company ("Robinson-Humphrey"), and the Company's outside counsel. After full discussion of the final Imperial Holly offer and the revised Flo-Sun offer, and after considering the advice of DLJ, Robinson-Humphrey and the Company's outside counsel, and the oral opinion of DLJ that, based upon and subject to the assumptions, limitations and qualifications set forth therein, as of the date of such opinion, the consideration to be received by the Company's stockholders pursuant to the Offer and the Merger was fair to such stockholders from a financial point of view, the Company Board unanimously approved the Offer, the Merger, the Merger Agreement and the transactions contemplated thereby, and the termination of the Flo-Sun Merger Agreement. On September 12, 1997, the Flo-Sun Merger Agreement was terminated and the Company executed the Merger Agreement. Section 11. Purpose of the Offer; the Merger; Merger Agreement; Plans for the Company. The purpose of the Offer, the Merger and the Merger Agreement is for Imperial Holly to acquire control of, and the entire equity interest in, the Company. The Offer and the Merger Agreement are intended to increase the likelihood that the Merger will be effected as promptly as practicable. The Merger Agreement. The following summary of the Merger Agreement, a copy of which is filed as an exhibit to the Schedule 14D-1, is qualified by reference to the Merger Agreement. The Offer. The Merger Agreement provides for the making of the Offer. The obligation of the Purchaser to accept for payment or pay for Shares tendered pursuant to the Offer is subject to the satisfaction of the Target Share Condition, the HSR Condition and the Financing Condition and certain other conditions that are set forth in Section 14. If any condition to the Purchaser's obligation to purchase Shares under the Offer is not satisfied prior to the Expiration Date, the Purchaser reserves the right (subject to the terms of the Merger Agreement and the applicable rules and regulations of the Commission) to (i) decline to purchase any of the Shares tendered and 16 terminate the Offer, (ii) waive such unsatisfied condition, and purchase the Target Number of Shares validly tendered and not withdrawn, (iii) extend the Offer and, subject to the right of stockholders to withdraw Shares as provided in Section 4 of this Offer to Purchase, retain the Shares which have been tendered during the period or periods for which the Offer is extended or (iv) amend the Offer. The Merger Agreement provides that the Purchaser reserves the right to increase the price per Share payable in the Offer or to otherwise amend the Offer; provided, however, the Purchaser will not, without the prior written consent of the Company, (i) decrease or change the form of consideration payable in the Offer, (ii) decrease the Target Number of Shares, (iii) impose conditions to the Offer in addition to those set forth in the Merger Agreement, (iv) change the conditions of the Offer (except that the Purchaser may waive any of the conditions of the Offer other than the Minimum Condition) or (v) make any other change in the terms or conditions of the Offer which is adverse to holders of Shares. Recommendation. The Board of Directors of the Company, based in part upon the opinion of DLJ that the proposed consideration to be received by holders of Shares pursuant to the Merger Agreement is fair from a financial point of view to the holders of Shares, unanimously determined that the Offer and the Merger are fair to and in the best interests of the stockholders of the Company, approved the Offer and the Merger and recommended acceptance of the Offer and approval and adoption of the Merger Agreement by the stockholders of the Company and approved the amendment to the Company Rights Plan so as to provide that no purchase rights under such agreement will become exercisable as a result of the approval, execution or delivery of the Merger Agreement or the consummation of the transactions contemplated thereby (including the Offer or the Merger). Board Representation. The Merger Agreement provides that, upon the Purchaser's acquisition of a majority of the outstanding Shares pursuant to the Offer, the Purchaser shall be entitled to designate such number of directors, rounded up to the next whole number, on the Board of Directors as shall give the Purchaser representation on the Board of Directors equal to the product of the total number of directors on the Board of Directors multiplied by the percentage that the aggregate number of Shares beneficially owned by the Purchaser at such time bears to the total number of Shares then outstanding, and the Company shall, at such time, promptly take all actions necessary to cause the Purchaser's designees to be elected as directors of the Company, including increasing the size of the Board of Directors or securing the resignations of incumbent directors or both. At the request and expense of the Purchaser, the Company shall take all action necessary to effect any such election, including mailing to its stockholders the information required by Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. Notwithstanding the foregoing, at all times prior to the Effective Time of the Merger, the Board of Directors of the Company shall include at least two directors who held office as of the date of the Merger Agreement (any such director remaining in office being a "Continuing Director"). Following the election or appointment of Purchaser's designees and prior to the Effective Time, such designees shall abstain from acting upon, and the approval of a majority of the Continuing Directors shall be required to authorize and shall be sufficient to authorize, any resolution with respect to any termination of the Merger Agreement by the Company, any amendment of the Merger Agreement requiring action by the Board of Directors of the Company, any extension of time for the performance of any of the obligations or other acts of Imperial Holly or the Purchaser under the Merger Agreement, any waiver of compliance with any of the agreements or conditions under the Merger Agreement for the benefit of the Company and any action to seek to enforce any obligation of Imperial Holly or the Purchaser under this Agreement. The Merger. The Merger Agreement provides that, at the Effective Time, the Purchaser will be merged with and into the Company, whereupon the separate corporate existence of the Purchaser will cease and the Company will be the surviving corporation in the Merger. The Merger Agreement further provides that (i) subject to certain requirements in the Merger Agreement, the Certificate of Incorporation and the By-Laws of the Purchaser as in effect at the Effective Time shall be the Certificate of Incorporation and the By-Laws of the surviving corporation, (ii) the directors of the Purchaser immediately prior to the Effective Time shall be the initial directors of the surviving corporation, and (iii) the officers of the Company immediately prior to the Effective Time shall be the initial officers of the surviving corporation. 17 Consideration to be Paid in the Merger. The Merger Agreement provides that each Share issued and outstanding immediately prior to the Effective Time (other than Excluded Shares and Dissenting Shares) will be converted into the right to receive (i) Cash Consideration or (ii) Stock Consideration. The number of Shares to be converted into the right to receive the Cash Consideration in the Merger shall be the Cash Election Number. Subsequent to the consummation of the Offer, each stockholder of the Company holding Shares not tendered in the Offer (other than Excluded Shares) will be entitled to make an election to receive the Cash Consideration. If the number of Shares electing to receive the Cash Consideration exceeds the Cash Election Number, then pursuant to the Merger Agreement (i) each Share other than Cash Election Shares will be converted into the Stock Consideration and (ii) each stockholder making an election to receive the Cash Consideration (a "Cash Election") will be entitled to receive the Offer Price for that number of Cash Election Shares as is equal to the product of (x) the number of Cash Election Shares of such stockholder and (y) a fraction, the numerator of which is the Cash Election Number and the denominator of which is the total number of Cash Election Shares and (iii) each other Cash Election Share held by such stockholder will be converted into the Stock Consideration. If the number of Shares electing to receive the Cash Consideration is less than the Cash Election Number, then (i) each Cash Election Share will be converted into the right to receive the Offer Price, (ii) in addition to such Cash Election Shares, each stockholder (including stockholders who made Cash Elections with respect to some but not all of their Shares) will be required to accept the Offer Price for that number of Shares as is equal to the product of (x) the excess of the Cash Election Number over the number of Cash Election Shares and (y) a fraction, the numerator of which is the number of Shares (other than Cash Election Shares) held by such stockholder and the denominator of which is the aggregate number of outstanding Shares other than Cash Election Shares and (iii) each other Share held by such stockholder will be converted into the Stock Consideration. The Stock Consideration also includes with each Imperial Share the right to purchase one one-hundredth of a share of Series A Junior Participating Preferred Stock, without par value, of Imperial Holly pursuant to a rights agreement, dated as of September 14, 1989, as amended, between Imperial Holly and the Bank of New York, as rights agent. See "Introduction." Company Options. Each unexpired and unexercised option to purchase Shares issued pursuant to the Company's 1996 Equity Incentive Plan, or otherwise granted by the Company (in each case, an "Option"), shall, at the Effective Time and at the election of the holder of such Options either (i) be assumed by Imperial Holly and constitute an option to acquire, on the same terms and conditions as were applicable under such assumed Option, a number of Imperial Shares equal to the product of (A) the Stock Consideration and (B) the number of Shares subject to such Option, at a price per share equal to the amount obtained by dividing the exercise price of such Option by the Stock Consideration or (ii) be canceled by the Company, and each holder of an Option so canceled shall be entitled to receive an amount in cash equal to the difference between the Offer Price and the exercise price of such Option. Each holder of an Option shall make such election by notifying the Company and Imperial Holly by 5:00 p.m. New York City time on the Election Date (as defined below). At the Effective Time, Imperial Holly shall deliver to holders of Options who make the election set forth in clause (i) of the preceding sentence, appropriate option agreements representing the right to acquire Imperial Shares on the same terms and conditions as contained in the outstanding Options. Imperial Holly shall adopt and comply with the terms of the 1996 Equity Incentive Plan as it applies to Options assumed as set forth above including, without limitation, provisions regarding the accelerated vesting of Options which shall occur by virtue of consummation of the Merger, to the extent required by the terms of such Options or such Plan. The date of grant of each option to acquire Imperial Shares shall be deemed to be the date on which the corresponding Option was granted. Stockholders' Meetings. In the Merger Agreement, each of the Company and Imperial Holly agreed to take all action necessary in accordance with applicable law to duly call, give notice of, convene and hold a special meeting of its stockholders as soon as practicable following the consummation of the Offer for the purpose of (in the case of the Company) the approving and adopting of the Merger Agreement and the Merger or (in the case of Imperial Holly) the issuance of the Stock Consideration to stockholders of the Company in the Merger (the "Company Stockholders Meeting" and the "Imperial Stockholders Meeting," respectively). Subject to their fiduciary duties under applicable law, the respective Board of Directors of the Company and Imperial Holly will recommend that their respective stockholders approve such actions. 18 Exchange of Certificates. The Merger Agreement provides that as of or promptly after the Effective Time, Imperial Holly shall deposit the aggregate Merger Consideration with the Bank of New York (the "Exchange Agent") for the benefit of the holders of Shares. As soon as practicable after the Effective Time, each holder of an outstanding certificate or certificates which prior thereto represented Shares shall, upon surrender to the Exchange Agent of such certificate or certificates and acceptance thereof by the Exchange Agent, be entitled to a certificate or certificates representing the number of full Imperial Shares received as Stock Consideration and the Cash Consideration, if any, into which the number of Shares previously represented by such certificate or certificates surrendered shall have been converted pursuant to the Merger Agreement. The Exchange Agent shall accept such certificates upon compliance with such reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. If any certificate for such Imperial Shares is to be issued in, or if cash is to be remitted to, a name other than that in which the certificate representing Shares surrendered for exchange is registered, the certificate so surrendered shall be properly endorsed, with signature guaranteed or otherwise in proper form for transfer. The person requesting such exchange shall pay any transfer or other taxes required by reason of the issuance of certificates for such Imperial Shares in a name other than that of the registered holder of the certificate surrendered or establish that such tax has been paid or is not applicable. Until surrendered, each certificate representing Shares shall be deemed at any time after the Effective Time to represent only the right to receive the Merger Consideration upon surrender. Each holder of Shares after the Effective Time who would otherwise have been entitled to receive as Stock Consideration a fraction of an Imperial Share (after taking into account all Shares delivered by such holder) shall receive, in lieu thereof, a cash payment (without interest) equal to such fraction multiplied by the Cash Consideration. No dividends or other distributions with respect to Imperial Shares with a record date after the Effective Time shall be paid to the holder of any unsurrendered certificate representing Shares and no cash payment in lieu of fractional Imperial Shares shall be paid to any such holder until the surrender of such certificate representing Shares. However, following surrender of any such certificates, but subject to applicable laws, the holder of a certificate representing whole Imperial Shares shall be paid, without interest, at the time of such surrender (i) cash in lieu of fractional Imperial Shares to which such holder is entitled and (ii) the proportionate amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such fractional or whole Imperial Shares. Any portion of the Merger Consideration deposited with the Exchange Agent which remains undistributed to the holders of the certificates representing Shares for six months after the Effective Time shall be delivered to Imperial Holly, and any holders of Shares prior to the Effective Time who have not theretofore complied with the exchange provisions of the Merger Agreement shall thereafter look only to Imperial Holly and only as general creditors thereof for payment of their claim for cash or Imperial Shares. None of the Purchaser, the Company, Imperial Holly or the Exchange Agent shall be liable to any person in respect of any cash or any Imperial Shares delivered to a public office pursuant to any applicable abandoned property, escheat or similar law. If any certificates representing Shares shall not have been surrendered immediately prior to the date on which any Merger Consideration in respect of such certificate would otherwise escheat to or become the property of any government authority, any such Merger Consideration in respect of such certificate shall, as such time and to the extent permitted by applicable law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto. The Company shall pay all charges and expenses of the Exchange Agent. Elections. The Merger Agreement provides that each person who, on or prior to the Election Date, is a record holder of Shares (other than Excluded Shares) will be entitled, with respect to all or any portion of his Shares, to make a Cash Election on or prior to such Election Date to receive the Cash Consideration. The Company shall prepare and mail a form of election, which form shall be subject to the reasonable approval of Imperial Holly and the Purchaser (the "Form of Election"), with the joint proxy statement/prospectus prepared in connection with the Merger (the "Proxy Statement") to the record holders of Shares as of the record date for the Company Stockholders Meeting to be used by each such record holder who wishes to make a Cash Election 19 with respect to any or all Shares held by such holder. The Company will use commercially reasonable efforts to make the Form of Election and the Proxy Statement available to all persons who become holders of Shares during the period between such record date and the Election Date. Any such holder's Cash Election shall have been properly made only if the Exchange Agent shall have received at its designated office, by 5:00 p.m., New York City time on the business day (the "Election Date") next preceding the day on which the vote is taken at the Company Stockholders' Meeting (or any adjournment thereof) a Form of Election properly completed and signed and accompanied by certificates for the Shares to which such Form of Election relates (or by an appropriate guarantee of delivery of such certificates as set forth in such Form of Election from a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States, provided such certificates are in fact delivered to the Exchange Agent within three NYSE trading days after the date of execution of such guarantee of delivery). Failure to deliver Shares covered by such a guarantee of delivery within the time set forth therein shall invalidate an otherwise properly made Cash Election. Any Form of Election may be revoked by the stockholder submitting it to the Exchange Agent only by written notice received by the Exchange Agent (i) prior to 5:00 p.m., New York City time, on the Election Date or (ii) after the date of the Company Stockholders Meeting, if (and to the extent that) the Paying Agent is legally required to permit revocations and the Effective Time shall not yet have occurred. In addition, all Forms of Election shall automatically be revoked if the Exchange Agent is notified in writing by Imperial Holly, Purchaser and the Company that the Merger has been abandoned. If a Form of Election is revoked, the certificate or certificates (or guarantees of delivery, as appropriate) for Shares to which such Form of Election relates shall be promptly returned to the stockholder submitting the same to the Exchange Agent. The determination of the Exchange Agent shall be binding as to whether or not Cash Elections have been properly made or revoked with respect to Shares and when Cash Elections and revocations were received. If the Exchange Agent determines that any Cash Election was not properly made with respect to Shares, such Shares shall be exchanged in the Merger for Stock Consideration subject to the proration procedures described in "Consideration to be Paid in the Merger". The Exchange Agent shall also make all computations as to the allocation and the proration contemplated in connection with any exchange, and any such computation shall be conclusive and binding on the holders of Shares. Dissenters' Rights. If the Merger is consummated, persons who hold Shares at that time would have the right to appraisal of their Shares in accordance with Section 262 of the DGCL. Such appraisal rights, if the statutory procedures are complied with, would result in a judicial determination of the "fair value" of such Dissenting Shares (excluding any element of value arising from the accomplishment or expectation of the Merger) owned by such holders. In addition, such dissenting stockholders may be entitled to receive payment of a fair rate of interest from the date of consummation of the Merger on the amount determined to be the fair value of their Dissenting Shares. Any such judicial determination of the fair value of the Dissenting Shares could be based upon considerations other than or in addition to the Offer Price, the Cash Consideration or the Stock Consideration and the market value of the Shares, including asset values, the investment value of the Shares and any other valuation considerations generally accepted in the investment community. The value so determined for Dissenting Shares could be more or less than the Offer Price, the Cash Consideration or the Stock Consideration, and payment of such consideration would take place subsequent to payment pursuant to the Offer. The Company shall not, without the prior written consent of Purchaser and Imperial Holly, make any payment with respect to, or settle or offer to settle with, any such dissenters. In addition, several decisions by the Delaware courts have held that a controlling stockholder of a corporation involved in a merger has a fiduciary duty to the other stockholders which requires that the merger be fair to such other stockholders. In determining whether a merger is fair to minority stockholders, the Delaware courts have considered, among other things, the type and amount of consideration to be received by the stockholders and whether there was fair dealing among the parties. In Weinberger v. UOP, Inc., the Delaware Supreme Court stated, among other things, that although the remedy ordinarily available in a merger that is found not to be "fair" to minority stockholders is the right to appraisal described above, such appraisal remedy may 20 not be adequate "in certain cases, particularly where fraud, misrepresentation, self-dealing, deliberate waste of corporate assets, or gross and palpable overreaching are involved," and that in such cases the Delaware Chancery Court would be free to fashion any form of appropriate relief. If the Purchaser purchases Shares pursuant to the Offer, and the Merger or another merger or other business combination is consummated more than one year after the completion of the Offer, or if such a merger or other business combination were to provide for the payment of consideration less than that paid pursuant to the Offer, compliance by the Purchaser with Rule 13e-3 under the Exchange Act would be required, unless the Shares were to be deregistered under the Exchange Act prior to such transaction. See Section 12. Rule 13e-3 would require, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the proposed transaction and the consideration offered to minority stockholders therein be filed with the SEC and disclosed to minority stockholders prior to consummation of the transaction. Representations and Warranties. The Merger Agreement contains customary representations and warranties by the Company, on the one hand, and the Purchaser and Imperial Holly, on the other hand, relating to, among other things, (i) due organization and qualification, including subsidiaries, (ii) charter documents, (iii) capitalization, (iv) due authorization, execution and delivery of the Merger Agreement and consummation of the transactions contemplated thereby, (v) conflict with charter documents and required consents, (vi) possession of all necessary permits, (vii) accuracy of information contained in documents filed with the Commission and financial statements prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"), (viii) no material adverse affect since the end of the Company's and Imperial Holly's respective last fiscal years, (ix) the absence of material litigation, (x) matters relating to the Employee Retirement Income Security Act, (xi) intellectual property, (xii) taxes, (xiii) environmental matters, (xiv) products, (xv) real property and other assets, (xvi) insurance, (xvii) opinions of the Company's and Imperial Holly's respective financial advisors, (xviii) vote necessary for stockholder approval, (xix) no brokers other than financial advisors of the Company and Imperial Holly and (xx) no material misstatements or omissions in documents filed with Commission in connection with Offer and Merger. The Company also represented and warranted that it (a) amended the Company Rights Agreement, (b) amended certain provisions of the Company's Employee Benefit Trust and (c) terminated the agreement and plan of merger, dated July 14, 1997, entered into among the Company, Flo-Sun Incorporated ("Flo-Sun") and certain affiliates of Flo-Sun. In addition, the Purchaser and Imperial Holly represented that Imperial Holly received a commitment letter from LCPI to provide financing to complete the Offer and the Merger. Employee Benefit Matters. For a one year period immediately following the Closing Date, Imperial Holly has agreed to provide or cause the Surviving Corporation to provide all employees of the Company who continue to be employed by Imperial Holly or the Surviving Corporation or any of their respective affiliates as of the Effective Time ("Continuing Employees") with compensation and benefits on terms which are, in the aggregate, not substantially less favorable than those provided to Continuing Employees immediately prior to the date of the Merger Agreement. Prior to the execution of the Merger Agreement, the Company amended each of (i) the Company's Supplemental Executive Retirement Plan and (ii) the Deferred Compensation Plan for Key Employees of the Company, as amended and restated as of August 1, 1990 (collectively, the "Company Executive Deferred Compensation Plans"), to provide that neither the execution of the Merger Agreement, nor the consummation of the transactions comtemplated by the Merger Agreement, shall constitute a "change of control" for purposes of such Company Executive Deferred Compensation Plans or otherwise will result in the acceleration of vesting or payment of any benefit, or the triggering of any ancillary or supplemental benefit or subsidy, under such plan. Prior to the execution of the Merger Agreement and in accordance with the terms thereof, the Company amended its Benefit Trust Agreement (the "Benefit Trust") in order to, among other things, (i) provide for the prepayment of the existing note of the Benefit Trust (the "Note"), with the cash proceeds received in the Offer and the Merger; (ii) provide for the remaining corpus of the Benefit Trust to be reinvested in Imperial Shares to be acquired from Imperial Holly; (iii) provide that the corpus of the Benefit Trust will not be immediately 21 distributed to participants, but rather will be held in the Benefit Trust to pay benefits when due; (iv) provide that, from and after consummation of the Offer, the Company will no longer be entitled to be reimbursed from the Benefit Trust for payments or contributions made prior to such time under the covered benefit plans; (v) provide that no actions taken in connection with the Offer and the Merger will constitute a Potential Change in Control under the Benefit Trust; (vi) provide that, from and after consummation of the Offer, the Trustee can sell Imperial Shares only after giving Imperial Holly a right of first refusal; (vii) provide that, from and after consummation of the Offer, Imperial Shares held by the Benefit Trust will be voted in proportion to all other outstanding Imperial Shares; and (viii) provide that, from and after consummation of the Offer, the Trustee will tender or exchange Imperial Shares held by the Benefit Trust as directed by the Company's Board of Directors. The Merger Agreement stipulates that the cash received by the Benefit Trust in the Offer and the Merger will be used to repay the Note to the Company and to purchase additional Imperial Shares. Consummation of the Offer will constitute a Change in Control under the Benefit Trust. Agreements with Respect to the Conduct of Business Pending the Merger. The Merger Agreement provides that, between the date of the Merger Agreement and the Effective Time, the Company and Imperial Holly shall not, unless agreed to in writing by the other party, fail to carry on their business and the business of their subsidiaries in the usual, regular and ordinary course in substantially the same manner as conducted beforehand, or fail to use commercially reasonable efforts to preserve substantially intact their present lines of business, maintain their rights and franchises and preserve their relationships with employees, customers and suppliers. The Merger Agreement contains covenants of both the Company and Imperial Holly with respect to the period between the date of the Merger Agreement and the Effective Time, including covenants that: (i) prevent amendment to corporate governance documents, (ii) prevent issuance of securities, (iii) prevent declaration and payment of dividends (other than regular quarterly dividends), (iv) limit reclassification or alteration of any of its capital stock, (v) limit acquisition or disposition of any entity or assets not in the ordinary course of business, (vi) limit incurrence of any indebtedness, (vii) limit entrance into, amendment or termination of any material contract, (viii) limit authorization of any material capital expenditure, (ix) limit increases of the compensation to its officers or employees, (x) limit entrance into or amendment of any employment or severance agreement, (xi) prevent the establishment or amendment of any benefit or option plans, (xii) limit changes in accounting methods, (xiii) prevent the making of any tax election with respect to any material tax liability and (xiv) limit payment, discharge or satisfaction of any obligation. In addition, the Merger Agreement contains covenants of both the Company and Imperial Holly with respect to the period between the date of the Merger Agreement and Effective Time, that neither party will (i) take any action that would prevent or impede the Merger from obtaining any material consent or approval, (ii) enter into any agreement that would limit such company's ability to compete or (iii) take any action that would result in breach of any representations or warranties or prevent the conditions to the Merger from being satisfied. Neither the Company, Imperial Holly nor any subsidiary thereof may authorize or enter into an agreement to do anything listed above. No Solicitation. The Merger Agreement provides that neither the Company nor any subsidiary shall, directly or indirectly, initiate, solicit, encourage, or otherwise facilitate any inquiries or the making of any proposal or offer relating to a merger, reorganization, share exchange, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction (other than the transactions contemplated by the Merger Agreement) (any of such transactions being an "Acquisition Proposal") involving, or any purchase or sale of all or any significant portion of the assets or 20% or more of the equity securities of, the Company or any subsidiary that could reasonably be expected to interfere with the completion of the Merger or the other transactions contemplated by the Merger Agreement. Neither the Company or any subsidiary of the Company will have any discussion with or provide any confidential information or data to any person or entity relating to an Acquisition Proposal or engage in any negotiations concerning an Acquisition Proposal, or otherwise facilitate any effort or attempt to make or implement an Acquisition Proposal or accept an Acquisition Proposal; provided, however, that nothing contained in the Merger Agreement shall prevent the Company or the Company's Board of Directors from (i) complying with Rule 14e-2 under the Exchange Act with regard to an Acquisition Proposal; (ii) engaging in any discussions or negotiations with, or providing any information to, any person or entity in 22 response to an unsolicited bona fide written Acquisition Proposal by any such person or entity; or (iii) recommending such an unsolicited bona fide written Acquisition Proposal to the holders of Shares if and only to the extent that, in any such case as is referred to in clauses (ii) and (iii), (A) the Company's Board of Directors concludes in good faith (after consultation with its legal counsel and financial advisors) that such Acquisition Proposal is reasonably capable of being completed, and would, if consummated, result in a transaction more favorable to holders of Shares than the transactions contemplated by the Merger Agreement (any such more favorable Acquisition Proposal being hereinafter referred to as a "Superior Proposal"), (B) the Company's Board of Directors determines in good faith after consultation with legal counsel that such action is necessary for it to act in a manner consistent with its fiduciary duties, (C) prior to providing any information or data to any person or entity in connection with a Superior Proposal, the Company's Board of Directors receives from such person or entity an executed confidentiality agreement on terms substantially similar to those contained in the confidentiality agreement, dated August 26, 1997, between the Company and Imperial Holly and (D) prior to providing any information or data to or entering into discussions or negotiations with any person or entity, the Company's Board of Directors notifies Imperial Holly promptly of the inquiries, proposals or offers received by, the information requested from, or the discussions or negotiations sought to be initiated or continued with, the Company or any subsidiary indicating the name of such person or entity and the terms and conditions of any proposals or offers. The Company also will cease and cause to be terminated any existing activities, discussions or negotiations with any parties previously conducted regarding any Acquisition Proposal. Indemnification of Directors. As provided in the Merger Agreement, Imperial Holly will, and will cause the Surviving Corporation to, maintain all rights of indemnification existing in favor of, and indemnify, each present and former director, officer, employee and fiduciary of the Company or any subsidiary and each person who served at the request of the Company or any subsidiary (collectively, the "Indemnified Parties") to the fullest extent permitted under applicable law against all losses and claims arising out of or pertaining to any action or omission in the capacity as an officer, director, employee or fiduciary of the Company. Imperial Holly and the Purchaser agree that all rights to indemnification existing in favor of the Indemnified Parties as provided in the Company's By-Laws, as in effect as of the date hereof, with respect to matters occurring through the Effective Time, shall survive the Merger and shall continue in full force and effect for a period of not less than six years from the Effective Time. In the event any claim, action, suit, proceeding or investigation (a "Claim") is brought against any Indemnified Party (whether arising before or after the Effective Time) after the Effective Time, the Indemnified Parties have certain rights with respect to retention of counsel, payment of fees and expenses and assistance in the vigorous defense of any Claim (provided that neither Imperial Holly nor the Surviving Corporation shall be liable for any settlement of any Claim effected without its written consent). Any Indemnified Party wishing to claim indemnification must notify Imperial Holly (but the failure to so notify Imperial Holly shall not relieve Imperial Holly from any liability that Imperial Holly may have thereunder except to the extent such failure materially prejudices Imperial Holly), and must deliver to Imperial Holly the undertaking contemplated by Section 145(e) of the General Corporate Law of the State of Delaware. The Indemnified Parties as a group may retain only one law firm to represent them with respect to each such matter unless there is, under applicable standards of professional conduct, a conflict on any significant issue between the positions of any two or more Indemnified Parties. For a period of six years after the Effective Time, Imperial Holly shall cause to be maintained in effect the current directors' and officers' liability insurance policies maintained by the Company with respect to claims arising from facts or events that occurred prior to the Effective Time; provided, however, that in no event shall Imperial Holly be required to expend more than an amount per year equal to 200% of current annual premiums paid by the Company for such insurance. Company Rights Plan. The Company's Board of Directors shall take all further action necessary in order to render the preferred stock purchase rights under the Company Rights Agreement inapplicable to the Offer, the Merger and the other transactions contemplated by the Merger Agreement, to terminate the Company Rights Agreement as of the Effective Time and to ensure that Imperial Holly and Purchaser will not have any obligations in connection with the Company Rights Agreement or such related purchase rights. 23 Conditions to Each Party's Obligation to Effect the Merger. In addition to the approval and adoption of the Merger Agreement and the transactions contemplated thereby by the affirmative vote of the stockholders of the Company in accordance with the DGCL and the Company's Certificate of Incorporation and the approval of the issuance of the Imperial Shares pursuant to the Merger by the affirmative vote of the shareholders of Imperial Holly in accordance with the applicable rules and regulations of the American Stock Exchange, the obligations of the Company, Imperial Holly and the Purchaser to consummate the Merger are subject to the following conditions: (i) any waiting period (and any extension thereof) applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated; (ii) the absence of any law, rule, regulation or other order by any governmental entity which would have the effect of restraining or making the Merger illegal or otherwise prohibiting consummation of the Merger; (iii) the Registration Statement on Form S-4 to be filed by Imperial Holly with the Commission after the consummation of the Offer (the "Registration Statement") shall have been declared effective, and the absence of a stop order suspending such effectiveness; (iv) the Imperial Shares to be issued in the Merger and pursuant to options assumed by Imperial Holly shall have been authorized for listing on the American Stock Exchange, subject to official notice of issuance; and (v) the Purchaser shall have purchased Shares pursuant to the Offer. Termination. The Merger Agreement may be terminated and the Merger and the other transactions contemplated thereby may be abandoned at any time prior to the Effective Time, notwithstanding any requisite approval and adoption of the Merger Agreement and the transactions contemplated thereby: (a) by mutual written consent of Imperial Holly and the Company; or (b) by Imperial Holly or the Company if the Effective Time shall not have occurred on or before May 31, 1998; provided, however, that the right to terminate the Merger Agreement will not be available to any party whose failure to fulfill any obligation under the Merger Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date; or (c) by either Imperial Holly or the Company, if any court of competent jurisdiction in the United States or other governmental entity, based otherwise than on any antitrust law, (i) shall have issued an order, decree, judgment, injunction, ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by the Merger Agreement and such order, decree, judgment, injunction, ruling or other action shall have become final or nonappealable or (ii) shall have failed to issue an order, decree, judgment, injunction, ruling or other action or to take any other action necessary to fulfill the conditions to the closing of the Merger and such denial of a request to issue such order, decree, judgment, injunction, ruling or other action or take such other action shall have become final and nonappealable; or (d) (x) by either Imperial Holly or the Company, if the Merger Agreement and the transactions contemplated thereby shall fail to receive the requisite vote for approval and adoption at the Company Stockholders' Meeting or (y) by the Company, if the issuance of the Imperial Shares as part of the Merger shall fail to receive the requisite vote for approval at the Imperial Shareholders Meeting; or (e) by Imperial Holly, if prior to the payment for Shares pursuant to the Offer (i) the Company's Board of Directors withdraws, modifies or changes its approval or recommendation (including by amendment of the Schedule 14D- 9) of the Merger Agreement, the Offer or the Merger in a manner adverse to Imperial Holly or the Purchaser, (ii) the Company's Board of Directors shall, at a time when there is an Acquisition Proposal with respect to the Company, fail to reaffirm such approval or recommendation of the Merger Agreement, the Offer or the Merger upon the reasonable request of Imperial Holly and Purchaser, (iii) the Company's Board of Directors shall approve or recommend any acquisition of the Company or a material portion of its assets or any tender offer for shares of its capital stock, in each case, other than by the other parties to the Merger Agreement or affiliates thereof; (iv) a tender offer or exchange offer for 20% or more of the outstanding Shares is commenced, and the Company's Board of Directors fails to recommend against acceptance of such tender offer or exchange offer by its stockholders (including by taking no position with 24 respect to the acceptance of such tender offer or exchange offer by its stockholders); or (v) the Company's Board of Directors has resolved to take any of the actions specified in clauses (i) through (iv) above; (f) by the Company, prior to the payment for Shares pursuant to the Offer, upon five business days' prior notice to Imperial Holly and Purchaser (which notice shall be revocable by the Company), if, as a result of a Superior Proposal received by the Company from a person or entity other than a party to this Agreement or any of its affiliates, the Company's Board of Directors determines in good faith that their fiduciary obligations require that such Superior Proposal be accepted; provided, however, that (i) the Company's Board of Directors shall have concluded in good faith, on the basis of advice of counsel, that such action is necessary for the Company's Board of Directors to act in a manner consistent with its fiduciary duties and (ii) prior to the effective date of any such termination, the Company shall provide Imperial Holly and Purchaser with an opportunity to make such adjustments in the terms and conditions of this Agreement, the Offer or the Merger as would enable the Company to proceed with the transactions contemplated hereby; provided, however, that it shall be a condition to the effectiveness of termination by the Company that the Company shall have made the payment of the Termination Fee (as defined below) to Imperial Holly; (g) by Imperial Holly, prior to the payment for Shares pursuant to the Offer, upon a breach of any representation, warranty, covenant or agreement on the part of the Company set forth in this Agreement, or if any representation or warranty of the Company shall have become untrue; provided, however, that, if such breach is curable by the Company and for so long as the Company continues to exercise all reasonable efforts to cure such breach, Imperial Holly may not terminate the Merger Agreement; (h) by the Company, prior to the payment for Shares pursuant to the Offer, upon breach of any representation, warranty, covenant or agreement on the part of Imperial Holly or the Purchaser set forth in this Agreement, or if any representation or warranty of Imperial Holly and the Purchaser shall have become untrue, in either case except for such breaches or failures (i) which, individually or in the aggregate, would not have an material adverse effect upon Imperial Holly and (ii) which, individually or in the aggregate, would not materially impair or delay the ability of the Purchaser to consummate the Offer or the ability of Imperial Holly, the Purchaser and the Company to effect the Merger; provided, however, that, if such breach is curable by Imperial Holly and the Purchaser and for so long as Imperial Holly and the Purchaser continue to exercise all reasonable efforts to cure such breach, the Company may not terminate the Merger Agreement; or (i) by Imperial Holly, if the Offer is terminated or expires without the purchase of any Shares thereunder, unless such termination or expiration has been caused by or resulted from the failure in any material respect of Imperial Holly or the Purchaser to perform any of its covenants and agreements contained in the Merger Agreement or in the Offer; and (j) by the Company, if all of the conditions to the Offer have been satisfied except for the Financing Condition and Imperial Holly fails to accept and pay for the Shares in the Offer solely because of the failure of LCPI to provide the funding necessary for such purchase. (k) by the Company, if on May 29, 1998, the Effective Time shall not have occurred because Imperial Holly and the Purchaser have not been permitted to consummate the Offer and the Merger by reason of any antitrust law. Fees and Expenses. The Merger Agreement provides that except as set forth herein, all expenses incurred in connection with the Merger Agreement shall be paid by the party incurring such expenses, whether or not the Merger is consummated, except that the Company and Imperial Holly each shall pay one- half of all expenses relating to printing, filing and mailing the Registration Statement and the Proxy Statement and all Commission and other regulatory filing fees incurred in connection with the Registration Statement and the Proxy Statement. Termination Fees. The Merger Agreement provides that (i) if Imperial Holly terminates the Merger Agreement pursuant to paragraph (e) above or (ii) if the Company terminates the Merger Agreement pursuant to 25 paragraph (f) above or (iii) if (A) Imperial Holly or the Company terminates the Merger Agreement pursuant to paragraph (d) due to the failure of the Company's stockholders to approve and adopt the Merger Agreement and (B) at the time of such failure to so approve and adopt the Merger Agreement there exists an Acquisition Proposal with respect to the Company and, within 12 months of the termination of the Merger Agreement, the Company enters into a definitive agreement with any third party with respect to an Acquisition Proposal with respect to the Company, then the Company will pay to Imperial Holly an amount equal to $8,000,000 (the "Company Termination Fee"). The Merger Agreement provides that if the Company terminates the Merger Agreement pursuant to paragraph (j) or (k) above, then Imperial Holly will pay to the Company an amount equal to $8,000,000 (the "Imperial Termination Fee"). The Company Termination Fee required to be paid pursuant to clause (ii) above shall be paid prior to, and will be a pre-condition to effectiveness of termination of the Merger Agreement and the Company Termination Fee required to be paid pursuant to clause (iii) will be paid to Imperial Holly on the next business day after a definitive agreement is entered into with a third party with respect to an Acquisition Proposal with respect to the Company. Any payment of a Company Termination Fee or an Imperial Termination Fee shall be made not later than two business days after termination of the Merger Agreement. Amendment. The Merger Agreement provides that it may be amended (by an instrument in writing signed by the parties thereto) by the parties thereto by action by or on behalf of their respective Boards of Directors at any time prior to the Effective Time; provided, however, after approval and adoption of the Merger Agreement and the transactions contemplated thereby by the stockholders of the Company, no amendment may be made which would reduce the amount or change the type of consideration payable in the Merger. Company Stockholders Agreement. As a condition and inducement to entering the Merger Agreement, Imperial Holly and the Purchaser required that substantially all of the directors and executive officers of the Company enter into a stockholders agreement, dated September 12, 1997. Pursuant to the Stockholder Agreement, each such stockholder severally agreed to tender all Shares owned by such stockholder into the Offer prior to the expiration of the Offer and not to withdraw any Shares so tendered so long as the per Share price is not less than $20.25 in cash net to the seller. Imperial Holly Proxy Agreements. As a condition and inducement to entering the Merger Agreement, the Company required that certain stockholders of Imperial Holly, affiliated with Imperial Holly and representing approximately 66.34% of the issued and outstanding Imperial Shares, enter into the Imperial Holly Proxy Agreements, pursuant to which they would agree to vote all of their Imperial Shares in favor of the Merger. Employment Agreements. In connection with the Merger, Imperial Holly intends to enter into a new employment agreement with Mr. Sprague providing for a 5- year term beginning on the Merger Date. Pursuant to the employment agreement, Mr. Sprague will continue as the President of the Company and will be nominated to serve on Imperial Holly's Board. In addition to his base salary which will continue at no less than $430,000, Mr. Sprague will be entitled to participate in an annual bonus program, which provides him with a maximum bonus opportunity equal to 75% of his base salary, to continue to receive benefits under the Company's Supplemental Executive Retirement Plan and retiree health benefits, to receive a stock option grant with respect to 135,000 shares of Imperial Holly common stock, and various other benefits and perquisites. In addition, upon termination of his employment for "Good Reason" or if he is involuntarily terminated by Imperial Holly other than for "Cause" (as those terms are defined in the employment agreement), Mr. Sprague will be entitled to receive a lump sum payment equal to three times the sum of his base salary and his highest bonus amount (as defined in the employment agreement), his stock options shall vest, and certain employee benefits will be continued for a period of up to five years. Also, in the event these payments would exceed the "golden" parachute payment limit of the Internal Revenue Code, Mr. Sprague will be made "whole" on a net after-tax basis for any parachute excise tax he incurs. Imperial Holly acknowledged, in connection with the execution of 26 the Merger Agreement, its intention to enter into employment agreements, to become effective upon consummation of the Merger, with certain other senior executives of the Company on terms to be determined. Section 12. Effect of the Offer on the Market for Shares. The purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining shares held by stockholders other than the Purchaser. The Purchaser cannot predict whether the reduction in the number of Shares and the existence of the Merger Agreement would have an adverse or beneficial effect on the market price for or marketability of the Shares or whether it would cause future market prices to be equal to or greater or less than the Offer Price. The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of the Shares. Depending upon factors similar to those described above regarding listing and market quotations, following the Offer it is possible that the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers. If the Purchaser acquires a substantial number of Shares, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 under the Securities Act may be impaired. Section 13. Dividends and Distributions. If, on or after September 12, 1997, the Company should, except as permitted under the Merger Agreement, (i) split or combine the Shares, or otherwise change the Shares or its capitalization, (ii) issue or sell any additional securities of the Company (other than Shares issued or sold upon the exercise (in accordance with the present terms thereof) of Options outstanding on September 12, 1997, or (iii) acquire currently outstanding Shares or otherwise cause a reduction in the number of outstanding Shares, then, without prejudice to the Purchaser's rights under Sections 1 and 14 hereof, the Purchaser, in its sole discretion (subject to the terms of the Merger Agreement), may make such adjustments as it deems appropriate in the Offer Price and other terms of the Offer and the Merger including, without limitation, the amount and type of securities offered to be purchased. If, on or after September 12, 1997, the Company should, except as permitted under the Merger Agreement, declare or pay any dividend on the Shares or make any distribution (including, without limitation, the issuance of additional Shares pursuant to a stock dividend or stock split, the issuance of other securities or the issuance of rights for the purchase of any securities) with respect to the Shares that is payable or distributable to stockholders of record on a date prior to the transfer to the name of the Purchaser or its nominee or transferee on the Company's stock transfer records of the Shares purchased pursuant to the Offer, then, without prejudice to the Purchaser's rights under Sections 1 and 14 hereof, (i) the Offer Price payable by the Purchaser pursuant to the Offer will be reduced by the amount of any such cash dividend or cash distribution and (ii) any such non-cash dividend, distribution or right to be received by the tendering stockholders will be received and held by the tendering stockholders for the account of the Purchaser and will be required to be promptly remitted and transferred by each tendering stockholder to the Paying Agent for the account of the Purchaser, accompanied by appropriate documentation of transfer. Pending such remittance and subject to applicable law, the Purchaser will be entitled to all rights and privileges as owner of any such non-cash dividend, distribution or right and may withhold the entire Offer Price or deduct from the Offer Price the amount or value thereof, as determined by the Purchaser in its sole discretion. Section 14. Conditions to the Offer. Notwithstanding any other provision of the Offer, the Purchaser will not be required to accept for payment or pay for any Shares tendered pursuant to the Offer, and may terminate or amend the Offer and may postpone the acceptance for payment of and payment for Shares tendered, if (i) the Target Share Condition, the HSR 27 Condition or the Financing Condition shall not have been satisfied or (ii) at any time on or after the date of the Merger Agreement, and prior to the acceptance for payment of Shares, any of the following conditions shall have occurred and be continuing: (a) there shall have been any action taken, or any statute, rule, regulation, judgment, administrative interpretation, order or injunction enacted, promulgated, entered, enforced or deemed applicable to the Offer or the Merger (other than the application of the waiting period provisions of the HSR Act) by any court of competent jurisdiction in the United States or other governmental entity, which would (i) restrain, prohibit or make illegal or otherwise prohibit (A) the acceptance for payment of, or payment for or purchase of at least the Target Number of Shares of the Shares or (B) the consummation of the Merger, or (ii) prohibiting Imperial Holly or any of its affiliates to exercise full rights of ownership of the Shares, including without limitation the right to vote any Shares purchased by them on all matters properly presented to the stockholders of the Company, including without limitation the adoption and approval of the Merger Agreement and the Merger; (b) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States, (ii) the declaration of any banking moratorium or any suspension of payments in respect of banks or any material limitation (whether or not mandatory) on the extension of credit by lending institutions in the United States, (iii) the commencement of a war, material armed hostilities or any other material international or national calamity involving the United States having a significant adverse effect on the functioning of the financial markets in the United States, or (iv) in the case of any of the foregoing existing at the time of the execution of the Merger Agreement, a material acceleration or worsening thereof; (c) the Company shall have breached or failed to comply with any of its obligations under the Merger Agreement (other than as a result of a breach by Imperial Holly or the Purchaser of any of their obligations under the Merger Agreement) and such breach or failure shall continue unremedied for ten (10) business days after the Company has received written notice from Imperial Holly or the Purchaser of the occurrence of such breach or failure, except such breaches or failures (i) which, individually and in the aggregate, would not have a material adverse effect on the Company and (ii) which, individually and in the aggregate, would not materially impair or delay the ability of the Purchaser to consummate the Offer or the ability of Imperial Holly, the Purchaser and the Company to effect the Merger; (d) any representation or warranty of the Company contained in the Merger Agreement shall fail to be true and correct as of such expiration or proposed termination of the Offer except for such failures (i) which, individually and in the aggregate, would not have a material adverse effect on the Company and (ii) which, individually and in the aggregate, would not materially impair or delay the ability of the Purchaser to consummate the Offer or the ability of Imperial Holly, the Purchaser and the Company to effect the Merger, provided that Imperial Holly shall have notified the Company promptly upon learning of such failure; (e) the Merger Agreement shall have been terminated pursuant to its terms or amended pursuant to its terms to provide for such termination or amendment of the Offer; or (f) the Company's Board of Directors shall have (i) (including by amendment of the Schedule 14D-9) withdrawn or modified in any manner adverse to Imperial Holly or the Purchaser its approval or recommendation of the Offer, the Merger or the Merger Agreement or (ii) resolved to do any of the foregoing; which, in the good faith reasonable judgment of Imperial Holly and the Purchaser, makes it inadvisable to proceed with acceptance for payment or payment for the Shares. The Merger Agreement provides that, except as provided for therein, the foregoing conditions are for the sole benefit of Imperial Holly and the Purchaser and may be asserted or waived by Imperial Holly or the Purchaser, in whole or in part, at any time or from time to time, in its discretion. The failure of Imperial Holly 28 or the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. Section 15. Certain Legal Matters; Required Regulatory Approvals. Except as set forth in this Offer to Purchase, based on a review of publicly available filings by the Company with the SEC and other publicly available information regarding the Company, neither Imperial Holly nor the Purchaser is aware of any licenses or regulatory permits that appear to be material to the business of the Company and its subsidiaries, taken as a whole, and that might be adversely affected by the Purchaser's acquisition of the Shares (and the indirect acquisition of the stock of the Company's subsidiaries) as contemplated herein, or any approvals or other actions by or with any domestic, foreign or supranational governmental authority or administrative or regulatory agency that would be required for the acquisition or ownership of the Shares (or the indirect acquisition of the stock of the Company's subsidiaries) by the Purchaser pursuant to the Offer as contemplated herein. Should any such approval or other action be required, it is presently contemplated that such approval or action would be sought except as described below under "State Takeover Laws." Should any such approval or other action be required, there can be no assurance that any such approval or action, if needed, would be obtained without substantial conditions or that adverse consequences might not result to the Company's or its subsidiaries' businesses, or that certain parts of the Company's, Imperial Holly's, the Purchaser's or any of their respective subsidiaries' businesses might not have to be disposed of or held separate or other substantial conditions complied with in order to obtain such approval or action or in the event that such approvals were not obtained or such actions were not taken. The Purchaser's obligation to purchase and pay for Shares is subject to certain conditions, including conditions with respect to injunctions and governmental actions. See the Introduction and Section 14. State Takeover Laws. A number of states (including Delaware, where the Company is incorporated) have adopted takeover laws and regulations which purport, to varying degrees, to be applicable to attempts to acquire securities of corporations which are incorporated in such states or which have substantial assets, stockholders, principal executive offices or principal places of business therein. To the extent that certain provisions of certain of these state takeover statutes purport to apply to the Offer or the Merger, the Purchaser believes that such laws conflict with federal law and constitute an unconstitutional burden on interstate commerce. In 1982, the Supreme Court of the United States, in Edgar v. Mite Corp., invalidated on constitutional grounds the Illinois Business Takeover Statute which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult, and the reasoning in such decision is likely to apply to certain other state takeover statutes. In 1987, however, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court of the United States held that the State of Indiana could, as a matter of corporate law and, in particular, those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of the remaining stockholders, provided that such laws were applicable only under certain conditions. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a federal district court in Oklahoma ruled that the Oklahoma statutes were unconstitutional insofar as they apply to corporations incorporated outside Oklahoma in that they would subject such corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a federal district court in Tennessee ruled that four Tennessee takeover statutes were unconstitutional as applied to corporations incorporated outside Tennessee. This decision was affirmed by the United States Court of Appeals for the Sixth Circuit. In December 1988, a federal district court in Florida held in Grand Metropolitan PLC v. Butterworth that the provisions of the Florida Affiliated Transactions Act and Florida Control Share Acquisition Act were unconstitutional as applied to corporations incorporated outside of Florida. The Purchaser has not attempted to comply with any state takeover statutes in connection with the Offer or the Merger. The Purchaser reserves the right to challenge the validity or applicability of any state law allegedly applicable to the Offer or the Merger and nothing in this Offer to Purchase nor any action taken in connection herewith is intended as a waiver of that right. In the event that it is asserted that one or more takeover statutes apply to the Offer or the Merger, and it is not determined by an appropriate court that such statute or statutes do 29 not apply or are invalid as applied to the Offer or the Merger, as applicable, the Purchaser may be required to file certain documents with, or receive approvals from, the relevant state authorities, and the Purchaser might be unable to accept for payment or purchase Shares tendered pursuant to the Offer or be delayed in continuing or consummating the Offer. In such case, the Purchaser may not be obligated to accept for purchase, or pay for, any Shares tendered. See Section 14. Antitrust. Under the HSR Act and the rules that have been promulgated thereunder by the FTC, certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division and the FTC and certain waiting period requirements have been satisfied. The acquisition of Shares by the Purchaser pursuant to the Offer are subject to such requirements. See Section 2. Pursuant to the HSR Act, on September 17, 1997, Imperial Holly filed a Premerger Notification and Report Form in connection with the purchase of Shares pursuant to the Offer with the FTC and the Antitrust Division. Under the provisions of the HSR Act applicable to the Offer, the purchase of Shares pursuant to the Offer may not be consummated until the expiration of a 15- calendar day waiting period following the filing by Imperial Holly. Accordingly, the waiting period under the HSR Act applicable to the purchase of Shares pursuant to the Offer will expire at 11:59 p.m., New York City time, on October 2, 1997, unless such waiting period is earlier terminated by the FTC and the Antitrust Division or extended by a request from the FTC or the Antitrust Division for additional information or documentary material prior to the expiration of the waiting period or by the withdrawal and resubmission of the Premerger Notification and Report Form by Imperial Holly. The effect of withdrawal and submission of such form would be to give the relevant governmental agency an additional 15-day waiting period. Pursuant to the HSR Act, Imperial Holly has requested early termination of the waiting period applicable to the Offer. There can be no assurance, however, that either the 15-day HSR Act waiting period will be terminated early or not extended. If either the FTC or the Antitrust Division were to request additional information or documentary material from Imperial Holly with respect to the Offer, the waiting period with respect to the Offer would expire at 11:59 p.m., New York City time, on the tenth calendar day after the date of substantial compliance by Imperial Holly with such request. Thereafter, the waiting period could be extended only by court order or with Imperial Holly's consent. If the acquisition of Shares is delayed pursuant to a request by the FTC or the Antitrust Division for additional information or documentary material pursuant to the HSR Act, the Offer may, but need not, be extended and, in any event, the purchase of and payment for Shares will be deferred until 10 days after the request is substantially complied with, or unless the waiting period is sooner terminated by the FTC and the Antitrust Division. Only one extension of such waiting period pursuant to a request for additional information is authorized by the HSR Act and the rules promulgated thereunder, except by court order or with the consent of Imperial Holly. Any such extension of the waiting period will not give rise to any withdrawal rights not otherwise provided for by applicable law. See Section 4. It is a condition to the Offer that the waiting period applicable under the HSR Act to the Offer expire or be terminated. See Section 14. In any event, pursuant to Rule 14e-1(a) under the Exchange Act, the Expiration Date may not occur prior to October 16, 1997. If the acquisition of Shares is delayed pursuant to a request by the FTC or the Antitrust Division for information or documentary material pursuant to the HSR Act, the Offer may, at the discretion of the Purchaser (subject to the terms and conditions of the Merger Agreement) be extended and, in any event the purchase of and payment for Shares will be deferred until the applicable waiting period expires or is terminated. Unless the Offer is extended, any extension of the waiting period will not give rise to any additional withdrawal rights. See Section 4. In practice, complying with a request for information or documentary material can take a significant amount of time. In addition, if the Antitrust Division or the FTC raises substantive issues in connection with a proposed transaction, the parties frequently engage in negotiations with the relevant governmental agency concerning possible means of addressing those issues and may agree to delay consummation of the transaction while such negotiations continue. The FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions such as the Purchaser's acquisition of Shares pursuant to the Offer and the Merger. At any time before or after 30 the Purchaser's acquisition of Shares, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the acquisition of Shares pursuant to the Offer or otherwise or seeking divestiture of Shares acquired by the Purchaser or divestiture of substantial assets of Imperial Holly, the Company or their subsidiaries. Private parties and state attorneys general may also bring legal action under the antitrust laws under certain circumstances. Based upon an examination of publicly available information relating to the businesses in which Imperial Holly and the Company are engaged, Imperial Holly and the Purchaser believe that the acquisition of Shares by the Purchaser will not violate the antitrust laws. Nevertheless, there can be no assurance that a challenge to the Offer or other acquisition of Shares by the Purchaser on antitrust grounds will not be made or, if such a challenge is made, of the result. See Section 14 for certain conditions to the Offer, including conditions with respect to injunctions and certain governmental actions. Section 16. Fees and Expenses. Lehman Brothers is acting as Dealer Manager in connection with the Offer. In addition, Lehman Brothers has provided certain financial advisory services to Imperial Holly in connection with the proposed acquisition of the Company. As compensation for such services, Imperial Holly has to date paid Lehman Brothers a fee of $100,000, which fee was payable upon execution of the engagement letter with Lehman Brothers, and a fee of $900,000, which was payable upon announcement of Imperial Holly's intent to acquire the Company. Imperial Holly has also agreed to pay Lehman Brothers a fee of 0.75% of the aggregate consideration to be paid to holders of Shares involved in the acquisition of the Company contingent upon the consummation of such acquisition, against which all fees previously paid will be fully creditable. Imperial Holly has agreed to reimburse Lehman Brothers for its out-of-pocket expenses, including fees and expenses of its counsel, and to indemnify Lehman Brothers (and certain affiliated persons) against certain liabilities and expenses. Lehman Brothers may from time to time in the future render various investment banking services to Imperial Holly and its affiliates, for which it is expected it would be paid customary fees. In addition, LCPI, an affiliate of Lehman Brothers, is serving as the exclusive arranger and adviser to Imperial Holly in securing the financing necessary to fund the purchase of Shares pursuant to the Offer and the Merger. D. F. King & Co., Inc. has been retained by the Purchaser as Information Agent in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telex, telegraph and personal interview and may request brokers, dealers and other nominee stockholders to forward material relating to the Offer to beneficial owners of Shares. The Purchaser will pay the Information Agent reasonable and customary compensation for all such services in addition to reimbursing the Information Agent for reasonable out- of-pocket expenses in connection therewith. In addition, Wachovia Bank, N.A. has been retained as the Paying Agent. The Purchaser will pay the Paying Agent reasonable and customary compensation for its services in connection with the Offer and reimburse the Paying Agent for its reasonable out-of-pocket expenses in connection therewith. Except as set forth above, neither Imperial Holly nor the Purchaser will pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies and other nominees will, upon request, be reimbursed by Imperial Holly or the Purchaser for customary clerical and mailing expenses incurred by them in forwarding offering materials to their customers. Section 17. Miscellaneous. The Purchaser is not aware of any jurisdiction in which the making of the Offer is not in compliance with applicable law. If the Purchaser becomes aware of any jurisdiction in which the making of the Offer would not be in compliance with applicable law, the Purchaser will make a good faith effort to comply with any such law. If, after such good faith effort, the Purchaser cannot comply with any such law, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares residing in such jurisdiction. In those 31 jurisdictions whose securities or blue sky laws require the Offer to be made by a licensed broker or dealer, the Offer is being made on behalf of the Purchaser by one or more registered brokers or dealers which are licensed under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF THE PURCHASER OR IMPERIAL HOLLY NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. The Purchaser has filed with the SEC the Schedule 14D-1 pursuant to Rule l4d-3 under the Exchange Act, furnishing certain additional information with respect to the Offer, and may file amendments thereto. The Schedule 14D-1 and any amendments thereto, including exhibits, may be inspected and copies may be obtained at the same places and in the same manner as set forth in Section 7 (except that they will not be available at the regional offices of the SEC). IHK MERGER SUB CORPORATION 32 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER AND IMPERIAL HOLLY 1. Directors and Executive Officers of the Purchaser. The following table sets forth the name, current business address and present principal occupation or employment and material occupations, positions, offices or employments for the past five years of each director and executive officer of the Purchaser. Unless otherwise indicated, the current business address of each person is c/o One Imperial Square, Suite 200, 8016 Highway 90-A, Sugar Land, Texas 77478, and each occupation set forth opposite an individual's name refers to employment with the Purchaser. Each such person is a citizen of the United States, unless otherwise indicated. DIRECTORS AND EXECUTIVE OFFICERS
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - --------------------------- ---------------------------------------------------- James C. Kempner........... Director; Chief Executive Officer and Chief Financial Officer; see "Directors and Executive Officers of Imperial Holly." William F. Schwer.......... Director; Vice President and Secretary; see "Directors and Executive Officers of Imperial Holly." Roger W. Hill.............. Director; Vice President; see "Directors and Executive Officers of Imperial Holly."
2. Directors and Executive Officers of Imperial Holly. The following table sets forth the name, business address and present principal occupation or employment, and material occupations, positions, offices or employments for the past five years of each director and executive officer of Imperial Holly. Unless otherwise indicated, the current business address of each such person is c/o One Imperial Square, Suite 200, 8016 Highway 90-A, Sugar Land, Texas 77478, and each occupation set forth opposite an individual's name refers to employment with Imperial Holly. Each such person is a citizen of the United States, unless otherwise indicated.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - --------------------------- ---------------------------------------------------- John D. Curtin, Jr......... Director since 1993. Chairman and CEO, Aearo Company from 1994 to present. Executive Vice President and Director of Cabot Corporation from 1989-1994. Director of Eastern Enterprises. David J. Dilger............ Director since 1996. Chief Executive Officer of Greencore Group plc from 1996 to Present. Chief Operating Officer of Greencore Group plc from 1991- 1996. Mr. Dilger is a citizen of Ireland. E. O. Gaylord.............. Director since 1978. President, Gaylord & Company (a venture capital firm) since 1988. Chairman of the Board of Directors EOTT Energy Corp. from 1993 to present. Director of Seneca Funds Corporation, Essex International, Kinder Morgan Energy Partners, L.P. and Stant Corporation.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - --------------------------- ---------------------------------------------------- Gerald Grinstein........... Director since 1996. Chairman of the Board of Delta Air Lines, Inc. from August, 1997 to present, director from 1987 to present. Chairman of the Board of Burlington Northern, Inc. from 1987 to 1995. Director of Browning Ferris Industries, Paccar, Inc. and Suntrend Corp. Ann O. Hamilton............ Director since 1974. Retired Senior Advisor, World Bank, Washington, D.C. Employed with World Bank from 1971-1995. Roger W. Hill.............. Director since 1988. President and CEO Holly Sugar Corp. from 1988 to present and Managing Director of Imperial Holly Corporation from 1996 to present. Harris L. Kempner, Jr...... Director since 1966. President of Kempner Capital Management, Inc. from 1982 to present. Director TNP Enterprises and American Indemnity Financial Corporation. Advisory Director of Cullen/Frost Bankers, Inc. I. H. Kempner, III......... Director since 1967. Chairman of the Board of Imperial Holly Corporation from 1971 to present. James C. Kempner........... Director since 1988. President, Chief Executive Officer and Chief Financial Officer of Imperial Holly Corporation from 1993 to present. Executive Vice President and Chief Financial Officer from 1988-1993. H. E. Lentz................ Director since 1993. Managing Director of Lehman Brothers Inc. from 1993 to present. Managing Director of Wasserstein, Perella & Co., Inc. from 1987 to 1993. Director of Rowan Companies, Inc. Robert L. K. Lynch......... Director since 1990. Chairman, President and Chief Executive Officer of Yaga, Inc. from 1995 to present. President of Galveston Management Co. from 1987-1994. Director of United States National Bank and Foster Farms. Kevin C. O'Sullivan........ Director since 1996. Chief Financial Officer of Greencore Group plc from 1992 to present. Mr. O'Sullivan is a citizen of Great Britain. Fayez Sarofim.............. Director since 1991. President and Chairman of the Board of Fayez Sarofim & Co. from 1958 to present. Director of Allegheny-Teledyne, Argonaut Group, Inc., EXOR Group and Unitrin, Inc. Daniel K. Thorne........... Director since 1988. President of Star Lake Cattle Company from 1984 to present and President Star Lake Properties, Inc. from 1992 to present. Peter C. Carrothers........ Officer since 1994. Senior Vice President-- Operations from 1994 to present. Pepsico Foods International, Vice President--Logistics from 1990 to 1994. Douglas W. Ehrenkranz...... Officer since 1995. Vice President--Sales and Marketing 1995 to present and Managing Director from April 1997 to present. Procter & Gamble Corp., Category Sales Manager from 1979 to 1993.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - --------------------------- ---------------------------------------------------- John A. Richmond........... Officer since 1991. Vice President--Operations from 1995 to present and Managing Director from April 1997 to present. Holly Sugar Corp., Senior Vice President and General Manager--Beet Sugar Operations from 1993 to 1995. Holly Sugar Corp., Senior Vice President and General Manager--Eastern Division from 1992 to 1993. William F. Schwer.......... Officer since 1989. Managing Director from 1995 to present. Senior Vice President and General Counsel from 1993 to 1995. Vice President and General Counsel 1992 to 1993.
Roy E. Henderson............ Officer since 1981. Vice President--Administration from 1994 to present, Vice President and Treasurer from 1981 to 1994.
H. P. Mechler.............. Officer since 1988. Vice President--Accounting from April 1997 to present, Controller from 1988 to April 1997. Karen L. Mercer............ Officer since 1993. Vice President and Treasurer from April 1997 to present. Treasurer from 1994 to April 1997. Texas Commerce Bank, Vice President-- General Lending in 1993. First City Bank, various positions 1988 to 1993. Alan K. Lebsock............ Officer since 1997. Controller from April 1997 to present. Holly Sugar Corp., Controller from 1990 to April 1997.
S-3 Facsimile copies of the Letter of Transmittal, properly completed and duly executed, will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each stockholder of the Company or his broker, dealer, commercial bank, trust company or other nominee to the Paying Agent at one of its address set forth below: The Paying Agent for the Offer is: WACHOVIA BANK, N.A. IF DELIVERY IS BY MAIL: BY OVERNIGHT COURIER: BY HAND: FOR NEW YORK DROP: Wachovia Bank, N.A. Wachovia Bank, N.A. Wachovia Bank, N.A. Wachovia Bank, N.A. Corporate Reorganizations Corporate Reorganizations Shareholder Services Department c/o Boston P. O. Box 9061 70 Campanelli Drive Wachovia East Building EquiServe L.P. Boston, MA 02205 Braintree, MA 02184 2nd Floor Corporate Reorganizations 301 North Church Street 55 Broadway Winston-Salem, Third Floor NC 27101 New York, NY 10006
BY FACSIMILE: (Eligible Institutions Only) (910) 770-4832 Confirmation Number: 1-800-633-4236 Any questions or requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers listed below. Additional copies of the Offer to Purchase, this Letter of Transmittal and other tender offer materials may be obtained from the Information Agent as set forth below, and will be furnished promptly at the Purchaser's expense. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: D. F. KING & CO., INC. 77 Water Street New York, New York 10005-4495 Call Collect: (212) 269-5550 Call Toll Free: (800) 758-5378 The Dealer Manager for the Offer is: LEHMAN BROTHERS 3 World Financial Center 200 Vesey Street New York, New York 10285 Call Collect: (212) 526-2449 EX-99.(A)(2) 3 LETTER OF TRANSMITTAL EXHIBIT 99(a)(2) LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF SAVANNAH FOODS & INDUSTRIES, INC. PURSUANT TO THE OFFER TO PURCHASE DATED SEPTEMBER 18, 1997 BY IHK MERGER SUB CORPORATION A WHOLLY OWNED SUBSIDIARY OF IMPERIAL HOLLY CORPORATION THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, OCTOBER 16, 1997 (THE "EXPIRATION DATE"), UNLESS THE OFFER IS EXTENDED. The Paying Agent for the Offer is: WACHOVIA BANK, N.A. If Delivery is by Mail: By Overnight Courier: By Hand For New York Drop: Wachovia Bank, N.A. Wachovia Bank, N.A. Wachovia Bank, N.A. Wachovia Bank, N.A. Corporate Reorganizations Corporate Reorganizations Shareholder Services Department c/o Boston P. O. Box 9061 70 Campanelli Drive Wachovia East Building EquiServe L.P. Boston, MA 02205 Braintree, MA 02184 2nd Floor Corporate Reorganizations 301 North Church Street 55 Broadway Winston-Salem, Third Floor NC 27101 New York, NY 10006
By Facsimile: (Eligible Institutions Only) (910) 770-4832 Confirmation Number: 1-800-633-4236 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be completed by stockholders if certificates for Shares (as defined in the Offer to Purchase, dated September 18, 1997 (the "Offer to Purchase")), are to be forwarded herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is utilized, if tenders of shares are made by book-entry transfer to an account maintained by Wachovia Bank, N.A. (the "Paying Agent") at The Depository Trust Company ("DTC") or Philadelphia Depository Trust Company ("PDTC") (each a "Book-Entry Transfer Facility" and collectively referred to as the "Book-Entry Transfer Facilities"), pursuant to the procedures set forth in Section 3 of the Offer to Purchase. Stockholders who tender Shares by book-entry transfer are referred to herein as "Book-Entry Stockholders." 1 Holders of Shares whose certificates for such Shares (the "Share Certificates") are not immediately available, or who cannot deliver their Share Certificates and all other required documents to the Paying Agent on or prior to the Expiration Date, must tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2. NOTE:SIGNATURES MUST BE PROVIDED ON THE INSIDE AND REVERSE BACK COVER. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. [_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE PAYING AGENT'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING: Name of Tendering Institution: _____________________________________ Check Box of Book-Entry Transfer Facility: [_]The Depository Trust Company [_]Philadelphia Depository Trust Company Account No. _____________ Transaction Code No. _____________________ [_]CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE PAYING AGENT AND COMPLETE THE FOLLOWING. PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY. Name(s) of Registered Holder(s): ___________________________________ Window Ticket Number (if any): _____________________________________ Date of Execution of Notice of Guaranteed Delivery: ________________ Name of Institution which Guaranteed Delivery: _____________________ DESCRIPTION OF SHARES TENDERED - -------------------------------------------------------------------------------
NAME(S) AND ADDRESS(S) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SHARE CERTIFICATE(S) AND SHARE SHARE(S) TENDERED CERTIFICATES) (ATTACH ADDITIONAL LIST, IF NECESSARY) - ----------------------------------------------------- TOTAL NUMBER OF SHARES SHARE REPRESENTED BY NUMBER OF CERTIFICATE SHARE SHARES NUMBER(S) CERTIFICATE(S)* TENDERED** - -----------------------------------------------------
------------------------------- ------------------------------- ------------------------------- ------------------------------- TOTAL SHARES_____________ * Need not be completed by Book-Entry Stockholders. ** Unless otherwise indicated, it will be assumed that all Shares represented by certificates delivered to the Paying Agent are being tendered. See Instruction 4. 2 Ladies and Gentlemen: The undersigned hereby tenders to IHK Merger Sub Corporation (the "Purchaser"), a Delaware corporation and a wholly owned subsidiary of Imperial Holly Corporation, a Texas corporation ("Imperial Holly"), the described shares of Common Stock, par value $0.25 per share (the "Shares"), of Savannah Foods & Industries, Inc., a Delaware corporation (the "Company"), at a price of $20.25 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated September 18, 1997 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which together with the Offer to Purchase constitute the "Offer"). The undersigned understands that the Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to Imperial Holly or one or more of Imperial Holly's subsidiaries or affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer. Subject to, and effective upon, acceptance for payment of and payment for the Shares tendered herewith in accordance with the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), the undersigned hereby sells, assigns, and transfers to, or upon the order of, the Purchaser all right, title and interest in and to all of the Shares that are being tendered hereby and any and all dividends on the Shares or any distribution (including, without limitation, the issuance of additional Shares pursuant to a stock dividend or stock split, the issuance of other securities or the issuance of rights for the purchase of any securities) with respect to the Shares that is declared or paid by the Company on or after September 12, 1997 and is payable or distributable to stockholders of record on a date prior to the transfer into the name of the Purchaser or its nominees or transferees on the Company's stock transfer records of the Shares purchased pursuant to the Offer (a "Distribution"), and constitutes and irrevocably appoints the Paying Agent the true and lawful agent, attorney-in-fact and proxy of the undersigned to the full extent of the undersigned's rights with respect to such Shares (and any Distributions) with full power of substitution (such power of attorney and proxy being deemed to be an irrevocable power coupled with an interest), to (i) deliver Share Certificates (and any Distributions) or transfer ownership of such Shares on the account books maintained by the Book-Entry Transfer Facilities, together in either such case with all accompanying evidences of transfer and authenticity, to or upon the order of the Purchaser upon receipt by the Paying Agent, as the undersigned's agent, of the purchase price, (ii) present Shares (and any Distributions) for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of Shares (and any Distributions), all in accordance with the terms of the Offer. The undersigned hereby irrevocably appoints James C. Kempner and William F. Schwer, and each of them individually, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution, to vote in such manner as each such attorney and proxy or his substitute shall, in his sole discretion, deem proper, and otherwise act (including pursuant to written consent) with respect to all of the Shares tendered hereby which have been accepted for payment by the Purchaser prior to the time of such vote or action (and any Distributions) which the undersigned is entitled to vote at any meeting of stockholders (whether annual or special and whether or not an adjourned or postponed meeting) of the Company, or by consent in lieu of such meeting, or otherwise. This power of attorney and proxy is coupled with an interest in the tendered Shares and is irrevocable and is granted in consideration of, and is effective upon, the acceptance for payment of such Shares by the Purchaser in accordance with the terms of the Offer. Such acceptance for payment shall revoke, without further action, any other power of attorney or proxy granted by the undersigned at any time with respect to the Shares (and any Distributions) and no subsequent powers of attorney or proxies will be given (and if given will be deemed not to be effective) with respect thereto by the undersigned. The undersigned understands that the Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares, the Purchaser or its designees will be able to exercise full voting rights with respect to such Shares and other securities, including voting at any meeting of stockholders. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby (and any Distributions) and that, when the same are accepted for payment by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title thereto, free 3 and clear of all liens, restrictions, charges and encumbrances and the same will not be subject to any adverse claim. The undersigned, upon request, will execute and deliver all additional documents deemed by the Paying Agent or the Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby (and any Distributions). In addition, the undersigned shall promptly remit and transfer to the Paying Agent for the account of the Purchaser any and all other Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer and, pending such remittance or appropriate assurance thereof, the Purchaser shall be entitled to all rights and privileges as owner of any such Distributions, and may withhold the entire purchase price or deduct from the purchase price of Shares tendered hereby the amount or value thereof, as determined by the Purchaser in its sole discretion. All authority herein conferred or herein agreed to be conferred shall not be affected by, and shall survive, the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, legal representatives, successors and assigns of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in Section 3 of the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions of the Offer. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price and/or return any Share Certificates not tendered or accepted for payment in the name(s) of the undersigned. Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price and/or return any Share Certificates not tendered or accepted for payment (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature. In the event that either or both the "Special Delivery Instructions" and the "Special Payment Instructions" are completed, please issue the check for the purchase price and/or return any Share Certificates not tendered or accepted for payment in the name(s) of, and deliver said check and/or return Share Certificates to, the person or persons so indicated. The undersigned recognizes that the Purchaser has no obligation pursuant to the "Special Payment Instructions" to transfer any Shares from the name of the registered holder thereof if the Purchaser does not accept for payment any of such Shares. 4 SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if Share To be completed ONLY if Share Certificates not tendered or not Certificates not tendered or not purchased and/or the check for purchased and/or the check for the purchase price of Shares the purchase price of Shares purchased are to be issued in the purchased are to be sent to name of someone other than the someone other than the undersigned, or if Shares undersigned, or to the tendered by book-entry transfer undersigned at an address other which are not purchased are than that shown on the front returned by credit to an account cover. maintained at a Book-Entry Transfer Facility other than that designated on the front cover. Mail check and/or certificates to: Name _____________________________ Issue check and/or certificates (PLEASE PRINT) to: Address __________________________ Name _____________________________ ---------------------------------- (PLEASE PRINT) ---------------------------------- Address __________________________ (INCLUDE ZIP CODE) ---------------------------------- ---------------------------------- ---------------------------------- (INCLUDE ZIP CODE) ---------------------------------- (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.) (SEE SUBSTITUTE FORM W-9 BELOW) 5 SIGN HERE (PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW) X ______________________________________________________________ X ______________________________________________________________ SIGNATURE(S) OF OWNER(S) Dated: __________________________________________________, 199__ (Must be signed by registered holder(s) exactly as name(s) appear(s) on Share Certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please provide the necessary information. See Instruction 5.) Name(s): _______________________________________________________ ---------------------------------------------------------------- (PLEASE PRINT) Capacity (Full Title): _________________________________________ Address:________________________________________________________ ---------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number: ________________________________ Tax Identification or Social Security No.: _____________________ (SEE SUBSTITUTE FORM W-9 BELOW) GUARANTEE OF SIGNATURE(S) (IF REQUIRED--SEE INSTRUCTIONS 1 AND 5) Authorized Signature: __________________________________________ Name: __________________________________________________________ Name of Firm: __________________________________________________ Address: _______________________________________________________ ---------------------------------------------------------------- ---------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number: ________________________________ Dated: _________________________________________________________ 6 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of Transmittal is required (a) if this Letter of Transmittal is signed by the registered holder of the Shares tendered herewith, unless such holder has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" or (b) if such Shares are tendered for the account of a bank or trust company in the United States or by a firm that is a member of the National Association of Securities Dealers, Inc. or of a registered national securities exchange which is a recognized member of a Medallion Signature Guarantee Program (an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of Transmittal is to be used if Share Certificates are to be forwarded herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is utilized, if tenders are to be made pursuant to the procedures for tender by book-entry transfer set forth in Section 3 of the Offer to Purchase. Share Certificates, or timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Shares into the Paying Agent's account at a Book-Entry Transfer Facility, as well as this Letter of Transmittal (or a facsimile hereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other documents required by this Letter of Transmittal, must be received by the Paying Agent at one of its addresses set forth herein prior to the Expiration Date and, if later, stockholders who cannot deliver their Share Certificates and all other required documents to the Paying Agent prior to the Expiration Date or who cannot complete the procedures for delivery by book- entry transfer on a timely basis must tender their Shares by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure: (a) such tender must be made by or through an Eligible Institution; (b) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by the Purchaser, must be received by the Paying Agent on or prior to the Expiration Date; and (c) the Share Certificates (or a Book-Entry Confirmation) representing all tendered Shares, in proper form for transfer together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile hereof), with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and any other documents required by this Letter of Transmittal, must be received by the Paying Agent within three New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery as provided in Section 3 of the Offer to Purchase. If Share Certificates are forwarded separately to the Paying Agent, a properly completed and duly executed Letter of Transmittal (or facsimile hereof) must accompany each such delivery. THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE PAYING AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted. All tendering stockholders, by execution of this Letter of Transmittal or facsimile hereof, waive any right to receive any notice of the acceptance of their Shares for payment. 3. INADEQUATE SPACE. If the space provided herein under "Description of Shares Tendered" is inadequate, the certificate numbers and/or the number of Shares and any other required information should be listed on a separate schedule attached hereto and separately signed on each page thereof in the same manner as this Letter of Transmittal is signed. 4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY TRANSFER). If fewer than all the Shares evidenced by any certificate submitted are to be tendered, fill in the number of Shares which are to be 7 tendered in the box entitled "Number of Shares Tendered." In such case, new certificate(s) for the remainder of the Shares that were evidenced by your old certificate(s) will be sent to you, unless otherwise provided in the appropriate box marked "Special Payment Instructions" and/or "Special Delivery Instructions" on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by certificates delivered to the Paying Agent will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal or any certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to the Purchaser of their authority so to act must be submitted. If this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of Share Certificates or separate stock powers are required unless payment is to be made to, or certificates for Shares not tendered or purchased are to be issued in the name of, a person other than the registered holder(s). Signatures on such Share Certificates or stock powers must be medallion guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares listed, the Share Certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holder(s) appear(s) on the certificates. Signatures on such Share Certificates or stock powers must be medallion guaranteed by an Eligible Institution. 6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the Purchaser will pay or cause to be paid any stock transfer taxes with respect to the transfer and sale of purchased Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if certificates for Shares not tendered or purchased are to be registered in the name of, any person other than the registered holder, or if tendered Share Certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder or such person) payable on account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATES LISTED IN THIS LETTER OF TRANSMITTAL. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in the name of and/or certificates for unpurchased Shares are to be returned to a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or such Share Certificates are to be returned to someone other than the signer of this Letter of Transmittal or to an address other than that shown on the front cover hereof, the appropriate boxes on this Letter of Transmittal should be completed. See Instruction 1. 8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance may be directed to the Information Agent at its address or telephone number set forth below. Requests for additional copies of the Offer to Purchase and this Letter of Transmittal may be directed to the Information Agent or to brokers, dealers, commercial banks or trust companies. 8 9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income tax law, a stockholder whose tendered Shares are accepted for payment is required to provide the Paying Agent with such stockholder's correct taxpayer identification number ("TIN") on Substitute Form W-9 below. If the Paying Agent is not provided with the correct TIN, the Internal Revenue Service may subject the stockholder or other payee to a $50 penalty. In addition, payments that are made to such stockholder or other payee with respect to Shares purchased pursuant to the Offer may be subject to 31% backup withholding. Certain stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, the stockholder must submit a Form W-8, signed under penalties of perjury, attesting to that individual's exempt status. A Form W-8 can be obtained from the Paying Agent. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. If backup withholding applies, the Paying Agent is required to withhold 31% of any such payments made to the stockholder or other payee. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. The stockholder is required to give the Paying Agent the TIN (e.g., social security number or employer identification number) of the record owner of the Shares or of the last transferee appearing on the transfers attached to, or endorsed on, the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. 10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s) representing Shares has (have) been lost, destroyed or stolen, the stockholder should promptly notify the Paying Agent in writing. The stockholder will then be instructed as to the steps that must be taken in order to replace the certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE COPY HEREOF) OR AN AGENT'S MESSAGE TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE PAYING AGENT ON OR PRIOR TO THE EXPIRATION DATE. 9 TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS (SEE INSTRUCTION 9) PAYER'S NAME: WACHOVIA BANK, N.A. - ------------------------------------------------------------------------------- PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. ---------------------- Social Security Number or ---------------------- SUBSTITUTE Employer ID Number -------------------------------------------------------- FORM W-9 PART 2--CERTIFICATION--Under penalties of perjury, I certify that: DEPARTMENT OF THE TREASURY (1) The number shown on this form is my correct INTERNAL REVENUE Taxpayer Identification Number (or I am waiting SERVICE for a number to be issued to me) and PAYER'S REQUEST FOR (2) I am not subject to backup withholding because: TAXPAYER (a) I am exempt from backup withholding, or (b) IDENTIFICATION I have not been notified by the Internal Revenue NUMBER ("TIN") Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. Certification Instructions--You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of under-reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding, you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out such Item (2). -------------------------------------------------------- SIGNATURE ________________________ PART 3-- DATE _____________________________ Awaiting TIN [_] NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a Taxpayer Identification Number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a Taxpayer Identification Number by the time of payment, 31% of all reportable payments made to me will be withheld, but that such amounts will be refunded to me if I then provide a Taxpayer Identification Number within sixty (60) days. Signature __________________________ Date ____________________________ , 1997 10 Any questions or requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers listed below. Additional copies of the Offer to Purchase, this Letter of Transmittal and other tender offer materials may be obtained from the Information Agent as set forth below, and will be furnished promptly at the Purchaser's expense. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: D. F. KING & CO., INC. 77 Water Street New York, New York 10005-4495 Call Collect: (212) 269-5550 Call Toll Free: (800) 758-5378 The Dealer Manager for the Offer is: LEHMAN BROTHERS 3 World Financial Center 200 Vesey Street New York, New York 10285 Call Collect: (212) 526-2449 EX-99.(A)(3) 4 NOTICE OF GUARANTEED DELIVERY EXHIBIT 99(a)(3) NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF SAVANNAH FOODS & INDUSTRIES, INC. This Notice of Guaranteed Delivery or one substantially equivalent hereto must be used to accept the Offer (as defined below) if certificates representing shares of common stock, par value $0.25 per share (the "Shares"), of Savannah Foods & Industries, Inc., a Delaware corporation (the "Company"), are not immediately available or time will not permit all required documents to reach Wachovia Bank, N.A. (the "Paying Agent") on or prior to the Expiration Date (as defined in the Offer to Purchase), or the procedures for delivery by book-entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile transmission or mail to the Paying Agent. See Section 3 of the Offer to Purchase. THE PAYING AGENT FOR THE OFFER IS: WACHOVIA BANK, N.A. If Delivery is by Mail: By Overnight Courier: By Hand: For New York Drop: Wachovia Bank, N.A. Wachovia Bank, N.A. Wachovia Bank, N.A. Wachovia Bank, N.A. Corporate Corporate Reorganizations Shareholder Services Department c/o Boston Reorganizations 70 Campanelli Drive Wachovia East Building EquiServe L.P. P. O. Box 9061 Braintree, MA 02184 2nd Floor Corporate Reorganizations Boston, MA 02205 301 North Church Street 55 Broadway Winston-Salem, Third Floor NC 27101 New York, NY 10006
By Facsimile: (Eligible Institutions Only) (910) 770-4832 Confirmation Number: 1-800-633-4236 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. Ladies and Gentlemen: The undersigned hereby tenders to IHK Merger Sub Corporation, a Delaware corporation (the "Purchaser"), upon the terms and subject to the conditions set forth in the Offer to Purchase, dated September 18, 1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer"), receipt of each of which is hereby acknowledged, the number of Shares indicated below pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Number of Shares: _____________ Shares Name(s) of Record Holder(s): _________ Certificate No(s). (if available): -------------------------------------- - -------------------------------------- Address(es): _________________________ - -------------------------------------- -------------------------------------- If Share(s) will be tendered by book- -------------------------------------- entry transfer, check one box. Area Code and Telephone Number(s): ___ -------------------------------------- [_] The Depository Trust Company Signature(s): ________________________ [_] Philadelphia Depository Trust -------------------------------------- Company THE GUARANTEE BELOW MUST BE COMPLETED GUARANTEE (NOTE TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm that is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Securities Transfer Agents Medallion Program, hereby (1) represents that the tender of Shares effected hereby complies with Rule 14e-4 under the Securities Exchange Act of 1934, as amended, and (2) guarantees to deliver to the Paying Agent, at one of its addresses set forth above, the certificates representing all tendered Shares, in proper form for transfer, or a Book- Entry Confirmation (as defined in the Offer to Purchase), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or, in the case of book- entry transfer of Shares, an Agent's Message (as defined in the Offer to Purchase), and any other documents required by the Letter of Transmittal within three New York Stock Exchange trading days after the date of execution of this Notice of Guaranteed Delivery. ------------------------------------- ------------------------------------- Name of Firm (Authorized Signature) ------------------------------------- ------------------------------------- Address Title ------------------------------------- Name: _______________________________ ------------------------------------- (Please type or print) Area Code and Telephone Number Date: _______________________________ NOTE: DO NOT SEND SHARE CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED DELIVERY. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-99.(A)(4) 5 LETTER TO BROKERS EXHIBIT 99(a)(4) LEHMAN BROTHERS 3 WORLD FINANCIAL CENTER NEW YORK, NY 10285 OFFER TO PURCHASE FOR CASH 14,397,836 SHARES OF COMMON STOCK OF SAVANNAH FOODS & INDUSTRIES, INC. AT $20.25 NET PER SHARE BY IHK MERGER SUB CORPORATION A WHOLLY OWNED SUBSIDIARY OF IMPERIAL HOLLY CORPORATION THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, OCTOBER 16, 1997 (THE "EXPIRATION DATE"), UNLESS THE OFFER IS EXTENDED. September 18, 1997 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by IHK Merger Sub Corporation, a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Imperial Holly Corporation, a Texas corporation ("Imperial Holly"), to act as financial advisor and Dealer Manager in connection with the Purchaser's offer to purchase 14,397,836 shares of common stock, par value $0.25 per share (the "Shares"), of Savannah Foods & Industries, Inc., a Delaware corporation (the "Company") or such other amount of Shares representing 50.1% of the amount of Shares outstanding on a fully diluted basis on the date of purchase, at a purchase price of $20.25 per Share, net to the seller in cash without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated September 18, 1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer") enclosed herewith. Holders of Shares whose certificates for such Shares (the "Share Certificates") are not immediately available or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares registered in your name or in the name of your nominee. The Offer is conditioned upon, among other things, (i) there being validly tendered and not withdrawn by the Expiration Date at least 14,397,836 shares or such other number of shares representing 50.1% of the Company's outstanding common stock on a fully diluted basis on the date of purchase, (ii) the expiration of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder and (iii) Imperial Holly having obtained financing sufficient to enable it (or to cause Purchaser) to purchase the shares tendered pursuant to the Offer and to consummate the merger of the Purchaser with and into the Company (the "Merger") following the consummation of the Offer. The offer also is subject to certain other conditions which are set forth in Section 14 of the Offer to Purchase. Enclosed herewith for your information and forwarding to your clients are copies of the following documents: 1. The Offer to Purchase, dated September 18, 1997. 2. The Letter of Transmittal to tender Shares for your use and for the information of your clients. Facsimile copies of the Letter of Transmittal may be used to tender Shares. 3. The Notice of Guaranteed Delivery for Shares to be used to accept the Offer if Share Certificates are not immediately available or if such certificates and all other required documents cannot be delivered to Wachovia Bank, N.A. (the "Paying Agent") by the Expiration Date or if the procedure for book-entry transfer cannot be completed by the Expiration Date. 4. A letter to stockholders of the Company from William W. Sprague III, President and Chief Executive Officer of the Company, together with the Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company. 5. A printed form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer. 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9. 7. A return envelope addressed to the Paying Agent. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, OCTOBER 16, 1997, UNLESS THE OFFER IS EXTENDED. In order to accept the Offer, a duly executed and properly completed Letter of Transmittal or manually signed facsimile thereof and any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry delivery of Shares, and any other required documents should be sent to the Paying Agent and Share Certificates representing the tendered Shares should be delivered to the Paying Agent or such Shares should be tendered by book-entry transfer into the Paying Agent's account maintained at one of the Book-Entry Transfer Facilities (as described in the Offer to Purchase), all in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. If holders of Shares wish to tender, but it is impracticable for them to forward their Share Certificates or other required documents on or prior to the Expiration Date or to comply with the book-entry transfer procedures on a timely basis, a tender of Shares may be effected by following the guaranteed delivery procedures specified in Section 3 of the Offer to Purchase. The Purchaser will not pay any commission or fees to any broker, dealer or other person (other than the Dealer Manager and the Information Agent, as described in the Offer to Purchase) for soliciting tenders of Shares pursuant to the Offer. The Purchaser will, however, upon request, reimburse you for customary clerical and mailing expenses incurred by you in forwarding any of the enclosed materials to your clients. The Purchaser will pay or cause to be paid any stock transfer taxes payable on the transfers of Shares to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. 2 Any inquiries you may have with respect to the Offer should be addressed to Lehman Brothers Inc., the Dealer Manager, or D. F. King & Co., Inc., the Information Agent, at their respective addresses and telephone numbers set forth on the back cover of the Offer to Purchase. Requests for additional copies of the enclosed materials may be directed to the Information Agent. Very truly yours, LEHMAN BROTHERS INC. 3 WORLD FINANCIAL CENTER 200 VESEY STREET NEW YORK, NEW YORK 10285 Dealer Manager NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, THE DEALER MANAGER, THE COMPANY, THE PAYING AGENT OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. 3 EX-99.(A)(5) 6 LETTER TO CLIENTS EXHIBIT 99(a)(5) OFFER TO PURCHASE FOR CASH 14,397,836 SHARES OF COMMON STOCK OF SAVANNAH FOODS & INDUSTRIES, INC. AT $20.25 NET PER SHARE BY IHK MERGER SUB CORPORATION A WHOLLY OWNED SUBSIDIARY OF IMPERIAL HOLLY CORPORATION THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, OCTOBER 16, 1997 (THE "EXPIRATION DATE"), UNLESS THE OFFER IS EXTENDED. To our Clients: Enclosed for your consideration are the Offer to Purchase, dated September 18, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer"), relating to the offer by IHK Merger Sub Corporation, a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Imperial Holly Corporation, a Texas corporation ("Imperial Holly"), to purchase 14,397,836 shares of common stock, par value $0.25 per share (the "Shares"), of Savannah Foods & Industries, Inc., a Delaware corporation (the "Company"), or such other amount of Shares representing 50.1% of the Shares outstanding on a fully diluted basis on the date of purchase, at a purchase price of $20.25 per Share, net to the seller in cash without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal enclosed herewith. Holders of Shares whose certificates for such Shares (the "Share Certificates") are not immediately available or who cannot deliver all required documents to Wachovia Bank, N.A. (the "Paying Agent") on or prior to the Expiration Date, or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. Accordingly, we request instructions as to whether you wish to have us tender on your behalf any or all Shares held by us for your account pursuant to the terms and conditions set forth in the Offer. Please note the following: 1. The tender price is $20.25 per Share, net to you in cash without interest thereon, upon the terms and subject to the conditions set forth in the Offer. 2. The Offer is being made for 14,397,836 Shares or such other amount of Shares representing 50.1% of the Company's outstanding common stock on a fully diluted basis on the date of purchase. 3. In the event that more than 14,397,836 Shares or such other amount of Shares representing 50.1% of the Company's outstanding common stock on a fully diluted basis on the date of purchase are validly tendered and not withdrawn in accordance with Section 4 of the Offer to Purchase prior to the Expiration Date, the Purchaser will accept for payment and pay for such Shares on a pro rata basis (with appropriate adjustments to avoid purchases of fractional Shares). 4. The Offer is conditioned upon, among other things, (i) there being validly tendered and not withdrawn by the Expiration Date at least 14,397,836 shares or such other number of shares representing 50.1% of the Company's outstanding common stock on a fully diluted basis on the date of purchase, (ii) the expiration of any applicable waiting period under the Hart-Scott- Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder and (iii) Imperial Holly having obtained financing sufficient to enable it (or to cause Purchaser) to purchase the shares tendered pursuant to the Offer and to consummate the merger of the Purchaser with and into the Company (the "Merger") following the consummation of the Offer. The offer also is subject to certain other conditions which are set forth in this Offer to Purchase. See Section 14 of the Offer to Purchase. 5. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by the Purchaser pursuant to the Offer. 6. The Offer, proration period and withdrawal rights will expire at 12:00 midnight, New York City time, on Thursday, October 16, 1997, unless the Offer is extended. 7. Payment for Shares purchased pursuant to the Offer will in all cases be made only after timely receipt by the Paying Agent of (a) Share Certificates for such Shares or timely confirmation of the book-entry transfer of such Shares into the account maintained by the Paying Agent at The Depository Trust Company or Philadelphia Depository Trust Company (collectively, the "Book- Entry Transfer Facilities"), pursuant to the procedures set forth in Section 3 of the Offer to Purchase, (b) the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase), in connection with a book-entry transfer, and (c) all other documents required by the Letter of Transmittal. Accordingly, payment may not be made to all tendering stockholders at the same time depending upon when Share Certificates or confirmations of book-entry transfer of such Shares into the Paying Agent's account at a Book-Entry Transfer Facility are actually received by the Paying Agent. If you wish to have us tender any or all of the Shares held by us for your account, please so instruct us by completing, executing, detaching and returning to us the instruction form set forth below. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified below. An envelope to return your instructions to us is enclosed. Your instructions should be forwarded to us in ample time to permit us to submit a tender on your behalf prior to the expiration of the Offer. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares residing in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the securities, blue sky or other laws of such jurisdiction. However, the Purchaser may, in its discretion, take such action as it may deem necessary to make the Offer in any jurisdiction and extend the Offer to holders of Shares in such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer is being made on behalf of the Purchaser by Lehman Brothers Inc., the Dealer Manager for the Offer, or one or more registered brokers or dealers that are licensed under the laws of such jurisdiction. 2 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH 14,397,836 SHARES OF COMMON STOCK OF SAVANNAH FOODS & INDUSTRIES, INC. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated September 18, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer") in connection with the offer by IHK Merger Sub Corporation, a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Imperial Holly Corporation, a Texas corporation, to purchase 14,397,836 shares of common stock, par value $0.25 per share (the "Shares"), of Savannah Foods & Industries, Inc., a Delaware corporation, or such other amount of Shares representing 50.1% of the amount of Shares outstanding on a fully diluted basis on the date of purchase, at a purchase price of $20.25 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase. This will instruct you to tender to the Purchaser the number of Shares indicated below (or if no number is indicated below, all Shares), which are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. Number of Shares to Be Tendered: ____________________ Shares SIGN HERE Signature(s):________________________________________________________________ Print Name(s):_______________________________________________________________ Print Address(es):___________________________________________________________ Area Code and Telephone Number(s):___________________________________________ Taxpayer Identification or Social Security Number(s):________________________ WACHOVIA BANK, N.A. Inquiry Number: 1-800-633-4236 3 EX-99.(A)(6) 7 IRS GUIDELINES FOR FORM W-9 EXHIBIT 99(a)(6) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE. PURPOSE OF FORM.--A person who is required to file an information return with the IRS must obtain your correct Taxpayer Identification Number (TIN) to report income paid to you, real estate transactions, mortgage interest you paid, the acquisition or abandonment of secured property, cancellation of debt or contributions you made to an IRA. Use the accompanying Substitute Form W-9 to furnish your correct TIN to the requester (the person asking you to furnish your TIN), and, when applicable, (1) to certify that the TIN you are furnishing is correct (or that you are waiting for a number to be issued), (2) to certify that you are not subject to backup withholding, or (3) to claim exemption from backup withholding if you are an exempt payee. Furnishing your correct TIN and making the appropriate certifications will prevent certain payments from being subject to backup withholding. HOW TO OBTAIN A TIN.--If you do not have a TIN, apply for one immediately. To apply, get Form SS-5, Application for a Social Security Card (for individuals), from your local office of the Social Security Administration, or Form SS-4, Application for Employer Identification Number (for businesses and all other entities), from your local IRS office. To complete Substitute Form W-9 if you do not have a TIN, write "Applied for" in the space for the TIN in Part 1, sign and date the form, and give it to the requester. Generally, you must obtain a TIN and furnish it to the requester by the time of payment. If the requester does not receive your TIN by the time of payment, backup withholding, if applicable, will begin and continue until you furnish your TIN to the requester. Note: Writing "Applied for" on the form means that you have already applied for a TIN OR that you intend to apply for one in the near future. As soon as you receive your TIN, complete another Substitute Form W-9, include your TIN, sign and date the form, and give it to the requester. WHAT IS BACKUP WITHHOLDING?--Persons making certain payments to you are required to withhold and pay to the IRS 31% of such payments under certain conditions. This is called "backup withholding." Payments that could be subject to backup withholding include interest, dividends, broker and barter exchange transactions, rents, royalties, non-employee compensation and certain payments from fishing boat operations, but dot not include real estate transactions. If you give the requester your correct TIN, make the appropriate certifications, and report all your taxable interest and dividends on your tax return, your payments will not be subject to backup withholding. Payments you receive will be subject to backup withholding if: 1. You do not furnish your TIN to the requester, or 2. The IRS notifies the requester that your furnished an incorrect TIN, or 3. You are notified by the IRS that you are subject to backup withholding because you failed to report all your interest and dividends on your tax return (for reportable interest and dividends only), or 4. You do not certify to the requester that you are not subject to backup withholding under 3 above (for reportable interest and dividend accounts opened after 1983 only), or 5. You do not certify your TIN when required. This applies only to reportable interest, dividend, broker or barter exchange accounts opened after 1983, broker accounts considered inactive during 1983, and real estate transactions. Certain payees and payments are exempt from backup withholding and information reporting. See Payees and Payments Exempt From Backup Withholding, below, and Exempt Payees Under Specific Instructions, below, if you are an exempt payee. PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING.--The following is a list of payees exempt from backup withholding and for which no information reporting is required. For interest and dividends, all listed payees are exempt except item (9). For broker transactions, payees listed in (1) through (13) and a person registered under the Investment Advisers Act of 1940 who regularly acts as a broker are exempt. Payments subject to reporting under sections 6041 and 6041A are generally exempt from backup withholding only if made to payees described in items (1) through (7), except a corporation that provides medical and health care services or bills and collects payments for such services is not exempt from backup withholding or information reporting. Only payees described in items (2) through (6) are exempt from backup withholding for barter exchange transactions and patronage dividends. (1) A corporation. (2) An organization exempt from tax under section 501(a), or an IRA, or a custodial account under section 403(b)(7). (3) The United States or any of its agencies or instrumentalities. (4) A state, the District of Columbia, a possession of the United States or any of their political subdivisions or instrumentalities. (5) A foreign government or any of its political subdivisions, agencies, or instrumentalities. (6) An international organization or any of its agencies or instrumentalities. (7) A foreign central bank of issue. (8) A dealer in securities or commodities required to register in the United States, the District of Columbia or a possession of the United States. (9) A futures commission merchant registered with the Commodity Futures Trading Commission. (10) A real estate investment trust. (11) An entity registered at all times during the tax year under the Investment Company Act of 1940. (12) A common trust fund operated by a bank under section 584(a). (13) A financial institution. (14) A middleman known in the investment community as a nominee or listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List. (15) A trust exempt from tax under section 664 or described in section 4947. Payments of dividend and patronage dividends generally not subject to backup withholding include the following: . Payments to nonresident aliens subject to withholding under section 1441. . Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien partner. . Payments of patronage dividends not paid in money. . Payments made by certain foreign organizations. Payments of interest generally not subject to backup withholding include the following: . Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $800 or more and is paid in the course of the payer's trade or business and you have not provided your correct TIN to the payer. . Payments of tax-exempt interest (including exempt interest dividends under section 852). . Payments described in section 6049(b)(5) to nonresident aliens. . Payments on tax-free covenant bonds under section 1451. . Payments made by certain foreign organizations. . Mortgage interest paid by you. Payments that are not subject to information reporting are also not subject to backup withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045, 6049, 6050A and 6050N, and their regulations. PENALTIES FAILURE TO FURNISH TIN.--If you fail to furnish your correct TIN to a requester, you will be subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis that results in no backup withholding, your are subject to a $500 penalty. CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying certifications or affirmations may be subject you to criminal penalties including fines and/or imprisonment. MISUSE OF TINS.--If the requester discloses or uses TINs in violation of Federal law, the requester may be subject to civil and criminal penalties. SPECIFIC INSTRUCTIONS NAME.--If you are an individual, you must generally provide the name shown on your Social Security card. However, if you have changed your last name, for instance, due to marriage, without informing the Social Security Administration of the name change, please enter your first name, the last name shown on your Social Security card, and your new last name. If you are a sole proprietor, you must furnish your individual name. You may also enter your business name or "doing business as" name on the business name line. Enter your name(s) as shown on your Social Security card and/or as it was used to apply for your EIN on Form SS-4. TAXPAYER IDENTIFICATION NUMBER.--You must enter your TIN in the appropriate box. If you are a sole proprietor, you may enter your SSN or EIN. See the chart below for further clarification of name and TIN combinations. If you do not have a TIN, follow the instructions under How to Obtain a TIN on page 1. EXEMPT PAYEES--If you are exempt from backup withholding, you should complete the Substitute Form W-9 to avoid possible erroneous backup withholding. Enter your correct TIN in Part 1, write "EXEMPT" in the block in Part 2, and sign and date the form. If you are a nonresident alien or foreign entity not subject to backup withholding, give the requester a completed Form W-8, Certificate of Foreign Status. SIGNING THE CERTIFICATION 1. INTEREST, DIVIDEND, BROKER AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984 AND BROKER ACCOUNTS CONSIDERED ACTIVE DURING 1983. You are required to furnish your correct TIN, but you are not required to sign the certification. 2. INTEREST, DIVIDEND, BROKER AND BARTER EXCHANGE ACCOUNTS OPENED AFTER 1983 AND BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983. You must sign the certification or backup withholding will apply. If you are subject to backup withholding and you are merely providing your correct TIN to the requester, you must cross out item 2 in the certification before signing the form. 3. REAL ESTATE TRANSACTIONS. You must sign the certification. You may cross out item 2 of the certification. 4. OTHER PAYMENTS. You are required to furnish your correct TIN, but you are not required to sign the certification unless you have been notified of an incorrect TIN. "Other payments" include payments made in the course of the requester's trade or business for rents, royalties, goods (other than bills for merchandise), medical and health care services, payments to a nonemployee for service (including attorney and accounting fees) and payments to certain fishing boat crew members. 5. MORTGAGE INTEREST PAID BY YOU, ACQUISITION OR ABANDONMENT OF SECURED PROPERTY OR IRA CONTRIBUTIONS. You are required to furnish your correct TIN, but you are not required to sign the certification. 6. TIN "APPLIED FOR." Follow the instructions under How to Obtain a TIN on page 1, and sign and date the Substitute Form W-9. SIGNATURE--For a joint account, only the person whose TIN is shown in Part 1 should sign. PRIVACY ACT NOTICE--Section 6109 requires you to furnish your correct TIN to persons who must file information returns with the IRS to report interest, dividends, certain other income paid to you, mortgage interest you paid, the acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. You must provide your TIN whether or not you are required to file a tax return. Payers must generally withhold 31% of taxable interest, dividend and certain other payments to a payee who does not furnish a TIN to a payer. Certain penalties may also apply. WHAT NAME AND NUMBER TO GIVE THE REQUESTER - -------------------------------------------------------------------------------- FOR THIS TYPE OF GIVE NAME AND SSN OF: ACCOUNT: - -------------------------------------------------------------------------------- 1. Individual The individual 2. Two or more The actual owner of individuals (joint the account or, if account) combined funds, the first individual on the account(1) 3. Custodian account of The minor(2) a minor (Uniform Gift to Minors Act) 4.a. The usual The grantor- revocable savings trustee(1) trust (grantor is also trustee) b. So-called trust The actual owner(1) account that is not a legal or valid trust under state law 5. Sole proprietorship The owner(3)
- -------------------------------------------------------------------------------- FOR THIS TYPE OF GIVE NAME AND EIN OF: ACCOUNT: - -------------------------------------------------------------------------------- 6. Sole proprietorship The owner(3) 7. A valid trust, Legal entity(4) estate, or pension trust 8. Corporate The corporation 9. Association, club, The organization religious, charitable, educational or other tax-exempt organization 10. Partnership The partnership 11. A broker or The broker or nominee registered nominee 12. Account with the The public entity Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments
- ---------------------------------------------------------------------------- (1) Use first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's SSN. (3) Show your individual name. You may also enter your business or "doing business as" name. You may use your SSN or EIN. (4) List first and circle the name of the legal trust, estate or pension trust. (Do not furnish the TIN of the personal representative or trustee unless the legal entity hereof is not designated in the account title). NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. EX-99.(A)(7) 8 SUMMARY ADVERTISEMENT EXHIBIT 99(a)(7) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares. The Offer is being made solely by the Offer to Purchase dated September 18, 1997 and the related Letter of Transmittal and is being made to all holders of Shares. The Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If the Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, the Purchaser will make a good faith effort to comply with such statute. If, after such good faith effort, the Purchaser cannot comply with such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed made on behalf of the Purchaser by Lehman Brothers Inc., the Dealer Manager, or one or more registered brokers or dealers licensed under the laws of such jurisdiction. Notice of Offer to Purchase for Cash 14,397,836 Outstanding Shares of Common Stock of SAVANNAH FOODS & INDUSTRIES, INC. at $20.25 Net Per Share by IHK Merger Sub Corporation a wholly owned subsidiary of IMPERIAL HOLLY CORPORATION __________________________________________________________________________ THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, OCTOBER 16, 1997, UNLESS THE OFFER IS EXTENDED. __________________________________________________________________________ IHK Merger Sub Corporation, a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Imperial Holly Corporation, a Texas corporation ("Imperial Holly"), is offering to purchase 14,397,836 shares of Common Stock, par value $0.25 per share (the "Shares"), of Savannah Foods & Industries, Inc., a Delaware corporation (the "Company") or such other amount of shares representing 50.1% of the outstanding shares of the Company on a fully diluted basis on the date of purchase, at a price of $20.25 per share net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated September 18, 1997 (the "Offer to Purchase") and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). Following the Offer, the Purchaser intends to effect the Merger (as defined below). THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE MERGER AGREEMENT (AS DEFINED BELOW) AND THE TRANSACTIONS CONTEMPLATED THEREBY, AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. The Offer is conditioned upon, among other things, (i) there being validly tendered and not withdrawn by the Expiration Date (as defined below) at least 14,397,836 shares or such other number of Shares representing 50.1% of the Company's outstanding common stock on a fully diluted basis on the date of purchase, (ii) the expiration of any applicable waiting period under the Hart- Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder and (iii) Imperial Holly having obtained financing sufficient to enable it (or to cause Purchaser) to purchase the Shares tendered pursuant to the Offer and to consummate the Merger. The Offer also is subject to certain other conditions which are set forth in Section 14 of the Offer to Purchase. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of September 12, 1997 (the "Merger Agreement"), among Imperial Holly, the Purchaser and the Company. The Merger Agreement provides that as soon as practicable after the purchase of Shares pursuant to the Offer and the satisfaction or waiver of certain conditions contained in the Merger Agreement and in accordance with the relevant provisions of the General Corporation Law of the State of Delaware, the Purchaser will be merged with and into the Company (the "Merger"). The Company will continue as the surviving corporation and as a wholly owned subsidiary of Imperial Holly following consummation of the Merger. At the effective time of the Merger (the "Effective Time"), each Share issued and outstanding immediately prior thereto (other than Shares held by Imperial Holly, the Purchaser or any of their subsidiaries, or in the treasury of the Company, all of which will be canceled (the "Excluded Shares"), and Shares held by stockholders who perfect their appraisal rights under Delaware law (the "Dissenting Shares")) will be converted into the right to receive, subject to the proration procedures described below (i) cash in the amount equal to the Offer Price, without interest thereon (the "Cash Consideration"), or (ii) Stock Consideration (as defined below). -2- The number of Shares to be converted into the right to receive the Cash Consideration in the Merger shall be equal to (x) 70% of the number of Shares issued and outstanding immediately prior to the Effective Time less (y) the sum of the Excluded Shares and the Dissenting Shares (the "Cash Election Number"). Subsequent to the consummation of the Offer, each stockholder of the Company holding Shares not tendered in the Offer (other than Excluded Shares) or not accepted for payment in the Offer because of proration will be entitled make an election to receive the Cash Consideration. If the number of Shares electing to receive the Cash Consideration exceeds the Cash Election Number, such shares will be converted into the right to receive the Cash Consideration on a pro rata basis, with the remainder converted into the right to receive the Stock Consideration. If the number of Shares electing to receive the Cash Consideration is less than the Cash Election Number, such shares will be converted into the right to receive the Cash Consideration while those Shares not so electing will be converted into the right to receive the Stock Consideration on a pro rata basis, with the remainder receiving the Cash Consideration. "Stock Consideration," with respect to each Share converted into the right to receive Stock Consideration, shall mean (x) if the Closing Price (as defined below) of the shares of common stock, without par value, of Imperial Holly ("Imperial Shares") is $13.25 or lower, a number of Imperial Shares equal to the quotient of the Offer Price divided by $13.25, (y) if the Closing Price of the Imperial Shares is $17.25 or greater, a number of Imperial Shares equal to the quotient of the Offer Price divided by $17.25, or (z) if the Closing Price of the Shares is greater than $13.25 but less than $17.25, a number of Imperial Shares equal to the quotient of the Offering Price divided by the Closing Price. The Stock Consideration also includes with each Imperial Share the right to purchase one one-hundredth of a share of Series A Junior Participating Preferred Stock of Imperial Holly pursuant to a Rights Agreement, dated as of September 14, 1989, as amended, between Imperial Holly and the Bank of New York, as rights agent. "Closing Price" means the volume weighted average of the trading prices of the Imperial Shares, rounded to three decimal places, as reported by Bloomberg Financial Markets, for each of the first 15 consecutive days upon which both the New York Stock Exchange and the American Stock Exchange are open for trading in the period commencing 20 of such trading days prior to the date of the closing of the Merger. In addition, as of September 12, 1997, each of the executive officers and directors of the Company executed a stockholder agreement with the Purchaser and Imperial Holly (the "Stockholders Agreement") pursuant to which each has agreed to tender all Shares owned by such stockholder into the Offer. In the event that more than 14,397,836 Shares or such other amount of Shares representing 50.1% of the Company's outstanding common stock on a fully diluted basis on the date of purchase are validly tendered and not withdrawn in accordance with Section 4 of the Offer to Purchase prior to the Expiration Date, the Purchaser will accept for payment and pay for such Shares on a pro rata basis (with applicable adjustments to avoid purchase of fractional Shares). For purposes of the Offer, the Purchaser shall be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not withdrawn as, if and when the Purchaser gives oral or written notice to the Wachovia Bank, N.A. (the "Paying Agent") of the Purchaser's acceptance of such Shares for payment. In all cases, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price therefor with the Paying Agent, which will act -3- as agent for tendering stockholders for the purpose of receiving payment from the Purchaser and transmitting payment to tendering stockholders whose Shares have theretofore been accepted for payment. Payment for Shares accepted for payment pursuant to the Offer in all cases will be made only after timely receipt by the Paying Agent of (i) certificates for (or a book-entry transfer with respect to) such Shares, (ii) a Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase), and (iii) all other documents required by the Letter of Transmittal. Under no circumstances will interest be paid by the Purchaser on the purchase price of the Shares, regardless of any extension of the Offer or any delay in making such payment. The term "Expiration Date" means 12:00 Midnight, New York City time, on Thursday, October 16, 1997, unless and until the Purchaser shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. Subject to the limitations set forth in the Merger Agreement, the Purchaser reserves the right (but will not be obligated), at any time or from time to time in its sole discretion, to extend the period of time during which the Offer is open by giving oral or written notice of such extension to the Paying Agent and by making a public announcement of such extension. There can be no assurance that the Purchaser will exercise its right to extend the Offer. Any such extension will be followed by a public announcement thereof no later than 9:00 A.M., New York City time, on the next business day after the previously scheduled Expiration Date. If the Purchaser extends the Offer, then without prejudice to the rights of the Purchaser, tendered Shares may be retained by the Paying Agent on behalf of the Purchaser and may not be withdrawn except to the extent that tendering stockholders are entitled to withdrawal rights, as set forth below. Except as otherwise provided below, tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any time after November 17, 1997. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Paying Agent at its address as set forth on the back cover of the Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from the name of the person who tendered such Shares. If certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Paying Agent, then, prior to the physical release of such certificates, the tendering stockholder must also submit the serial numbers shown on such certificates, and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution (as defined in the Offer to Purchase), except in the case of Shares tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in Section 3 of the Offer to Purchase, any notice of withdrawal with respect to such Shares must specify the name and number of the account at the applicable Book-Entry Transfer Facility (as defined in the Offer to Purchase) to be credited with the withdrawn Shares. Any Shares properly withdrawn will be deemed not to have been validly tendered for purposes of the Offer, but -4- may be retendered at any subsequent time prior to the Expiration Date by following any of the procedures described in Section 3 of the Offer to Purchase. All questions as to the form and validity (including time of receipt) of notice of withdrawal will be determined by the Purchaser, in its sole discretion, whose determination shall be final and binding on all parties. The Company has provided to the Purchaser its lists of stockholders and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase and the related Letter of Transmittal and other relevant materials will be mailed to record holders of Shares and furnished to brokers, dealers, banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholders lists or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. The information required to be disclosed by Rule 14d-6(e)(1)(vii) under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. THE OFFER TO PURCHASE AND LETTER OF TRANSMITTAL CONTAIN INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. Questions and requests for assistance may be directed to the Information Agent and the Dealer Manager at the telephone numbers and locations listed below. Copies of the Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other tender offer documents may be obtained at the Purchaser's expense from the Information Agent or from your broker, dealer, commercial bank or trust company or other nominee. No fees or commissions will be payable by Imperial Holly or the Purchaser to brokers, dealers or other persons other than the Information Agent and the Dealer Manager for soliciting tenders of Shares pursuant to the Offer. -5- The Information Agent for the Offer is: D. F. KING & CO., INC. 77 Water Street New York, New York 10005-4495 CALL COLLECT: (212) 269-5550 CALL TOLL FREE: (800) 758-5378 The Dealer Manager for the Offer is: LEHMAN BROTHERS 3 World Financial Center 200 Vesey Street New York, New York 10285 CALL COLLECT: (212) 526-2449 September 18, 1997 -6- EX-99.(C)(1) 9 AGREEMENT AND PLAN OF MERGER EXHIBIT 99(c)1 AGREEMENT AND PLAN OF MERGER AMONG IMPERIAL HOLLY CORPORATION, IHK MERGER SUB CORPORATION AND SAVANNAH FOODS & INDUSTRIES, INC. DATED AS OF SEPTEMBER 12, 1997 TABLE OF CONTENTS ----------------- PAGE ---- ARTICLE I THE OFFER SECTION 1.01 The Offer............................................ 2 SECTION 1.02 Company Actions...................................... 3 SECTION 1.03 Stockholder Lists.................................... 4 SECTION 1.04 Directors............................................ 4 ARTICLE II THE MERGER SECTION 2.01 The Merger........................................... 5 SECTION 2.02 Effective Time; Closing.............................. 5 SECTION 2.03 Effects of the Merger................................ 6 SECTION 2.04 Certificate of Incorporation and By-Laws............. 6 SECTION 2.05 Directors and Officers............................... 6 SECTION 2.06 Conversion of Shares................................. 6 SECTION 2.07 Conversion of Common Stock of Merger Sub............. 8 SECTION 2.08 Stockholders' Meetings............................... 9 SECTION 2.09 Rights Under Stock Plans............................. 9 SECTION 2.10 Exchange of Certificates............................. 10 SECTION 2.11 Elections............................................ 12 SECTION 2.12 Dissenting Shares.................................... 14 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY SECTION 3.01 Organization and Qualification; Subsidiaries......... 14 SECTION 3.02 Certificate of Incorporation and By-Laws............. 15 SECTION 3.03 Capitalization....................................... 15 SECTION 3.04 Authority Relative to this Agreement................. 16 SECTION 3.05 No Conflict; Required Filings and Consents........... 17 SECTION 3.06 Permits; Compliance.................................. 17 SECTION 3.07 SEC Filings; Financial Statements.................... 18 SECTION 3.08 Absence of Certain Changes or Events................. 19 SECTION 3.09 Absence of Litigation................................ 20 SECTION 3.10 Employee Benefit Plans; Labor Matters................ 20 SECTION 3.11 Intellectual Property................................ 23 SECTION 3.12 Taxes................................................ 24 SECTION 3.13 Environmental Matters................................ 24 SECTION 3.14 Products............................................. 25 SECTION 3.15 Properties and Assets; Real Property and Leases......................................... 25 SECTION 3.16 Insurance............................................ 26 SECTION 3.17 Opinion of Financial Advisor......................... 27 SECTION 3.18 Vote Required........................................ 27 SECTION 3.19 Brokers.............................................. 27 ii SECTION 3.20 Company Rights Agreement............................. 28 SECTION 3.21 Information Supplied................................. 28 SECTION 3.22 Termination of Existing Merger Agreement............. 29 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF IHK AND MERGER SUB SECTION 4.01 Organization and Qualification; Subsidiaries......... 29 SECTION 4.02 Certificate of Incorporation and By-Laws............. 30 SECTION 4.03 Capitalization....................................... 30 SECTION 4.04 Authority Relative to this Agreement................. 31 SECTION 4.05 No Conflict; Required Filings and Consents........... 31 SECTION 4.06 Permits; Compliance.................................. 32 SECTION 4.07 SEC Filings; Financial Statements.................... 32 SECTION 4.08 Absence of Certain Changes or Events................. 33 SECTION 4.09 Absence of Litigation................................ 34 SECTION 4.10 Employee Benefit Plans; Labor Matters................ 35 SECTION 4.11 Intellectual Property................................ 37 SECTION 4.12 Taxes................................................ 38 SECTION 4.13 Environmental Matters................................ 38 SECTION 4.14 Products............................................. 39 SECTION 4.15 Properties and Assets; Real Property and Leases...... 39 SECTION 4.16 Insurance............................................ 40 SECTION 4.17 Opinion of Financial Advisor......................... 40 SECTION 4.18 Vote Required........................................ 40 SECTION 4.19 Brokers.............................................. 41 SECTION 4.20 Information Supplied................................. 41 SECTION 4.21 Financing............................................ 42 ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER SECTION 5.01 Conduct of Business by the Company Pending the Merger......................................... 42 SECTION 5.02 Conduct of Business by IHK and the IHK Subsidiaries Pending the Merger................................. 45 SECTION 5.03 Government Filings................................... 47 ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.01 Stockholders' Meetings............................... 48 SECTION 6.02 Registration Statement; Proxy Statement.............. 49 SECTION 6.03 Access to Information; Confidentiality............... 51 SECTION 6.04 Approvals and Consents; Cooperation.................. 52 SECTION 6.05 No Solicitation of Transactions...................... 52 SECTION 6.06 Employee Benefits Matters............................ 53 SECTION 6.07 Directors' and Officers' Indemnification and Insurance...................................... 53 SECTION 6.08 Obligations of IHK and Merger Sub.................... 54 SECTION 6.09 Affiliates' Letters.................................. 54 iii SECTION 6.10 Letters of Accountants............................... 55 SECTION 6.11 Listing Market....................................... 55 SECTION 6.12 IHK Board Representation............................. 55 SECTION 6.13 Company Rights Plan.................................. 56 SECTION 6.14 Public Announcements................................. 56 SECTION 6.15 Subsequent Financial Statements...................... 56 ARTICLE VII CONDITIONS TO THE MERGER SECTION 7.01 Conditions to Each Party's Obligation to Effect the Merger......................................... 57 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER SECTION 8.01 Termination.......................................... 58 SECTION 8.02 Effect of Termination................................ 60 SECTION 8.03 Amendment............................................ 60 SECTION 8.04 Waiver............................................... 60 SECTION 8.05 Fees and Expenses.................................... 60 ARTICLE IX GENERAL PROVISIONS SECTION 9.01 Non-Survival of Representations, Warranties and Agreements..................................... 62 SECTION 9.02 Notices.............................................. 62 SECTION 9.03 Severability......................................... 63 SECTION 9.04 Assignment........................................... 63 SECTION 9.05 Interpretation....................................... 64 SECTION 9.06 Specific Performance................................. 64 SECTION 9.07 Governing Law........................................ 64 SECTION 9.08 Parties in Interest.................................. 64 SECTION 9.09 Counterparts......................................... 65 SECTION 9.10 Waiver of Jury Trial................................. 65 SECTION 9.11 Entire Agreement..................................... 65 SECTION 9.12 Certain Definitions.................................. 65 iv TABLE OF DEFINED TERMS (not a part of the Agreement) SECTION ------- Acquisition Proposal.................................. 6.05(a) Affiliate............................................. 9.12(a) Agreement............................................. Preamble AMEX.................................................. 9.12(o) Beneficial Owner...................................... 9.12(b) Benefit Trust......................................... 3.03 Benefit Trust Agreement............................... Annex B Benefit Trust Shares.................................. 3.03 Blue Sky Laws......................................... 3.05(b) Business Day.......................................... 9.12(c) Cash Consideration.................................... 2.06(a) Claim................................................. 6.07(b) Closing............................................... 2.02 Closing Price......................................... 9.12(d) Code.................................................. 2.09(a) Company............................................... Preamble Company Affiliate..................................... 6.09 Company Common Stock.................................. 1.01(a) Company Disclosure Schedule........................... Article III Preamble Company Environmental Permits......................... 3.13(b) Company ERISA Affiliate............................... 3.01(3) Company Executive Deferred Compensation Plans......... 3.10(h) Company Financial Statements.......................... 3.07(b) Company Material Adverse Effect....................... 3.01 Company Options....................................... 2.09(a) Company Permits....................................... 3.06 Company Plans......................................... 3.10(a) Company Preferred Stock............................... 3.03 Company Products...................................... 3.14 Company Rights........................................ 3.03 Company Rights Agreement.............................. 3.03 Company Rights Agreement Amendment.................... 3.20 Company SEC Reports................................... 3.07(a) Company Specified Stockholders........................ 9.12(e) Company Stock Option Plan............................. 2.09(a) Company Stockholder Approval.......................... 2.08 Company Stockholder Meeting........................... 6.01(a) v Company Subsequent Financial Statements............... 6.15(a) Company Subsidiary.................................... 3.01 Confidentiality Agreement............................. 6.03(b) Continuing Director................................... 1.04(a) Control............................................... 9.12(e) Deed Reservations..................................... 3.15(c) Dissenting Shares..................................... 2.12 DGCL.................................................. 1.02 DLJ................................................... 1.02 Effective Time........................................ 2.02(b) Election Date......................................... 2.11(c) Environmental Laws.................................... 3.13(a) ERISA................................................. 3.10(a) Exchange Act.......................................... 9.12(f) Exchange Agent........................................ 2.10(a) Exchange Fund......................................... 2.10(f) Excluded Shares....................................... 2.06(a) Expense Amount........................................ 8.05(b) Expenses.............................................. 8.05(a) Flo-Sun Agreement..................................... 3.22 Governmental Entity................................... 9.12(g) Hazardous Substances.................................. 3.13 HSR Act............................................... 1.01(a) IHK................................................... Preamble IHK Disclosure Schedule............................... Article IV Preamble IHK Environmental Permits............................. 4.13 IHK ERISA Affiliate................................... 4.10(b) IHK Financial Statements.............................. 4.07(b) IHK Junior Preferred Stock............................ 2.06(a) IHK Material Adverse Effect........................... 4.01 IHK Permits........................................... 4.06 IHK Plans............................................. 4.10(a) IHK Preferred Stock................................... 4.03 IHK Products.......................................... 4.14 IHK Purchase Rights................................... 2.06(a) IHK Rights Agreement.................................. 2.06(a) IHK SEC Reports....................................... 4.07(a) IHK Shareholders' Meeting............................. 6.01(b) IHK Specified Stockholders............................ 9.12(i) IHK Stockholder Approval.............................. 2.08 IHK Subsequent Financial Statements................... 6.15(b) IHK Subsidiary........................................ 4.01 Indemnified Parties................................... 6.07(a) vi Intellectual Property Rights.......................... 3.11 Knowledge or Known.................................... 9.12(h) Law................................................... 9.12(i) Lehman Brothers....................................... 4.17 Liens................................................. 3.15(c) Listing Market........................................ 6.11 Merger................................................ Recitals Merger Consideration.................................. 2.06(a) Merger Shares......................................... 2.06(b) Merger Sub............................................ Preamble Multiemployer Plan.................................... 3.10(b) Multiple Employer Plan................................ 3.10(b) NYSE.................................................. 9.12(o) Offer................................................. 1.01(a) Offer Documents....................................... 1.01(b) Offer Price........................................... 1.01(a) Order................................................. 9.12(j) Permitted Liens....................................... 3.15(c) Person................................................ 9.12(k) Proxy Statement....................................... 6.02(b) Registration Statement................................ 3.21 Representatives....................................... 6.03(a) Schedule 14D-1........................................ 1.01(b) Schedule 14D-9........................................ 1.02 SEC................................................... 1.01(b) Securities Act........................................ 9.12(l) Special Meetings...................................... 2.08 Stock Consideration................................... 9.12(m) Stockholder Approvals................................. 2.08 Stockholders' Meetings................................ 2.08 Subsidiary or Subsidiaries............................ 9.12(n) Substitute Options.................................... 6.05(a) Superior Proposal..................................... 7.05(a) Surviving Corporation................................. 2.01 Terminating Company Breach............................ 8.01(g) Terminating IHK Breach................................ 8.01(g) Termination Fee....................................... 8.05(b) Total Shares.......................................... 2.06(b) Trading Day........................................... 9.12(o) U.S. GAAP............................................. 3.07(b) WARN.................................................. 3.10(f) Waterway Works........................................ 3.15(c) vii AGREEMENT AND PLAN OF MERGER ---------------------------- AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of September 12, 1997 among IMPERIAL HOLLY CORPORATION, a Texas corporation ("IHK"), IHK MERGER SUB CORPORATION, a Delaware corporation ("Merger Sub"), and SAVANNAH FOODS & INDUSTRIES, INC., a Delaware corporation (the "Company"). R E C I T A L S: - - - - - - - - WHEREAS, the Board of Directors of each of IHK and the Company has determined that it is in the best interests of their respective stockholders for Merger Sub to acquire the Company upon the terms and subject to the conditions set forth herein; WHEREAS, the Board of Directors of the Company has unanimously adopted resolutions approving the acquisition of the Company by Merger Sub, this Agreement and the transactions contemplated hereby, and has unanimously agreed to recommend that the Company's stockholders approve this Agreement and the transactions contemplated hereby and tender their shares of Company Common Stock (as defined below) in the Offer (as defined below); WHEREAS, if at least 50.1% of the outstanding shares of Company Common Stock are purchased pursuant to the Offer, IHK, Merger Sub and the Company have agreed (subject to the terms and conditions of this Agreement), after the expiration or termination of the Offer and as soon as practicable following the approval of the stockholders of the Company, to effect the merger of Merger Sub with and into the Company (the "Merger") as more fully described herein; and WHEREAS, the Company has advised IHK, Merger Sub and the IHK Specified Stockholders (as hereinafter defined) that it will not enter into this Agreement unless the IHK Specified Stockholders execute and deliver to the Company an Agreement and Irrevocable Proxy in the form set forth in Annex C to this Agreement; and WHEREAS, IHK has advised the Company and the Company Specified Stockholders that IHK will not enter into this Agreement unless the Company Specified Stockholders (as hereinafter defined) execute and deliver to IHK the Stockholders Agreement in form set forth as Annex D to this Agreement and providing that the Company Specified Stockholders will tender their shares of Company Common Stock into the Offer under the terms set forth therein; and WHEREAS, IHK, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with this Agreement; NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I THE OFFER SECTION 1.01 The Offer. (a) Provided that this Agreement shall not have been terminated in accordance with Section 8.01 hereof, promptly (but in no event later than five Business Days (as defined below) following the date hereof), Merger Sub shall commence (within the meaning of Rule 14d-2 under the Exchange Act) an offer to purchase (the "Offer") at least 50.1% of all shares outstanding (on a fully diluted basis) of common stock, par value $.25 per share, of the Company ("Company Common Stock") at a price of $20.25 per share, net to the seller in cash (such price, or any such higher price as may be paid in the Offer, being referred to herein as the "Offer Price"). The obligation of Merger Sub to consummate the Offer and to accept for payment and to pay for any shares of Company Common Stock tendered pursuant thereto shall be subject only to those conditions set forth in Annex A hereto. The Company agrees that no shares of Company Common Stock held by the Company or any of the Company Subsidiaries (as defined below) will be tendered pursuant to the Offer; provided, however, that prior to the Effective Time (as defined below), shares of Company Common Stock held by the Company may be allocated, issued, delivered or transferred pursuant to the Company Stock Option Plan (as such term is defined in Section 2.09) in accordance with the terms thereof or Section 2.09. Merger Sub will not, without the prior written consent of the Company, (i) decrease or change the form of the consideration payable in the Offer, (ii) decrease the number of shares of Company Common Stock sought pursuant to the Offer, (iii) impose additional conditions to the Offer, (iv) change the conditions to the Offer, except that Merger Sub in its sole discretion may waive any of the conditions to the Offer (but may not waive the condition that not less than 50.1% of the Company Common Stock outstanding on a fully diluted basis shall have been validly tendered and not withdrawn), or (v) make any other change in the terms or conditions of the Offer which is adverse to the holders of the shares of Company Common Stock. Merger Sub agrees that, subject to the terms and conditions of the Offer and this Agreement, it will accept for payment and pay for all shares of Company Common Stock validly tendered and not withdrawn pursuant to the Offer promptly after expiration of the Offer; provided, however, that Merger Sub shall not be obligated to accept for payment and pay for in the Offer, in the aggregate, more than 50.1% of the outstanding shares of Company Common Stock. The Offer shall initially provide that it shall expire 20 Business Days after it is commenced, and may not be extended except as provided below. If the conditions set forth in Annex A are not satisfied or, to the extent permitted by this Agreement, waived by Merger Sub as of any scheduled expiration date, Merger Sub may extend the Offer from time to time until the earlier of the consummation of the Offer or 30 Business Days after the date hereof, and shall extend the Offer (x) to the extent necessary to comply with the waiting period requirements (including any extension or second request) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder (the "HSR Act") and (y) upon the request of the Company, to a date no later than November 30, 1997 to the extent 2 necessary for IHK to satisfy the condition set forth in clause (2) of Annex A. The Company and Merger Sub shall use commercially reasonable efforts to satisfy the conditions set forth in Annex A as soon as practicable. (b) On the date of commencement of the Offer, IHK and Merger Sub shall file or cause to be filed with the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 (together with all amendments thereto, the "Schedule 14D-1") with respect to the Offer, which shall contain the offer to purchase and related letter of transmittal and other ancillary Offer documents and instruments pursuant to which the Offer will be made (collectively with any supplements or amendments thereto, the "Offer Documents"). Merger Sub will disseminate the Offer Documents to holders of shares of Company Common Stock. IHK, Merger Sub and the Company will promptly correct any information provided by them for use in the Offer Documents that becomes false or misleading in any material respect, and Merger Sub will take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to holders of shares of Company Common Stock, in each case as and to the extent required by applicable law. The Company and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-1 (including the Offer Documents) prior to its filing with the SEC. Merger Sub agrees to provide the Company with any comments that may be received from the SEC or its staff with respect to the Schedule 14D-1 (including the Offer Documents) and any amendments thereto, promptly after receipt thereof. SECTION 1.02 Company Actions. The Company hereby consents to the Offer and represents and warrants that (a) its Board of Directors (at a meeting duly called and held), has (i) determined that the Offer and the Merger are fair to and in the best interests of the stockholders of the Company, (ii) resolved to approve the Offer and the Merger and recommend (subject to its fiduciary duties after taking into account advice of legal counsel) acceptance of the Offer and approval and adoption of this Agreement by such stockholders of the Company, (iii) taken all necessary steps to render Section 203 of the Delaware General Corporation Law (the "DGCL") inapplicable to the Merger, (iv) resolved to elect not to be subject, to the extent permitted by law, to any state takeover law other than Section 203 of the DGCL that may purport to be applicable to the Offer, the Merger or the transactions contemplated by this Agreement and (v) approved the Company Rights Agreement Amendment (as defined below), and (b) Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), the Company's financial advisor, has advised the Company's Board of Directors that, in their opinion, the consideration to be paid in the Offer and the Merger to the Company's stockholders is fair, from a financial point of view, to such stockholders. Upon commencement of the Offer, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") containing the recommendations of its Board of Directors in favor of the Offer and the Merger and shall permit the inclusion in the Offer Documents of such recommendations, in each case subject to the fiduciary duties of the Board of Directors of the Company. The Company, IHK and Merger Sub will promptly correct any information provided by them for use in the Schedule 14D-9 that becomes false or misleading in any material respect, and the Company will take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to holders of shares of Company Common 3 Stock, in each case as and to the extent required by applicable law. IHK and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-9 prior to its filing with the SEC. The Company agrees to provide IHK with any comments that may be received from the SEC or its staff with respect to the Schedule 14D-9 and any amendments thereto, promptly after receipt thereof. SECTION 1.03 Stockholder Lists. In connection with the Offer, the Company shall promptly furnish Merger Sub with mailing labels, security position listings and any available listing or computer file containing the names and addresses of the record holders of shares of Company Common Stock as of a recent date and shall furnish Merger Sub with such information and assistance as Merger Sub or its agents may reasonably request in communicating the Offer to the record and beneficial stockholders of the Company. Subject to the requirements of applicable law, IHK and Merger Sub will hold such listings and other information in confidence and in accordance with the terms of the Confidentiality Agreement (as defined below), shall use such information only in connection with the Offer and the Merger and, if this Agreement is terminated, shall deliver to the Company all copies of all such information (and extracts or summaries thereof) then in their or their agents' or advisors' possession. SECTION 1.04 Directors. (a) Promptly upon the purchase by Merger Sub pursuant to the Offer of such number of shares of Company Common Stock as represents at least 50.1% of the outstanding shares of Company Common Stock and from time to time thereafter, Merger Sub shall be entitled to designate such number of directors, rounded up to the next whole number, on the Board of Directors of the Company as will give Merger Sub representation on the Board of Directors of the Company equal to the product of the number of directors on the Board of Directors of the Company and the percentage that such number of shares of Company Common Stock so purchased bears to the number of shares of Company Common Stock outstanding, and the Company shall promptly, to the extent permitted by the Company's Certificate of Incorporation and By-Laws and the DGCL, upon request by Merger Sub, either (at the Company's election) increase the size of the Board of Directors of the Company or exercise all reasonable efforts to secure the resignations of such number of directors as is necessary to provide Merger Sub with such level of representation and to enable Merger Sub's designees to be so elected. Notwithstanding the foregoing, at all times prior to the Effective Time (as hereinafter defined) of the Merger the Board of Directors of the Company shall include at least two directors in office as of the date hereof (any such director remaining in office being a "Continuing Director"). The Company's obligations to appoint designees to the Board of Directors of the Company shall be subject to Section 14(f) of the Exchange Act. At the request and expense of Merger Sub, the Company shall take all action necessary to effect any such election, including mailing to its stockholders the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. IHK and Merger Sub will timely supply to the Company in writing and IHK and Merger Sub will be solely responsible for any and all information with respect to themselves and their respective officers, directors and affiliates and director designees required by such Section and Rule. 4 (b) Following the election or appointment of Merger Sub's designees pursuant to this Section and prior to the Effective Time, such designees shall abstain from acting upon, and the approval of a majority of the Continuing Directors shall be required to authorize and shall be sufficient to authorize, any resolution with respect to any termination of this Agreement by the Company, any amendment of this Agreement requiring action by the Board of Directors of the Company, any extension of time for the performance of any of the obligations or other acts of IHK or Merger Sub under this Agreement, any waiver of compliance with any of the agreements or conditions under this Agreement for the benefit of the Company, and any action to seek to enforce any obligation of IHK or Merger Sub under this Agreement. The Continuing Directors shall be appointed as a Special Committee of the Board of Directors of the Company and, in addition to having all of the powers of the Continuing Directors set out in the preceding sentence, the Special Committee shall have the full power over all issues relating to the relationship between the Company on the one hand and IHK and Merger Sub on the other and the Company shall not take any action if, in the opinion of a majority of the Special Committee, such action would frustrate or be reasonably likely to impair or delay the ability of the parties to consummate the Merger. In connection herewith, the Continuing Directors (as such or in their capacity as the Special Committee) shall be authorized, on behalf of and at the expense of the Company, to retain financial and legal advisors. ARTICLE II THE MERGER SECTION 2.01 The Merger. Upon the terms and subject to the conditions hereof, and in accordance with the relevant provisions of the DGCL, the Merger shall occur as soon as practicable following the satisfaction or waiver, if permissible, of the conditions set forth in Article VII hereof. The Company shall be the surviving corporation in the Merger (the "Surviving Corporation") under the name SAVANNAH FOODS & INDUSTRIES, INC. (or such other name as the parties shall agree) and shall continue its existence under the laws of Delaware. The separate corporate existence of Merger Sub shall cease. SECTION 2.02 Effective Time; Closing. (a) The closing of the Merger (the "Closing") will take place on the day that is two Business Days (as defined below) after satisfaction or waiver (subject to applicable Law (as defined below)) of the conditions set forth in Article VII (excluding conditions that, by their terms, cannot be satisfied until the Closing Date), unless another time or date is agreed to in writing by the parties hereto. The Closing shall be held at the offices of Andrews & Kurth L.L.P., 4200 Texas Commerce Tower, 600 Travis, Houston, Texas 77002, unless another place is agreed to in writing by the parties hereto. 5 (b) As soon as practicable following the Closing, the parties hereto shall cause the Merger to be consummated by filing a Certificate of Merger with the Secretary of State of Delaware in such form as is required by, and executed in accordance with, the relevant provisions of the DGCL. The term "Effective Time" means the date and time of the filing of the Certificate of Merger with the Secretary of State of the State of Delaware (or such later time as may be agreed in writing by each of the parties hereto and specified in the Certificate of Merger; provided, however, that for financial accounting purposes, the Effective Time shall be the first day of the month in which the Closing occurs. SECTION 2.03 Effects of the Merger. The Merger shall have the effects set forth in the applicable provisions of the DGCL and set forth herein. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of each of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation. SECTION 2.04 Certificate of Incorporation and By-Laws. The Certificate of Incorporation and the By-Laws of Merger Sub, in each case as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation and By-Laws of the Surviving Corporation; provided, however, that Article I of the Certificate of Incorporation of the Surviving Corporation shall be amended to read in its entirety as follows: "ARTICLE I. The name of the Corporation is SAVANNAH FOODS & INDUSTRIES, INC." (or such other name as the parties shall agree). SECTION 2.05 Directors and Officers. The directors of Merger Sub immediately prior to the Effective Time and the officers of the Company immediately prior to the Effective Time shall be the directors and officers, respectively, of the Surviving Corporation until their respective successors are duly elected and qualified. SECTION 2.06 Conversion of Shares. (a) At the Effective Time, except as otherwise provided herein and subject to Section 2.06(b), each share of Company Common Stock, issued and outstanding immediately prior to the Effective Time (other than the shares of Company Common Stock owned by IHK, Merger Sub or any of their Subsidiaries or held in the treasury of the Company, all of which shall be canceled and cease to exist, without consideration being payable therefore (the "Excluded Shares"), shall, by virtue of the Merger and, except as provided in Section 2.11, without any action on the part of the holder thereof, be converted into, exchanged for and represent the right to receive (without interest), subject to the proration procedures described below, either (i) the Stock Consideration (as defined below) or (ii) cash in an amount equal to the Offer Price ("Cash Consideration" and, together with the Stock Consideration, the "Merger Consideration")); provided, however, that, in any event, if between the date of this Agreement and the Effective Time the outstanding shares of IHK Common Stock or Company Common Stock shall have been changed into a different number of shares or a 6 different class by reason of any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares, the Cash Consideration and the Stock Consideration shall be correspondingly adjusted to reflect such stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares. All shares of Company Common Stock so converted or exchanged shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each certificate previously evidencing any such shares shall thereafter represent the right to receive, upon the surrender of such certificate in accordance with the provisions of Section 2.11, only the applicable Merger Consideration and any cash to be paid in lieu of fractional shares of IHK Common Stock and associated fractional rights ("IHK Purchase Rights") to purchase one one-hundredth of a share of Series A Junior Participating Preferred Stock, without par value, of IHK ("IHK Junior Preferred Stock") pursuant to the Rights Agreement, dated as of September 14, 1989, as amended (the "IHK Rights Agreement"), between IHK and The Bank of New York, as rights agent, to which such holder is entitled pursuant to Section 2.10(e) (without interest thereon). The holders of such certificates previously evidencing such shares of Company Common Stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares of Company Common Stock except as otherwise provided herein or by law. IHK shall prepare a statement setting forth the calculations required or otherwise contemplated by this Section 2.06 in reasonable detail prior to the Closing Date and shall furnish a copy thereof to the Company. (b) Notwithstanding anything in this Agreement to the contrary, the number of shares of Company Common Stock (the "Cash Election Number") to be converted into the right to receive the Cash Consideration in the Merger shall be equal to 70% of the number of shares of Company Common Stock issued and outstanding immediately prior to the Effective Time less the sum of (i) the number of Dissenting Shares (as hereinafter defined) and (ii) the number of Excluded Shares. (c) In the event that the aggregate number of shares in respect of which Cash Elections (as defined below) have been made (the "Cash Election Shares") exceeds the Cash Election Number, each share of Company Common Stock in respect of which a Cash Election has not been made shall be converted into the right to receive the Stock Consideration, and each of the Cash Election Shares shall be converted into the right to receive the Stock Consideration or the Cash Consideration in the following manner: (i) A proration factor (the "Proration Factor") shall be determined by dividing the Cash Election Number by the total number of Cash Election Shares. (ii) The number of Cash Election Shares as to which each stockholder who made a Cash Election shall be converted into the right to receive the Cash Consideration (on a consistent basis among stockholders who made a Cash Election pro rata to the number of shares as to which they made such elections) shall be equal to the product of the Proration Factor multiplied by the total number of Cash Election Shares beneficially owned by such stockholder. 7 (iii) Subject to Section 2.10(e), each Cash Election Share other than those shares that shall receive the Cash Election Amount in accordance with Section 2.06(c)(ii), shall be converted into the right to receive the Stock Consideration. (d) Subject to Section 2.10(e), if the number of Cash Election Shares is less than the Cash Election Number, then: (i) Each Cash Election Share shall be converted into the right to receive the Cash Consideration; and (ii) Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time other than Cash Election Shares, the shares of Company Common Stock to be canceled in accordance with Section 2.06(e) and Dissenting Shares (the "Eligible Shares"), shall be converted into the right to receive the Cash Consideration or the Stock Consideration in the following manner: (A) The number of Eligible Shares to be converted into the right to receive the Cash Consideration shall be equal to the excess of the Cash Election Number over the number of Cash Election Shares (which shall be allocated on a basis consistent among all stockholders who beneficially own Eligible Shares pro rata to the number of Eligible Shares beneficially owned by each such stockholder). (B) Each other Eligible Share shall be converted into the right to receive the Stock Consideration. (e) At the Effective Time, each Excluded Share shall be canceled without any conversion thereof and no payment or distribution shall be made with respect thereto. SECTION 2.07 Conversion of Common Stock of Merger Sub. Each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and become at the Effective Time one share of common stock of the Surviving Corporation. SECTION 2.08 Stockholders' Meetings. Subject to applicable law, each of IHK and the Company, acting through its respective Board of Directors, shall, in accordance with applicable law, duly call, give notice of, convene and hold a special meeting (the "Special Meetings" or the "Stockholders' Meetings") of its respective stockholders as soon as practicable for the purpose (in the case of the Company) of approving and adopting the agreement of merger (within the meaning of Section 251 of the DGCL) set forth in this Agreement and approving the Merger (the "Company Stockholder Approval") or (in the case of IHK) the issuance of the shares of IHK Common Stock to the stockholders of the Company in the Merger (the "IHK Stockholder Approval" and together with the Company Stockholder Approval, the "Stockholder Approvals"), and, subject to the fiduciary duties of the respective Boards of Directors under applicable law as determined by such 8 directors in good faith after consultation with and based upon the advice of outside counsel, include in the Proxy Statement (as defined in Section 6.02) of each of the Company and IHK for use in connection with the Special Meetings, the recommendation of their Boards of Directors that stockholders vote in favor of the Company Stockholder Approval or IHK Stockholder Approval, as the case may be. The Company and IHK agree to use commercially reasonable efforts to cause the Special Meetings to occur within 30 days after the Registration Statement (as defined below in Section 3.21) is effective under the Securities Act. IHK and Merger Sub agree that, at the Company Stockholders' Meeting, all of the shares of Company Common Stock acquired pursuant to the Offer or otherwise by IHK or Merger Sub will be voted in favor of the Company Stockholder Approval. SECTION 2.09 Rights Under Stock Plans. (a) Each unexpired and unexercised option to purchase shares of Company Common Stock (the "Company Options") issued pursuant to the Company's 1996 Equity Incentive Plan (the "Company Stock Option Plan"), or otherwise granted by the Company outside the Company Stock Option Plan, each of which issued and outstanding Company Options are set forth in Section 3.03 of the Company Disclosure Schedule (as defined below), shall, at the Effective Time and at the election of the holder of such Company Options, either (i) be assumed by IHK and shall constitute an option to acquire, on the same terms and conditions as were applicable under such assumed Company Option, a number of shares of IHK Common Stock equal to the product of (A) the Stock Consideration and (B) the number of shares of Company Common Stock subject to such Company Option, at a price per share equal to the amount obtained by dividing the exercise price of such Company Option by the Stock Consideration (the "Substitute Options") or (ii) each Company Option which is vested or exercisable or shall become vested or exercisable as a result of the Offer or the Merger shall be canceled by the Company, and each holder of a Company Option so canceled shall be entitled to receive an amount in cash equal to the difference between the Offer Price and the exercise price of such Company Option. Each holder of a Company Option shall make such election by notifying the Company and IHK by 5:00 p.m. New York City time on the Election Date (as defined below). At the Effective Time, IHK shall deliver to holders of Company Options, who make the election set forth in clause (i) of the preceding sentence, appropriate option agreements representing the right to acquire shares of IHK Common Stock on the same terms and conditions as contained in the outstanding Company Options. IHK shall adopt and comply with the terms of the Company Stock Option Plan as it applies to Company Options assumed as set forth above including, without limitation, provisions regarding the accelerated vesting of Company Options which shall occur by virtue of consummation of the Merger, to the extent required by the terms of such Company Options or the Company Stock Option Plan. The date of grant of each Substitute Option shall be deemed to be the date on which the corresponding Company Option was granted. It is the intention of the parties that, subject to applicable Law, the Substitute Options qualify following the Effective Time as incentive stock options as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), to the extent that the Company Options qualified as incentive stock options prior to the Effective Time. 9 (b) IHK shall take all corporate action necessary to reserve for issuance a sufficient number of shares of IHK Common Stock for delivery upon exercise of Company Options assumed in accordance with this Section 2.09. Promptly after the Effective Time, the shares of IHK Common Stock subject to Substitute Options shall be covered by an effective registration statement on Form S-8 (or any successor form) or another appropriate form and IHK shall use commercially reasonable efforts to maintain the effectiveness of such registration statement or registration statements for so long as Substitute Options remain outstanding. In addition, IHK shall use commercially reasonable efforts to cause the shares of IHK Common Stock subject to Substitute Options to be listed on the Listing Market (as defined below). SECTION 2.10 Exchange of Certificates. (a) Prior to the mailing of the Proxy Statement, IHK shall appoint a bank or trust company to act as paying agent (the "Exchange Agent") for the payment of the Merger Consideration. As of or promptly after the Effective Time, IHK shall deposit the aggregate Merger Consideration with the Exchange Agent for the benefit of the holders of shares of Company Common Stock, for exchange in accordance with this Article II. (b) As soon as practicable after the Effective Time, each holder of an outstanding certificate or certificates which prior thereto represented shares of Company Common Stock shall, upon surrender to the Exchange Agent of such certificate or certificates and acceptances thereof by the Exchange Agent, be entitled to a certificate or certificates representing the number of full shares of IHK Common Stock received as Stock Consideration and the Cash Consideration, if any, into which the number of shares of Company Common Stock previously represented by such certificate or certificates surrendered shall have been converted pursuant to this Agreement. The Exchange Agent shall accept such certificates upon compliance with such reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. After the Effective Time, there shall be no further transfer on the records of the Company or its transfer agent of certificates representing shares of Company Common Stock, and if such certificates are presented to the Surviving Corporation for transfer, they shall be canceled against delivery of cash and/or certificates for shares of IHK Common Stock in accordance with this Agreement. If any certificate for such shares of IHK Common Stock is to be issued in, or if cash is to be remitted to, a name other than that in which the certificate for shares of Company Common Stock surrendered for exchange is registered, it shall be a condition of such exchange that the certificate so surrendered shall be properly endorsed, with signature guaranteed or otherwise in proper form for transfer and that the person requesting such exchange shall pay to the Surviving Corporation or its transfer agent any transfer or other taxes required by reason of the issuance of certificates for such shares of IHK Common Stock in a name other than that of the registered holder of the certificate surrendered, or establish to the satisfaction of the Surviving Corporation or its transfer agent that such tax has been paid or is not applicable. Until surrendered as contemplated by this Section 2.10(b), each certificate for shares of Company Common Stock shall be deemed at any time after the Effective Time of the Merger to represent only the right to receive upon such surrender the Merger Consideration as contemplated by Section 2.06. 10 (c) No dividends or other distributions with respect to shares of IHK Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered certificate for shares of Company Common Stock with respect to the shares of IHK Common Stock represented thereby and no cash payment in lieu of fractional shares of IHK Common Stock shall be paid to any such holder pursuant to Section 2.10(e) until the surrender of the certificate for shares of Company Common Stock with respect to the shares of IHK Common Stock represented thereby in accordance with this Article II. Subject to the effect of applicable laws, following surrender of any such certificates, these shall be paid to the holder of the certificate representing whole shares of IHK Common Stock issued in connection therewith, without interest (i) at the time of such surrender the amount of any cash payable in lieu of fractional shares to which such holder is entitled pursuant to Section 2.10(e) and the proportionate amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such shares of IHK Common Stock, and (ii) at the appropriate payment date, the proportionate amount of dividends or other distributions with a record date after the Effective Time but prior to such surrender and a payment date subsequent to such surrender payable with respect to such whole shares of IHK Common Stock. (d) All cash paid upon the surrender for exchange of certificates representing shares of Company Common Stock in accordance with the terms of this Article II (including any cash paid pursuant to Section 2.10(e)) shall be deemed to have been issued (and paid) in full satisfaction of all rights pertaining to the shares of Company Common Stock exchanged for cash theretofore represented by such certificates. (e) Notwithstanding any other provisions of this Agreement, each holder of shares of Company Common Stock after the Effective Time who would otherwise have been entitled to receive as Stock Consideration a fraction of a share of IHK Common Stock (after taking into account all shares of Company Common Stock delivered by such holder) shall receive, in lieu thereof, a cash payment (without interest) equal to such fraction multiplied by the Cash Consideration. (f) Any portion of the Merger Consideration deposited with the Exchange Agent pursuant to this Section 2.10 (the "Exchange Fund") which remains undistributed to the holders of the certificates representing shares of Company Common Stock for six months after the Effective Time shall be delivered to IHK, and any holders of shares of Company Common Stock prior to the Effective Time who have not theretofore complied with this Article II shall thereafter look only to IHK and only as general creditors thereof for payment of their claim for cash or shares of IHK Common Stock, if any. (g) None of Merger Sub, the Company, IHK or the Exchange Agent shall be liable to any person in respect of any cash or any shares of IHK Common Stock from the Exchange Fund delivered to a public office pursuant to any applicable abandoned property, escheat or similar law. If any certificates representing shares of Company Common Stock shall not have been surrendered immediately prior to the date on which any Merger Consideration in respect of such certificate would otherwise escheat to or become the property of any Government Authority, any such Merger Consideration in respect of such certificate shall, as such time and to the extent permitted by 11 applicable law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto. (h) The Exchange Agent shall invest any cash included in the Exchange Fund, as directed by IHK, on a daily basis, provided that such investments shall be in obligations of the United States of America or obligations fully guaranteed as to principal and interest by the United States of America, any of which may be made through a repurchase agreement in commercially reasonable form with any bank or other financial institution having capital, surplus and undivided profits of at least $500,000,000. Any interest and other income resulting from such investments shall be paid to IHK. To the extent that there are losses with respect to such investments, or the Exchange Fund diminishes for other reasons below the level required to make prompt payments of the Merger Consideration as contemplated hereby, IHK shall promptly replace or restore the portion of the Exchange Fund lost through investments or other events so as to ensure that the Exchange Fund is, at all times, maintained at a level sufficient to make such payments. (i) The Company shall pay all charges and expenses of the Exchange Agent. SECTION 2.11 Elections. (a) Each person who, on or prior to the Election Date referred to in paragraph (c) below, is a record holder of shares of Company Common Stock (other than holders of shares to be canceled as set forth in Section 2.06(a)) will be entitled, with respect to all or any portion of his shares, to make an unconditional election (a "Cash Election") on or prior to such Election Date to receive the Cash Consideration (subject to Section 2.06), on the basis hereinafter set forth. (b) Prior to the mailing of the Proxy Statement, IHK shall appoint the Exchange Agent for the payment of the Merger Consideration. (c) The Company shall prepare and mail a form of election, which form shall be subject to the reasonable approval of IHK and Merger Sub (the "Form of Election"), with the Proxy Statement to the record holders of shares of Company Common Stock as of the record date for the Company Stockholders' Meeting, which Form of Election shall be used by each record holder of shares of Company Common Stock who wishes to make a Cash Election, subject to the provisions of Section 2.06 hereof, for any or all shares of Company Common Stock held by such holder. The Company will use commercially reasonable efforts to make the Form of Election and the Proxy Statement available to all persons who become holders of shares of Company Common Stock during the period between such record date and the Election Date referred to below. Any such holder's Cash Election shall have been properly made only if the Exchange Agent shall have received at its designated office, by 5:00 p.m., New York City time on the Business Day (the "Election Date") next preceding the day on which the vote is taken at the Company Stockholders' Meeting (or any adjournment thereof) a Form of Election properly completed and signed and accompanied by certificates for the shares of Company Common Stock to which such Form of Election relates (or by an appropriate guarantee of delivery of such certificates as set forth in such Form of Election from 12 a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States, provided such certificates are in fact delivered to the Exchange Agent within three NYSE trading days after the date of execution of such guarantee of delivery). Failure to deliver shares covered by such a guarantee of delivery within the time set forth therein shall invalidate an otherwise properly made Cash Election. (d) Any Form of Election may be revoked by the stockholder submitting it to the Exchange Agent only by written notice received by the Exchange Agent (i) prior to 5:00 p.m., New York City time, on the Election Date or (ii) after the date of the Company Stockholders Meeting, if (and to the extent that) the Exchange Agent is legally required to permit revocations and the Effective Time shall not have occurred prior to such date. In addition, all Forms of Election shall automatically be revoked if the Exchange Agent is notified in writing by IHK, Merger Sub and the Company that the Merger has been abandoned. If a Form of Election is revoked, the certificate or certificates (or guarantees of delivery, as appropriate) for the shares of Company Common Stock to which such Form of Election relates shall be promptly returned to the stockholder submitting the same to the Exchange Agent. (e) The determination of the Exchange Agent shall be binding as to whether or not elections to receive the Cash Consideration have been properly made or revoked pursuant to this Section 2.11 with respect to shares of Company Common Stock and when elections and revocations were received by it. If the Exchange Agent determines that any Cash Election was not properly made with respect to shares of Company Common Stock, such shares of Company Common Stock shall be treated by the Exchange Agent as shares of Company Common Stock which were not Cash Election Shares at the Effective Time, and such shares of Company Common Stock shall be exchanged in the Merger for Stock Consideration pursuant to Section 2.06. The Exchange Agent shall also make all computations as to the allocation and the proration contemplated by Section 2.06, and any such computation shall be conclusive and binding on the holders of shares of Company Common Stock. The Exchange Agent may, with the mutual agreement of IHK and Merger Sub, make such rules as are consistent with this Section 2.11 for the implementation of the elections provided for herein as shall be necessary or desirable fully to effect such elections. SECTION 2.12 Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, any issued and outstanding shares of Company Common Stock which are held by stockholders who did not vote in favor of the Merger and who comply with all of the relevant provisions of Section 262 of the DGCL (the "Dissenting Shares") shall not be converted into or be exchanged for the right to receive the Merger Consideration (but instead shall be converted into the right to receive payment from the Surviving Corporation with respect to such Dissenting Shares in accordance with the DGCL), unless and until such holders shall have failed to perfect or shall have effectively withdrawn or lost their rights to appraisal under the DGCL. If any such holder shall have failed to perfect or shall have effectively withdrawn or lost such right, such holder's shares of Company Common Stock shall be entitled to receive either (i) the Stock Consideration or (ii) the Cash Consideration in accordance with Section 2.06. The Company shall give prompt notice to 13 Merger Sub and IHK of any demands received by the Company for appraisal of shares of Company Common Stock, and Merger Sub and IHK shall have the right to participate in and direct all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Merger Sub and IHK, make any payment with respect to, or settle or offer to settle, any such demands. IHK agrees to invest in, or lend to, the Surviving Corporation sufficient funds to permit any payment with respect to Dissenting Shares. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as set forth in the Disclosure Schedule delivered by the Company concurrently with the execution of this Agreement (the "Company Disclosure Schedule") (each section of which qualifies the correspondingly numbered representation and warranty or covenant to the extent specified therein), the Company hereby represents and warrants to IHK and the Merger Sub that: SECTION 3.01 Organization and Qualification; Subsidiaries. Each of the Company and each subsidiary of the Company (a "Company Subsidiary") is a corporation duly incorporated, validly existing and in good standing under the Laws of the jurisdiction of its incorporation and has the requisite power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to be so organized, existing or in good standing or to have such power, authority and governmental approvals would not, individually or in the aggregate, have a Company Material Adverse Effect (as defined below). The Company and each Company Subsidiary are duly qualified or licensed as a foreign corporation to do business, and are in good standing, in each jurisdiction where the character of the properties owned, leased or operated by the Company and the respective Company Subsidiaries or the nature of their respective businesses makes such qualification or licensing necessary, except for such failures to be so qualified or licensed and in good standing that would not, individually or in the aggregate, have a Company Material Adverse Effect. The term "Company Material Adverse Effect" means any adverse change, circumstance or effect that, individually or in the aggregate with all other adverse changes, circumstances and effects, is or is reasonably likely to be materially adverse to the business, operations, assets, liabilities (including, without limitation, contingent liabilities), financial condition or results of operations of the Company and the Company Subsidiaries taken as a whole. Section 3.01 of the Company Disclosure Schedule sets forth, as of the date of this Agreement, a true and complete list of all of the Company Subsidiaries, together with the jurisdiction of incorporation of each Company Subsidiary and the percentage of each Company Subsidiary's outstanding capital stock or other equity interests owned by the Company and the Company Subsidiaries, as the case may be, and the name of each other holder of any such outstanding capital stock or other equity interests and the percentage so held with respect to each such Company Subsidiary. There are no partnerships or joint venture arrangements or other business entities in which the Company or any Company Subsidiary owns an equity interest that are material to the business of the Company and the Company Subsidiaries taken as a whole. 14 SECTION 3.02 Certificate of Incorporation and By-Laws. The Company has made available to IHK complete and correct copies of its Certificate of Incorporation and By-Laws and the certificates of incorporation and by-laws or other comparable charter or organizational documents of the Company Subsidiaries, in each case as amended to the date of this Agreement. The Company is not in violation of any of the provisions of its Certificate of Incorporation or By-Laws. Except as would not have a Company Material Adverse Effect, no Company Subsidiary is in violation of any of the provisions of its Certificate of Incorporation or By-Laws or other comparable charter or organizational documents. SECTION 3.03 Capitalization. The authorized capital stock of the Company consists of 64,000,000 shares of Company Common Stock and 1,000,000 shares of preferred stock ("Company Preferred Stock"). As of September 1, 1997, (i) 28,738,196 shares of Company Common Stock are issued and outstanding, all of which are validly issued, fully paid and nonassessable and 2,500,000 of which are held by Wachovia Bank, N.A. (formerly Wachovia Bank of North Carolina N.A.), as trustee of the trust created pursuant to the Savannah Foods & Industries, Inc. Benefit Trust Agreement (the "Benefit Trust"; shares held by the trustee of the Benefit Trust immediately prior to the Effective Time being referred to herein as the "Benefit Trust Shares"); (ii) 2,568,604 shares of Company Common Stock are held in the treasury of the Company; (iii) 1,250,000 shares of Company Common Stock are reserved for future issuance pursuant to Company Options and (iv) 1,000,000 shares of Company Preferred Stock are reserved for issuance pursuant to the Rights Agreement, dated as of March 31, 1989, between the Company and Citizens and Southern Trust Company, as Rights Agent (as amended, the "Company Rights Agreement"). Except for Company Options heretofore granted pursuant to the Company Stock Option Plan or pursuant to agreements or arrangements described in Section 3.03 of the Company Disclosure Schedule and the Preferred Stock Purchase Rights (the "Company Rights") issued pursuant to the Company Rights Agreement, there are no options, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or any Company Subsidiary or obligating the Company or any Company Subsidiary to issue or sell any shares of capital stock of, or other equity interests in, the Company or any Company Subsidiary. All shares of Company Common Stock and Company Preferred Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. There are no outstanding contractual obligations of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any shares of Company Common Stock or Company Preferred Stock or any capital stock of any Company Subsidiary. Each outstanding share of capital stock of each Company Subsidiary is duly authorized, validly issued, fully paid and nonassessable and each such share owned by the Company or another Company Subsidiary is free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on the Company's or such other Company Subsidiary's voting rights, charges and other encumbrances of any nature whatsoever. Neither the Company nor any Company Subsidiary directly or indirectly owns, or has agreed to purchase or otherwise acquire, 5% or more of the capital stock of any corporation, partnership, joint venture or other business association or entity, assuming for such purpose the conversion of all securities convertible into such capital stock held by the Company or any Company Subsidiary and the 15 exercise of all warrants, options and other rights of the Company or any Company Subsidiary to purchase such capital stock (other than the Company Subsidiaries set forth in Section 3.01 of the Company Disclosure Schedule). There are no material outstanding contractual obligations of the Company or any Company Subsidiary to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any Company Subsidiary or any other Person. There are no voting trusts or other agreements or understandings to which the Company or any Company Subsidiary is a party with respect to the voting of capital stock of the Company or any Company Subsidiary. SECTION 3.04 Authority Relative to this Agreement. (a) The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby (other than, with respect to the Merger, the approval and adoption of this Agreement by the holders of a majority of the then outstanding shares of Company Common Stock, and the filing and recordation of appropriate merger documents as required by the DGCL). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by IHK and Merger Sub, constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms (except insofar as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally, or principles governing the availability of equitable remedies). (b) The Company's Board of Directors has approved the Offer, the Merger and this Agreement, and such approval is sufficient to render inapplicable to the Offer, the Merger and this Agreement and the transactions contemplated by this Agreement the provisions of Section 203 of the DGCL. To the Knowledge of the Company, no other state takeover statute or similar statute or regulation applies or purports to apply to the Merger, this Agreement or any of the transactions contemplated by this Agreement. SECTION 3.05 No Conflict; Required Filings and Consents. (a) The execution and delivery of this Agreement by the Company will not, (i) conflict with or violate the Certificate of Incorporation or By-laws or equivalent organizational documents of the Company or any Company Subsidiary, (ii) assuming that all consents, approvals, authorizations and other actions described in Section 3.05(b) have been obtained and all filings and obligations described in Section 3.05(b) have been made, conflict with or violate any foreign or domestic Law applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound or affected, or (iii) result in any breach 16 of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of the Company or any Company Subsidiary pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation, except, with respect to clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults, or other occurrences which would not, individually or in the aggregate, have a Company Material Adverse Effect. (b) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity, except (i) for applicable requirements, if any, of the Exchange Act, state securities or "blue sky" Laws ("Blue Sky Laws"), the NYSE, the Listing Market and state takeover Laws, the pre-merger notification requirements of the HSR Act, and filing and recordation of appropriate merger documents as required by the DGCL and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of the Merger, or otherwise prevent the Company from performing its obligations under this Agreement, and would not, individually or in the aggregate, have a Company Material Adverse Effect. SECTION 3.06 Permits; Compliance. Each of the Company and the Company Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Entity necessary for the Company or any Company Subsidiary to own, lease and operate its properties or to carry on its business as it is now being conducted (the "Company Permits"), except where the failure to have, or the suspension or cancellation of, any of the Company Permits would not, individually or in the aggregate, have a Company Material Adverse Effect, and, as of the date hereof, no suspension or cancellation of any of the Company Permits is pending or, to the Knowledge of the Company, threatened, except where the failure to have, or the suspension or cancellation of, any of the Company Permits would not, individually or in the aggregate, have a Company Material Adverse Effect. Neither the Company nor any Company Subsidiary is in conflict with, or in default or violation of, (i) any Law applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound or affected, (ii) any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any Company Subsidiary is a party or by which the Company or any Company Subsidiary or any property or asset of the Company or any Company Subsidiary is bound or affected or (iii) any Company Permits, except for any such conflicts, defaults or violations that would not, individually or in the aggregate, have a Company Material Adverse Effect. SECTION 3.07 SEC Filings; Financial Statements. (a) The Company has filed all forms, reports and documents required to be filed by it with the SEC since October 1, 1995 (collectively, the "Company SEC Reports"). The Company SEC Reports (i) were prepared in accordance with the requirements of the Securities Act, or the 17 Exchange Act, as the case may be, and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. No Company Subsidiary is required to file any form, report or other document with the SEC. (b) Each of the consolidated financial statements (including, in each case, any notes thereto) contained in the Company SEC Reports (the "Company Financial Statements"), (i) was prepared from the books of account and other financial records of the Company and the consolidated Company Subsidiaries, (ii) was prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP") applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto) and (iii) presented fairly, in all material respects, the consolidated financial position of the Company and the consolidated Company Subsidiaries as at the respective dates thereof and the results of their operations and their cash flows for the respective periods indicated therein except as otherwise noted therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments which were not and are not expected, individually or in the aggregate, to have a Company Material Adverse Effect and the omission of footnotes). (c) The books of account and other financial records of the Company and the Company Subsidiaries from which the Company Financial Statements were prepared: (i) reflect all items of income and expense and all assets and liabilities required to be reflected therein in accordance with U.S. GAAP applied on a basis consistent with the past practices of the Company, (ii) are in all material respects complete and correct, and do not contain or reflect any material inaccuracies or discrepancies and (iii) have been maintained in accordance with good business and accounting practices. (d) Except for liabilities and obligations reflected on the September 29, 1996 consolidated balance sheet of the Company (including the notes thereto), liabilities and obligations disclosed in the Company SEC Reports filed prior to the date of this Agreement and other liabilities and obligations incurred in the ordinary course of business consistent with past practice since September 29, 1996, neither the Company nor any Company Subsidiary has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) which, individually or in the aggregate, are or are reasonably likely to be material to the Company and the Company Subsidiaries taken as a whole. (e) The Company has heretofore furnished to IHK complete and correct copies of (i) all agreements, documents and other instruments not yet filed by the Company with the SEC but that are currently in effect and that the Company expects to file with the SEC after the date of this Agreement and (ii) all amendments and modifications that have not been filed by the Company with the SEC to all agreements, documents and other instruments that previously have been filed by the Company with the SEC and are currently in effect. 18 SECTION 3.08 Absence of Certain Changes or Events. Since September 29, 1996, except as contemplated by this Agreement or as disclosed in the Company SEC Reports filed prior to the date of this Agreement, the Company and the Company Subsidiaries have conducted their businesses only in the ordinary course and in a manner consistent with past practice and, since such date, there has not been (a) any Company Material Adverse Effect, (b) any change by the Company in its accounting methods, principles or practices, except as may be required by U.S. GAAP, (c) any damage, destruction or loss (whether or not covered by insurance) with respect to properties or assets of the Company or any Company Subsidiary that, individually or in the aggregate, would result in a Company Material Adverse Effect, (d) any declaration, setting aside or payment of any dividend or distribution in respect of shares of Company Common Stock or any redemption, purchase or other acquisition of any of its securities other than the previously declared regular quarterly dividend of $0.0375 per share of Company Common Stock, (e) any revaluation by the Company and the Company Subsidiaries of any asset (including, without limitation, any writing down of the value of inventory or writing off of notes or accounts receivable), other than in the ordinary course of business consistent with past practice, (f) any entry by the Company or any Company Subsidiary into any commitment or transaction material to the Company and the Company Subsidiaries taken as a whole, except in the ordinary course of business consistent with past practice, (g) any increase in or establishment of any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, stock option (including, without limitation, the granting of stock options, stock appreciation rights, performance awards, or restricted stock awards), stock purchase or other employee benefit plan, or any other increase in the compensation payable or to become payable to any officers or key employees of the Company or any Company Subsidiary, except in the ordinary course of business consistent with past practice, (h) any acquisition or disposition by the Company or any Company Subsidiary of any material asset, except in the ordinary course of business consistent with past practice, (i) any incurrence, assumption or guarantee of any indebtedness or obligation relating to any lending or borrowing except current liabilities and commitments incurred in the ordinary course of business consistent with past practice, or (j) any amendment, modification or termination of any existing, or entering into any new, material contract, or any material plan, lease, license, permit or franchise, except in the ordinary course of business consistent with past practice. SECTION 3.09 Absence of Litigation. (a) Except as set forth in Section 3.09 of the Company Disclosure Schedule, there is no litigation, suit, claim, action, proceeding or investigation pending or, to the Knowledge of the Company, threatened against or affecting the Company or any Company Subsidiary, or any property or asset of the Company or any Company Subsidiary, before any court, arbitrator or Governmental Entity, which (i) individually or in the aggregate has had or is reasonably likely to have a Company Material Adverse Effect or (ii) seeks to delay or prevent the consummation of the Offer or the Merger. (b) Neither the Company nor any Company Subsidiary nor any property or asset of the Company or any Company Subsidiary is subject to any continuing order of, consent decree, settlement agreement or other similar written agreement with, or, to the Knowledge of the Company, 19 continuing investigation by, any Governmental Entity, or any Order, determination or award of any Governmental Entity or arbitrator having or reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect. SECTION 3.10 Employee Benefit Plans; Labor Matters. (a) Section 3.10(a) of the Company Disclosure Schedule contains a true and complete list of (i) all "employee benefit plans" (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements, and all employment, termination, severance or other contracts or agreements to which the Company or any Company Subsidiary is a party, by which the Company or any Company Subsidiary is bound, with respect to which the Company or any Company Subsidiary has any obligation or which are maintained, contributed to or sponsored by the Company or any Company Subsidiary for the benefit of any current or former employee, officer or director of the Company or any Company Subsidiary and (ii) each employee benefit plan for which the Company or any Company Subsidiary could incur liability under Section 4069 of ERISA, in the event such plan were terminated, or under Section 4212(c) of ERISA, or in respect of which the Company or any Company Subsidiary remains secondarily liable under Section 4204 of ERISA (collectively, the "Company Plans"). Each Company Plan is in writing and the Company has previously made available to IHK a true and complete copy of each Company Plan and a true and complete copy of (1) each trust or other funding arrangement, (2) each summary plan description and summary of material modifications, (3) the most recently filed Internal Revenue Service ("IRS") Form 5500, (4) the most recently received IRS determination letter for each such Company Plan, and (5) the most recently prepared actuarial report and financial statement in connection with each such Company Plan. Neither the Company nor any Company Subsidiary has any express or implied commitment (I) to create, to incur liability with respect to, or to cause to exist any other employee benefit plan, program or arrangement, (II) to enter into any contract or agreement to provide compensation or benefits to any individual or (III) to modify, change or terminate any Company Plan (other than with respect to a modification, change or termination required by ERISA or the Code). (b) None of the Company Plans is a multiemployer plan, within the meaning of Section 3(37) or 4001(a)(3) of ERISA (a "Multiemployer Plan"), or a single employer pension plan, within the meaning of Section 4001(a)(15) of ERISA, for which the Company or any Company Subsidiary could incur liability under Section 4063 or 4064 of ERISA (a "Multiple Employer Plan"). With respect to each Company Plan, neither the Company nor any Company Subsidiary nor any trade or business, whether or not incorporated (a "Company ERISA Affiliate") that together with the Company or any Company Subsidiary would be deemed a "single employer" within the meaning of Section 4001(b) of ERISA has made or suffered a "complete withdrawal" or a "partial withdrawal" as such terms are respectively defined in Sections 4203 and 4205 of ERISA (or any liability resulting therefrom has been satisfied in full). None of the Company Plans (i) provides for the payment of separation, severance, termination or similar-type benefits to any Person, (ii) 20 obligates the Company or any Company Subsidiary to pay separation, severance, termination or other benefits as a result of the Merger or (iii) obligates the Company or any Company Subsidiary to make any payment or provide any benefit that would be subject to a tax under Section 4999 of the Code. None of the Company Plans provides for or promises retiree medical, disability or life insurance benefits to any current or former employee, officer or director of the Company or any Company Subsidiary. (c) Each Company Plan which is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS that such Company Plan is so qualified and each trust established in connection with any Company Plan which is intended to be exempt from federal income taxation under Section 501(a) of the Code has received a determination letter from the IRS that such trust is so exempt. To the Company's Knowledge, no fact or event has occurred since the date of any such determination letter from the IRS that would adversely affect the qualified status of any such Company Plan or the exempt status of any such trust. Each trust maintained or contributed to by the Company or any Company Subsidiary which is intended to be qualified as a voluntary employees' beneficiary association exempt from federal income taxation under Sections 501(a) and 501(c)(9) of the Code has received a favorable determination letter from the IRS that it is so qualified and so exempt, and, to the Company's Knowledge, no fact or event has occurred since the date of such determination by the IRS that would adversely affect such qualified or exempt status. (d) To the Company's Knowledge, there has been no non-exempt prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Company Plan. Neither the Company nor any Company Subsidiary is currently liable or has previously incurred any liability for any tax or penalty (other than any tax or penalty that would not have a Company Material Adverse Effect) arising under Section 4971, 4972, 4979, 4980 or 4980B of the Code or Section 502(c) of ERISA, and to the Company's Knowledge, no fact or event exists which would give rise to any such liability. Neither the Company nor any Company Subsidiary has incurred any liability (other than any liability that would not have a Company Material Adverse Effect) under, arising out of or by operation of Title IV of ERISA that has not been satisfied in full (other than liability for premiums to the Pension Benefit Guaranty Corporation arising in the ordinary course), including, without limitation, any liability in connection with (i) the termination or reorganization of any employee pension benefit plan subject to Title IV of ERISA or (ii) the withdrawal from any Multiemployer Plan or Multiple Employer Plan, and, to the Company's Knowledge, no fact or event exists which would give rise to any such liability. No complete or partial termination has occurred within the five years preceding the date hereof with respect to any Company Plan. No reportable event (within the meaning of Section 4043 of ERISA) for which the 30-day notice requirement to the Pension Benefit Guaranty Corporation has not been waived has occurred or is expected to occur with respect to any Company Plan subject to Title IV of ERISA. No asset of the Company or any Company Subsidiary is the subject of any lien arising under Section 302(f) of ERISA or Section 412(n) of the Code; neither the Company nor any Company Subsidiary has been required to post any security under Section 307 of ERISA or Section 401(a)(29) of the 21 Code; and no fact or event exists which would give rise to any such lien or requirement to post any such security. (e) Each Company Plan is now and has been operated in all respects in accordance with the requirements of all applicable Laws, including, without limitation, ERISA and the Code, except where any failure to so operate would not have a Company Material Adverse Effect. No Company Plan has incurred an "accumulated funding deficiency" (within the meaning of Section 302 of ERISA or Section 412 of the Code), whether or not waived. The Company's September 29, 1996 balance sheet reflects an accrual of all amounts of employer contributions and premiums accrued but unpaid with respect to the Company Plans. With respect to each Company Plan subject to Title IV of ERISA, the accumulated benefit obligations of such Company Plan are set forth in the footnotes to the Company's September 29, 1996 balance sheet. (f) The Company and the Company Subsidiaries have not incurred any liability under, and have complied in all respects with, the Worker Adjustment and Retraining Notification Act and the regulations promulgated thereunder ("WARN") and do not reasonably expect to incur any such liability as a result of actions taken or not taken prior to the Effective Time. Section 3.10(f) of the Company Disclosure Schedule lists all notices given by the Company and the Company Subsidiaries in connection with WARN. (g) (i) Neither the Company nor any Company Subsidiary is a party to any collective bargaining agreement or other labor union contract applicable to Persons employed by the Company or any Company Subsidiary, nor, to the Knowledge of the Company, are there any activities or proceedings of any labor union to organize any such employees; (ii) except as would not have a Company Material Adverse Effect, neither the Company nor any Company Subsidiary has breached or otherwise failed to comply with any provision of any such agreement or contract and there are no grievances outstanding against the Company or any Company Subsidiary under any such agreement or contract; (iii) there are no unfair labor practice complaints pending against the Company or any Company Subsidiary before the National Labor Relations Board or any current union representation questions involving employees of the Company or any Company Subsidiary; and (iv) there is no strike, slowdown, work stoppage or lockout, or, to the Knowledge of the Company, threat thereof, by or with respect to any employees of the Company or any Company Subsidiary. The consent of the labor unions which are parties to the collective bargaining agreements listed in Section 3.10(g) of the Company Disclosure Schedule is not required to consummate the Merger. (h) The Board of Directors of the Company has, prior to its execution of this Agreement, amended each of (i) the Company's Supplemental Executive Retirement Plan, (ii) the Deferred Compensation Plan for Key Employees of Michigan Sugar Company, (iii) the Deferred Compensation Plan for Key Employees of the Company, as amended and restated as of August 12, 1983, and (iv) the Deferred Compensation Plan for Key Employees of the Company, as amended and restated as of August 1, 1990 (collectively, the "Company Executive Deferred Compensation Plans"), to provide that neither the execution of this Agreement, nor the consummation of the transactions contemplated by this Agreement, shall constitute a "change in control" for purposes of 22 such Company Executive Deferred Compensation Plans or otherwise will result in the acceleration of vesting or payment of any benefit, or the triggering of any ancillary or supplemental benefit or subsidy, under such plan. The Company has the authority and power to amend the Company Executive Deferred Compensation Plans as described in this Section 3.10(h) without limitation or restriction with respect to any current participants or beneficiaries, and none of such participants or beneficiaries shall have a valid claim in law or equity that such amendment was not effective against them, or otherwise that they are entitled to rights or benefits that would have accrued to them under such plans had they not been so amended. SECTION 3.11 Intellectual Property. "Intellectual Property Rights" means trademarks, trademark rights, trade names, trade name rights, patents, patent rights, industrial models, inventions, copyrights, service marks, trade secrets, applications for trademarks and for service marks, know-how and other proprietary rights and information. The Company and the Company Subsidiaries own, or possess adequate licenses or other valid rights to use, all Intellectual Property Rights used or held for use in connection with the business of the Company and the Company Subsidiaries as currently conducted. The conduct of the business of the Company and the Company Subsidiaries as currently conducted does not and will not conflict in any way with any Intellectual Property Rights of any third party that, individually or in the aggregate, would have a Company Material Adverse Effect. To the Knowledge of the Company, there are no infringements of an Intellectual Property Right owned by or licensed by or to the Company or any Company Subsidiary that, individually or in the aggregate, would have a Company Material Adverse Effect. Neither the Company nor any Company Subsidiary has licensed or otherwise permitted the use by any third party of any Intellectual Property Rights on terms or in a manner which, individually or in the aggregate, would have a Company Material Adverse Effect. Neither the Company nor any Company Subsidiary is in breach of any agreements pursuant to which the Company or any Company Subsidiary has a license to use Intellectual Property Rights, which breach has had or is reasonably likely to have a Company Material Adverse Effect, and the Merger will not constitute such a breach or otherwise reduce or impair, in any material respect, the rights of the Company or any Company Subsidiary under such license agreements. No claims are pending or, to the Knowledge of the Company, threatened by any Person with respect to the ownership, validity or enforceability of any Intellectual Property Rights owned by or licensed to or by the Company or any Company Subsidiary or challenging or questioning the right of the Company or any Company Subsidiary to use any Intellectual Property Rights, except claims that would not, if determined adversely to the Company or any Company Subsidiary, individually or in the aggregate, have a Company Material Adverse Effect. SECTION 3.12 Taxes. The Company and each of the Company Subsidiaries have (a) filed all federal, state, local and foreign tax returns required to be filed by them prior to the date of this Agreement (taking into account extensions), (b) paid or accrued all taxes shown to be due on such returns and have paid all applicable ad valorem and value added taxes as are due, and (c) paid or accrued all taxes for which a notice of assessment or collection has been received (other than amounts being contested in good faith by appropriate proceedings), except in the case of any failure to file such returns or to pay or accrue such taxes which would not individually or in the aggregate, 23 have a Company Material Adverse Effect. The Company has open years for federal income tax returns and state income and franchise tax returns only as set forth in the Section 3.12 of the Company Disclosure Schedule. The Company and each Company Subsidiary have withheld or collected and paid over to the appropriate Governmental Entity (or are properly holding for such payment) all taxes required by Law to be withheld or collected. Neither the Company nor any Company Subsidiary has made an election under Section 341(f) of the Code. Except as set forth in Section 3.12 of the Company Disclosure Schedule, no requests for waivers of the time to assess any taxes against the Company or any Company Subsidiary have been granted or are pending, except for requests with respect to such taxes that have been adequately reserved for in the most recent financial statements contained in the Company SEC Reports, or, to the extent not adequately reserved, the assessment of which would not, in the aggregate, have a Company Material Adverse Effect. Except as set forth in Section 3.12 of the Company Disclosure Schedule, neither the Company nor any Company Subsidiary has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Section 280G of the Code. As used in this Agreement the term "taxes" includes all federal, state, local and foreign income, franchise, property, sales, use, excise and other taxes, including without limitation obligations for withholding taxes from payments due or made to any other person and any interest, penalties or additions to tax. SECTION 3.13 Environmental Matters. (a) For purposes of this Agreement, the following terms shall have the following meanings: (i) "Hazardous Substances" means (A) those substances defined in or regulated under the following federal statutes and their state counterparts, as each may be amended from time to time, and all regulations thereunder: the Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide and Rodenticide Act and the Clean Air Act; (B) petroleum and petroleum products including crude oil and any fractions thereof; (C) natural gas, synthetic gas and any mixtures thereof; (D) radon; (E) any other pollutant or contaminant; and (F) any substance with respect to which a federal, state or local agency requires environmental investigation, monitoring, reporting or remediation; and (ii) "Environmental Laws" means any Law relating to (A) releases or threatened releases of Hazardous Substances or materials containing Hazardous Substances; (B) the manufacture, handling, transport, use, treatment, storage or disposal of Hazardous Substances or materials containing Hazardous Substances; or (C) otherwise relating to pollution of the environment or the protection of human health and safety and natural resources. (b) Except as would not, individually or in the aggregate, have a Company Material Adverse Effect: (i) neither the Company nor any Company Subsidiary has violated or is in violation of any Environmental Law; (ii) none of the properties owned or leased by the Company or any 24 Company Subsidiary (including, without limitation, soils and surface and ground waters) are contaminated with any Hazardous Substance; (iii) neither the Company nor any Company Subsidiary is actually or potentially or, to the Knowledge of the Company, allegedly liable for any off-site contamination; (iv) neither the Company nor any Company Subsidiary is actually or potentially or, to the Knowledge of the Company, allegedly liable under any Environmental Law (including, without limitation, pending or threatened liens); (v) each of the Company and each Company Subsidiary has all permits, licenses and other authorizations required under any Environmental Law ("Company Environmental Permits"); and (vi) each of the Company and each Company Subsidiary has always been and is in compliance with its Company Environmental Permits. SECTION 3.14 Products. Except as would not have a Company Material Adverse Effect, (a) there have been no written notices, citations or decisions by any Governmental Entity that any product produced, manufactured, marketed or distributed by the Company or any Company Subsidiary (the "Company Products") is defective or fails to meet any applicable standards promulgated by such Governmental Entity, (b) the Company and the Company Subsidiaries have complied with all Laws applicable to design, manufacture, labeling, testing and inspection of Company Products, and (c) there have been no recalls ordered or, to the knowledge of the Company, threatened by any Governmental Entity with respect to any of the Company Products. Neither the Company nor any Company Subsidiary has entered into any agreement or arrangement that limits or otherwise restricts the Company or any Company Subsidiary or any successor thereto, or that would limit IHK or any subsidiary thereof or any successor thereto, from engaging or competing in any line of business or in any geographic area. SECTION 3.15 Properties and Assets; Real Property and Leases. (a) The Company and the Company Subsidiaries have sufficient title to all their respective properties and assets to conduct their respective businesses as currently conducted or as contemplated to be conducted, with only such exceptions as, individually or in the aggregate, would not have a Company Material Adverse Effect. (b) Set forth in Section 3.15(b) of the Company's Disclosure Schedule is a true, correct and complete list (including a general description of the uses for such real property) of all real property owned or leased by the Company and each of the Company Subsidiaries. (c) Except as would not have a Company Material Adverse Effect, each parcel of real property owned or leased by the Company or any Company Subsidiary (i) is owned or leased free and clear of all mortgages, pledges, liens, security interests, conditional and installment sale agreements, encumbrances, charges or other claims of third parties of any kind (collectively, "Liens"), other than (A) Liens for current taxes and assessments not yet past due, (B) inchoate mechanics' and materialmen's Liens for construction in progress, (C) workmen's, repairmen's, warehousemen's and carriers' Liens arising in the ordinary course of business of the Company or such Company Subsidiary consistent with past practices and (D) all matters of record, Liens and other imperfections of title and encumbrances (including, without limitation, (l) reservations 25 specified in instruments of conveyance such as deeds and indentures, reserving in favor of the grantor under such instrument ("Deed Reservations"), the right to make or construct canals, cuts, sluice-ways, dikes and other works ("Waterway Works") for the drainage or reclamation of any lands, (2) Deed Reservations for the exclusive possession of a portion of the land on either side of such Waterway Works, (3) Deed Reservations reserving an interest in mineral rights, including without limitation, petroleum, petroleum products, phosphate minerals, oil and gas, (4) any covenant or restriction pursuant to any deed or recorded plat affecting the Property and (5) any other Deed Reservation) which, individually or in the aggregate, would not adversely affect the use of the property for its intended purpose (Liens described in clauses (A) through (D) being referred to herein as "Permitted Liens"), and (ii) is neither subject to any governmental decree or order to be sold nor is being condemned, expropriated or otherwise taken by any public authority with or without payment of compensation therefor, nor, to the Knowledge of the Company, has any such condemnation, expropriation or taking been proposed. (d) All leases of real property leased for the use or benefit of the Company or any Company Subsidiary to which the Company or any Company Subsidiary is a party or by which the Company or any Company Subsidiary is bound, and all amendments and modifications thereto are in full force and effect and have not been modified or amended, and there exists no default under any such lease by the Company or any Company Subsidiary or any other party thereto, nor any event which with notice or lapse of time or both would constitute a default thereunder by the Company or any Company Subsidiary or any other party thereto, except as, individually or in the aggregate, would not have a Company Material Adverse Effect. SECTION 3.16 Insurance. The Company and the Company Subsidiaries have obtained and maintained in full force and effect insurance with responsible and reputable insurance companies or associations in such amounts, on such terms, with such deductibles, and covering such risks, including fire and other risks insured against by extended coverage, as is customarily carried by reasonably prudent Persons conducting businesses or owning assets similar to those of the Company and the Company Subsidiaries, and each has maintained in full force and effect liability insurance against claims for personal injury or death or property damage occurring in connection with the activities of the Company and the Company Subsidiaries or any properties owned, occupied or controlled by the Company or any Company Subsidiary in such amount as is customarily carried by reasonably prudent Persons conducting businesses or owning assets similar to those of the Company and the Company Subsidiaries. The Company and each of the Company Subsidiaries may terminate each of its insurance policies or binders at or after the Closing and will incur no penalties or other costs in doing so that would, individually or in the aggregate, have a Company Material Adverse Effect. None of such policies or binders was obtained through the use of false or misleading information or the failure to provide the insurer with all information requested in order to evaluate the liabilities and risks. There is no material default with respect to any provision contained in any such policy or binder, nor has the Company or any of the Company Subsidiaries failed to give any material notice or present any material claim under any such policy or binders in due and timely fashion. There are no billed but unpaid premiums past due under any such policy or binder, the failure of which to be paid would result in the cancellation of such policy or binder. Except as 26 otherwise set forth in the Company SEC Reports or in Section 3.16 of the Company Disclosure Schedule, (a) there are no outstanding claims in excess of normal retentions that are not covered under any such policies or binders and, to the Knowledge of the Company, there has not occurred any event that might reasonably form the basis of any claim in excess of normal retentions that is not covered against or relating to the Company or any of the Company Subsidiaries that is not covered by any of such policies or binders; (b) no notice of cancellation or non-renewal of any such policies or binders has been received; and (c), except as set forth in Section 3.16 of the Company Disclosure Schedule, there are no performance bonds outstanding with respect to the Company or any of the Company Subsidiaries. SECTION 3.17 Opinion of Financial Advisor. The Company has received a fairness opinion of DLJ on the date of this Agreement and the Company will promptly, upon the execution of this Agreement, deliver a copy of such opinion to IHK. SECTION 3.18 Vote Required. The only vote of the holders of any class or series of capital stock of the Company necessary to approve this Agreement and the transactions contemplated hereby is the affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock. SECTION 3.19 Brokers. Except as set forth in Section 3.19 of the Company's Disclosure Schedule, other than DLJ and The Robinson-Humphrey Company, Inc. ("Robinson-Humphrey"), no broker, finder or investment banker is entitled to a brokerage, finder's or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company. The Company has heretofore made available to IHK a complete and correct copy of all agreements between the Company and either DLJ or Robinson-Humphrey pursuant to which such firms would be entitled to any payment relating to the Transactions. SECTION 3.20 Company Rights Agreement. The Company Rights Agreement has been amended (the "Company Rights Agreement Amendment") so as to provide that neither IHK nor Merger Sub will become an "Acquiring Person" and that no "Stock Acquisition Date" or "Distribution Date" (as such terms are defined in the Company Rights Agreement) will occur as a result of the approval, execution or delivery of this Agreement or the consummation of the transactions contemplated hereby. In addition, the Company Rights Agreement contains no exception from the definition of "Acquiring Person" for Flo-Sun Incorporated and its Affiliates. SECTION 3.21 Information Supplied. The Schedule 14D-9 and any other documents to be filed by the Company with the SEC or any other governmental or regulatory authority in connection with the Offer and the other transactions contemplated hereby will not, on the date of its filing or, with respect to the Schedule 14D-9, on the date it is filed with the SEC and first published, sent or given to stockholders, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation is made by the Company with respect to information supplied in writing by or on behalf of IHK or 27 Merger Sub expressly for inclusion therein and information incorporated by reference therein from documents filed by IHK or Merger Sub with the SEC. The Schedule 14D-9 and any such other documents filed by the Company with the SEC under the Exchange Act or with any other Governmental Entity under applicable law will comply as to form in all material respects with the requirements of the Exchange Act or other applicable law, as the case may be. None of the information supplied or to be supplied by the Company for inclusion or incorporation by reference in the Offer Documents or the Registration Statement on Form S-4 (together with all amendments thereto, the "Registration Statement") to be filed with the SEC by IHK in connection with the issuance of shares of IHK Common Stock in the Merger and as contemplated by Section 2.06 will at the time the Registration Statement becomes effective under the Securities Act or at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and none of the information supplied or to be supplied by the Company and included or incorporated by reference in the Proxy Statement (as defined in Section 6.02), as supplemented if necessary, will, at the date mailed to stockholders of the Company, or at the time of the Company Stockholder Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. If at any time prior to the time of such meeting, any event with respect to the Company or any Company Subsidiary, or with respect to other information supplied by the Company for inclusion in the Proxy Statement or the Registration Statement, shall occur which is required to be described in an amendment of, or a supplement to, the Proxy Statement or the Registration Statement, such event shall be so described, and such amendment or supplement shall be promptly filed with the SEC. The Proxy Statement, insofar as it relates to other information supplied by the Company for inclusion therein, will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. SECTION 3.22 Termination of Existing Merger Agreement. The Company has terminated the Agreement and Plan of Merger dated as of July 14, 1997 among XSF Holdings, Inc., DXE Merger Corp., the Company and Flo-Sun Incorporated (the "Flo-Sun Agreement"), in accordance with the provisions thereof. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF IHK AND MERGER SUB Except as set forth in the Disclosure Schedule delivered by IHK and Merger Sub concurrently with the execution of this Agreement (the "IHK Disclosure Schedule") (each section of which qualifies the correspondingly numbered representation and warranty or covenant to the extent specified therein), IHK and Merger Sub, jointly and severally, hereby represent and warrant to the Company that: 28 SECTION 4.01 Organization and Qualification; Subsidiaries. (a) Each of IHK and each subsidiary of IHK (an "IHK Subsidiary") is a corporation duly incorporated, validly existing and in good standing under the Laws of the jurisdiction of its incorporation and has the requisite power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to be so organized, existing or in good standing or to have such power, authority and governmental approvals would not, individually or in the aggregate, have an IHK Material Adverse Effect (as defined below). IHK and each IHK Subsidiary are duly qualified or licensed as a foreign corporation to do business, and are in good standing, in each jurisdiction where the character of the properties owned, leased or operated by IHK and the respective IHK Subsidiaries or the nature of their respective businesses makes such qualification or licensing necessary, except for such failures to be so qualified or licensed and in good standing that would not, individually or in the aggregate, have an IHK Material Adverse Effect. The term "IHK Material Adverse Effect" means any adverse change, circumstance or effect that, individually or in the aggregate with all other adverse changes, circumstances and effects, is or is reasonably likely to be materially adverse to the business, operations, assets, liabilities (including, without limitation, contingent liabilities), financial condition or results of operations of IHK and the IHK Subsidiaries taken as a whole. Section 4.01 of the IHK Disclosure Schedule sets forth, as of the date of this Agreement, a true and complete list of all of the IHK Subsidiaries, together with the jurisdiction of incorporation of each IHK Subsidiary and the percentage of each IHK Subsidiary's outstanding capital stock or other equity interests owned by IHK and the IHK Subsidiaries, as the case may be, and the name of each other holder of any such outstanding capital stock or other equity interests and the percentage so held with respect to each such IHK Subsidiary. Except as set forth in Schedule 4.01 of the IHK Disclosure Schedule, there are no partnerships or joint venture arrangements or other business entities in which IHK or any IHK Subsidiary owns an equity interest that are material to the business of IHK and the IHK Subsidiaries taken as a whole. (b) Merger Sub is a corporation duly incorporated, validly existing and in good standing under the Laws of Delaware. Merger Sub has not conducted any activities other than in connection with the organization of Merger Sub, the negotiation and execution of this Agreement and the consummation of the transactions contemplated hereby. Merger Sub has no Subsidiaries. Except for obligations or liabilities incurred in connection with its incorporation or organization and the transactions contemplated by this Agreement, Merger Sub has not incurred, directly or indirectly, through any Subsidiary or Affiliate, any obligations or liabilities or engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any Person. From the date of this Agreement until the Effective Time, all of the outstanding capital stock of Merger Sub will be owned directly by IHK. 29 SECTION 4.02 Certificate of Incorporation and By-Laws. IHK has made available to the Company complete and correct copies of its Articles of Incorporation and By-Laws and the certificates of incorporation and by-laws or other comparable charter or organizational documents of the IHK Subsidiaries, in each case as amended to the date of this Agreement. IHK is not in violation of any of the provisions of its Articles of Incorporation or By-Laws. Except as would not have an IHK Material Adverse Effect, no IHK Subsidiary is in violation of any of the provisions of its Certificate of Incorporation or By-Laws or other comparable charter or organizational documents. SECTION 4.03 Capitalization. The authorized capital stock of IHK consists of 50,000,000 shares of IHK Common Stock and 5,000,000 shares of preferred stock ("IHK Preferred Stock"). As of September 1, 1997, (i) 14,282,728 shares of IHK Common Stock are issued and outstanding, all of which are validly issued, fully paid and nonassessable; (ii) no shares of IHK Common Stock are held in the treasury of IHK; (iii) 773,860 shares of IHK Common Stock are reserved for future issuance pursuant to IHK Options and (iv) 333,334 shares of IHK Preferred Stock are reserved for issuance pursuant to the IHK Rights Agreement. Except for IHK Options heretofore granted pursuant to the IHK Stock Option Plan as set forth in Section 4.03 of the IHK Disclosure Schedule or pursuant to agreements or arrangements described in Section 4.03 of the IHK Disclosure Schedule and the IHK Purchase Rights, there are no options, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of IHK or any IHK Subsidiary or obligating IHK or any IHK Subsidiary to issue or sell any shares of capital stock of, or other equity interests in, IHK or any IHK Subsidiary. All shares of IHK Common Stock and IHK Preferred Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. There are no outstanding contractual obligations of IHK or any IHK Subsidiary to repurchase, redeem or otherwise acquire any shares of IHK Common Stock or IHK Preferred Stock or any capital stock of any IHK Subsidiary. Each outstanding share of capital stock of each IHK Subsidiary is duly authorized, validly issued, fully paid and nonassessable and except as set forth in Section 4.03 of the IHK Disclosure Schedule each such share owned by IHK or another IHK Subsidiary is free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on IHK's or such other IHK Subsidiary's voting rights, charges and other encumbrances of any nature whatsoever. Neither IHK nor any IHK Subsidiary directly or indirectly owns, or has agreed to purchase or otherwise acquire, 5% or more of the capital stock of any corporation, partnership, joint venture or other business association or entity, assuming for such purpose the conversion of all securities convertible into such capital stock held by IHK or any IHK Subsidiary and the exercise of all warrants, options and other rights of IHK or any IHK Subsidiary to purchase such capital stock (other than the IHK Subsidiaries set forth in Section 4.01 of the IHK Disclosure Schedule). Except as set forth in Section 4.03 of the IHK Disclosure Schedule, there are no material outstanding contractual obligations of IHK or any IHK Subsidiary to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any IHK Subsidiary or any other Person. Except for the Investor Agreement dated August 27, 1996, among IHK, Greencore Group plc and Earlsfort Holdings B.V., there are no voting trusts or other agreements or understandings to which IHK or any IHK Subsidiary is a party with respect to the voting of capital stock of IHK or any IHK Subsidiary. 30 SECTION 4.04 Authority Relative to this Agreement. IHK and Merger Sub have all necessary corporate power and authority to execute and deliver this Agreement, to perform their respective obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by IHK and Merger Sub and the consummation by IHK and Merger Sub of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of IHK or Merger Sub are necessary to authorize this Agreement or to consummate the transactions contemplated hereby (other than, with respect to the Merger, the approval of the issuance of the Stock Consideration by the holders of a majority of the shares of IHK Common Stock voted at the IHK Shareholders' Meeting (as defined in Section 6.01(b)), and the filing and recordation of appropriate merger documents as required by the DGCL). This Agreement has been duly and validly executed and delivered by IHK and Merger Sub and, assuming the due authorization, execution and delivery by the Company, constitutes the legal, valid and binding obligation of IHK and Merger Sub, enforceable against them in accordance with its terms (except insofar as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally, or principles governing the availability of equitable remedies). SECTION 4.05 No Conflict; Required Filings and Consents. (a) The execution and delivery of this Agreement by IHK and Merger Sub will not, (i) conflict with or violate the Articles of Incorporation or By-laws or equivalent organizational documents of IHK, Merger Sub or any other IHK Subsidiary, (ii) assuming that all consents, approvals, authorizations and other actions described in Section 4.05(b) have been obtained and all filings and obligations described in Section 4.05(b) have been made, conflict with or violate any foreign or domestic Law applicable to IHK, Merger Sub or any other IHK Subsidiary or by which any property or asset of IHK, Merger Sub or any other IHK Subsidiary is bound or affected, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of IHK, Merger Sub or any other IHK Subsidiary pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation, except, with respect to clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults, or other occurrences which would not, individually or in the aggregate, have an IHK Material Adverse Effect. (b) The execution and delivery of this Agreement by IHK and Merger Sub do not, and the performance of this Agreement by IHK and Merger Sub will not require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity, except (i) for applicable requirements, if any, of the Exchange Act, Blue Sky Laws, the Listing Market and state takeover Laws, the pre-merger notification requirements of the HSR Act, and filing and recordation of appropriate merger documents as required by the DGCL and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of the Merger, or otherwise prevent IHK or Merger Sub from 31 performing their respective obligations under this Agreement, and would not, individually or in the aggregate, have an IHK Material Adverse Effect. SECTION 4.06 Permits; Compliance. Each of IHK and the IHK Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Entity necessary for IHK or any IHK Subsidiary to own, lease and operate its properties or to carry on its business as it is now being conducted (the "IHK Permits"), except where the failure to have, or the suspension or cancellation of, any of the IHK Permits would not, individually or in the aggregate, have an IHK Material Adverse Effect, and, as of the date hereof, no suspension or cancellation of any of the IHK Permits is pending or, to the Knowledge of IHK, threatened, except where the failure to have, or the suspension or cancellation of, any of the IHK Permits would not, individually or in the aggregate, have an IHK Material Adverse Effect. Neither IHK nor any IHK Subsidiary is in conflict with, or in default or violation of, (i) any Law applicable to IHK or any IHK Subsidiary or by which any property or asset of IHK or any IHK Subsidiary is bound or affected, (ii) any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which IHK or any IHK Subsidiary is a party or by which IHK or any IHK Subsidiary or any property or asset of IHK or any IHK Subsidiary is bound or affected or (iii) any IHK Permits, except for any such conflicts, defaults or violations that would not, individually or in the aggregate, have an IHK Material Adverse Effect. SECTION 4.07 SEC Filings; Financial Statements. (a) IHK has filed all forms, reports and documents required to be filed by it with the SEC since March 31, 1995 (collectively, the "IHK SEC Reports"). The IHK SEC Reports (i) were prepared in accordance with the requirements of the Securities Act or the Exchange Act, as the case may be, and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. No IHK Subsidiary is required to file any form, report or other document with the SEC. (b) Each of the consolidated financial statements (including, in each case, any notes thereto) contained in the IHK SEC Reports (the "IHK Financial Statements"), (i) was prepared from the books of account and other financial records of IHK and the consolidated IHK Subsidiaries, (ii) was prepared in accordance with U.S. GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto) and (iii) presented fairly, in all material respects, the consolidated financial position of IHK and the consolidated IHK Subsidiaries as at the respective dates thereof and the results of their operations and their cash flows for the respective periods indicated therein except as otherwise noted therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments which were not and are not expected, individually or in the aggregate, to have an IHK Material Adverse Effect and the omission of footnotes). 32 (c) The books of account and other financial records of IHK and the IHK Subsidiaries from which the IHK Financial Statements were prepared: (i) reflect all items of income and expense and all assets and liabilities required to be reflected therein in accordance with U.S. GAAP applied on a basis consistent with the past practices of IHK, (ii) are in all material respects complete and correct, and do not contain or reflect any material inaccuracies or discrepancies and (iii) have been maintained in accordance with good business and accounting practices. (d) Except for liabilities and obligations reflected on the March 31, 1997 consolidated balance sheet of IHK (including the notes thereto), liabilities and obligations disclosed in the IHK SEC Reports filed prior to the date of this Agreement and other liabilities and obligations incurred in the ordinary course of business consistent with past practice since March 31, 1997, neither IHK nor any IHK Subsidiary has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) which, individually or in the aggregate, are or are reasonably likely to be material to IHK and the IHK Subsidiaries taken as a whole. (e) IHK has heretofore furnished to the Company complete and correct copies of (i) all agreements, documents and other instruments not yet filed by IHK with the SEC but that are currently in effect and that IHK expects to file with the SEC after the date of this Agreement and (ii) all amendments and modifications that have not been filed by IHK with the SEC to all agreements, documents and other instruments that previously have been filed by IHK with the SEC and are currently in effect. SECTION 4.08 Absence of Certain Changes or Events. Since March 31, 1997, except as contemplated by this Agreement or as disclosed in the IHK SEC Reports filed prior to the date of this Agreement, IHK and the IHK Subsidiaries have conducted their businesses only in the ordinary course and in a manner consistent with past practice and, since such date, there has not been (a) any IHK Material Adverse Effect, (b) any change by IHK in its accounting methods, principles or practices, except as may be required by U.S. GAAP, (c) any damage, destruction or loss (whether or not covered by insurance) with respect to properties or assets of IHK or any IHK Subsidiary that, individually or in the aggregate, would result in an IHK Material Adverse Effect, (d) any declaration, setting aside or payment of any dividend or distribution in respect of shares of IHK Common Stock or any redemption, purchase or other acquisition of any of its securities other than the previously declared regular quarterly dividend of $0.03 per share of IHK Common Stock, (e) any revaluation by IHK and the IHK Subsidiaries of any asset (including, without limitation, any writing down of the value of inventory or writing off of notes or accounts receivable), other than in the ordinary course of business consistent with past practice, (f) any entry by IHK or any IHK Subsidiary into any commitment or transaction material to IHK and the IHK Subsidiaries taken as a whole, except in the ordinary course of business consistent with past practice, (g) any increase in or establishment of any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, stock option (including, without limitation, the granting of stock options, stock appreciation rights, performance awards or restricted stock awards), stock purchase or other employee benefit plan, or any other increase in the compensation payable or to become payable to any officers or key employees of IHK or any IHK Subsidiary, except in the ordinary course of business consistent with past practice, 33 (h) any acquisition or disposition by IHK or any IHK Subsidiary of any material asset, except in the ordinary course of business consistent with past practice, (i) any incurrence, assumption or guarantee of any indebtedness or obligation relating to any lending or borrowing except current liabilities and commitments incurred in the ordinary course of business consistent with past practice, or (j) any amendment, modification or termination of any existing, or entering into any new, material contract, or any material plan, lease, license, permit or franchise, except in the ordinary course of business consistent with past practice. SECTION 4.09 Absence of Litigation. (a) Except as set forth in Section 4.09 of the IHK Disclosure Schedule, there is no litigation, suit, claim, action, proceeding or investigation pending or, to the Knowledge of IHK, threatened against or affecting IHK or any IHK Subsidiary, or any property or asset of IHK or any IHK Subsidiary, before any court, arbitrator or Governmental Entity, which (i) individually or in the aggregate has had or is reasonably likely to have an IHK Material Adverse Effect or (ii) seeks to delay or prevent the consummation of the Merger. (b) Neither IHK nor any IHK Subsidiary nor any property or asset of IHK or any IHK Subsidiary is subject to any continuing order of, consent decree, settlement agreement or other similar written agreement with, or, to the Knowledge of IHK, continuing investigation by, any Governmental Entity, or any Order, determination or award of any Governmental Entity or arbitrator having or reasonably likely to have, individually or in the aggregate, an IHK Material Adverse Effect. SECTION 4.10 Employee Benefit Plans; Labor Matters. (a) Section 4.10(a) of the IHK Disclosure Schedule contains a true and complete list of (i) all "employee benefit plans" (within the meaning of Section 3(3) of ERISA) and all bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements, and all employment, termination, severance or other contracts or agreements to which IHK or any IHK Subsidiary is a party, by which IHK or any IHK Subsidiary is bound, with respect to which IHK or any IHK Subsidiary has any obligation or which are maintained, contributed to or sponsored by IHK or any IHK Subsidiary for the benefit of any current or former employee, officer or director of IHK or any IHK Subsidiary and (ii) each employee benefit plan for which IHK or any IHK Subsidiary could incur liability under Section 4069 of ERISA, in the event such plan were terminated, or under Section 4212(c) of ERISA, or in respect of which IHK or any IHK Subsidiary remains secondarily liable under Section 4204 of ERISA (collectively, the "IHK Plans"). Each IHK Plan is in writing and IHK has previously made available to the Company a true and complete copy of each IHK Plan and a true and complete copy of (1) each trust or other funding arrangement, (2) each summary plan description and summary of material modifications, (3) the most recently filed IRS Form 5500, (4) the most recently received IRS determination letter for each such IHK Plan, and (5) the most recently prepared actuarial report and financial statement in connection with each such IHK Plan. 34 Neither IHK nor any IHK Subsidiary has any express or implied commitment (I) to create, to incur liability with respect to, or to cause to exist any other employee benefit plan, program or arrangement, (II) to enter into any contract or agreement to provide compensation or benefits to any individual or (III) to modify, change or terminate any IHK Plan (other than with respect to a modification, change or termination required by ERISA or the Code). (b) Each of the IHK Plans that is a Multiemployer Plan or a Multiple Employer Plan is designated as such on Section 4.10(b) of the IHK Disclosure Schedule and, with respect to each IHK Plan so designated, except as would not have an IHK Material Adverse Effect: (i) neither IHK nor any IHK Subsidiary nor any trade or business, whether or not incorporated (an "ERISA Affiliate") that together with IHK or any IHK Subsidiary would be deemed a "single employer" within the meaning of Section 4001(b) of ERISA has made or suffered a "complete withdrawal" or a "partial withdrawal," as such terms are respectively defined in Sections 4203 and 4205 of ERISA (or any liability resulting therefrom has been satisfied in full), (ii) no event has occurred that presents a risk of a partial withdrawal, (iii) neither IHK, nor any IHK Subsidiary, nor any ERISA Affiliate has any contingent liability under Section 4204 of ERISA, and (iv) no circumstances exist that present a risk that any such plan will go into reorganization. With respect to Multiemployer Plans and Multiple Employer Plans, except as would not have an IHK Material Adverse Effect, neither IHK nor any IHK Subsidiary would incur withdrawal liability in the event of a complete withdrawal within the meaning of Title IV of ERISA from any such Plan. None of the IHK Plans (i) provides for the payment of separation, severance, termination or similar-type benefits to any Person, (ii) obligates IHK or any IHK Subsidiary to pay separation, severance, termination or other benefits as a result of the Merger or (iii) obligates IHK or any IHK Subsidiary to make any payment or provide any benefit that would be subject to a tax under Section 4999 of the Code. None of the IHK Plans provides for or promises retiree medical, disability or life insurance benefits to any current or former employee, officer or director of IHK or any IHK Subsidiary. (c) Each IHK Plan which is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS that such IHK Plan is so qualified and each trust established in connection with any IHK Plan which is intended to be exempt from federal income taxation under Section 501(a) of the Code has received a determination letter from the IRS that such trust is so exempt. To IHK's Knowledge, no fact or event has occurred since the date of any such determination letter from the IRS that would adversely affect the qualified status of any such IHK Plan or the exempt status of any such trust. Each trust maintained or contributed to by the IHK or any IHK Subsidiary which is intended to be qualified as a voluntary employees' beneficiary association exempt from federal income taxation under Sections 501(a) and 501(c)(9) of the Code has received a favorable determination letter from the IRS that it is so qualified and so exempt, and, to IHK's Knowledge, no fact or event has occurred since the date of such determination by the IRS that would adversely affect such qualified or exempt status. (d) To IHK's Knowledge, there has been no non-exempt prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any IHK Plan. Neither IHK nor any IHK Subsidiary is currently liable or has previously incurred any liability for 35 any tax or penalty (other than any tax or penalty that would not have an IHK Material Adverse Effect) arising under Section 4971, 4972, 4979, 4980 or 4980B of the Code or Section 502(c) of ERISA, and to IHK's Knowledge, no fact or event exists which would give rise to any such liability. Neither IHK nor any IHK Subsidiary has incurred any liability (other than any liability that would not have an IHK Material Adverse Effect) under, arising out of or by operation of Title IV of ERISA that has not been satisfied in full (other than liability for premiums to the Pension Benefit Guaranty Corporation arising in the ordinary course), including, without limitation, any liability in connection with (i) the termination or reorganization of any employee pension benefit plan subject to Title IV of ERISA or (ii) the withdrawal from any Multiemployer Plan or Multiple Employer Plan, and, to IHK's Knowledge, no fact or event exists which would give rise to any such liability. No complete or partial termination has occurred within the five years preceding the date hereof with respect to any IHK Plan. No reportable event (within the meaning of Section 4043 of ERISA) for which the 30-day notice requirement to the Pension Benefit Guaranty Corporation has not been waived has occurred or is expected to occur with respect to any IHK Plan subject to Title IV of ERISA. No asset of IHK or any IHK Subsidiary is the subject of any lien arising under Section 302(f) of ERISA or Section 412(n) of the Code; neither IHK nor any IHK Subsidiary has been required to post any security under Section 307 of ERISA or Section 401(a)(29) of the Code; and no fact or event exists which would give rise to any such lien or requirement to post any such security. (e) Each IHK Plan is now and has been operated in all respects in accordance with the requirements of all applicable Laws, including, without limitation, ERISA and the Code, except where any failure to so operate would not have an IHK Material Adverse Effect. No IHK Plan has incurred an "accumulated funding deficiency" (within the meaning of Section 302 of ERISA or Section 412 of the Code), whether or not waived. IHK's March 31, 1997 balance sheet reflects an accrual of all amounts of employer contributions and premiums accrued but unpaid with respect to the IHK Plans. With respect to each IHK Plan subject to Title IV of ERISA, the accumulated benefit obligations of such IHK Plan are set forth in the footnotes to IHK's March 31, 1997 balance sheet. (f) IHK and the IHK Subsidiaries have not incurred any liability under, and have complied in all respects with, WARN and do not reasonably expect to incur any such liability as a result of actions taken or not taken prior to the Effective Time. (g) (i) Except as set forth in Section 4.10(g) of the IHK Disclosure Schedule, neither IHK nor any IHK Subsidiary is a party to any collective bargaining agreement or other labor union contract applicable to Persons employed by IHK or any IHK Subsidiary, nor, to the Knowledge of IHK, are there any activities or proceedings of any labor union to organize any such employees; (ii) except as would not have an IHK Material Adverse Effect, neither IHK nor any IHK Subsidiary has breached or otherwise failed to comply with any provision of any such agreement or contract and there are no grievances outstanding against IHK or any IHK Subsidiary under any such agreement or contract; (iii) there are no unfair labor practice complaints pending against IHK or any IHK Subsidiary before the National Labor Relations Board or any current union representation questions involving employees of IHK or any IHK Subsidiary; and (iv) there is no strike, slowdown, work stoppage or lockout, or, to the Knowledge of IHK, threat thereof, by or with respect to any 36 employees of IHK or any IHK Subsidiary. The consent of the labor unions which are parties to the collective bargaining agreements listed in Section 4.10(g) of the IHK Disclosure Schedule is not required to consummate the Merger. SECTION 4.11 Intellectual Property. IHK and the IHK Subsidiaries own, or possess adequate licenses or other valid rights to use, all Intellectual Property Rights used or held for use in connection with the business of IHK and the IHK Subsidiaries as currently conducted. The conduct of the business of IHK and the IHK Subsidiaries as currently conducted does not and will not conflict in any way with any Intellectual Property Rights of any third party that, individually or in the aggregate, would have an IHK Material Adverse Effect. To the Knowledge of IHK, there are no infringements of an Intellectual Property Right owned by or licensed by or to IHK or any IHK Subsidiary that, individually or in the aggregate, would have an IHK Material Adverse Effect. Neither IHK nor any IHK Subsidiary has licensed or otherwise permitted the use by any third party of any Intellectual Property Rights on terms or in a manner which, individually or in the aggregate, would have an IHK Material Adverse Effect. Neither IHK nor any IHK Subsidiary is in breach of any agreements pursuant to which IHK or any IHK Subsidiary has a license to use Intellectual Property Rights, which breach has had or is reasonably likely to have an IHK Material Adverse Effect, and the Merger will not constitute such a breach or otherwise reduce or impair, in any material respect, the rights of IHK or any IHK Subsidiary under such license agreements. No claims are pending or, to the Knowledge of IHK, threatened by any Person with respect to the ownership, validity or enforceability of any Intellectual Property Rights owned by or licensed to or by IHK or any IHK Subsidiary or challenging or questioning the right of IHK or any IHK Subsidiary to use any Intellectual Property Rights, except claims that would not, if determined adversely to IHK or any IHK Subsidiary, individually or in the aggregate, have an IHK Material Adverse Effect. SECTION 4.12 Taxes. IHK and each of the IHK Subsidiaries have (a) filed all federal, state, local and foreign tax returns required to be filed by them prior to the date of this Agreement (taking into account extensions), (b) paid or accrued all taxes shown to be due on such returns and have paid all applicable ad valorem and value added taxes as are due, and (c) paid or accrued all taxes for which a notice of assessment or collection has been received (other than amounts being contested in good faith by appropriate proceedings), except in the case of any failure to file such returns or to pay or accrue such taxes which would not individually or in the aggregate, have an IHK Material Adverse Effect. IHK has open years for federal income tax returns and state income and franchise tax returns only as set forth in the Section 4.12 of the IHK Disclosure Schedule. IHK and each IHK Subsidiary have withheld or collected and paid over to the appropriate Governmental Entity (or are properly holding for such payment) all taxes required by Law to be withheld or collected. Neither IHK nor any IHK Subsidiary has made an election under Section 341(f) of the Code. No requests for waivers of the time to assess any taxes against IHK or any IHK Subsidiary have been granted or are pending, except for requests with respect to such taxes that have been adequately reserved for in the most recent financial statements contained in the IHK SEC Reports, or, to the extent not adequately reserved, the assessment of which would not, in the aggregate, have an IHK Material Adverse Effect. Except as set forth in Section 4.12 of the IHK Disclosure Schedule, neither IHK nor any IHK Subsidiary has made any payments, is obligated to make any payments, 37 or is a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Section 280G of the Code. As used in this Agreement the term "taxes" includes all federal, state, local and foreign income, franchise, property, sales, use, excise and other taxes, including without limitation obligations for withholding taxes from payments due or made to any other person and any interest, penalties or additions to tax. SECTION 4.13 Environmental Matters. Except as would not, individually or in the aggregate, have an IHK Material Adverse Effect: (i) neither IHK nor any IHK Subsidiary has violated or is in violation of any Environmental Law; (ii) none of the properties owned or leased by IHK or any IHK Subsidiary (including, without limitation, soils and surface and ground waters) are contaminated with any Hazardous Substance; (iii) neither IHK nor any IHK Subsidiary is actually or potentially or, to the Knowledge of IHK, allegedly liable for any off-site contamination; (iv) neither IHK nor any IHK Subsidiary is actually or potentially or, to the Knowledge of IHK, allegedly liable under any Environmental Law (including, without limitation, pending or threatened liens); (v) each of IHK and each IHK Subsidiary has all permits, licenses and other authorizations required under any Environmental Law ("IHK Environmental Permits"); and (vi) each of IHK and each IHK Subsidiary has always been and is in compliance with its IHK Environmental Permits. SECTION 4.14 Products. Except as would not have an IHK Material Adverse Effect, (a) there have been no written notices, citations or decisions by any Governmental Entity that any product produced, manufactured, marketed or distributed by IHK or any IHK Subsidiary (the "IHK Products") is defective or fails to meet any applicable standards promulgated by such Governmental Entity, (b) IHK and the IHK Subsidiaries have complied with all Laws applicable to design, manufacture, labeling, testing and inspection of IHK Products, and (c) there have been no recalls ordered or, to the knowledge of IHK, threatened by any Governmental Entity with respect to any of the IHK Products. Neither IHK nor any IHK Subsidiary has entered into any agreement or arrangement that limits or otherwise restricts IHK or any IHK Subsidiary or any successor thereto, or that would limit IHK or any subsidiary thereof or any successor thereto, from engaging or competing in any line of business or in any geographic area. SECTION 4.15 Properties and Assets; Real Property and Leases. (a) IHK and the IHK Subsidiaries have sufficient title to all their respective properties and assets to conduct their respective businesses as currently conducted or as contemplated to be conducted, with only such exceptions as, individually or in the aggregate, would not have an IHK Material Adverse Effect. (b) Set forth in Section 4.15(b) of IHK's Disclosure Schedule is a true, correct and complete list (including a general description of the uses for such real property) of all real property owned or leased by IHK and each of the IHK Subsidiaries. 38 (c) Except as would not have an IHK Material Adverse Effect, each parcel of real property owned or leased by IHK or any IHK Subsidiary (i) is owned or leased free and clear of all Liens, other than (A) Liens for current taxes and assessments not yet past due, (B) inchoate mechanics' and materialmen's Liens for construction in progress, (C) workmen's, repairmen's, warehousemen's and carriers' Liens arising in the ordinary course of business of IHK or such IHK Subsidiary consistent with past practices and (D) all matters of record, Liens and other imperfections of title and encumbrances (including, without limitation, Deed Reservations), (2) Deed Reservations reserving an interest in mineral rights, including without limitation, petroleum, petroleum products, phosphate minerals, oil and gas, (3) any covenant or restriction pursuant to any deed or recorded plat affecting the Property and (4) any other Deed Reservation) which, individually or in the aggregate, would not adversely affect the use of the property for its intended purpose, and (ii) is neither subject to any governmental decree or order to be sold nor is being condemned, expropriated or otherwise taken by any public authority with or without payment of compensation therefor, nor, to the Knowledge of IHK, has any such condemnation, expropriation or taking been proposed. (d) All leases of real property leased for the use or benefit of IHK or any IHK Subsidiary to which IHK or any IHK Subsidiary is a party or by which IHK or any IHK Subsidiary is bound, and all amendments and modifications thereto are in full force and effect and have not been modified or amended, and there exists no default under any such lease by IHK or any IHK Subsidiary or any other party thereto, nor any event which with notice or lapse of time or both would constitute a default thereunder by IHK or any IHK Subsidiary or any other party thereto, except as, individually or in the aggregate, would not have an IHK Material Adverse Effect. SECTION 4.16 Insurance. IHK and the IHK Subsidiaries have obtained and maintained in full force and effect insurance with responsible and reputable insurance companies or associations in such amounts, on such terms, with such deductibles, and covering such risks, including fire and other risks insured against by extended coverage, as is customarily carried by reasonably prudent Persons conducting businesses or owning assets similar to those of IHK and the IHK Subsidiaries, and each has maintained in full force and effect public liability insurance, insurance against claims for personal injury or death or property damage occurring in connection with the activities of IHK and the IHK Subsidiaries or any properties owned, occupied or controlled by IHK or any IHK Subsidiary in such amount as is customarily carried by reasonably prudent Persons conducting businesses or owning assets similar to those of IHK and the IHK Subsidiaries. IHK and each of the IHK Subsidiaries may terminate each of its insurance policies or binders at or after the Closing and will incur no material penalties or other material costs in doing so. None of such policies or binders was obtained through the use of false or misleading information or the failure to provide the insurer with all information requested in order to evaluate the liabilities and risks. There is no material default with respect to any provision contained in any such policy or binder, nor has IHK or any of the IHK Subsidiaries failed to give any material notice or present any material claim under any such policy or binders in due and timely fashion. There are no billed but unpaid premiums past due under any such policy or binder, the failure of which to be paid would result in the cancellation of such policy or binder. Except as otherwise set forth in the IHK SEC Reports or in Schedule 4.16 of 39 the IHK Disclosure Schedule, (a) there are no outstanding claims in excess of normal retentions that are not covered under any such policies or binders and, to the Knowledge of IHK, there has not occurred any event that might reasonably form the basis of any claim in excess of normal retentions that is not covered against or relating to IHK or any of the IHK Subsidiaries that is not covered by any of such policies or binders; (b) no notice of cancellation or non-renewal of any such policies or binders has been received; and (c) there are no performance bonds outstanding with respect to IHK or any of the IHK Subsidiaries. SECTION 4.17 Opinion of Financial Advisor. IHK has received a fairness opinion of Lehman Brothers Inc. ("Lehman Brothers") on the date of this Agreement and IHK will promptly, upon the execution of this Agreement by the Company, deliver a copy of such opinion to the Company. SECTION 4.18 Vote Required. The only vote of the holders of any class or series of capital stock of IHK necessary to approve the transactions contemplated by this Agreement is the approval of the issuance of the Stock Consideration by the affirmative vote of the holders of a majority of the shares of IHK Common Stock voted at the IHK Shareholders' Meeting (as defined in Section 6.01(b)). SECTION 4.19 Brokers. Except as set forth in Section 4.19 of the IHK Disclosure Schedule, other than Lehman Brothers, no broker, finder or investment banker is entitled to a brokerage, finder's or other fee or commission in connection with the Merger based upon arrangements made by or on behalf of IHK. IHK has heretofore made available to the Company a complete and correct copy of all agreements between IHK and Lehman Brothers pursuant to which such firm would be entitled to any payment relating to the Merger. SECTION 4.20 Information Supplied. (a) The Offer Documents and any other documents to be filed by IHK and Merger Sub with the SEC or any other governmental or regulatory authority in connection with the Offer and the other transactions contemplated hereby will not, on the date of its filing or, with respect to the Offer Documents, on the date they are filed with the SEC and first published, sent or given to stockholders of the Company and the date shares of Company Common Stock are purchased pursuant to the Offer, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation is made by IHK or Merger Sub with respect to information supplied in writing by or on behalf of the Company expressly for inclusion therein and information incorporated by reference therein from documents filed by the Company or any of the Company Subsidiaries with the SEC. The Offer Documents and any other such documents filed by IHK or Merger Sub with the SEC under the Exchange Act or with any other governmental or regulatory authority under applicable law will comply as to form in all material respects with the requirements of the Exchange Act or applicable law, as the case may be. 40 (b) Neither the information supplied or to be supplied in writing by or on behalf of IHK or Merger Sub for inclusion, nor the information incorporated by reference from documents filed by IHK or any of the IHK Subsidiaries including Merger Sub, with the SEC, in the Schedule 14D-9, or any other documents to be filed by IHK or Merger Sub or the Company with the SEC or any other governmental or regulatory authority in connection with the Offer and the other transactions contemplated hereby will on the date of its filing or, with respect to the Schedule 14D-9, on the date it is filed with the SEC and first published, sent or given to stockholders of the Company, contains any untrue statement of a material fact or omit to state any material fact required to be stated therein, in light of the circumstances under which they are made, not misleading. (c) None of the information supplied or to be supplied by IHK for inclusion or incorporation by reference in the Registration Statement will at the time the Registration Statement becomes effective under the Securities Act or at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and none of the information supplied or to be supplied by IHK and included or incorporated by reference in the Proxy Statement, as supplemented if necessary, will, at the date mailed to shareholders of IHK, or at the time of the IHK Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. If at any time prior to the time of such meeting, any event with respect to IHK or any IHK Subsidiary, or with respect to other information supplied by IHK for inclusion in the Proxy Statement or the Registration Statement, shall occur which is required to be described in an amendment of, or a supplement to, the Proxy Statement or the Registration Statement, such event shall be so described, and such amendment or supplement shall be promptly filed with the SEC. The Proxy Statement, insofar as it relates to other information supplied by IHK for inclusion therein, will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. SECTION 4.21 Financing. In connection with the transactions contemplated by this Agreement, Lehman Brothers Commercial Paper Inc. ("LBCPI") has issued a commitment letter (the "Lehman Brothers Commitment") to IHK, a true and correct copy of which has been delivered to the Company, for funds which, together with cash available to IHK, will enable IHK (or cause Merger Sub) to (a) pay the Offer Price pursuant to the Offer, (b) pay the Cash Consideration pursuant to the Merger, (c) refinance such of its existing indebtedness as shall be necessary to consummate the Offer and the Merger and the financing therefor and provide working capital prior to the Effective Time and (d) pay related fees and expenses. Upon consummation of the Offer, IHK will provide funds obtained from the Lehman Brothers Commitment to Merger Sub sufficient to pay for all amounts described above. 41 ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER SECTION 5.01 Conduct of Business by the Company Pending the Merger. The Company covenants and agrees that, between the date of this Agreement and the Effective Time, except as set forth in Section 5.01 of the Company Disclosure Schedule or as specifically contemplated by any other provision of this Agreement, unless IHK shall otherwise agree in writing: (a) the Company and the Company Subsidiaries shall carry on their respective businesses in the usual, regular and ordinary course in all material respects, in substantially the same manner as heretofore conducted, and shall use commercially reasonable efforts to preserve intact their present lines of business, maintain their rights and franchises and preserve their relationships with employees, customers, suppliers and others having business dealings with them to the end that their ongoing businesses shall not be impaired in any material respect at the Effective Time; provided, however, that no action by the Company or any Company Subsidiary specifically permitted by any other provision of this Section 5.01 shall be deemed a breach of this Section 5.01(a); (b) neither the Company nor any Company Subsidiary shall amend or otherwise change its Certificate of Incorporation or By-Laws or equivalent organizational documents; (c) neither the Company nor any Company Subsidiary shall issue, sell, pledge, dispose of, grant or encumber, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of, (i) any shares of capital stock of the Company or any Company Subsidiary of any class or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of the Company or any Company Subsidiary (except for (A) the issuance of a maximum of 200,000 shares of Company Common Stock issuable pursuant to Company Options outstanding on the date hereof in accordance with the terms thereof and (B) issuances by a direct or indirect wholly owned subsidiary of the Company of capital stock to such subsidiary's parent) or (ii) any assets of the Company or any Company Subsidiary, except in the ordinary course of business and in a manner consistent with past practice; (d) neither the Company nor any Company Subsidiary shall declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock, other than (i) any regular quarterly dividends declared and paid in accordance with past practice and not in excess of $0.0375 per share of Company Common Stock and (ii) dividends by a direct or indirect wholly owned subsidiary of the Company to such subsidiary's parent; (e) neither the Company nor any Company Subsidiary shall reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock, 42 except for any such transaction by a wholly owned subsidiary of the Company that remains a wholly owned subsidiary of the Company after the consummation of such transaction; (f) neither the Company nor any Company Subsidiary shall (i) acquire or dispose of (including, without limitation, by merger, consolidation, acquisition or disposition of stock or assets, or by liquidation or dissolution) any interest in any corporation, partnership, other business organization or any division thereof or any assets, other than the acquisition or disposition of assets in the ordinary course of business consistent with past practice and any other acquisitions for consideration which is not, in the aggregate, in excess of $10,000,000 and any other dispositions for consideration which is not, in the aggregate, in excess of $10,000,000; (ii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any Person, or make any loans or advances, except for (A) indebtedness incurred in the ordinary course of business and consistent with past practice, (B) indebtedness of the Company to a direct or indirect wholly owned Company Subsidiary or indebtedness of a direct or indirect wholly owned Company Subsidiary to the Company or another direct or indirect wholly owned Company Subsidiary and (C) other indebtedness with a maturity of not more than one year incurred in the ordinary course of business consistent with past practice; (iii) enter into, amend or terminate any contract or agreement material to the business, results of operations or financial condition of the Company and the Company Subsidiaries taken as a whole other than in the ordinary course of business, consistent with past practice; (iv) authorize any capital expenditure, other than capital expenditures for the Company and the Company Subsidiaries as a whole, in an aggregate amount not exceeding the sum of (A) the amount provided in the capital expenditure budget for the fiscal year ending September 28, 1997 previously provided to IHK and (B) $5,000,000; or (v) enter into or amend any contract, agreement, commitment or arrangement that, if fully performed, would not be permitted under this subsection (f); (g) neither the Company nor any Company Subsidiary shall (i) increase the compensation payable or to become payable to its officers or employees, except for increases in accordance with past practices in salaries or wages of employees of the Company or any Company Subsidiary who are not officers of the Company, or (ii) except pursuant to existing policies and agreements, grant any severance or termination pay to any director, officer or other employee of the Company or any Company Subsidiary, or (iii) enter into or amend any employment or severance agreement with any director, officer or other employee of the Company or any Company Subsidiary or (iv) establish, adopt, enter into, extend, amend or terminate any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other agreement, trust, fund, policy or arrangement for the benefit of any director, officer or employee; (h) neither the Company nor any Company Subsidiary shall take any action, other than as required by the SEC or by U.S. GAAP, with respect to accounting policies or procedures (including, without limitation, procedures with respect to the payment of accounts payable and collection of accounts receivable); 43 (i) neither the Company nor any Company Subsidiary shall make any tax election or settle or compromise any material federal, state, local or foreign income tax liability; (j) neither the Company nor any Company Subsidiary shall take any action that would prevent or impede any party to this Agreement from obtaining any consent or approval the receipt of which is a condition to the consummation of the Offer or the Merger; (k) neither the Company nor any Company Subsidiary shall enter into any agreement or arrangement that would limit or otherwise restrict the Company or any Company Subsidiary or any successor thereto or, after consummation of the Merger, IHK or any subsidiary thereof or any successor thereto, from engaging or competing in any line of business or in any geographic area; (l) neither the Company nor any Company Subsidiary shall pay, discharge or satisfy any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course business and consistent with past practice, of liabilities reflected or reserved against in the September 29, 1996 consolidated balance sheet of the Company (including the notes thereto) or subsequently incurred in the ordinary course of business and consistent with past practice; (m) neither the Company nor any Company Subsidiary shall take any action that would result in (i) any of the representations or warranties of the Company set forth in this Agreement that are qualified as to materiality becoming untrue, (ii) any of such representations or warranties that are not so qualified becoming untrue in any material respect or (iii) except as otherwise permitted by Section 6.05, any of the conditions to the Offer set forth in Annex A or the conditions to the Merger set forth in Article VII not being satisfied; and (n) neither the Company nor any Company Subsidiary shall authorize or enter into an agreement to do anything prohibited by Sections 5.01(b) through (m). SECTION 5.02 Conduct of Business by IHK and the IHK Subsidiaries Pending the Merger. Except with respect to any action taken to incur indebtedness to fund the Offer, the Cash Consideration and any expenses incurred in connection therewith and to fund working capital requirements in the ordinary course of business prior to the Effective Time, IHK covenants and agrees that, between the date of this Agreement and the Effective Time, except as set forth in Section 5.02 of the IHK Disclosure Schedule or as specifically contemplated by any other provision of this Agreement, unless the Company shall otherwise agree in writing: (a) IHK and the IHK Subsidiaries shall carry on their respective businesses in the usual, regular and ordinary course in all material respects, in substantially the same manner as heretofore conducted, and shall use commercially reasonable efforts to preserve intact their present lines of business, maintain their rights and franchises and preserve their relationships with employees, customers, suppliers and others having business dealings with them to the end that their ongoing businesses shall not be impaired in any material respect at the Effective Time; provided, however, 44 that no action by IHK or any IHK Subsidiary specifically permitted by any other provision of this Section 5.02 shall be deemed a breach of is Section 5.02(a); (b) Neither IHK nor any IHK Subsidiary shall amend or otherwise change its Articles of Incorporation or By-Laws or equivalent organizational documents; (c) Neither IHK nor any IHK Subsidiary shall issue, sell, pledge, dispose of, grant or encumber, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of, (i) any shares of capital stock of IHK or any IHK Subsidiary of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of IHK or any IHK Subsidiary (except for (A) the issuance of a maximum of 590,870 shares of IHK Common Stock pursuant to the IHK Option Plan, (B) pursuant to the IHK Employee Stock Purchase Plan and (C) issuances by a direct or indirect wholly owned subsidiary of IHK of capital stock to such subsidiary's parent or (ii) any assets of IHK or any IHK Subsidiary, except in the ordinary course of business and in a manner consistent with past practice; (d) Neither IHK nor any IHK Subsidiary shall declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock, other than (i) any quarterly dividends declared and paid in accordance with past practice and not in excess of $0.03 per share of IHK Common Stock and (ii) such dividends by a direct or indirect wholly owned subsidiary of IHK to such subsidiary's parent; (e) Neither IHK nor any IHK Subsidiary shall reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock, except for any such transaction by a direct or indirect wholly owned subsidiary of IHK that remains a wholly-owned subsidiary of IHK after the consummation of such transaction; (f) Neither IHK nor any IHK Subsidiary shall (i) acquire or dispose of (including, without limitation, by merger, consolidation, or acquisition or disposition of stock or assets, or by liquidation or dissolution) any interest in any corporation, partnership, other business organization or any division thereof or any assets, other than the acquisition or disposition of assets in the ordinary course of business consistent with past practice and any other acquisitions for consideration which is not, in the aggregate, in excess of $10,000,000 and any other dispositions for consideration which is not, in the aggregate, in excess of $10,000,000; (ii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any Person, or make any loans or advances, except for (A) indebtedness incurred in the ordinary course of business and consistent with past practice, (B) indebtedness of IHK to a direct or indirect wholly owned IHK Subsidiary or indebtedness of IHK or a direct or indirect wholly owned IHK Subsidiary to another direct or indirect wholly owned IHK Subsidiary, (C) other indebtedness with a maturity of not more than one year incurred in the ordinary course of business consistent with past practice and (D) indebtedness to fund the Offer and the Cash Consideration and the expenses incurred in connection therewith and 45 to refinance the Company's and IHK's existing indebtedness; (iii) enter into, amend or terminate any contract or agreement material to the business, results of operations or financial condition of IHK and the IHK Subsidiaries taken as a whole other than in the ordinary course of business, consistent with past practice; (iv) authorize any capital expenditure, other than capital expenditures for IHK and the IHK Subsidiaries as a whole, in an aggregate ate amount not exceeding the sum of (A) the amount provided in the capital expenditure budget for the fiscal year ending March 31, 1998 previously provided to the Company and (B) $5,000,000; or (v) enter into or amend any contract, agreement, commitment or arrangement that, if fully performed, would not be permitted under this subsection (f); (g) Neither IHK nor any IHK Subsidiary shall (i) increase the compensation payable or to become payable to its officers or employees, except for increases in accordance with past practices in salaries or wages of employees of IHK or any IHK Subsidiary who are not officers of IHK, or (ii) except pursuant to existing policies and agreements, grant any severance or termination pay to any director, officer or other employee of IHK or any IHK Subsidiary, or (iii) except for change of control agreements specified in Section 5.02(g) of the IHK Disclosure Schedule enter into or amend any employment or severance agreement with any director, officer or other employee of IHK or any IHK Subsidiary or (iv) establish, adopt enter into, extend, amend or terminate any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer or employee; (h) Neither IHK nor any IHK Subsidiary shall take any action, other than as required by the SEC or U.S. GAAP, with respect to accounting policies or procedures (including, without limitation, procedures with respect to the payment of accounts payable and collection of accounts receivable); (i) Neither IHK nor any IHK Subsidiary shall make any tax election or settle or compromise any material federal, state, local or foreign income tax liability; (j) Neither IHK nor any IHK Subsidiary shall take any action that would prevent or impede any party to this Agreement from obtaining any consent or approval the receipt of which is a condition to the consummation of the Offer or the Merger; (k) Neither IHK nor any IHK Subsidiary shall enter into any agreement or arrangement that would limit or otherwise restrict IHK or any IHK Subsidiary or any successor thereto, after the consummation of the Merger, from engaging or competing in any line of business or in any geographic area; (l) Neither IHK nor any IHK Subsidiary shall pay, discharge or satisfy any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business and consistent with past 46 practice, of liabilities reflected or reserved against in the March 31, 1997 consolidated balance sheet of IHK or subsequently incurred in the ordinary course of business and consistent with past practice; (m) Neither IHK nor any IHK Subsidiary shall take any action that would result in (i) any of the representations or warranties of IHK and the Merger Sub set forth in this Agreement that are qualified as to materiality becoming untrue, (ii) any of such representations or warranties that are not so qualified becoming untrue in any material respect or (iii) any of the conditions to the Offer set forth in Annex A or the conditions to the Merger set forth in Article VII not being satisfied; and (n) Neither IHK nor any IHK Subsidiary shall authorize or enter into an agreement to do anything prohibited by Sections 5.02(b) through (m). SECTION 5.03 Government Filings. (a) The Company shall use commercially reasonable efforts to promptly file and shall cause the Company Subsidiaries to promptly file all reports required to be filed by any of them with any Governmental Entities between the date of this Agreement and the Effective Time and shall (to the extent permitted by Law or regulation or any applicable confidentiality agreement) deliver to IHK copies of all such reports promptly after the same are filed. (b) IHK shall use commercially reasonable efforts to promptly file and shall cause each IHK Subsidiary to promptly file all reports required to be filed by any of them with any Governmental Entities between the date of this Agreement and the Effective Time and shall (to the extent permitted by Law or regulation or any applicable confidentiality agreement) deliver to the Company copies of all such reports promptly after the same are filed. (c) Subject to applicable Laws, IHK shall have the right to review in advance, and to the extent practicable to consult with the Company, with respect to all the information relating to IHK or any IHK Subsidiary or the Merger which appears in any Company or Company Subsidiary filings made with, or written materials submitted to, any Governmental Entity. (d) Subject to applicable Laws, the Company shall have the right to review in advance, and to the extent practicable to consult with IHK, with respect to all the information relating to the Company or any Company Subsidiary or the Merger which appears in any IHK or IHK Subsidiary filings made with, or written materials submitted to, any Governmental Entity. (e) In exercising the rights provided by Sections 5.03(c) and 5.03(d), each of the parties hereto agrees to act reasonably and as promptly as practicable. 47 ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.01 Stockholders' Meetings. (a) Unless otherwise required pursuant to the applicable fiduciary duties of the Company's Board of Directors to the stockholders of the Company (as determined in good faith by the Company's Board of Directors based upon the advice of outside counsel), (i) the Company shall call and hold a meeting of its stockholders (the "Company Stockholders' Meeting") as promptly as practicable to consider and vote upon the approval of this Agreement and the Merger, and the Company shall use commercially reasonable efforts to hold the Company Stockholders' Meeting as soon as practicable after the date on which shares of Company Common Stock are purchased in the Offer and the Registration Statement becomes effective, (ii) the Company's Board of Directors shall recommend such approval (as well as acceptance of the Offer), and (iii) the Company shall take all lawful action to solicit such approval, including, without limitation, timely mailing the Proxy Statement. (b) Unless otherwise required pursuant to the applicable fiduciary duties of IHK's Board of Directors to the shareholders of IHK (as determined in good faith by IHK's Board of Directors based upon the advice of outside counsel), (i) IHK shall call and hold a meeting of its shareholders (the "IHK Shareholders' Meeting") as promptly as practicable to consider and vote upon the approval of the issuance of the Stock Consideration, and IHK shall use commercially reasonable efforts to hold the IHK Shareholders' Meeting as soon as practicable after the date on which shares of Company Common Stock are purchased in the Offer and the Registration Statement becomes effective, (ii) the IHK's Board of Directors shall recommend such approval, and (iii) IHK shall take all lawful action to solicit such approval, including, without limitation, timely mailing the Proxy Statement. SECTION 6.02 Registration Statement; Proxy Statement. (a) As promptly as practicable after the execution of this Agreement (i) IHK and the Company shall prepare and IHK shall file with the SEC the Registration Statement in connection with the registration under the Securities Act of the shares of IHK Common Stock to be issued to the stockholders of the Company in the Merger, a portion of which Registration Statement shall also serve as the joint proxy statement/prospectus (together with any amendments thereof or supplements thereto, the "Proxy Statement") relating to the Stockholders' Meetings. The Registration Statement shall also register the resale of IHK Common Stock received in the Offer and the Merger by Affiliates of the Company by such Affiliates and IHK shall maintain the effectiveness of the Registration Statement with respect to such resales of such IHK Common Stock for a period of one year after the Effective Time. At any time during such one year period, upon IHK's request, any such Affiliates shall not be allowed to sell IHK Common Stock pursuant to such Registration 48 Statement for a period of 45 days if (i) IHK or any IHK Subsidiary is engaged in confidential negotiations or other confidential business activities, disclosure of which would be required in such registration statement (but would not be required if such sales were not made), and IHK determines in good faith that such disclosure would be materially detrimental to IHK and its stockholders, or (ii) IHK determines to effect a registered underwritten public offering of IHK's equity securities or of securities convertible to IHK's equity securities for IHK's account and IHK takes substantial steps (including, but not limited to, selecting the managing underwriter for such offering) and is proceeding with reasonable diligence to effect such offering; provided, however, that IHK may only make such a request twice during such one year period. A deferral of such sales shall be lifted, if, in the case of a deferral pursuant to clause (i) of the preceding sentence, the negotiations or other activities are disclosed or terminated, or, in the case of a deferral pursuant to clause (ii) of the preceding sentence, the proposed registration for IHK's account is abandoned. The Company and such Affiliates shall furnish all information concerning the Company and such Affiliates as IHK may reasonably request in connection with such actions and the preparation of the Registration Statement and the Proxy Statement. IHK shall use commercially reasonable efforts, and the Company and such Affiliates will cooperate with IHK, to cause the Registration Statement to become effective as promptly as practicable and to keep the Registration Statement effective as long as is necessary to consummate the Merger. Prior to the effective date of the Registration Statement, IHK shall take all action required under any applicable federal or state securities Laws in connection with the issuance of shares of IHK Common Stock pursuant to the Merger. IHK shall, as promptly as practicable, provide copies of any written comments received from the SEC with respect to the Registration Statement to the Company and advise the Company of any verbal comments with respect to the Registration Statement received from the SEC. IHK and the Company shall each give the other and its counsel the opportunity to review the Registration Statement and each document to be incorporated by reference therein and all responses to requests for additional information by and replies to comments of the SEC before their being filed with, or sent to, the SEC. IHK and the Company shall each use commercially reasonable efforts, after consultation with the other party, to respond promptly to all such comments of and requests by the SEC. Unless otherwise required by the applicable fiduciary duties of the respective Boards of Directors to their respective stockholders (as determined in good faith by each respective Board of Directors based upon the advice of its outside counsel), as promptly as practicable after the Registration Statement shall have become effective, the Company and IHK shall mail the Proxy Statement to their respective stockholders. (b) Unless otherwise required pursuant to the applicable fiduciary duties of the respective Boards of Directors to their respective stockholders (as determined in good faith by each respective Board of Directors based upon the advice of its outside counsel), no amendment or supplement to the Proxy Statement or the Registration Statement will be made by IHK or the Company without the approval of the other party, which approval shall not be unreasonably withheld. IHK will advise the Company, promptly after it receives notice thereof, of the time when the Registration Statement has become effective or any supplement or amendment has been filed, of the issuance of any stop order, of the suspension of the qualification of IHK Common Stock issuable in connection with the Merger for offering or sale in any jurisdiction, or of any request by the SEC for amendment of the Proxy Statement or the Registration Statement. 49 (c) Notwithstanding anything to the contrary in this Agreement, (i) IHK shall have no obligation to mail the Proxy Statement to its shareholders unless and until IHK shall have received the "comfort letter" referred to in Section 6.10(a) and (ii) the Company shall have no obligation to mail the Proxy Statement to its stockholders unless and until the Company shall have received the "comfort letter" referred to in Section 6.10(b). (d) The information supplied by IHK for inclusion in the Registration Statement and the Proxy Statement shall not, at (i) the time the Registration Statement is declared effective, (ii) the time the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to its shareholders and (iii) the time of the IHK Shareholders' Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. If at any time prior to the time of the IHK Shareholders' Meeting, any event or circumstance relating to IHK or any IHK Subsidiary, or their respective officers or directors, should be discovered by IHK which should be set forth in an amendment or a supplement to the Registration Statement or Proxy Statement, IHK shall promptly inform the Company. (e) The information supplied by the Company for inclusion in the Registration Statement and the Proxy Statement shall not, at (i) the time the Registration Statement is declared effective, (ii) the time the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to the stockholders of the Company and (iii) the time of the Company Stockholders' Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. If at any time prior to the time of the Company Stockholders' Meeting any event or circumstance relating to the Company or any Company Subsidiary, or their respective officers or directors, should be discovered by the Company which should be set forth in an amendment or a supplement to the Registration Statement or Proxy Statement, the Company shall promptly inform IHK. (f) All documents that IHK is responsible for filing with the SEC in connection with the transactions contemplated herein will comply as to form and substance in all material respects with the applicable requirements of the Securities Act and the rules and regulations thereunder and the Exchange Act and the rules and regulations thereunder. (g) All documents that the Company is responsible for filing with the SEC in connection with the transactions contemplated herein will comply as to form and substance in all material aspects with the applicable requirements of the Securities Act and the rules and regulations thereunder and the Exchange Act and the rules and regulations thereunder. SECTION 6.03 Access to Information; Confidentiality. (a) To the fullest extent possible, consistent with applicable Law, the Company shall afford to IHK and its officers, employees, accountants, counsel, financial advisors and other representatives ("Representatives") reasonable access during normal business hours during the 50 period prior to the Effective Time to all the officers, employees, agents, properties, books, contracts, commitments and records of the Company and the Company Subsidiaries, and will cooperate in furnishing and cause its officers, employees and agents to furnish information regarding the Company and the Company Subsidiaries reasonably required in connection with the indebtedness contemplated by the Lehman Brothers Commitment and during such period, the Company shall furnish promptly to IHK and its Representatives all information concerning the businesses, properties and personnel of the Company and the Company Subsidiaries as IHK may reasonably request. (b) Until the Effective Time, IHK and the Company will be bound by, and will hold any information received pursuant to this Agreement in confidence in accordance with the terms of, the confidentiality agreement between the Company and IHK dated August 26, 1997 (the "Confidentiality Agreement"). (c) To the fullest extent possible, consistent with applicable Law, IHK shall, and shall cause the IHK Subsidiaries to, afford to the Company and its Representatives reasonable access during normal business hours during the period prior to the Effective Time to all the officers, employees, agents, properties, books, contracts, commitments and records of IHK and the IHK Subsidiaries, and during such period, IHK shall furnish promptly to the Company and its Representatives all information concerning the businesses, properties and personnel of IHK and the IHK Subsidiaries as the Company may reasonably request. (d) No investigation by either the Company or IHK shall affect the representations and warranties of the other. SECTION 6.04 Approvals and Consents; Cooperation. (a) Upon the terms and subject to the conditions set forth in this Agreement, each of the parties (i) shall make promptly its filings, and thereafter make any other required submissions, under the HSR Act with respect to the Offer and the Merger and (ii) shall use all commercially reasonable efforts to obtain as promptly as practicable (A) all necessary actions or nonactions, waivers, consents and approvals from Governmental Entities, including opposing any attempt by any Governmental Entity to obtain a preliminary or permanent injunction, or to affirm on appeal any such injunction, from the Federal Trade Commission or a federal or state court to enjoin the consummation of the Offer and the Merger under any antitrust Law, and provided that IHK shall consider in good faith but shall not be required to agree to any proposal to make any material modification to the business transaction contemplated by this Agreement in order to obtain the agreement of any Governmental Entity to permit the Offer and Merger to be consummated, and (B) all necessary consents, approvals or waivers from third parties and (iii) shall execute and deliver any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement. 51 (b) The Company and IHK each agrees that it will consult with the other party with respect to the obtaining of all permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the transactions contemplated by this Agreement and each party will keep the other party apprised of the status of matters relating to completion of the transactions contemplated by this Agreement. SECTION 6.05 No Solicitation of Transactions. (a) The Company agrees that neither it nor any Company Subsidiary shall, and that it shall cause its and each Company Subsidiary's Representatives not to, directly or indirectly, initiate, solicit, encourage or otherwise facilitate (including by way of furnishing information) any inquiries or the making of any proposal, or offer with respect to a merger, reorganization, share exchange, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving, or any purchase or sale of all or any significant portion of the assets or 20% or more of the equity securities of, the Company or any Company Subsidiary that, in any such case, could reasonably be expected to interfere with the completion of the Merger or the other transactions contemplated by this Agreement (any such proposal or offer being hereinafter referred to as an "Acquisition Proposal"). The Company further agrees that neither it nor any Company Subsidiary shall, and that it shall cause its and each Company Subsidiary's Representatives not to, directly or indirectly, have any discussion with or provide any confidential information or data to any Person relating to an Acquisition Proposal or engage in any negotiations concerning an Acquisition Proposal, or otherwise facilitate any effort or attempt to make or implement an Acquisition Proposal or accept an Acquisition Proposal; provided, however, that nothing contained in this Agreement shall prevent the Company or the Company's Board of Directors from (i) complying with Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal; (ii) engaging in any discussions or negotiations with, or providing any information to, any Person in response to an unsolicited bona fide written Acquisition Proposal by any such Person; or (iii) recommending such an unsolicited bona fide written Acquisition Proposal to the holders of Company Common Stock if and only to the extent that, in any such case as is referred to in clause (ii) or (iii), (A) the Company's Board of Directors concludes in good faith (after consultation with its legal counsel and financial advisors) that such Acquisition Proposal is reasonably capable of being completed, taking into account all legal, financial, regulatory and other aspects of the Acquisition Proposal and the Person making the Acquisition Proposal, and would, if consummated, result in a transaction more favorable to holders of Company Common Stock than the transaction contemplated by this Agreement (any such more favorable Acquisition Proposal being hereinafter referred to as a "Superior Proposal"), (B) the Company's Board of Directors determines in good faith after consultation with legal counsel that such action is necessary for it to act in a manner consistent with its fiduciary duties under applicable law, (C) prior to providing any information or data to any Person in connection with a Superior Proposal by any such Person, the Company's Board of Directors receives from such Person an executed confidentiality agreement on terms substantially similar to those contained in the Confidentiality Agreement and (D) prior to providing any information or data to any Person or entering into discussions or negotiations with any Person, the Company's Board of Directors notifies IHK promptly of such inquiries, proposals or offers received by, any such information requested 52 from, or any such discussions or negotiations sought to be initiated or continued with, the Company, any Company Subsidiary or any of their Representatives indicating, in connection with such notice, the name of such Person and the terms and conditions of any proposals or offers. The Company agrees that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal. The Company agrees that it shall keep IHK informed, on a current basis, of the status and terms of any such proposals or offers and the status of any such discussions or negotiations. (b) The Company agrees that it will take the necessary steps to promptly inform each Company Subsidiary and each Representative of the Company or any Company Subsidiary of the obligations undertaken in this Section 6.05. SECTION 6.06 Employee Benefits Matters. Annex B hereto sets forth certain agreements among the parties hereto with respect to employee benefits matters and is incorporated herein by this reference. SECTION 6.07 Directors' and Officers' Indemnification and Insurance. (a) From and after the Effective Time, IHK shall, and shall cause the Surviving Corporation to, indemnify and hold harmless, each present and former director, officer, employee and fiduciary the Company and each Company Subsidiary and each Person who served at the request of the Company or any Company Subsidiary as a director, officer, trustee, partner, fiduciary or employee of another corporation, partnership, joint venture, trust pension or other employee benefit plan or enterprise (collectively, the "Indemnified Parties"), to the fullest extent permitted under applicable Law, against all costs and expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities and settlement amounts paid in connection with any claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), whether civil, criminal, administrative or investigative, arising out of or pertaining to any action or omission in their capacity as an officer, director, employee or fiduciary, whether occurring before or after the Effective Time, including, without limitation, the transactions contemplated by this Agreement (and shall also advance, or cause to be advanced, expenses as incurred to the fullest extent permitted under the DGCL, provided that the Person to whom expenses are advanced provides the undertaking to repay such advances contemplated by Section 145(e) of the DGCL). IHK and Merger Sub agree that all rights to indemnification existing in favor of the Indemnified Parties as provided in the Company's By-Laws, as in effect as of the date hereof, with respect to matters occurring through the Effective Time, shall survive the Merger and shall continue in full force and effect for a period of not less than six years from the Effective Time. (b) Without limiting the foregoing, in the event any claim, action, suit, proceeding or investigation (a "Claim") is brought against any Indemnified Party (whether arising before or after the Effective Time) after the Effective Time (i) the Indemnified Parties may retain counsel satisfactory to them and reasonably satisfactory to IHK and the Surviving Corporation, (ii) IHK and the Surviving Corporation shall pay all reasonable fees and expenses of such counsel for the 53 Indemnified Parties promptly as statements therefor are received and (iii) IHK and the Surviving Corporation will use commercially reasonable efforts to assist in the vigorous defense of any such matter, provided that neither IHK nor the Surviving Corporation shall be liable for any settlement of any Claim effected without its written consent, which consent, however, shall not be unreasonably withheld. Any Indemnified Party wishing to claim indemnification under this Section 6.07, upon learning of any such Claim, shall notify IHK (but the failure so to notify IHK shall not relieve IHK from any liability that IHK may have under this Section 6.07 except to the extent such failure materially prejudices IHK), and shall deliver to IHK the undertaking contemplated by Section 145(e) of the DGCL. The Indemnified Parties as a group may retain only one law firm to represent them with respect to each such matter unless there is, under applicable standards of professional conduct, a conflict on any significant issue between the positions of any two or more Indemnified Parties. (c) For a period of six years after the Effective Time, IHK shall cause to be maintained in effect the current directors' and officers' liability insurance policies maintained by the Company (provided that IHK may substitute therefor policies of at least the same coverage containing terms and conditions which are no less advantageous) with respect to claims arising from facts or events that occurred prior to the Effective Time; provided, however, that in no event shall IHK be required to expend pursuant to this Section 6.07(c) more than an amount per year equal to 200% of current annual premiums paid by the Company for such insurance (which premiums the Company represents and warrants to be approximately $260,000 per year in the aggregate). SECTION 6.08 Obligations of IHK and Merger Sub. IHK shall take all action necessary to perform, and shall cause Merger Sub to perform, its obligations under this Agreement and to consummate the Merger on the terms and subject to conditions set forth in this Agreement. SECTION 6.09 Affiliates' Letters. No later than 5 days from the date of this Agreement, the Company shall deliver to IHK a list of names and addresses of those persons who were, in the Company's reasonable judgment, on such date, affiliates within the meaning of Rule 145 of the rules and regulations promulgated under the Securities Act of the Company (each such person being a "Company Affiliate"). The Company shall provide IHK with such information and documents as IHK shall reasonably request for purposes of reviewing such list. The Company shall use its reasonable efforts to deliver or cause to be delivered to IHK, prior to the Effective Time, a letter substantially in the form attached hereto as Exhibit 6.09, executed by each of the Company Affiliates identified in the foregoing list and of any person who shall have become a Company Affiliate subsequent to the delivery of such list. SECTION 6.10 Letters of Accountants. (a) The Company shall use commercially reasonable efforts to cause to be delivered to IHK a "comfort" letter of Price Waterhouse LLP or Arthur Andersen LLP, the Company's independent public accountants, dated and delivered the date on which the Registration Statement shall become effective and addressed to IHK, in the form, scope and content contemplated by Statement on Auditing Standards No. 72, as amended issued by the American Institute of Certified 54 Public Accountants, Inc. ("SAS 72"), relating to the financial statements and other financial data with respect to the Company and its consolidated subsidiaries included or incorporated by reference in the Proxy Statement and such other matters as may be reasonably required by IHK, and based upon procedures carried out to a specified date not earlier than five days prior to the date thereof. (b) IHK shall use commercially reasonable efforts to cause to be delivered to the Company a "comfort letter" of Deloitte & Touche LLP, IHK's independent public accountants, dated the date on which the Registration Statement shall become effective, and addressed to the Company, in the form, scope and content contemplated by SAS 72, relating to the financial statements and other financial data with respect to IHK and the IHK Subsidiaries included in or incorporated by reference in the Proxy Statement and such other matters as may be reasonably required by the Company, and based upon procedures carried out to a specified date not earlier than five days prior to the date thereof. SECTION 6.11 Listing Market. IHK shall promptly prepare and submit to the American Stock Exchange or such other stock exchange or market as the parties reasonably agree (the "Listing Market") a listing application covering the shares of IHK Common Stock to be issued in the Merger and pursuant to Substitute Options, and shall use commercially reasonable efforts to obtain, prior to the Effective Time, approval for the listing of such IHK Common Stock, subject to official notice to the Listing Market of issuance, and the Company shall cooperate with IHK with respect to such listing. SECTION 6.12 IHK Board Representation. Prior to the Effective Time, IHK shall cause two nominees of the Company ("Company Nominees"), subject to the reasonable approval of IHK, to be elected as directors of IHK (and to be in office immediately prior to the Effective Time). For a period of one or two years after the Effective Time, depending on the class to which such Company Nominee is initially elected, IHK shall cause each such Company Nominee to be nominated for re-election to an additional three year term at the expiration of his initial term in office. SECTION 6.13 Company Rights Plan. The Company's Board of Directors shall take all further action (in addition to that described in Section 3.20) necessary in order to render the Company Rights inapplicable to the Offer, the Merger and the other transactions contemplated by this Agreement, to terminate the Company Rights Agreement as of the Effective Time and to ensure that IHK and Merger Sub will not have any obligations in connection with the Rights Agreement or the Company Rights (including by redeeming the Company Rights immediately prior to the Effective Time or by amending the Company Rights Agreement). Except as otherwise provided in this Section 6.13 and Section 3.20, the Company shall not, prior to the Effective Time, redeem the Company Rights or amend or terminate the Company Rights Agreement unless (a) required to do so by order of a court of competent jurisdiction or (b) required by the applicable fiduciary duties of the Company's Board of Directors to the stockholders of the Company (as determined in good faith by the Company's Board or Directors based upon the advice of outside counsel). 55 SECTION 6.14 Public Announcements. Unless otherwise required by applicable Law or stock exchange requirements, IHK and the Company shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or any transaction contemplated thereby and shall not issue any such press release or make any such public statement prior to such consultation. SECTION 6.15 Subsequent Financial Statements. (a) As soon as practicable following filing, the Company shall deliver to IHK a copy of each periodic report on Forms 10-Q or 10-K, so filed prior to the Effective Time. The financial statements contained therein are referred to as the "Company Subsequent Financial Statements." The Company Subsequent Financial Statements (i) will be prepared from the books of account and other financial records of the Company and the consolidated Company Subsidiaries, (ii) will be prepared in accordance with U.S. GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto) and (iii) will present fairly, in all material respects, the consolidated financial position of the Company and the consolidated Company Subsidiaries as at the respective dates thereof and the results of their operations and cash flows for the respective periods indicated therein except as otherwise noted therein (subject in the case of unaudited statements, to normal and recurring year-end adjustments which shall not be expected, individually or in the aggregate, to have a Company Material Adverse Effect and the omission of footnotes). (b) As soon as practicable following filing, IHK shall deliver to the Company a copy of each periodic report on Forms 10-Q or 10-K, so filed prior to the Effective Time. The financial statements contained therein are referred to as the "IHK Subsequent Financial Statements." The IHK Subsequent Financial Statements (i) will be prepared from the books of account and other financial records of IHK and the consolidated IHK Subsidiaries, (ii) will be prepared in accordance with U.S. GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto) and (iii) will present fairly, in all material respects, the consolidated financial position of IHK and the consolidated IHK Subsidiaries as at the respective dates thereof and the results of their operations and cash flows for the respective periods indicated therein except as otherwise noted therein (subject in the case of unaudited statements, to normal and recurring year-end adjustments which shall not be expected, individually or in the aggregate, to have an IHK Material Adverse Effect and the omission of footnotes). ARTICLE VII CONDITIONS TO THE MERGER 56 SECTION 7.01 Conditions to Each Party's Obligation to Effect the Merger. The obligations of the Company, IHK and Merger Sub to consummate the Merger are subject to the satisfaction of the following conditions: (a) this Agreement and the transactions contemplated hereby shall have been approved and adopted by the affirmative vote of the stockholders of the Company in accordance with the DGCL and the Company's Certificate of Incorporation and the issuance of the IHK Common Stock pursuant to the Merger shall have been approved by the affirmative vote of the shareholders of IHK in accordance with the applicable rules and regulations of the Listing Market; (b) any waiting period (and any extension thereof) applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated; (c) no Governmental Entity (as defined in Section 9.12(g)) or court of competent jurisdiction located or having jurisdiction in the United States shall have enacted, issued, promulgated, enforced or entered any Law, rule, regulation, executive order or Order which is then in effect and has the effect of restraining or making the Merger illegal or otherwise prohibiting consummation of the Merger; (d) the Registration Statement shall have been declared effective, and no stop order suspending the effectiveness of the Registration Statement shall be in effect; (e) the shares of IHK Common Stock to be issued in the Merger and pursuant to Substitute Options shall have been authorized for listing on the Listing Market, subject to official notice of issuance; and (f) Merger Sub shall have purchased shares of Company Common Stock pursuant to the Offer. ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER SECTION 8.01 Termination. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, notwithstanding any requisite approval and adoption of this Agreement and the transactions contemplated hereby, as follows: (a) by mutual written consent of IHK and the Company; (b) by either IHK or the Company, if the Effective Time shall not have occurred on or before May 31, 1998 (the "Termination Date"); provided, however, that the right to terminate this Agreement under this Section 8.01(b) shall not be available to any party whose failure to fulfill any 57 obligation under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before the Termination Date; (c) by either IHK or the Company, if any court of competent jurisdiction in the United States or other Governmental Entity, based otherwise than on any antitrust Law, (i) shall have issued an Order or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such Order or other action shall have become final and nonappealable or (ii) shall have failed to issue an Order or to take any other action necessary to fulfill the conditions to the Closing of the Merger and such denial of a request to issue such Order or take such other action shall have become final and nonappealable; (d) (x) by either IHK or the Company, if this Agreement and the transactions contemplated hereby shall fail to receive the requisite vote for approval and adoption at the Company Stockholders' Meeting or (y) by the Company, if the issuance of the IHK Common Stock as part of the Merger shall fail to receive the requisite vote for approval at the IHK Shareholders' Meeting; (e) by IHK, if prior to the payment for shares of Company Common Stock pursuant to the Offer (i) the Company's Board of Directors withdraws, modifies or changes its approval or recommendation (including by amendment of the Schedule 14D-9) of this Agreement, the Offer or the Merger in a manner adverse to IHK or Merger Sub, (ii) the Company's Board of Directors shall, at a time when there is an Acquisition Proposal with respect to the Company, fail to reaffirm such approval or recommendation of this Agreement, the Offer or the Merger upon the reasonable request of IHK and Merger Sub, (iii) the Company's Board of Directors shall approve or recommend any acquisition of the Company or a material portion of its assets or any tender offer for shares of its capital stock, in each case, other than by the other parties hereto or an affiliate thereof; (iv) a tender offer or exchange offer for 20% or more of the outstanding shares of capital stock of the Company is commenced, and the Company's Board of Directors fails to recommend against acceptance of such tender offer or exchange offer by its stockholders (including by taking no position with respect to the acceptance of such tender offer or exchange offer by its stockholders); or (v) the Company's Board of Directors shall resolve to take any of the actions specified in clauses (i) through (iv) of this Section 8.01(e); (f) by the Company, prior to the payment for shares of Company Common Stock pursuant to the Offer, upon five Business Days' prior notice to IHK and Merger Sub (which notice shall be revocable by the Company), if, as a result of a Superior Proposal received by the Company from a Person other than a party to this Agreement or any of its affiliates, the Company's Board of Directors determines in good faith that their fiduciary obligations under applicable Law require that such Superior Proposal be accepted; provided, however, that (i) the Company's Board of Directors shall have concluded in good faith, after considering applicable provisions of Law and after giving effect to all concessions which may be offered by IHK and Merger Sub pursuant to clause (ii) below, on the basis of advice of counsel, that such action is necessary for the Company's Board of Directors to act in a manner consistent with its fiduciary duties under applicable laws and (ii) prior to the effective date of any such termination, the Company shall provide IHK and Merger Sub with 58 an opportunity to make such adjustments in the terms and conditions of this Agreement, the Offer or the Merger as would enable the Company to proceed with the transactions contemplated hereby; provided, however, that it shall be a condition to the effectiveness of termination by the Company pursuant to this Section 8.01(f) that the Company shall have made the payment of the Termination Fee (as defined below) to IHK required by Section 8.05(b); (g) by IHK, prior to the payment for shares of Company Common Stock pursuant to the Offer, upon a breach of any representation, warranty, covenant or agreement on the part of the Company set forth in this Agreement, or if any representation or warranty of the Company shall have become untrue, in either case such that the conditions to the Offer set forth in clauses (c) or (d) of Annex A would be satisfied (a "Terminating Company Breach"); provided, however, that, if such Terminating Company Breach is curable by the Company and for so long as the Company continues to exercise all reasonable efforts to cure such Terminating Company Breach, IHK may not terminate this Agreement under this Section 8.01(g); (h) by the Company, prior to the payment for shares of Company Common Stock pursuant to the Offer, upon breach of any representation, warranty, covenant or agreement on the part of IHK or Merger Sub set forth in this Agreement, or if any representation or warranty of IHK and Merger Sub shall have become untrue, in either case except for such breaches or failures (i) which, individually or in the aggregate, would not have an IHK Material Adverse Effect and (ii) which, individually or in the aggregate, would not materially impair or delay the ability of Merger Sub to consummate the Offer or the ability of IHK, Merger Sub and the Company to effect the Merger ("Terminating IHK Breach"); provided, however, that, if such Terminating IHK Breach is curable by IHK and Merger Sub and for so long as IHK and Merger Sub continue to exercise all reasonable efforts to cure such Terminating IHK Breach, the Company may not terminate this Agreement under this Section 8.01(h); (i) by IHK, if the Offer is terminated or expires without the purchase of any shares of Company Common Stock thereunder, unless such termination or expiration has been caused by or resulted from the failure in any material respect of IHK or Merger Sub to perform any of its covenants and agreements contained in this Agreement or in the Offer; (j) by the Company, if all of the conditions to the Offer set forth in Annex A except for clause (2) have been satisfied and IHK fails to accept and pay for shares of Company Common Stock in the Offer solely because of the failure of LBCPI to fund its loan commitment contained in the Lehman Brothers Commitment; and (k) by the Company, if on May 29, 1998, the Effective Time shall not have occurred because IHK and Merger Sub have not been permitted to consummate the Offer and the Merger by reason of any antitrust Law. 59 SECTION 8.02 Effect of Termination. In the event of termination of this Agreement pursuant to Section 8.01, this Agreement shall forthwith become void and, except as provided in Section 8.05, there shall be no liability under this Agreement on the part of IHK, Merger Sub or the Company or any of their respective officers or directors and all rights and obligations of each party hereto shall cease, provided that nothing herein shall relieve any party from liability for any breach of this Agreement (it being understood that IHK and Merger Sub shall have no liability for failure to obtain financing of the Offer and the Merger or to obtain expiration of all waiting periods under the HSR Act or to avoid the entry or affirmation of any injunction under any antitrust Law in respect of the Offer or the Merger, unless the Company elects to terminate this Agreement under Section 8.01(j) or (k), respectively, and then only to the extent provided in Section 8.05(c)). SECTION 8.03 Amendment. This Agreement may be amended by the parties hereto by action taken by or on behalf of their respective Boards of Directors at any time prior to the Effective Time; provided, however, that after the approval and adoption of this Agreement and the transactions contemplated hereby by the stockholders of the Company, no amendment may be made which would reduce the amount or change the type of consideration into which each share of Company Common Stock shall be converted upon consummation of the Merger. This Agreement may not be amended except by an instrument in writing signed by the parties hereto. SECTION 8.04 Waiver. At any time prior to the Effective Time, any party hereto may (a) extend the time for the performance of any obligation or other act of any other party hereto, (b) waive any inaccuracy in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any agreement or condition contained herein. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby. SECTION 8.05 Fees and Expenses. (a) Except as set forth in this Section 8.05, all expenses incurred in connection with this Agreement shall be paid by the party incurring such expenses, whether or not the Merger is consummated, except that the Company and IHK each shall pay one-half of all Expenses (as defined below) relating to printing, filing and mailing the Registration Statement and the Proxy Statement and all SEC and other regulatory filing fees incurred in connection with the Registration Statement and the Proxy Statement. "Expenses" as used in this Agreement shall include all reasonable out-of-pocket expenses (including, without limitation, all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party hereto and its affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement, the preparation, printing, filing and mailing of the Registration Statement and the Proxy Statement, the solicitation of stockholder approvals and all other matters related to the closing of the Merger. (b) The Company and IHK agree that 60 (i) if IHK shall terminate this Agreement pursuant to Section 8.01(e) or (ii) if the Company shall terminate this Agreement pursuant to Section 8.01(f) or (iii) if (A) IHK or the Company shall terminate this Agreement pursuant to Section 8.01(d) due to the failure of the Company's stockholders to approve and adopt this Agreement and (B) at the time of such failure to so approve and adopt this Agreement there shall exist an Acquisition Proposal with respect to the Company and, within 12 months of the termination of this Agreement, the Company enters into a definitive agreement with any third party with respect to an Acquisition Proposal with respect to the Company, then the Company shall pay to IHK an amount equal to $8,000,000 (the "Company Termination Fee"). (c) The Company and IHK agree that if the Company shall terminate this Agreement pursuant to Section 8.01(j) or (k), then IHK shall pay to the Company an amount equal to $8,000,000 (the "IHK Termination Fee"). (d) The Company Termination Fee required to be paid pursuant to Section 8.05(b)(ii) shall be paid prior to, and shall be a pre-condition to effectiveness of termination of this Agreement pursuant to Section 8.01(f) and the Company Termination Fee required to be paid pursuant to Section 8.05(b)(iii) shall be paid to IHK on the next Business Day after a definitive agreement is entered into with a third party with respect to an Acquisition Proposal with respect to the Company. Any payment of a Company Termination Fee otherwise required to be made pursuant to Section 8.05(b) or an IHK Termination Fee required to be made pursuant to Section 8.05(c) shall be made not later than two Business Days after termination of this Agreement. All payments under this Section 8.05 shall be made by wire transfer of immediately available funds to an account designated by the payee. ARTICLE IX GENERAL PROVISIONS SECTION 9.01 Non-Survival of Representations, Warranties and Agreements. The representations, warranties and agreements in this Agreement shall terminate at the Effective Time or upon the termination of this Agreement pursuant to Section 8.01, as the case may be, except that representations, warranties and agreements set forth in Articles I and II and Sections 6.06, 6.07 and 6.12 and Article IX shall survive the Effective Time for the respective periods set forth in such sections or, if no such period is specified, indefinitely and those set forth in Sections 3.19, 4.19, 6.03(b), 8.02 and 8.05 and Article IX shall survive termination for the respective periods set forth in such sections or, if no such period is specified, indefinitely. 61 SECTION 9.02 Notices. (a) All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be sent by an overnight courier service that provides proof of receipt, mailed by registered or certified mail (postage prepaid, return receipt requested) or telecopied to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): if to the Company: Savannah Foods & Industries, Inc. Two East Bryan Street Savannah, Georgia 81401 Attention: Corporate Secretary Telecopier No.: (912) 651-4905 with a copy to: Skadden Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, New York 10022 Telecopier No.: (212) 735-2000 Attention: Stephen M Banker if to IHK or Merger Sub: Imperial Holly Corporation One Imperial Square P.O. Box 9 Sugar Land, Texas 77847 Attention: James C. Kempner Telecopier No.: (281) 490-4895 with a copy to: Andrews & Kurth L.L.P. 4200 Texas Commerce Tower Houston, Texas 77002 Attention: Robert V. Jewell Telecopier No.: (713) 220-4285 (b) If this Agreement provides for a designated period after a notice within which to perform an act, such period shall commence on the date of receipt or refusal of the notice. 62 (c) If this Agreement requires the exercise of a right by notice on or before a certain date or within a designated period, such right shall be deemed exercised on the date of delivery to the courier service, telecopying or mailing of the notice pursuant to which such right is exercised. (d) Notices of changes of address shall be effective only upon receipt. SECTION 9.03 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Merger is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the Merger be consummated as originally contemplated to the fullest extent possible. SECTION 9.04 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of Law or otherwise) without the prior written consent of the other parties. SECTION 9.05 Interpretation. (a) When a reference is made in this Agreement to Sections, Exhibits or Schedules, such reference shall be to a Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents, glossary of defined terms and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." The phrases "the date of this Agreement" and "the date hereof" shall be deemed to refer to the date in the first paragraph of this Agreement. (b) The Parties hereto acknowledge that certain matters set forth in the applicable Disclosure Schedule are included for informational purposes only, notwithstanding the fact that, because they do not rise above applicable materiality thresholds or otherwise, they would not be required to be set forth therein by the terms of this Agreement and that disclosure of such matters shall not be taken as an admission by the Company or IHK that such disclosure is required to be made under the terms or any provision of this Agreement and in no event shall the disclosure of such matters be deemed or interpreted to broaden or otherwise amplify the representations and warranties contained in this Agreement. Notwithstanding anything to the contrary in Articles III and IV, each section of the Disclosure Schedule that includes an asterisk in its heading is intended to be responsive to statements in the correspondingly numbered representation or warranty requesting a listing of specified matters and does not list exceptions to the correspondingly numbered representation and warranty. 63 SECTION 9.06 Specific Performance. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or in equity. SECTION 9.07 Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the state of Delaware applicable to contracts executed in and to be performed in that State. All actions and proceedings arising out of or relating to this Agreement shall be heard and determined in any Delaware state or federal court. SECTION 9.08 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, other than Article II (which may be enforced by the beneficiaries thereof), Sections 6.06 and 6.07 (which are intended to be for the benefit of the persons covered thereby and may be enforced by such persons) and Section 6.13. SECTION 9.09 Counterparts. This Agreement may be executed in two or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 9.10 Waiver of Jury Trial. Each of IHK, the Company and Merger Sub hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise), arising out of or relating to this Agreement or the actions of IHK, the Company or Merger Sub in the negotiation, administration, performance and enforcement thereof. SECTION 9.11 Entire Agreement. This Agreement (including the Annexes, the Exhibits, the Company Disclosure Schedule and the IHK Disclosure Schedule) constitutes the entire agreement among the parties with respect to the subject matter hereof and, except for the Confidentiality Agreements, supersedes all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. SECTION 9.12 Certain Definitions. For purposes of this Agreement: (a) "Affiliate" of a specified Person means a Person who directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, such specified Person; 64 (b) "Beneficial Owner" with respect to any shares of Company Common Stock means a Person who shall be deemed to be the beneficial owner of such shares (i) which such Person or any of its Affiliates or associates (as such term is defined in Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly or indirectly, (ii) which such Person or any of its Affiliates or associates has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of consideration rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding or (iii) which are beneficially owned, directly or indirectly, by any other Persons with whom such Person or any of its Affiliates or associates or Person with whom such Person or any of its Affiliates or associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares; (c) "Business Day" means any day that is not a Saturday, Sunday or other day on which banking institutions in New York, New York are authorized or required by law or executive order to close; (d) "Closing Price" means the volume weighted average of the trading prices of IHK Common Stock, rounded to three decimal places, as reported by Bloomberg Financial Markets, for each of the first 15 consecutive Trading Days in the period commencing 20 Trading Days prior to the date of the Closing; (e) "Company Specified Stockholders" means substantially all of the directors and executive officers of the Company. (f) "Control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or credit arrangement or otherwise; (g) "Exchange Act" means the Securities Exchange Act of 1934, as amended or in effect from time to time; (h) "Governmental Entity" means any United States (federal, state or local) or foreign government or governmental, regulatory or administrative authority, agency or commission; (i) "IHK Specified Stockholders" means P. C. Carrothers, John D. Curtin, D. W. Ehrenkranz, E. O. Gaylord, Gerald Greinstein, Ann O. Hamilton, B. T. Harrison, R. E. Henderson, Roger W. Hill, C. K. Jones, Harris L. Kempner, Jr., I. H. Kempner, James C. Kempner, R. L. Knecht, A. K. Lebsock, H. E. Lentz, Robert L. K. Lynch, H. P. Mechler, K. L. Mercer, J. A. Richmond, Fayez Sarofim, W. F. Schwer, R. W. Strickland, Daniel K. Thorne (individually, and as trustee for certain trusts), Harris Weston (individually, and as trustee for certain trusts), Greencore 65 Group plc, H. Kempner Trust Association, Harris and Eliza Kempner Fund and U. S. National Bank (as trustee for certain trusts). (j) "Knowledge" or "Known" means, with respect to any matter in question, in the case of IHK or the Company, as the case may be, if any of the executive officers of IHK or the Company has actual knowledge of such matter after making due inquiry of all Persons who directly report to such executive officers; (k) "Law" means any United States (federal, state or local) or foreign law, statute, ordinance, rule, regulation, order, judgment or decree; (l) "Order" means any decree, judgment, injunction, ruling, writ or other order (whether temporary, preliminary or permanent); (m) "Person" means an individual, corporation, partnership, limited partnership, syndicate, person (including, without limitation, a "person" defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government; (n) "Securities Act" means the Securities Act of 1933, as amended and in effect from time to time; (o) "Stock Consideration" is (i) if the Closing Price of IHK Common Stock is $13.25 or lower, a number of shares of IHK Common Stock equal to the quotient of the Offer Price divided by $13.25, together with a corresponding number of IHK Purchase Rights (as defined in Section 2.06(a)); (ii) if the Closing Price of IHK Common Stock is $17.25 or greater, a number of shares of IHK Common Stock equal to the quotient of the Offer Price divided by $17.25, together with a corresponding number of IHK Purchase Rights; or (iii) if the Closing Price of the IHK Common Stock is greater than $13.25 but less than $17.25, that portion of a share of IHK Common Stock equal to the quotient of the Offer Price divided by the Closing Price of the IHK Common Stock, together with a corresponding number of IHK Purchase Rights; (p) "Subsidiary" or "Subsidiaries" of any Person means any corporation, partnership, joint venture or other legal entity of which such Person (either alone or through or together with any other subsidiary) owns, directly or indirectly, more than 50% of the stock or other equity interests, the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity; (q) "Trading Day" means a day on which the New York Stock Exchange, Inc. (the "NYSE") and the American Stock Exchange (the "AMEX") are both open for trading. 66 IN WITNESS WHEREOF, IHK, Merger Sub and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. IMPERIAL HOLLY CORPORATION By: /s/ James C. Kempner --------------------------------------------------- Name: JAMES C. KEMPNER -------------------- Title: President and Chief Executive Officer ------------------------------------- IHK MERGER SUB CORPORATION By: /s/ James C. Kempner --------------------------------------------------- Name: JAMES C. KEMPNER -------------------- Title: President and Chief Executive Officer ------------------------------------- SAVANNAH FOODS & INDUSTRIES, INC. By: /s/ William W. Sprague III --------------------------------------------------- Name: WILLIAM W. SPRAGUE III -------------------------- Title: President and CEO ----------------- 67 ANNEX A TO THE AGREEMENT AND PLAN OF MERGER CONDITIONS TO THE OFFER Capitalized terms used in this Annex A shall have the meanings assigned to them in the Agreement to which it is attached (the "Merger Agreement"). Merger Sub shall not be required to accept for payment, purchase or, subject to any applicable rules and regulations of the SEC, including Rule 14e- l(c) under the Exchange Act, to pay for, any shares of Company Common Stock tendered pursuant to the Offer until the expiration of any applicable waiting period under the HSR Act and Merger Sub may, subject to the terms and conditions of the Merger Agreement, terminate or amend the Offer as to any shares of Company Common Stock not then accepted for payment, or may delay the acceptance for payment of or (subject to such Merger Agreement, rules or regulations) payment for shares of Company Common Stock tendered, if (1) at the expiration of the Offer, the number of shares of Company Common Stock validly tendered and not withdrawn, together with any other shares of Company Common Stock owned by IHK or Merger Sub or their affiliates, shall not constitute at least 50.1% of the outstanding shares of Company Common Stock on a fully diluted basis, (2) IHK shall not have obtained financing sufficient to enable IHK (or cause Merger Sub) to pay the amounts set forth in clauses (a), (b) and (c) of Section 4.21 of the Merger Agreement or (3) at any time on or after the date of the Merger Agreement and prior to the acceptance for payment of shares of Company Common Stock, any of the following events shall have occurred and be continuing: (a) there shall have been any action taken, or any statute, rule, regulation, judgment, administrative interpretation, Order or injunction enacted, promulgated, entered, enforced or deemed applicable to the Offer or the Merger (other than the application of the waiting period provisions of the HSR Act) by any court of competent jurisdiction in the United States or other Governmental Entity, which would (i) restrain, prohibit or make illegal or otherwise prohibit (A) the acceptance for payment of, or payment for or purchase of at least 50.1% of the shares of Company Common Stock or (B) the consummation of the Merger, or (ii) prohibiting IHK or any of its affiliates to exercise full rights of ownership of the shares of Company Common Stock, including without limitation the right to vote any shares of Company Common Stock purchased by them on all matters properly presented to the stockholders of the Company, including without limitation the adoption and approval of this Agreement and the Merger; (b) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States, (ii) the declaration of any banking moratorium or any suspension of payments in respect of banks or any material limitation (whether or not mandatory) on the extension of credit by lending institutions in the United States, (iii) the commencement of a war, material armed hostilities or any other material international or national calamity A-1 involving the United States having a significant adverse effect on the functioning of the financial markets in the United States, or (iv) in the case of any of the foregoing existing at the time of the execution of the Merger Agreement, a material acceleration or worsening thereof; (c) the Company shall have breached or failed to comply with any of its obligations under the Merger Agreement (other than as a result of a breach by IHK or Merger Sub of any of their obligations under the Merger Agreement) and such breach or failure shall continue unremedied for ten (10) business days after the Company has received written notice from IHK or Merger Sub of the occurrence of such breach or failure, except such breaches or failures (i) which, individually and in the aggregate, would not have a Company Material Adverse Effect and (ii) which, individually and in the aggregate, would not materially impair or delay the ability of Merger Sub to consummate the Offer or the ability of IHK, Merger Sub and the Company to effect the Merger; (d) any representation or warranty of the Company contained in the Merger Agreement shall fail to be true and correct as of such expiration or proposed termination of the Offer except for such failures (i) which, individually and in the aggregate, would not have a Company Material Adverse Effect and (ii) which, individually and in the aggregate, would not materially impair or delay the ability of Merger Sub to consummate the Offer or the ability of IHK, Merger Sub and the Company to effect the Merger, provided that IHK shall have notified the Company promptly upon learning of such failure; (e) the Merger Agreement shall have been terminated pursuant to its terms or amended pursuant to its terms to provide for such termination or amendment of the Offer; or (f) the Company's Board of Directors shall have (i) (including by amendment of the Schedule 14D-9) withdrawn or modified in any manner adverse to IHK or Merger Sub its approval or recommendation of the Offer, the Merger or this Agreement or (ii) resolved to do any of the foregoing; which, in the good faith reasonable judgment of IHK and Merger Sub, makes it inadvisable to proceed with acceptance for payment or payment for shares of Company Common Stock. Except as set forth in the Merger Agreement, the foregoing conditions are for the sole benefit of IHK and Merger Sub and may be asserted regardless of the circumstances (including any action or inaction by IHK or Merger Sub other than a breach by IHK or Merger Sub of the Merger Agreement) giving rise to any such condition or waived by IHK or Merger Sub, in whole or in part, at any time or from time to time, in its discretion. The failure of IHK or Merger Sub at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. A-2 ANNEX B TO THE AGREEMENT AND PLAN OF MERGER AGREEMENTS RESPECTING PLANS AND OTHER EMPLOYEE BENEFIT MATTERS 1. (a) For a period of one year immediately following the Closing Date, IHK shall provide or cause the Surviving Corporation to provide all employees of the Company who continue to be employed by IHK or the Surviving Corporation or any of their respective Affiliates as of the Effective Time ("Continuing Employees") with compensation and benefits on terms which are, in the aggregate, not substantially less favorable than those provided to the Continuing Employees immediately prior to the date hereof. (b) IHK further agrees that, for purposes of all employee benefit plans of IHK or the Surviving Corporation or any of their respective Affiliates in which Continuing Employees participate from and after the Effective Time and under which an employee's benefit depends, in whole or in part, on length of service, credit will be given to Continuing Employees for service previously credited with the Company or any Company Subsidiary prior to the Effective Time to the extent that such crediting of service does not result in duplication of benefits. (c) IHK shall cause each employee benefit plan in which Continuing Employees participate from and after the Effective Time to waive (i) any preexisting condition restriction which was waived under the terms of any analogous Company plan prior to the Effective Time and (ii) any waiting period limitation which would otherwise be applicable to a Continuing Employee on or after the Effective Time to the extent the Continuing Employee had satisfied any similar waiting period under an analogous Company plan prior to the Effective Time. IHK further agrees that it shall guarantee all obligations of the Company under any Company Plan. 2. IHK and the Company acknowledge that the consummation of the Offer shall constitute a "Change in Control" for purposes of the Company Stock Option Plan. 3. (a) IHK will consent to the Company's entering into a new or amended employment agreement with William W. Sprague III on the terms agreed to by IHK, Merger Sub and the Company. (b) IHK intends to consent to the Company's entering into new or amended employment agreements as soon as practicable following the date hereof with the Continuing Employees agreed to by IHK and the Company. 4. The Company will cause the following actions with respect to the Company's Benefit Trust Agreement dated March 14, 1996 as amended (the "Benefit Trust Agreement") to occur prior to the execution of this Agreement: B-1 (a) The Company will amend the Benefit Trust Agreement in the following respects: (i) provide for the corpus of the trust to be invested in IHK Common Stock, rather than Company Common Stock; (ii) provide for prepayment of the Note, at the Company's direction, with corpus (cash or IHK Common Stock as directed); (iii) clarify Section 3.2 of the Trust Agreement to ensure that a release of pledged stock is not distributed to participants on release, but held in trust to pay benefits when due; (iv) provide that the Offer and the Merger will not constitute a Proposed Change in Control under the Trust Agreement; (v) provide that the Trustee can only sell IHK Common Stock after giving IHK a right of first refusal; (vi) provide that shares of IHK Common Stock held by the Trust will be voted in proportion to all other outstanding IHK Common Stock; and (vii) provide that the Trustee will tender or exchange of IHK Common Stock held by the Trust as directed by the Company's Board of Directors. (b) The cash received by the Benefit Trust in the Offer and the Merger will be used to repay the existing Note of the Benefit Trust to the Company and to purchase additional shares of IHK Common Stock. B-2 EXHIBIT 6.09 TO THE AGREEMENT AND PLAN OF MERGER FORM OF AFFILIATE LETTER FOR AFFILIATES OF THE COMPANY [DATE] IMPERIAL HOLLY CORPORATION One Imperial Square, Suite 200 Sugar Land, Texas 77487 Ladies and Gentlemen: I have been advised that as of the date of this letter I may be deemed to be an "affiliate" of Savannah Foods & Industries, Inc., a Delaware corporation (the "Company"), as the term "Affiliate" is defined for purposes of paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules And Regulations") of the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the Agreement and Plan of Merger dated as of September , 1997 (the "Merger Agreement") among Imperial Holly Corporation, a Texas corporation ("IHK"), IHK Merger Sub Corporation, a Delaware corporation ("Merger Sub"), and the Company, Merger Sub will be merged with and into the Company (the "Merger"). Capitalized terms used in this letter without definition shall have the meanings assigned to them in the Merger Agreement. As a result of the Merger, I may receive shares of common stock, no par value, of IHK ("IHK Common Stock"). I would receive such IHK Common Stock (the "Shares") in exchange for shares (or upon exercise of options for shares) owned by me of common stock, par value $.25 per share, of the Company ("Company Common Stock"). 1. I represent, warrant and covenant to IHK that in the event I receive any Shares as a result of the Merger: A. I shall not make any sale, transfer or other disposition of the Shares in violation of the Act or the Rules and Regulations. B. I have carefully read this letter and the Merger Agreement and discussed the requirements of such documents and other applicable limitations upon my ability to sell, transfer or otherwise dispose of the Shares, to the extent I felt necessary, with my counsel or counsel for the Company. C. I have been advised that the issuance of the Shares to me pursuant to the Merger has been registered with the Commission under the Act on a Registration Statement on Form 1 S-4. However, I have also been advised that, because at the time the Merger is submitted for a vote of the stockholders of the Company, (a) I may be deemed to be an affiliate of the Company and (b) distribution by me of the IHK Common Stock has not been registered under the Act, I may not sell, transfer or otherwise dispose of the IHK Common Stock issued to me in the Merger unless (i) such sale, transfer or other disposition is made in conformity with the volume and other limitations of Rule 145 promulgated by the Commission under the Act, (ii) such sale, transfer or other disposition has been registered under the Act, the Company shall include the Shares in the Registration Statement and to maintain the effectiveness of the Registration statement for a period of 100 days after the effective date hereof or (iii) in the opinion of counsel reasonably acceptable to IHK, such sale, transfer or other disposition is otherwise exempt from registration under the Act. D. Except as provided in paragraph C, I understand that IHK is under no obligation to register the sale, transfer or other disposition of the Shares by me or on my behalf under the Act or, except as provided in paragraph 2(A) below, to take any other action necessary in order to make compliance with an exemption from such registration available. E. I understand that there will be placed on the certificates for the Shares issued to me, or any substitutions therefor, a legend stating in substance: "THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED , 1997 BETWEEN THE REGISTERED HOLDER HEREOF AND IMPERIAL HOLLY CORPORATION, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF IMPERIAL HOLLY CORPORATION." F. I understand that unless a sale or transfer is made in conformity with the provisions of Rule 145, or pursuant to a registration statement, IHK reserves the right to put the following legend on the certificates issued to my transferee: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933." 2 G. Execution of this letter should not be considered an admission on my part that I am an "affiliate" of the Company as described in the first paragraph of this letter, nor as a waiver of any rights I may have to object to any claim that I am such an affiliate on or after the date of this letter. 2. By IHK's acceptance of this letter, IHK hereby agrees with me as follows: A. For so long as and to the extent necessary to permit me to sell the Shares pursuant to Rule 145 and, to the extent applicable, Rule 144 under the Act, IHK shall (a) use its reasonable efforts to (i) file, on a timely basis, all reports and data required to be filed with the Commission by it pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and (ii) furnish to me upon request a written statement as to whether IHK has complied with such reporting requirements during the 12 months preceding any proposed sale of the IHK Common Stock by me under Rule 145, and ( b) otherwise use its reasonable efforts to permit such sales pursuant to Rule 145 and Rule 144. IHK hereby represents to me that it has filed all reports required to be filed with the Commission under Section 13 of the 1934 Act during the preceding 12 months. B. It is understood and agreed that certificates with the legends set forth in paragraphs E and F above will be substituted by delivery of certificates without such legend if (i) one year shall have elapsed from the date the undersigned acquired the IHK Common Stock received in the Merger and the provisions of Rule 145(d)(2) are then available to the undersigned, (ii) two years shall have elapsed from the date the undersigned acquired the IHK Common Stock received in the Merger and the provisions of Rule 145(d)(3) are then applicable to the undersigned, or (iii) IHK has received either an opinion of counsel, which opinion and counsel shall be reasonably satisfactory to IHK, or a "no action" letter obtained by the undersigned from the staff of the Commission, to the effect that the restrictions imposed by Rule 145 under the Act no longer apply to the undersigned. Very truly yours, ------------------------------------- Name: Agreed and accepted this ____ day of [_______________], 1997, by IMPERIAL HOLLY CORPORATION By: -------------------------------- Name: Title: 3 EX-99.(C)(2) 10 STOCKHOLDERS AGREEMENT EXHIBIT 99(c)(2) STOCKHOLDERS AGREEMENT dated as of September , 1997, among Imperial Holly Corporation, a Texas corporation ("IHK"), IHK Merger Sub Corporation, a Delaware corporation and wholly owned subsidiary of IHK ("Merger Sub"), and the other parties identified on Schedule A hereto (each, a "Stockholder"). WHEREAS, each Stockholder desires that Savannah Foods & Industries, Inc., a Delaware corporation (the "Company"), IHK and Merger Sub enter into an Agreement and Plan of Merger dated as of the date hereof (as the same may be amended or supplemented, the "Merger Agreement") with respect to the merger of Merger Sub with and into the Company (the "Merger"); and WHEREAS, such Stockholder is executing this Agreement as an inducement to IHK and Merger Sub to enter into and execute the Merger Agreement. NOW, THEREFORE, in consideration of the execution and delivery by IHK and Merger Sub of the Merger Agreement and the mutual covenants, conditions and agreements contained herein and therein, the parties agree as follows: SECTION 1. Representations and Warranties. Each Stockholder severally, and not jointly, represents and warrants to IHK and Merger Sub as follows: (a) Such Stockholder is the record or beneficial owner of the number of shares of Common Stock, par value $0.25 per share, of the Company (the "Company Common Stock") and holds options for shares of Company Common Stock, each as set forth opposite such Stockholders' name in Schedule A hereto (as may be adjusted from time to time pursuant to Section 4, such Stockholder's "Shares"). Except for such Stockholder's Shares, such Stockholder is not the record or beneficial owner of any shares of Company Common Stock. Any of such Shares which are described on Schedule A as option shares shall be deemed "Option Shares" for the purposes of this Agreement. All other shares shall be deemed "Owned Shares." Any Option Shares which are exercised prior to the termination of this Agreement shall be deemed to be "Owned Shares." (b) This Agreement has been duly authorized, executed and delivered by such Stockholder and constitutes the legal, valid and binding obligation of such Stockholder, enforceable against such Stockholder in accordance with its terms. Neither the execution and delivery of this Agreement nor the consummation by such Stockholder of the transactions contemplated hereby will result in a violation of, or a default under, or conflict with, any contract, trust, commitment, agreement, understanding, arrangement or restriction of any kind to which such Stockholder is a party or bound or to which such Stockholder's Shares are subject. The consummation by such Stockholder of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under, any provision of any judgment, order, decree, statute, law, rule or regulation applicable to such Stockholder or such Stockholder's Shares. (c) Such Stockholder's Owned Shares and the certificates representing such Owned Shares are now and at all times during the term hereof will be held by such Stockholder, or by a nominee or custodian for the benefit of such Stockholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any such encumbrances arising hereunder. (d) Such Stockholder understands and acknowledges that IHK is entering into, and causing Merger Sub to enter into, the Merger Agreement in reliance upon such Stockholder's execution and delivery of this Agreement. SECTION 2. Purchase and Sale of Shares. So long as the Per Share Amount in the Offer is not less than $20.25 in cash (net to the seller), each Stockholder hereby severally agrees that he shall tender his Owned Shares into the Offer prior to the expiration of the Offer and that it shall not withdraw any Shares so tendered (it being understood that the obligation contained in this sentence is unconditional). SECTION 3. Covenants. Each Stockholder severally, and not jointly, agrees with, and covenants to, IHK and Merger Sub as follows: such Stockholder shall not, except as contemplated by the terms of this Agreement, during the term of this Agreement, (i) transfer (which term shall include, without limitation, for the purposes of this Agreement, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of such Stockholder's Shares or any interest therein, (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of such Shares or any interest therein, (iii) grant any proxy, power-of- attorney or other authorization or consent in or with respect to such Shares, (iv) deposit such Shares into a voting trust or enter into a voting agreement or arrangement with respect to such Shares or (v) take any action that would in any way restrict, limit or interfere with the performance of its obligations hereunder or the transactions contemplated hereby; provided that each Stockholder shall be entitled to transfer all or any portion of such Shareholder's Shares to any person or entity which agrees in writing to be bound by the provisions of this Agreement. SECTION 4. Certain Events. Each Stockholder agrees that this Agreement and the obligations hereunder shall attach to such Stockholder's Shares and shall be binding upon any person or entity to which legal or beneficial ownership of such Shares shall pass, whether by operation of law or otherwise, including without limitation such Stockholder's heirs, guardians, administrators or successors. In the event of any stock split, stock dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Company Common Stock, or the acquisition of additional shares of Company Common Stock or other securities or rights of the Company by any Stockholder, the number of Owned Shares and Option Shares listed on Schedule A -2- beside the name of such Stockholder shall be adjusted appropriately and this Agreement and the obligations hereunder shall attach to any additional shares of Company Common Stock or other securities or rights of the Company issued to or acquired by such Stockholder. SECTION 5. Transfer. Each Stockholder agrees with and covenants to IHK that such Stockholder shall not request that the Company register the transfer (booked as entry or otherwise) of any certificated or uncertificated interest representing any of the securities of the Company, unless such transfer is made in compliance with this Agreement. SECTION 6. Stockholder Capacity. No person executing this Agreement who is or becomes during the term hereof a director or officer of the Company makes any agreement or understanding herein in his or her capacity as such director or officer. Each Stockholder signs solely in his or her capacity as the record holder and beneficial owner of such Stockholder's Shares and nothing herein shall limit or affect any actions taken by a Stockholder in its capacity as an officer or director for the Company to the extent specifically permitted by the Merger Agreement. SECTION 7. Further Assurances. Each Stockholder shall, upon request of IHK or Merger Sub, execute and deliver any additional documents and take such further actions as may reasonably be deemed by IHK or Merger Sub to be necessary or desirable to carry out the provisions hereof. SECTION 8. Termination. This Agreement, and all rights and obligations of the parties hereunder, shall terminate upon the earlier of (a) the date upon which the Merger Agreement is terminated by the Company, IHK or Merger Sub for any reason in accordance with its terms or (b) the date that IHK or Merger Sub shall have purchased and paid for the Shares of each Stockholder pursuant to the Offer. SECTION 9. Miscellaneous. (a) Capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings assigned to such terms in the Merger Agreement. (b) All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or such other address for a party as shall be specified by like notice): (i) if to IHK or Merger Sub, to the address set forth in Section 9.02 of the Merger Agreement; and (ii) if to a Stockholder, to the address set forth on Schedule A hereto, or such other address as may be specified in writing by such Stockholder. (c) The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. -3- (d) This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement, and shall become effective (even without the signature of any other Stockholder) as to any Stockholder when one or more counterparts have been signed by each of IHK, Merger Sub and such Stockholder and delivered to IHK and such Stockholder. (e) This Agreement (including the documents and instruments referred to herein) constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. (f) This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts or laws thereof. (g) Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise, by any of the parties without the prior written consent of the other parties, except by laws of descent. Any assignment in violation of the foregoing shall be void. (h) If any term, provision, covenant or restriction herein, or the application thereof to any circumstances, shall, to any extent, be held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions herein and the application thereof to any other circumstances, shall remain in full force and effect, shall not in any way be affected, impaired or invalidated, and shall be enforced to the fullest extent permitted by law. (i) Each Stockholder agrees that irreparable damage would occur and that IHK and Merger Sub would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that IHK and Merger Sub shall be entitled to an injunction or injunctions to prevent breaches by any Stockholder of this Agreement and to enforce specifically the terms and provisions of this Agreement. (j) No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by such party. IN WITNESS WHEREOF, IHK, Merger Sub and the Stockholders have caused this Agreement to be duly executed and delivered as of the date first written above. -4- IMPERIAL HOLLY CORPORATION By:_________________________________ Name: Title: IHK MERGER SUB CORPORATION By:_________________________________ Name: Title: -5- SCHEDULE A NUMBER OF SHARES OF NUMBER OF SHARES OF COMMON STOCK ISSUABLE STOCKHOLDER (INCLUDING ADDRESS) COMMON STOCK OWNED UPON EXERCISE OF OPTIONS - ------------------------------- ------------------- ------------------------ W. Waldo Bradley John D. Carswell R. Eugene Cartledge Dale C. Critz Lee B. Durham, Jr. F. Sprague Exley Arthur M. Gignilliat, Jr. Robert L. Harrison James M. Reed William W. Sprague III Hugh M. Tarbutton Arnold Tenenbaum D. Richard Donnelly James M. Kelley David H. Roche Gregory H. Smith -6- EX-99.(C)(3) 11 FORM OF AGREEMENT AND IRREVOCABLE PROXY EXHIBIT 99(c)(3) AGREEMENT AND IRREVOCABLE PROXY This Agreement and Irrevocable Proxy, dated as of September , 1997 (the "Agreement"), is by and between Savannah Foods & Industries, Inc., a Delaware corporation (the "Company"), and the party identified as the "Stockholder" on the signature page hereof (the "Stockholder"). R E C I T A L S: WHEREAS, the Company, Imperial Holly Corporation, a Texas corporation ("IHK"), and IHK Merger Sub Corporation, a Delaware corporation ("Merger Sub"), propose to enter into an Agreement of Merger, dated as of the date hereof (the "Merger Agreement"), providing, among other things, for the merger of the Company and Merger Sub in accordance with the terms and provisions of, and subject to the conditions set forth in, the Merger Agreement (the "Merger"); and WHEREAS, the Stockholder is the owner, beneficially and of record, of the number of shares of Company Common Stock (the "Shares") identified on the signature page of this Agreement; and WHEREAS, the Stockholder has agreed to vote the Shares in favor of the issuance of the Stock Consideration upon consummation of the Merger at IHK's Shareholders' Meeting; NOW, THEREFORE, to induce the Company to enter into the Merger Agreement and in consideration of the aforesaid and the representations, warranties, covenants and agreements set forth herein and in the Merger Agreement, including the benefits that the parties hereto expect to derive from the Merger, the receipt and sufficiency of all of which are hereby acknowledged by the parties, the parties hereto agree as follows: 1. Revocation of Prior Proxies. The Stockholder hereby revokes all previous proxies granted with respect to any of the Shares owned by the Stockholder that would conflict with the terms of the Proxy granted hereby. 2. Grant of Irrevocable Proxy. The Stockholder hereby irrevocably constitutes and appoints the Company and R. Eugene Cartledge, Chairman of the Board of the Company, and William W. Sprague III, President and Chief Executive Officer of the Company, in their respective capacities as officers of the Company, and any individual, who shall hereafter succeed to the office of Chairman of the Board or President and Chief Executive Officer, respectively, of the Company, and each of them individually, as its true and lawful proxy and attorney-in-fact, with full power of substitution, for and in the name, place and stead of the Stockholder, to call and attend any and all meetings of IHK's stockholders, including IHK's Shareholders' Meeting, at which the issuance of the Stock Consideration by IHK upon consummation of the Merger is to be considered and voted upon by IHK's stockholders, and any adjournments thereof, to execute any and all written consents of stockholders of IHK and to vote all of the Shares and any and all shares of any other class of capital stock of IHK presently or at any future time owned beneficially or of record by the Stockholders, including any and all securities having voting rights issued or issuable in respect thereof, which the Stockholder is entitled to vote other than as set forth on Exhibit B hereto (all of the foregoing being collectively referred to as the "Subject Stock"), and to represent and otherwise act as the Stockholder could act, in the same manner and with the same effect as if the Stockholder were personally present, at any such annual, special or other meeting of the stockholders of the Company (including the IHK's Shareholders' Meeting), and at any adjournment thereof (a "Meeting"), or pursuant to any written consent in lieu of meeting or otherwise; provided, however, that any such vote or consent in lieu thereof or any other action so taken shall be solely for the purposes of voting in favor of issuance of the Stock Consideration upon consummation of the Merger and any transactions contemplated thereby. Such attorneys and proxies are hereby authorized to vote the Subject Stock in accordance with the terms of the Proxy contemplated hereby. 3. Vote in Favor of Stock Consideration. If the Company is unable or declines to exercise the power and authority granted by the Proxy for any reason, the Stockholder covenants and agrees to vote all the Subject Stock in favor of approval of the issuance of the Stock Consideration upon consummation of the Merger at any Meeting (including the IHK Shareholders' Meeting) and, upon request of the Company, to provide the Stockholder's written consent thereto. 4. No Action Without the Company's Consent. The Stockholder hereby covenants and agrees that it will not vote or take any action by written consent of stockholders in lieu of meeting on any matter that is subject to the Proxy without the Company's prior written consent. 5. Negative Covenants of the Stockholder. Except to the extent contemplated herein or in the Merger Agreement, the Stockholder hereby covenants and agrees that the Stockholder will not, and will not agree to, directly or indirectly, (a) sell, transfer, assign, cause to be redeemed or otherwise dispose of any of the Subject Stock or enter into any contract, option or other agreement or understanding with respect to the sale, transfer, assignment, redemption or other disposition of any Subject Stock; or (b) grant any proxy, power-of-attorney or other authorization or interest in or with respect to such Subject Stock pertaining or relating to the Merger Agreement, the Merger, the issuance of the Stock Consideration upon consummation of the Merger, or any of the transactions contemplated thereby; or (c) deposit such Subject Stock into a voting trust or enter into a voting agreement or arrangement with respect to such Subject Stock, unless and until, in the case of (a), (b) or (c) above, the Stockholder shall have taken all actions (including, without limitation, the endorsement of a legend on the certificates evidencing such Subject Stock) reasonably necessary to ensure that such Subject Stock shall at all times be subject to all the rights, -2- powers and privileges granted or conferred, and subject to all the restrictions, covenants and limitations imposed, by this Agreement and shall have caused any transferee of any of the Subject Stock to execute and deliver to the Company, an Agreement and Irrevocable Proxy, in substantially the form of this Agreement with respect to the Subject Stock. Nothing contained herein shall be construed in any way as affecting the right of the Stockholder to grant a security interest, by way of pledge, by hypothecation or otherwise, in the Subject Stock in connection with bona fide credit arrangements or as requiring the lender in such bona fide credit arrangement to be bound by the terms of this Agreement, provided that the Stockholder shall promptly notify the Company of any such grant. 6. Negative Covenants of the Company. The Company covenants and agrees that it will not (a) amend in any material respect the Merger Agreement, unless it obtains the Stockholder's prior written consent thereof, or (b) modify the terms of any other Agreement and Irrevocable Proxy between the Company and any other stockholder of IHK, dated as of even date herewith, unless the Company shall have offered to modify the terms of this Agreement and Irrevocable Proxy in the same manner and the Stockholder has elected not to accept such offer. Provided that the Company shall have notified the Stockholder of any such amendment or modification, the Company and the Stockholder hereby agree that the sole remedy of the Stockholder for a breach by the Company of the foregoing covenant shall be to elect to terminate this Agreement and Irrevocable Proxy by notice to the Company. 7. Stockholder's Representations and Warranties. The Stockholder represents and warrants to the Company that (a) the Stockholder has duly authorized, executed and delivered this Agreement and this Agreement constitutes a valid and binding agreement, enforceable in accordance with its terms and neither the execution and delivery of this Agreement nor the consummation by the Stockholder of the transactions contemplated hereby will constitute a violation of, a default under, or conflict with any contract, commitment, agreement, understanding, arrangement or restriction of any kind to which the Stockholder is a party or by which the Stockholder is bound; or (b) consummation by the Stockholder of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under, any provision of law other than filing on Form 13D that may be required under the Securities Exchange Act of 1934, as amended; (c) except to the extent contemplated herein and except as described in the final sentence of this Section 7, the Subject Stock and the certificates representing same are now and at all times during the term of this Agreement will be held by the Stockholder, or by a nominee or custodian for the benefit of the Stockholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreement or any other encumbrances whatsoever ("Encumbrances") with respect to the ownership or voting of the Subject Stock or otherwise, other than Encumbrances created by or arising pursuant to this Agreement; and there are no outstanding options, warrants or rights to purchase or acquire, or proxies, powers-of- attorney, voting agreements, trust agreements or other agreements relating to, the Subject Stock other than this Agreement; (d) except as set forth on Exhibit B, such Subject Stock constitutes all of the securities of IHK owned beneficially or of record by the Stockholder on the date hereof; and -3- (e) the Stockholder has the present power and right to vote all of the Subject Stock as contemplated herein. The Stockholder hereby advises the Company that the Shares are pledged as security under that certain Agreement [describe if applicable], and that no default, event of default, or event of acceleration has occurred thereunder. 8. Certain Defined Terms. Unless otherwise expressly provided herein, all capitalized terms used herein without definition shall have the meanings assigned to them in the Merger Agreement. 9. Choice of Law. The terms and provisions of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to the provisions thereof relating to conflicts of law. 10. Binding Effect; Assignability. The terms and provisions of this Agreement shall be binding upon, inure to the benefit of, and be enforceable by the successors and permitted assigns of the parties hereto. This Agreement and the rights hereunder may not be assigned or transferred by the Company, except with the prior written consent of the Stockholder. 11. Term. This Agreement shall terminate at the earlier of (i) the Effective Time, or (ii) the termination of the Merger Agreement in accordance with its terms, or (iii) upon written notice of termination of this Agreement given by the Company to the Stockholder expressly referring to this paragraph, or (iv) the revocation by the Company of the recommendation to its stockholders to approve the Merger, the Merger Agreement, and the transactions contemplated thereby or (v) termination of this Agreement in accordance with Section 6 hereof or (vi) May 31, 1998. 12. Irrevocable Proxy Coupled with an Interest. The Stockholder acknowledges that the Company will enter into the Merger Agreement in reliance upon this Agreement, including the Proxy, and that the Proxy is granted in consideration for the execution and delivery of the Merger Agreement by the Company. THE STOCKHOLDER AGREES THAT THE PROXY AND ALL OTHER POWER AND AUTHORITY INTENDED TO BE CONFERRED HEREBY IS COUPLED WITH AN INTEREST SUFFICIENT IN LAW TO SUPPORT AN IRREVOCABLE POWER AND, EXCEPT AS PROVIDED IN SECTION 11 ABOVE, SHALL NOT BE TERMINATED BY ANY ACT OF THE STOCKHOLDER BY LACK OF APPROPRIATE POWER OR AUTHORITY OR BY THE OCCURRENCE OF ANY OTHER EVENT OR EVENTS. 13. Specific Performance. The parties acknowledge and agree that performance of their respective obligations hereunder will confer a unique benefit on the other and that a failure of performance will result in irreparable harm to the other and will not be compensable by money damages. The parties therefore agree that this Agreement, including the Proxy, shall be specifically enforceable and that specific enforcement and injunctive -4- relief shall be a remedy properly available to the Company and the Stockholder for any breach of any agreement, covenant or representation of the other hereunder. 14. Further Assurance. The Stockholder will, upon request, execute and deliver any additional documents and take such further actions as may reasonably be deemed by the Company or its counsel to be necessary or desirable to carry out the provisions hereof. 15. Severability. If any term, provision, covenant or restriction of this Agreement, or the applicable thereof to any circumstance shall, to any extent, be held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement or the application thereof to any other circumstance, shall remain in full force and effect, shall not in any way be affected, impaired or invalidated and shall be enforced to the fullest extent permitted by law. 16. Counterparts. This Agreement and Irrevocable proxy may be executed in counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same document. 17. Notice. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or such other address for a party as shall be specified by like notice): (i) if to the Company, to the address set forth in Section 9.02 of the Merger Agreement; and (ii) if to a Stockholder, to the address set forth on the signature page hereof, or such other address as may be specified in writing by such Stockholder. -5- IN WITNESS WHEREOF, the Company and the Stockholder have duly executed this Agreement or caused this Agreement to be duly executed as of the date first set forth hereinabove. THE STOCKHOLDER: -6- -----END PRIVACY-ENHANCED MESSAGE-----