IMPERIAL HOLLY CORP, S-4, 1997-11-18

IMPERIAL HOLLY CORP
S-4, 1997-11-18
SUGAR & CONFECTIONERY PRODUCTS

Previous: RBB FUND INC, 24F-2NT, 1997-11-18

Next: CSA INCOME FUND LIMITED PARTNERSHIP III, 10-Q, 1997-11-18

<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 18, 1997

REGISTRATION NO.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
IMPERIAL HOLLY CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

<TABLE>
<S> <C> <C>
TEXAS 2062 74-0704500
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
ONE IMPERIAL SQUARE, SUITE 200 WILLIAM F. SCHWER
8016 HIGHWAY 90-A MANAGING DIRECTOR AND GENERAL COUNSEL
SUGAR LAND, TEXAS 77478 ONE IMPERIAL SQUARE, SUITE 200
(281) 491-9181 8016 HIGHWAY 90-A
(Address, Including Zip Code, and Telephone SUGAR LAND, TEXAS 77478
Number, Including Area Code, of Registrant's (281) 491-9181
Principal Executive Offices) (Name, Address, Including Zip Code and
Telephone Number, Including Area
Code, of Agent For Service)
</TABLE>

---------------------
COPIES TO:

<TABLE>
<S> <C>
ROBERT V. JEWELL, ESQ. STEPHEN M BANKER, ESQ.
ANDREWS & KURTH L.L.P. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
600 TRAVIS, SUITE 4200 919 THIRD AVENUE
HOUSTON, TEXAS 77002 NEW YORK, NEW YORK 10022
(713) 220-4200 (212) 735-3000
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective and all other
conditions to the merger (the "Merger") of Savannah Foods & Industries, Inc.
("Savannah Foods") and a wholly owned subsidiary of Imperial Holly Corporation
("Imperial Holly") pursuant to the Merger Agreement described herein have been
satisfied or waived.

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
=============================================================================================================
PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) OFFERING PRICE(2) REGISTRATION FEE(3)
- -------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
Common Stock, no par value.................... 14,508,420 $104,142,061 $31,559
=============================================================================================================
</TABLE>

(1) Represents the maximum number of shares of common stock, no par value
("Imperial Common Stock"), of Imperial Holly. Includes 13,176,192 shares of
Imperial Common Stock to be issued to stockholders of Savannah Foods upon
consummation of the Merger (the "Merger Shares"), 377,359 shares to be
issued to the H. Kempner Trust Association in connection with the H. Kempner
Trust Financing (as defined herein) (the "H. Kempner Shares") and 954,869
shares of Imperial Common Stock to be issued to the Benefit Trust (as
defined herein) immediately following consummation of the Merger (the
"Benefit Trust Shares").

(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act of 1993, as amended (the
"Securities Act"), and includes $88,369,953 with respect to Merger Shares
($495,733,881 less cash consideration of $407,363,928), $5,000,000 with
respect to H. Kempner Shares and $10,772,108 with respect to Benefit Trust
Shares. The maximum offering price with respect to Merger Shares is computed
pursuant to Rule 457(f) under the Securities Act using $17.25, the average
high and low sales price of the common stock, par value $0.25 per share
("Savannah Common Stock"), of Savannah Foods on November 17, 1997 as
reported on the New York Stock Exchange less the cash consideration paid in
the Offer (as defined herein) and the Merger. The registration fee with
respect to the H. Kempner Shares is computed based on an offering price of
$13.25 per share. The registration fee with respect to Benefit Trust Shares
is computed pursuant to Rule 457(c) under the Securities Act using
$11.28125, the average high and low sales price of Imperial Common Stock on
November 17, 1997 as reported on the American Stock Exchange.

(3) Pursuant to Rule 457(b), with respect to Merger Shares, the required fee of
$26,779 is offset entirely by an aggregate fee of $116,390 previously paid
at the times of the filing of the Schedule 14D-1 and the Schedule 14A and
preliminary proxy materials in connection with this transaction. An
aggregate filing fee of $4,780 relating to the H. Kempner Shares and the
Benefit Trust Shares has been submitted in connection herewith.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2

SAVANNAH FOODS & INDUSTRIES, INC.
2 EAST BRYAN STREET
SAVANNAH, GEORGIA 31401

November 20, 1997

Dear Stockholders:

A Special Meeting of Stockholders (the "Savannah Special Meeting") of
Savannah Foods & Industries, Inc. ("Savannah Foods") will be held on December
19, 1997 at 10:00 a.m., local time, at the Hyatt Regency Hotel, 2 West Bay
Street, Savannah, Georgia. At this meeting, stockholders of Savannah Foods will
be asked to consider and vote upon a proposal to adopt and approve the Agreement
and Plan of Merger (the "Merger Agreement"), dated as of September 12, 1997,
among Imperial Holly Corporation ("Imperial Holly"), IHK Merger Sub Corporation,
a wholly owned subsidiary of Imperial Holly ("IHK Sub"), and Savannah Foods and
the merger (the "Merger") of IHK Sub with and into Savannah Foods, with Savannah
Foods surviving and continuing as a wholly owned subsidiary of Imperial Holly.

The Merger will constitute the second and final step in the acquisition of
Savannah Foods by Imperial Holly. The first step was a tender offer (the
"Offer") for 50.1% of the outstanding shares of common stock, par value $0.25
per share ("Savannah Common Stock"), of Savannah Foods at a price of $20.25 net
to each tendering stockholder in cash, which IHK Sub successfully completed on
October 16, 1997. Upon consummation of the Merger, each outstanding share of
Savannah Common Stock (other than shares of Savannah Common Stock owned by
Imperial Holly and its affiliates, which include shares purchased in the Offer)
will be converted into the right to receive, subject to stockholder elections
and proration, either (i) $20.25 of common stock, no par value ("Imperial Common
Stock"), of Imperial Holly, subject to a collar of $13.25 to $17.25 per share of
Imperial Common Stock, or (ii) $20.25 in cash.

In the Merger, 30% of the outstanding shares of Savannah Common Stock will
be converted into the right to receive Imperial Common Stock, and 19.9% of the
outstanding shares of Savannah Common Stock will be converted into the right to
receive $20.25 in cash. The remaining 50.1% of the outstanding shares of
Savannah Common Stock, which were purchased by IHK Sub in the Offer, will be
cancelled. The shares of Imperial Common Stock issued in the Merger will be
listed on the American Stock Exchange.

One feature of the Merger permits Savannah Foods stockholders to elect,
subject to proration, the number of shares of Savannah Common Stock they wish to
have converted into cash in the Merger at $20.25 per share by completing a Cash
Election Form. The actual cash consideration and the number of shares of
Imperial Common Stock you will receive will depend on: (i) whether you make an
affirmative election (a "Cash Election") to receive cash, (ii) how many Cash
Elections are made by other Savannah Foods stockholders and (iii) the
application of a proration procedure, as explained in detail in the Joint Proxy
Statement/Prospectus accompanying this letter. AS A RESULT OF POSSIBLE
PRORATION, (A) IF YOU DO NOT MAKE A CASH ELECTION, YOU MAY NEVERTHELESS RECEIVE
SOME CASH AND (B) IF YOU MAKE A CASH ELECTION, YOU MAY NEVERTHELESS RECEIVE SOME
SHARES OF IMPERIAL COMMON STOCK.

The Board of Directors of Savannah Foods has unanimously approved the
Merger Agreement, the Merger and the related transactions described in the
attached Joint Proxy Statement/Prospectus and has determined that these
transactions are fair to and in the best interests of Savannah Foods and its
stockholders. In addition, the Board of Directors of Savannah Foods has received
an opinion of Donaldson, Lufkin & Jenrette Securities Corporation, its financial
advisor, which states that the consideration to be received by the Savannah
Foods stockholders pursuant to the Merger Agreement is fair to the Savannah
Foods stockholders from a financial point of view. THE BOARD OF DIRECTORS OF
SAVANNAH FOODS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF SAVANNAH FOODS
VOTE IN FAVOR OF THE MERGER AGREEMENT AND THE MERGER.

IHK SUB OWNS A MAJORITY OF THE OUTSTANDING SHARES OF SAVANNAH COMMON STOCK
AS A RESULT OF THE OFFER AND HAS AGREED TO VOTE SUCH SHARES IN FAVOR OF THE
MERGER AGREEMENT AND THE MERGER. ACCORDINGLY, THE APPROVAL OF THE MERGER
AGREEMENT AND THE MERGER AT THE SAVANNAH SPECIAL MEETING IS ASSURED.
<PAGE> 3

In the material accompanying this letter, you will find a Notice of Special
Meeting of Stockholders, the Joint Proxy Statement/Prospectus, a Cash Election
Form and a Proxy Card to allow you to vote your shares of Savannah Common Stock
at the Savannah Special Meeting. I urge you to read carefully the Joint Proxy
Statement/Prospectus which more fully describes the Merger Agreement and the
Merger and includes information about Savannah Foods and Imperial Holly. A copy
of the Merger Agreement is attached as Annex A to the Joint Proxy
Statement/Prospectus.

Whether or not you plan to attend the Savannah Special Meeting, please
complete, sign, date and return the Proxy Card in the postage prepaid envelope
enclosed herewith. If you attend the Savannah Special Meeting, you may vote in
person if you wish, even if you have previously returned the Proxy Card.

Sincerely,

William W. Sprague III
President and Chief Executive
Officer
<PAGE> 4

SAVANNAH FOODS & INDUSTRIES, INC.
2 EAST BRYAN STREET
SAVANNAH, GEORGIA 31401
------------------------

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 19, 1997
------------------------

NOTICE IS HEREBY GIVEN that a Special Meeting (the "Savannah Special
Meeting") of Stockholders of Savannah Foods & Industries, Inc., a Delaware
corporation ("Savannah Foods"), will be held on December 19, 1997 at 10:00 a.m.,
local time, at the Hyatt Regency Hotel, 2 West Bay Street, Savannah, Georgia to
consider and vote upon the following matters more fully described in the
accompanying Joint Proxy Statement/Prospectus:

1. The approval and adoption of the Agreement and Plan of Merger (the
"Merger Agreement"), dated as of September 12, 1997, among Imperial Holly
Corporation ("Imperial Holly"), IHK Merger Sub Corporation, a wholly owned
subsidiary of Imperial Holly ("IHK Sub"), and Savannah Foods and of the merger
(the "Merger") of IHK Sub with and into Savannah Foods, with Savannah Foods as
the surviving corporation, as contemplated by the Merger Agreement. The Merger
Agreement provides that, among other things, Imperial Holly would conduct a
tender offer (the "Offer") for 50.1% of the outstanding shares of Savannah Foods
common stock, par value $0.25 per share (the "Savannah Common Stock"), at a
price of $20.25 per share net to each tendering stockholder in cash. On October
16, 1997, IHK Sub successfully completed the Offer. Under the terms of the
Merger Agreement, each outstanding share of Savannah Common Stock (other than
shares of Savannah Common Stock owned by Imperial Holly and its affiliates,
which include shares purchased in the Offer) will be converted into the right to
receive, subject to stockholder elections and proration, either (i) $20.25 of
Imperial Holly's common stock, no par value ("Imperial Common Stock"), subject
to a collar of $13.25 to $17.25 per share of Imperial Common Stock, or (ii)
$20.25 in cash. In the Merger, 30% of the outstanding shares of Savannah Common
Stock will be converted into the right to receive Imperial Common Stock, and the
19.9% of the outstanding shares of Savannah Common Stock will be converted into
the right to receive $20.25 in cash. The remaining 50.1% of the outstanding
shares of Savannah Common Stock, which were purchased by IHK Sub in the Offer,
will be cancelled.

2. Such other business as may properly come before the Savannah Special
Meeting or any adjournment or postponement thereof.

The Board of Directors of Savannah Foods has fixed the close of business on
November 17, 1997 as the record date for the determination of the holders of
shares of Savannah Common Stock entitled to notice of, and to vote at, the
Savannah Special Meeting or any adjournment or postponement thereof. Your
attention is directed to the accompanying Joint Proxy Statement/Prospectus.

THE BOARD OF DIRECTORS OF SAVANNAH FOODS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS OF SAVANNAH FOODS VOTE IN FAVOR OF THE MERGER AGREEMENT AND THE
MERGER.

Each stockholder has the right to dissent from the Merger and demand
payment of the fair value of his shares of Savannah Common Stock. The right of
any stockholder to receive such payment is contingent upon strict compliance
with the requirements of Section 262 of the Delaware General Corporation Law.
For a more complete description of dissenters' rights, see "Stockholders' Rights
of Appraisal" in the accompanying Joint Proxy Statement/Prospectus.

AS A RESULT OF THE OFFER, IHK SUB OWNS A MAJORITY OF THE OUTSTANDING SHARES
OF SAVANNAH COMMON STOCK AND HAS AGREED TO VOTE SUCH SHARES IN FAVOR OF THE
MERGER AGREEMENT AND THE MERGER. ACCORDINGLY, THE APPROVAL OF THE MERGER
AGREEMENT AND THE MERGER IS ASSURED.

By the order of the Board of
Directors,

John M. Tatum
Secretary

Savannah, Georgia
November 20, 1997
<PAGE> 5

IMPERIAL HOLLY CORPORATION
ONE IMPERIAL SQUARE, SUITE 200
8016 HIGHWAY 90-A
SUGAR LAND, TEXAS 77478

November 20, 1997

Dear Stockholders:

A Special Meeting of Stockholders (the "Imperial Special Meeting") of
Imperial Holly Corporation ("Imperial Holly") will be held on December 19, 1997
at 9:00 a.m., local time, at the Sweetwater Country Club, 4400 Palm Royale
Boulevard, Sugar Land, Texas. At this meeting, stockholders of Imperial Holly
will be asked to consider and vote upon a proposal to issue shares of Imperial
Holly's common stock, no par value ("Imperial Common Stock"), to stockholders of
Savannah Foods & Industries, Inc. ("Savannah Foods") in connection with the
acquisition of Savannah Foods by Imperial Holly by means of a merger (the
"Merger") of IHK Merger Sub Corporation, a wholly owned subsidiary of Imperial
Holly ("IHK Sub"), with and into Savannah Foods.

The Merger will be effected pursuant to an Agreement and Plan of Merger,
dated as of September 12, 1997, among Imperial Holly, IHK Sub and Savannah Foods
(the "Merger Agreement"). The Merger will constitute the second and final step
in the acquisition of Savannah Foods by Imperial Holly. The first step was a
tender offer (the "Offer") for 50.1% of the outstanding shares of common stock,
par value $0.25 ("Savannah Common Stock"), of Savannah Foods at a price of
$20.25 net to each tendering stockholder in cash, which IHK Sub successfully
completed on October 16, 1997. Under the terms of the Merger Agreement, IHK Sub
will be merged with and into Savannah Foods, with Savannah Foods surviving and
continuing as a wholly owned subsidiary of Imperial Holly. Upon consummation of
the Merger, each outstanding share of Savannah Common Stock (other than shares
of Savannah Common Stock owned by Imperial Holly and its affiliates, which
include shares purchased in the Offer) will be converted into the right to
receive, subject to stockholder elections and proration, either (i) $20.25 of
Imperial Common Stock, subject to a collar of $13.25 to $17.25 per share of
Imperial Common Stock, or (ii) $20.25.

The Board of Directors of Imperial Holly has unanimously approved the
issuance of Imperial Common Stock to the Savannah Foods stockholders in the
Merger and has determined that such issuance is fair to and in the best interest
of Imperial Holly. In addition, the Board of Directors of Imperial Holly has
received an opinion of Lehman Brothers Inc., its financial advisor, which states
that the consideration to be paid by Imperial Holly pursuant to the Merger
Agreement is fair to Imperial Holly from a financial point of view. THE BOARD OF
DIRECTORS OF IMPERIAL HOLLY UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF
IMPERIAL HOLLY VOTE IN FAVOR OF THE ISSUANCE OF SHARES OF IMPERIAL COMMON STOCK
IN THE MERGER.

IMPERIAL HOLLY STOCKHOLDERS HOLDING 66.3% OF THE OUTSTANDING SHARES OF
IMPERIAL COMMON STOCK HAVE GRANTED SAVANNAH FOODS AND R. EUGENE CARTLEDGE, A
DIRECTOR OF SAVANNAH FOODS, AND WILLIAM W. SPRAGUE III, THE PRESIDENT OF
SAVANNAH FOODS, PROXIES TO VOTE SUCH SHARES IN FAVOR OF THE ISSUANCE OF IMPERIAL
COMMON STOCK TO STOCKHOLDERS OF SAVANNAH FOODS IN THE MERGER. ACCORDINGLY, THE
APPROVAL AND ADOPTION OF SUCH PROPOSAL IS ASSURED.
<PAGE> 6

In the material accompanying this letter, you will find a Notice of Special
Meeting of Stockholders, a Joint Proxy Statement/Prospectus and a Proxy Card to
allow you to vote your shares at the Imperial Special Meeting. I urge you to
read carefully the Joint Proxy Statement/Prospectus which more fully describes
the Merger Agreement, the Merger and the issuance of Imperial Common Stock. A
copy of the Merger Agreement is attached as Annex A to the Joint Proxy
Statement/Prospectus.

Whether or not you plan to attend the Imperial Special Meeting, please
complete, sign, date and return the Proxy Card in the postage prepaid envelope
enclosed herewith. If you attend the Imperial Special Meeting, you may vote in
person, if you wish, even if you have previously returned your Proxy Card.

Sincerely,

James C. Kempner
President and Chief Executive
Officer
<PAGE> 7

IMPERIAL HOLLY CORPORATION
ONE IMPERIAL SQUARE, SUITE 200
8016 HIGHWAY 90-A
SUGAR LAND, TEXAS 77478
------------------------

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 19, 1997
------------------------

NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Imperial Special Meeting") of Imperial Holly Corporation, a Texas corporation
("Imperial Holly"), will be held on December 19, 1997 at 9:00 a.m., local time,
at the Sweetwater Country Club, 4400 Palm Royale Boulevard, Sugar Land, Texas to
consider and vote upon the following matters more fully described in the
accompanying Joint Proxy Statement/Prospectus:

1. The approval of the issuance of shares of common stock, no par value
("Imperial Common Stock"), of Imperial Holly to stockholders of Savannah Foods &
Industries, Inc. ("Savannah Foods") pursuant to the Agreement and Plan of
Merger, dated as of September 12, 1997, among Imperial Holly, IHK Merger Sub
Corporation, a wholly owned subsidiary of Imperial Holly ("IHK Sub"), and
Savannah Foods providing for the merger (the "Merger") of IHK Sub with and into
Savannah Foods.

2. Such other business as may properly come before the Imperial Special
Meeting or any adjournment or postponement thereof.

The Board of Directors of Imperial Holly has fixed the close of business on
November 17, 1997 as the record date for the determination of the holders of
shares of Imperial Common Stock entitled to notice of, and to vote at, the
Imperial Special Meeting or any adjournment or postponement thereof. Your
attention is directed to the accompanying Joint Proxy Statement/Prospectus.

THE BOARD OF DIRECTORS OF IMPERIAL HOLLY UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS OF IMPERIAL HOLLY VOTE IN FAVOR OF THE ISSUANCE OF SHARES OF
IMPERIAL COMMON STOCK IN THE MERGER.

IMPERIAL HOLLY STOCKHOLDERS HOLDING 66.3% OF THE OUTSTANDING SHARES OF
IMPERIAL COMMON STOCK HAVE GRANTED SAVANNAH FOODS AND R. EUGENE CARTLEDGE, A
DIRECTOR OF SAVANNAH FOODS, AND WILLIAM W. SPRAGUE III, THE PRESIDENT OF
SAVANNAH FOODS, PROXIES TO VOTE SUCH SHARES IN FAVOR OF THE ISSUANCE OF SHARES
OF IMPERIAL COMMON STOCK TO STOCKHOLDERS OF SAVANNAH FOODS IN THE MERGER.
ACCORDINGLY, THE APPROVAL AND ADOPTION OF SUCH PROPOSAL IS ASSURED.

By the order of the Board of
Directors,

William F. Schwer
General Counsel and Secretary

Sugar Land, Texas
November 20, 1997
<PAGE> 8

Proxy Statement

for
SAVANNAH FOODS & INDUSTRIES, INC.
------------------------

Proxy Statement/Prospectus
for
IMPERIAL HOLLY CORPORATION
------------------------

JOINT PROXY STATEMENT FOR SPECIAL MEETINGS OF STOCKHOLDERS
TO BE HELD ON DECEMBER 19, 1997.
------------------------

This Joint Proxy Statement/Prospectus (the "Joint Proxy
Statement/Prospectus") is being furnished to the holders of common stock, par
value $0.25 per share ("Savannah Common Stock"), of Savannah Foods & Industries,
Inc., a Delaware corporation ("Savannah Foods"), in connection with the
solicitation of proxies by the Board of Directors of Savannah Foods (the
"Savannah Board") for use at the Special Meeting of Stockholders of Savannah
Foods to be held at the Hyatt Regency Hotel, 2 West Bay Street, Savannah,
Georgia on December 19, 1997 at 10:00 a.m., local time, and at any and all
adjournments or postponements thereof (the "Savannah Special Meeting"). Only
holders of record of Savannah Common Stock as of the close of business on
November 17, 1997 (the "Savannah Record Date") will be entitled to notice of and
to vote at the Savannah Special Meeting.

This Joint Proxy Statement/Prospectus is also being furnished to the
holders of common stock, no par value ("Imperial Common Stock"), of Imperial
Holly Corporation, a Texas corporation ("Imperial Holly"), in connection with
the solicitation of proxies by the Board of Directors of Imperial Holly (the
"Imperial Board") for use at the Special Meeting of Stockholders of Imperial
Holly to be held at the Sweetwater Country Club, 4400 Palm Royale Boulevard,
Sugar Land, Texas, on December 19, 1997 at 9:00 a.m., local time, and at any and
all adjournments or postponements thereof (the "Imperial Special Meeting" and,
together with the Savannah Special Meeting, the "Special Meetings"). Only
holders of record of Imperial Common Stock as of the close of business on
November 17, 1997 (the "Imperial Record Date") will be entitled to notice of and
to vote at the Imperial Special Meeting.

Savannah Proposal. At the Savannah Special Meeting, holders of Savannah
Common Stock will be asked to consider and vote upon a proposal to approve the
Agreement and Plan of Merger (the "Merger Agreement"), dated as of September 12,
1997, among Imperial Holly, IHK Merger Sub Corporation, a wholly owned
subsidiary of Imperial Holly ("IHK Sub"), and Savannah Foods and the merger (the
"Merger") of IHK Sub with and into Savannah Foods, with Savannah Foods as the
surviving corporation, as contemplated by the Merger Agreement (the "Savannah
Proposal"). A conformed copy of the Merger Agreement is attached hereto as Annex
A.

Imperial Proposal. At the Imperial Special Meeting, holders of Imperial
Common Stock will be asked to consider and vote upon a proposal to approve the
issuance of Imperial Common Stock to stockholders of Savannah Foods in the
Merger (the "Imperial Proposal" and, together with the Savannah Proposal, the
"Proposals").

Votes Required. The affirmative vote of the holders of a majority of the
shares of Savannah Common Stock outstanding and entitled to vote is necessary to
approve the Savannah Proposal. AS A RESULT OF THE OFFER (AS DEFINED BELOW), IHK
SUB OWNS A MAJORITY OF THE OUTSTANDING SHARES OF SAVANNAH COMMON STOCK AND HAS
AGREED TO VOTE SUCH SHARES IN FAVOR OF THE SAVANNAH PROPOSAL. ACCORDINGLY, THE
APPROVAL AND ADOPTION OF THE SAVANNAH PROPOSAL IS ASSURED.

The affirmative vote of a majority of the shares of Imperial Common Stock
casting votes at the Imperial Special Meeting is necessary to approve the
Imperial Proposal. IMPERIAL HOLLY STOCKHOLDERS HOLDING 66.3% OF THE OUTSTANDING
SHARES OF IMPERIAL COMMON STOCK HAVE GRANTED SAVANNAH FOODS AND R. EUGENE
CARTLEDGE, A DIRECTOR OF SAVANNAH FOODS, AND WILLIAM W. SPRAGUE III, THE
PRESIDENT OF SAVANNAH FOODS, PROXIES TO VOTE SUCH SHARES IN FAVOR OF THE
IMPERIAL PROPOSAL. ACCORDINGLY, THE APPROVAL AND ADOPTION OF THE IMPERIAL
PROPOSAL IS ASSURED.

Conversion of Savannah Common Stock. The Merger will constitute the second
and final step in the acquisition of Savannah Foods by Imperial Holly. The first
step was a tender offer (the "Offer") by IHK Sub for 14,397,836 shares (the
"Target Number of Shares") of Savannah Common Stock, representing 50.1% of the
issued and outstanding shares of Savannah Common Stock, for $20.25 per share in
cash (the "Offer Price"), which IHK Sub successfully completed on October 16,
1997.
Cover Page continued
<PAGE> 9

The Merger Agreement provides that, at the effective time of the Merger
(the "Effective Time"), each share of Savannah Common Stock issued and
outstanding immediately prior thereto (other than shares of Savannah Common
Stock held by Imperial Holly, IHK Sub or any of their subsidiaries (which
include the shares purchased in the Offer) or held in the treasury of Savannah
Foods, all of which will be canceled and cease to exist without consideration
being payable therefor (the "Excluded Shares")), and shares of Savannah Common
Stock 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 stockholder election and proration procedures described below, (i) $20.25
in cash, without interest thereon (the "Cash Consideration"), or (ii) the Stock
Consideration (as defined below, and together with the Cash Consideration (the
"Merger Consideration")). The number of shares of Savannah Common Stock to be
converted into the right to receive the Cash Consideration in the Merger (the
"Cash Election Number") will be (x) 70% of the number of shares of Savannah
Common Stock outstanding immediately prior to the Effective Time (which include
shares of Savannah Common Stock purchased in the Offer) less (y) the sum of the
Excluded Shares (which include shares of Savannah Common Stock purchased in the
Offer) and the Dissenting Shares.

Each holder of shares of Savannah Common Stock after the Offer (other than
Excluded Shares) will be entitled to make an election to receive the Cash
Consideration (a "Cash Election"). In the event that the number of shares of
Savannah Common Stock making a Cash Election exceeds the Cash Election Number,
such shares of Savannah Common Stock 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. In the event that the number of
shares of Savannah Common Stock electing to receive the Cash Consideration is
less than the Cash Election Number, such shares of Savannah Common Stock will be
converted into the right to receive the Cash Consideration while those shares of
Savannah Common Stock 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.

The "Stock Consideration" for each share of Savannah Common Stock will be
determined as follows: (x) if the Closing Price (as defined below) of Imperial
Common Stock is $13.25 or lower, the Stock Consideration will be a number of
shares of Imperial Common Stock equal to the quotient of $20.25 divided by
$13.25, (y) if the Closing Price of shares of Imperial Common Stock is $17.25 or
greater, the Stock Consideration will be a number of shares of Imperial Common
Stock equal to the quotient of $20.25 divided by $17.25, or (z) if the Closing
Price of the shares of Imperial Common Stock is greater than $13.25 but less
than $17.25, the Stock Consideration will be a number of shares of Imperial
Common Stock equal to the quotient of $20.25 divided by the Closing Price. The
Stock Consideration also includes certain rights to purchase shares of preferred
stock of Imperial Holly issued under Imperial Holly's Rights Plan. See
"Description of Imperial Capital Stock -- Rights to Purchase Preferred Stock."
"Closing Price" means the volume weighted average of the trading prices of
Imperial Common Stock, 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 trading days prior to the date of the closing of the
Merger. Any Savannah Foods stockholder who would otherwise receive a fraction of
a share of Imperial Common Stock will receive a cash payment in lieu thereof.

Elections. Savannah Foods has prepared and mailed a form of election (a
"Cash Election Form") with this Joint Proxy Statement/Prospectus to the record
holders of Savannah Common Stock as of the Savannah Record Date which must be
completed and submitted by each such record holder of Savannah Common Stock who
makes a Cash Election in order for such holder to receive the Cash Consideration
with respect to all or any portion of his or her shares of Savannah Common
Stock. In addition, Savannah Foods will use commercially reasonable efforts to
make the Cash Election Form and this Joint Proxy Statement/Prospectus available
to all persons who become holders of Savannah Common Stock during the period
between the Savannah Record Date and the Election Date (as defined below). Any
such holder's Cash Election will have been properly made only if the Bank of New
York (the "Exchange Agent") has received at its designated office, by 5:00 p.m.,
New York City time, on the business day next preceding the day on which the vote
is taken at the Savannah Special Meeting (the "Election Date") a Cash Election
Form properly completed and signed and accompanied by certificates for the
shares of Savannah Common Stock to which such Cash Election Form relates (or by
an appropriate guarantee of delivery of such certificates as set forth in such
Cash Election Form). Failure to deliver shares covered by such a guarantee of
delivery within the time set forth therein will invalidate an otherwise properly
made Cash Election. Copies of the Cash Election Form can be obtained by Savannah
Foods stockholders by calling D.F. King & Co., Inc. at (800) 758-5378.

BECAUSE OF THE PRORATION PROCEDURES DESCRIBED HEREIN, SAVANNAH FOODS
STOCKHOLDERS MAY NOT RECEIVE THE AMOUNT OF CASH CONSIDERATION THAT THEY ELECT.

ii
<PAGE> 10

Cover Page continued

THE SAVANNAH BOARD MAKES NO RECOMMENDATION AS TO WHETHER SAVANNAH FOODS
STOCKHOLDERS SHOULD OR SHOULD NOT MAKE A CASH ELECTION. EACH SAVANNAH FOODS
STOCKHOLDER SHOULD MAKE HIS OR HER OWN DECISION, IN CONSULTATION WITH HIS OR HER
OWN FINANCIAL AND/OR TAX ADVISORS, AS TO WHETHER OR NOT TO MAKE A CASH ELECTION.
STOCKHOLDERS OF SAVANNAH FOODS WHO VOTE FOR THE SAVANNAH PROPOSAL WILL NOT BE
ENTITLED TO PURSUE DISSENTERS' RIGHTS OF APPRAISAL UNDER SECTION 262 OF THE
DELAWARE GENERAL CORPORATION LAW (THE "DGCL"). SEE "STOCKHOLDERS' RIGHTS OF
APPRAISAL."

Conditions. The Merger Agreement provides that the obligations of Savannah
Foods, Imperial Holly and IHK Sub to consummate the Merger are subject to the
satisfaction of certain conditions, including: (i) the approval of the Savannah
Proposal by the stockholders of Savannah Foods and the approval of the Imperial
Proposal by the stockholders of Imperial Holly and (ii) no governmental entity
or court of competent jurisdiction having enacted, issued or enforced any law,
rule, regulation or order restraining or making the Merger illegal or otherwise
prohibiting its consummation.

SEE "RISK FACTORS" COMMENCING ON PAGE 12 FOR A DESCRIPTION OF CERTAIN
MATTERS THAT SHOULD BE CONSIDERED BY SAVANNAH FOODS AND IMPERIAL HOLLY
STOCKHOLDERS IN CONNECTION WITH THEIR CONSIDERATION OF THE PROPOSALS.

This Joint Proxy Statement/Prospectus, together with the applicable Letters
to Stockholders, Notices of Special Meetings of Stockholders, Proxy Cards and
Cash Election Form (in the case of Savannah Foods stockholders), are first being
mailed to the stockholders of Savannah Foods and Imperial Holly on or about
November 20, 1997.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS JOINT PROXY STATEMENT/ PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

The date of this Joint Proxy Statement/Prospectus is November 20, 1997.

iii
<PAGE> 11

AVAILABLE INFORMATION

Savannah Foods and Imperial Holly are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith file reports and other information with the
Commission relating to their business, financial position, results of operations
and other matters. Such reports, proxy statements and other information can be
inspected and copied at the Public Reference Section maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and at its Regional Offices located at The Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511, and 7 World Trade Center, New
York, New York 10048. Copies of such material also can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Savannah Common Stock and Imperial
Common Stock are listed on the New York Stock Exchange (the "NYSE") and the
American Stock Exchange (the "AMEX"), respectively. Such reports, proxy
statements and other materials can also be inspected at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005 (in the case of
Savannah Foods) and at the offices of the American Stock Exchange, 86 Trinity
Place, New York, New York 10006-1881 (in the case of Imperial Holly). The
Commission maintains a web site (http://www.sec.gov) that contains reports,
proxy statements and other information filed by Savannah Foods and Imperial
Holly through the Commission's Electronic Data Gathering Analysis and Retrieval
System.

Imperial Holly has filed with the Commission a Registration Statement (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Imperial Common Stock offered hereby.
This Joint Proxy Statement/Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Reference is made
to the Registration Statement and to the exhibits relating thereto for further
information with respect to Savannah Foods, Imperial Holly and the Imperial
Common Stock offered hereby. The Registration Statement and any amendments
thereto, including exhibits filed as a part thereof, are available for
inspection and copying as set forth above. Statements contained in this Joint
Proxy Statement/Prospectus or in any document incorporated in this Joint Proxy
Statement/Prospectus by reference as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.

No person is authorized to give any information or to make any
representation not contained in this Joint Proxy Statement/Prospectus and, if
given or made, such information or representation should not be relied upon as
having been authorized by Savannah Foods, Imperial Holly or any other person.
This Joint Proxy Statement/Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities in any jurisdiction to any person
to whom it is not lawful to make any such offer or solicitation in such
jurisdiction. Neither the delivery of this Joint Proxy Statement/Prospectus nor
any distribution of the securities made under this Joint Proxy
Statement/Prospectus shall, under any circumstances, create an implication that
there has been no change in the affairs of Savannah Foods or Imperial Holly
since the date of this Joint Proxy Statement/Prospectus.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

THIS JOINT PROXY STATEMENT/PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS
AND INCORPORATES BY REFERENCE CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF THE SECURITIES ACT, THE EXCHANGE ACT AND THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS
OF OPERATIONS AND BUSINESS OF SAVANNAH FOODS AND IMPERIAL HOLLY, INCLUDING
STATEMENTS UNDER THE CAPTIONS "RISK FACTORS," "BUSINESS OF IMPERIAL HOLLY
FOLLOWING THE MERGER," "DESCRIPTION OF THE MERGER -- SAVANNAH FOODS' FINANCIAL
ADVISORS," "DESCRIPTION OF THE MERGER -- IMPERIAL HOLLY'S FINANCIAL ADVISOR",
"DESCRIPTION OF THE MERGER -- RECOMMENDATIONS OF THE BOARD OF DIRECTORS; REASONS
FOR THE MERGER" AND "PRO FORMA FINANCIAL STATEMENTS". THE WORDS "ANTICIPATE",
"BELIEVE", "COULD", "ESTIMATE", "EXPECT", "INTEND", "MAY", "PLAN", "PREDICT",
"PROJECT", "SHOULD" AND SIMILAR EXPRESSIONS ARE ALSO INTENDED TO IDENTIFY

iv
<PAGE> 12

FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN
RISKS AND UNCERTAINTIES. NO ASSURANCE CAN BE GIVEN THAT SUCH RESULTS WILL BE
REALIZED. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE
FOLLOWING: (1) EFFECTS OF THE SUBSTANTIAL INCREASE IN LEVERAGE AS A RESULT OF
THE MERGER AND EFFECTS OF LIMITATIONS ON LIQUIDITY, EITHER OF WHICH COULD
ADVERSELY AFFECT PLANNED STRATEGIES; (2) EXPECTED COST SAVINGS FROM THE MERGER
MAY NOT BE FULLY REALIZED; (3) COSTS OR DIFFICULTIES RELATED TO THE INTEGRATION
OF THE BUSINESSES OF SAVANNAH FOODS AND IMPERIAL HOLLY COULD BE GREATER THAN
EXPECTED; (4) FLUCTUATIONS IN THE PRICE OF RAW SUGAR AND REFINED SUGAR MAY
OCCUR; AND (5) GENERAL ECONOMIC AND INDUSTRY CONDITIONS MAY BE LESS FAVORABLE
THAN EXPECTED. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE OR
SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL OUTCOMES MAY VARY
MATERIALLY FROM THOSE INDICATED. FURTHER INFORMATION REGARDING SUCH FACTORS AND
OTHER FACTORS WHICH COULD AFFECT THE FINANCIAL RESULTS OF IMPERIAL HOLLY AFTER
THE MERGER AND SUCH FORWARD-LOOKING STATEMENTS IS INCLUDED IN THE SECTION
ENTITLED "RISK FACTORS."

INCORPORATION OF DOCUMENTS BY REFERENCE

The following documents filed with the Commission by Savannah Foods (File
No. 1-11420) and Imperial Holly (File No. 1-10307) pursuant to the Exchange Act
are incorporated by reference in this Joint Proxy Statement/Prospectus:

1. Savannah Foods' Annual Report on Form 10-K (the "Savannah 1996
10-K") for the fiscal year ended September 29, 1996;

2. Those portions of Savannah Foods' Proxy Statement for its 1997
Annual Meeting that have been incorporated by reference in the Savannah
1996 10-K;

3. Savannah Foods' Quarterly Reports on Form 10-Q for the quarters
ended December 29, 1996, March 30, 1997 and June 29, 1997;

4. Savannah Foods' Current Reports on Form 8-K dated October 24, 1996,
November 22, 1996, December 19, 1996, July 21, 1997, July 24, 1997,
September 19, 1997 and October 31, 1997;

5. Imperial Holly's Annual Report on Form 10-K for the fiscal year
ended March 31, 1997;

6. Imperial Holly's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997;

7. Imperial Holly's Current Reports on Form 8-K dated September 12,
1997 and November 3, 1997;

8. The description of the Imperial Common Stock contained in Imperial
Holly's Registration Statement on Form 8-A dated August 11, 1989; and

9. The description of Imperial Holly's Rights to Purchase Preferred
Stock contained in Imperial Holly's Registration Statement on Form 8-A
dated September 29, 1989.

All documents and reports filed by Savannah Foods and Imperial Holly
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Joint Proxy Statement/Prospectus and prior to the date of the
Special Meetings shall be deemed to be incorporated by reference in this Joint
Proxy Statement/Prospectus and to be a part hereof from the dates of filing of
such documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Joint Proxy Statement/Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Joint Proxy Statement/Prospectus.

v
<PAGE> 13

THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
RELATING TO SAVANNAH FOODS AND IMPERIAL HOLLY WHICH ARE NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS
SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE, WITHOUT
CHARGE, TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER OF IMPERIAL COMMON STOCK
OR SAVANNAH COMMON STOCK, TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS
DELIVERED, ON WRITTEN OR ORAL REQUEST TO SAVANNAH FOODS & INDUSTRIES, INC., 2
EAST BRYAN STREET, SAVANNAH, GEORGIA 31401, ATTENTION: CORPORATE SECRETARY
(TELEPHONE NUMBER: 912-234-1261) OR IMPERIAL HOLLY CORPORATION, ONE IMPERIAL
SQUARE, SUITE 200, 8016 HIGHWAY 90-A, SUGAR LAND, TEXAS 77478, ATTENTION:
CORPORATE SECRETARY (TELEPHONE NUMBER: 281-491-9181). IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUESTS SHOULD BE MADE BY DECEMBER 12, 1997,
SEVEN BUSINESS DAYS BEFORE THE SPECIAL MEETINGS.

vi
<PAGE> 14

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION....................................... iv
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS... iv
INCORPORATION OF DOCUMENTS BY REFERENCE..................... v
SUMMARY..................................................... 1
The Companies............................................... 1
Savannah Foods............................................ 1
Imperial Holly............................................ 1
Savannah Special Meeting.................................... 1
Time, Date and Place; Matters to be Considered............ 1
Required Vote; Quorum..................................... 1
Imperial Special Meeting.................................... 2
Time, Date and Place; Matters to be Considered............ 2
Required Vote; Quorum..................................... 2
Merger Agreement............................................ 2
Consideration............................................. 2
Elections................................................. 2
Exchange of Certificates.................................. 3
Fractional Shares......................................... 3
Conditions................................................ 3
Termination............................................... 3
Plan of Financing........................................... 3
Tender Credit Facility.................................... 4
Senior Credit Facility.................................... 4
Senior Subordinated Notes................................. 4
Equity Financing.......................................... 4
Recommendations of the Board of Directors; Reasons for the
Merger.................................................... 4
Recommendations of Savannah Board and Savannah Foods'
Reasons for the Merger................................. 4
Recommendations of Imperial Board and Imperial Holly's
Reasons for the Merger................................. 5
Savannah Foods' Financial Advisors.......................... 5
Imperial Holly's Financial Advisor.......................... 5
Interest of Certain Persons in the Merger................... 6
Board of Directors; Management............................ 6
Savannah Foods Options.................................... 6
Director Share Units...................................... 6
Directors' Deferred Compensation Plan..................... 6
Employment and Related Agreements......................... 6
Indemnification........................................... 7
Benefit Trust............................................. 7
Certain Other Agreements.................................... 7
Savannah Foods Stockholders Agreement..................... 7
Imperial Holly Proxy Agreements........................... 7
Accounting Treatment........................................ 7
Certain Federal Income Tax Consequences..................... 7
Business Following the Merger............................... 8
Stockholders' Rights of Appraisal........................... 8
Differences in Rights of Stockholders....................... 8
Risk Factors................................................ 8
Selected Historical Financial Information................... 9
Summary Pro Forma Combined Financial Information............ 11
RISK FACTORS................................................ 12
BUSINESS OF IMPERIAL HOLLY FOLLOWING THE MERGER............. 15
SPECIAL MEETINGS............................................ 16
SOURCES AND USES OF FUNDS................................... 17
DESCRIPTION OF MERGER....................................... 18
Background.................................................. 18
</TABLE>

vii
<PAGE> 15
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Recommendations of the Boards of Directors; Reasons for the
Merger.................................................... 23
Savannah Foods' Financial Advisors.......................... 26
Imperial Holly's Financial Advisor.......................... 28
Resales of Imperial Common Stock Received in the Merger..... 32
Delisting and Deregistration of Savannah Common Stock....... 32
INTEREST OF CERTAIN PERSONS IN THE MERGER................... 32
THE MERGER AGREEMENT........................................ 34
The Offer................................................. 34
Recommendation............................................ 34
Board Representation...................................... 34
The Merger................................................ 35
Consideration to be Paid in the Merger.................... 35
Savannah Foods Options.................................... 35
Stockholders' Meetings.................................... 36
Exchange of Certificates.................................. 36
Elections................................................. 37
Appraisal Rights.......................................... 37
Representations and Warranties............................ 38
Employee Benefit Matters.................................. 38
Agreements with Respect to Conduct of Business Pending the
Merger................................................. 39
No Solicitation........................................... 39
Indemnification of Directors.............................. 40
Savannah Foods' Rights Agreement.......................... 40
Conditions of Each Party's Obligation to Effect the
Merger................................................. 40
Termination............................................... 41
Fees and Expenses......................................... 41
Termination Fees.......................................... 41
Amendment................................................. 41
Other Agreements............................................ 41
PLAN OF FINANCING........................................... 42
DEBT TENDER OFFER........................................... 43
GOVERNMENT REGULATION....................................... 44
Regulatory Approvals........................................ 44
Regulation of Sugar Industry................................ 44
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................... 45
MARKET PRICE AND DIVIDEND DATA; STOCK EXCHANGE LISTING...... 46
STOCKHOLDERS' RIGHTS OF APPRAISAL........................... 47
PRO FORMA FINANCIAL STATEMENTS.............................. 50
SECURITY OWNERSHIP OF IMPERIAL HOLLY........................ 56
DESCRIPTION OF IMPERIAL CAPITAL STOCK....................... 58
COMPARISON OF STOCKHOLDER RIGHTS............................ 59
LEGAL OPINION............................................... 64
EXPERTS..................................................... 64
STOCKHOLDER PROPOSALS....................................... 64
GLOSSARY OF SELECT TERMS.................................... 65
ANNEX A Agreement and Plan of Merger among Imperial Holly
Corporation, IHK Merger Sub Corporation and
Savannah Foods & Industries, Inc., dated as of
September 12, 1997................................. A-i
ANNEX B Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation, dated
September 11, 1997............................ B-1
ANNEX C Opinion of Lehman Brothers Inc., dated September
11, 1997.................................................. C-1
ANNEX D Section 262 of the Delaware General Corporation
Law....................................................... D-1
</TABLE>

viii
<PAGE> 16

SUMMARY

The following is a summary of, and is qualified in its entirety by, the
more detailed information contained elsewhere in this Joint Proxy
Statement/Prospectus, the Annexes hereto and the documents incorporated by
reference herein. A GLOSSARY OF CERTAIN DEFINED TERMS USED HEREIN APPEARS
BEGINNING ON PAGE 65 HEREOF. Certain other terms used herein are defined
elsewhere in this Joint Proxy Statement/Prospectus. Stockholders of Savannah
Foods and Imperial Holly are urged to read this Joint Proxy
Statement/Prospectus, the Annexes hereto and the documents incorporated herein
by reference in their entirety. Stockholders should carefully consider the
information set forth below under the heading "Risk Factors" beginning on page
12 hereof.

THE COMPANIES

SAVANNAH FOODS. Savannah Foods is a Delaware corporation based in Savannah,
Georgia. Savannah Foods was incorporated in Delaware in 1969 as the successor to
the Savannah Sugar Refining Corporation which was originally incorporated in New
York in 1916. In 1996, Savannah Foods was the second largest marketer of refined
sugar in the United States with an estimated 20% domestic market share, with
fiscal 1997 production consisting of 85% cane sugar and 15% beet sugar. Savannah
Foods operates three cane sugar refineries in Georgia, Florida and Louisiana and
four beet sugar production facilities located in Michigan. Savannah Foods'
principal refined sugar brands are Dixie Crystal(R), Evercane(R) and Pioneer(R).
Savannah Foods' principal markets for its products are in the southeastern and
the midwestern United States.

IMPERIAL HOLLY. Imperial Holly is a Texas corporation based in Sugar Land,
Texas, outside Houston. Imperial Holly was incorporated as the Imperial Sugar
Company in 1924 and is the successor to a cane sugar and milling operation that
began producing granulated sugar in 1843. In 1996, Imperial Holly was the fourth
largest marketer of refined sugar in the United States with a 14% domestic
market share and with fiscal 1997 production consisting of 57% beet sugar and
43% cane sugar. Imperial Holly operates a cane sugar refinery in Texas and eight
beet sugar production facilities in Texas, California, Montana and Wyoming.
Imperial Holly's principal refined sugar brands are Imperial(R), Holly(R) and
Spreckels(R). Imperial Holly's principal markets for its products are in the
southwestern and western United States.

Except where the context otherwise indicates, all references to "Savannah
Foods" or "Imperial Holly" are intended to include their respective operating
subsidiaries through which the products and services described herein are
directly provided.

SAVANNAH SPECIAL MEETING

TIME, DATE AND PLACE; MATTERS TO BE CONSIDERED. The Savannah Special
Meeting will be held at the Hyatt Regency Hotel, 2 West Bay Street, Savannah,
Georgia on December 19, 1997 at 10:00 a.m., local time, to consider and vote
upon (i) a proposal to approve the Merger Agreement and the Merger contemplated
thereby and (ii) such other matters as may be properly brought before the
Savannah Special Meeting. Only holders of record of shares of Savannah Common
Stock on the Savannah Record Date, which is the close of business on November
17, 1997, will be entitled to receive notice of and to vote at the Savannah
Special Meeting.

REQUIRED VOTE; QUORUM. At the close of business on the Savannah Record
Date, there were 28,738,196 shares of Savannah Common Stock outstanding, each of
which entitles the registered holder thereof to one vote. A majority of the
outstanding shares of Savannah Common Stock entitled to vote, present in person
or by proxy, will constitute a quorum at the Savannah Special Meeting. The
affirmative vote of the holders of a majority of the shares of Savannah Common
Stock outstanding and entitled to vote is necessary to approve the Savannah
Proposal. IHK Sub owns a sufficient number of shares of Savannah Common Stock to
assure approval and adoption of the Savannah Proposal at the Savannah Special
Meeting and has agreed to vote all of such shares in favor of the Savannah
Proposal. Accordingly, the affirmative vote of any other holder of shares of
Savannah Common Stock will not be required to approve the Savannah Proposal.
1
<PAGE> 17

IMPERIAL SPECIAL MEETING

TIME, DATE AND PLACE; MATTERS TO BE CONSIDERED. The Imperial Special
Meeting is scheduled to be held at the Sweetwater Country Club, 4400 Palm Royale
Boulevard, Sugar Land, Texas on December 19, 1997 at 9:00 a.m., local time, to
consider and vote upon (i) the issuance of Imperial Common Stock to stockholders
of Savannah Foods in the Merger and (ii) such other matters as may be properly
brought before the Imperial Special Meeting. Only holders of record of shares of
Imperial Common Stock on the Imperial Record Date, which is the close of
business on November 17, 1997, will be entitled to notice of and to vote at the
Imperial Special Meeting.

REQUIRED VOTE; QUORUM. At the close of business on the Imperial Record
Date, there were 14,285,767 shares of Imperial Common Stock outstanding, each of
which entitles the registered holder thereof to one vote. A majority of the
outstanding shares of Imperial Common Stock entitled to vote, present in person
or by proxy, will constitute a quorum at the Imperial Special Meeting. The
affirmative vote of a majority of the votes cast at the Imperial Special Meeting
is required to approve the Imperial Proposal. Imperial Holly stockholders
holding 66.3% of the outstanding shares of Imperial Common Stock have granted
Savannah Foods and R. Eugene Cartledge, a director of Savannah Foods, and
William W. Sprague III, the President of Savannah Foods, proxies to vote such
shares in favor of the Imperial Proposal, thus assuring its approval.
Accordingly, the affirmative vote of any other holder of shares of Imperial
Common Stock will not be required to approve the Imperial Proposal.

MERGER AGREEMENT

CONSIDERATION. On September 12, 1997, Imperial Holly, IHK Sub and Savannah
Foods entered into the Merger Agreement providing for the acquisition of
Savannah Foods by Imperial Holly. Pursuant to the Offer, which was successfully
completed on October 16, 1997, IHK Sub acquired 14,397,836 shares of Savannah
Common Stock, representing 50.1% of the issued and outstanding shares of
Savannah Common Stock, for $20.25 per share in cash.

The Merger will constitute the second and final step in the acquisition of
Savannah Foods by Imperial Holly. The Merger Agreement provides that at the
Effective Time, each share of Savannah Common Stock outstanding immediately
prior thereto (other than Excluded Shares and Dissenting Shares) will be
converted into the right to receive, subject to stockholder elections and the
proration procedures described below, (i) the Cash Consideration of $20.25 or
(ii) the Stock Consideration. The number of shares of Savannah Common Stock to
be converted into the right to receive the Cash Consideration in the Merger will
be (x) 70% of the number of shares of Savannah Common Stock outstanding
immediately prior to the Effective Time (which include shares of Savannah Common
Stock purchased in the Offer) less (y) the sum of the Excluded Shares (which
include shares of Savannah Common Stock purchased in the Offer) and the
Dissenting Shares. In connection with the Merger, each holder of shares of
Savannah Common Stock (other than Excluded Shares) will be entitled to make a
Cash Election. In the event that the number of shares of Savannah Common Stock
making a Cash Election 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.
In the event that the number of shares of Savannah Common Stock 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 of Savannah Common Stock 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.

completed and signed and accompanied by certificates for the shares of Savannah
Common Stock to which such Cash Election Form relates (or by an appropriate
guarantee of delivery of such certificates as set forth in such Cash Election
Form and such certificates are delivered to the Exchange Agent within three NYSE
trading days after the date of execution of the guarantee of delivery). Failure
to deliver Savannah Common Stock covered by such a guarantee of delivery within
such three-day period will invalidate an otherwise properly made Cash Election.

BECAUSE OF THE PRORATION PROCEDURES DESCRIBED HEREIN, SAVANNAH FOODS
STOCKHOLDERS MAY NOT RECEIVE THE AMOUNT OF CASH CONSIDERATION THAT THEY ELECT.

EXCHANGE OF CERTIFICATES. The Merger Agreement provides for Imperial Holly
to deposit the aggregate Merger Consideration with the Exchange Agent for the
benefit of the holders of Savannah Common Stock. As soon as practicable after
the Effective Time, each holder of an outstanding certificate which prior
thereto represented Savannah Common Stock will, upon proper surrender to the
Exchange Agent of such certificate, be entitled to a certificate representing
the number of shares of Imperial Common Stock received as Stock Consideration
and the Cash Consideration, as applicable. The Exchange Agent may impose
reasonable terms and conditions to accept the surrender of a certificate in
accordance with normal exchange practices. If any certificate for Imperial
Common Stock is to be issued in, or if cash is to be remitted to, a name other
than that in which the surrendered certificate which prior thereto represented
shares of Savannah Common Stock is registered, the certificate so surrendered
must be properly endorsed, with signature guaranteed or otherwise in proper form
for transfer. Until surrendered, each certificate which prior thereto
represented shares of Savannah Common Stock will be deemed at any time after the
Effective Time to represent only the right to receive the Merger Consideration
upon surrender.

FRACTIONAL SHARES. Each holder of Savannah Common Stock after the Effective
Time who would otherwise have been entitled to receive as Stock Consideration a
fraction of a share of Imperial Common Stock (after taking into account all
shares of Savannah Common Stock delivered by such holder) will receive, in lieu
thereof, a cash payment (without interest) equal to such fraction multiplied by
the Cash Consideration as soon as practicable after the Effective Time.

CONDITIONS. The Merger Agreement provides that the obligations of Savannah
Foods, Imperial Holly and IHK Sub to consummate the Merger are subject to the
satisfaction of certain conditions, including: (i) the approval of the Savannah
Proposal by the stockholders of Savannah Foods and the approval of the Imperial
Proposal by the stockholders of Imperial Holly, (ii) no governmental entity or
court of competent jurisdiction having enacted, issued or enforced any law,
rule, regulation or order restraining or making the Merger illegal or otherwise
prohibiting its consummation and (iii) any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), having expired (which waiting period expired on October 2, 1997).

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, upon the occurrence
of certain events or if the Effective Time shall not have occurred on or before
May 31, 1998. Under certain circumstances generally related to the failure of
Savannah Foods stockholders to approve the Savannah Proposal and the
consummation of an acquisition proposal made by a third party that the Savannah
Board deems more favorable to the stockholders of Savannah Foods and the
withdrawal by the Savannah Board of its recommendation of the Savannah Proposal,
termination of the Merger Agreement will result in the payment of an $8 million
fee by Savannah Foods to Imperial Holly.

PLAN OF FINANCING

Imperial Holly will incur indebtedness of up to approximately $705 million
in order to (i) finance the cash consideration payable to Savannah Foods
stockholders in the Offer and the Merger, (ii) refinance certain indebtedness of
Imperial Holly and Savannah Foods and purchase the Senior Notes (as defined
herein) in the Debt Tender Offer (as defined herein), (iii) pay fees and
expenses related to the Offer and the Merger and (iv) provide working capital
for Imperial Holly. These funds are expected to come from the sources provided
below. The funds necessary to purchase shares of Savannah Common Stock pursuant
to the Offer and the
3
<PAGE> 19

Merger and to pay related fees and expenses were furnished to IHK Sub by
Imperial Holly as a capital contribution. See "Sources and Uses of Funds" and
"Plan of Financing."

TENDER CREDIT FACILITY. Imperial Holly has entered into a secured credit
facility (the "Tender Credit Facility") in an aggregate amount of up to $505
million provided by Lehman Commercial Paper, Inc. ("LCPI"), an affiliate of
Lehman Brothers Inc. ("Lehman Brothers"), a financial advisor to Imperial Holly.
The Tender Credit Facility is comprised of a $292 million term loan facility,
which was used to fund the Offer, and a $210 million revolving credit facility,
of which $128.4 million was outstanding on November 14, 1997 to retire certain
indebtedness of Imperial Holly, to purchase the Senior Notes in the Debt Tender
Offer and to pay certain related fees and expenses. The revolving credit
facility will also be used as a source of working capital for Imperial Holly
through the consummation of the Merger. Upon the consummation of the Merger, the
Tender Credit Facility will be replaced by the Senior Credit Facility (as
defined herein). See "Plan of Financing -- Tender Credit Facility."

SENIOR CREDIT FACILITY. Imperial Holly has obtained a commitment letter
(the "Financing Commitment Letter") from LCPI to arrange a secured credit
facility (the "Senior Credit Facility") in an amount of up to $705 million. The
Senior Credit Facility, which will be entered into in connection with the
closing of the Merger, will be comprised of either (i) a $255 million term loan
facility and a $200 million revolving credit facility or (ii) a $505 million
term loan facility and a $200 million revolving credit facility (in the event
that the private placement of the Senior Subordinated Notes described below is
not consummated on or prior to the date of the consummation of the Merger). The
proceeds of the Senior Credit Facility will be used to repay amounts owing under
the Tender Credit Facility, to fund the cash consideration payable in the Merger
and certain expenses related thereto, to retire certain indebtedness of Savannah
Foods and to provide Imperial Holly with financing for future working capital
and other general corporate purposes. See "Plan of Financing -- Senior Credit
Facility."

SENIOR SUBORDINATED NOTES. Imperial Holly intends to issue prior to or at
the time of the consummation of the Merger approximately $250 million of senior
subordinated notes due in 2007 (the "Senior Subordinated Notes") in a private
placement exempt from registration pursuant to Rule 144A under the Securities
Act. If the offering of the Senior Subordinated Notes is not consummated on or
prior to the date of the consummation of the Merger, LCPI, pursuant to the
Financing Commitment Letter, has agreed to increase the term loan portion of the
Senior Credit Facility by $250 million. See "Plan of Financing -- Senior
Subordinated Notes." The Senior Credit Facility and the Senior Subordinated
Notes are collectively referred to as the "Debt Financing."

EQUITY FINANCING. Imperial Holly has entered into an agreement to sell
shares of Imperial Common Stock to the H. Kempner Trust Association concurrently
with the consummation of the Merger for an aggregate consideration of $5 million
at a purchase price per share equal to the lesser of $14.50 or the Closing Price
(the "H. Kempner Trust Financing").

RECOMMENDATIONS OF THE BOARDS OF DIRECTORS; REASONS FOR THE MERGER

RECOMMENDATION OF SAVANNAH BOARD AND SAVANNAH FOODS' REASONS FOR THE
MERGER. The Savannah Board has unanimously determined that the transactions
contemplated by the Merger Agreement are fair to and in the best interests of
Savannah Foods and its stockholders and recommends that the holders of Savannah
Common Stock vote FOR approval of the Savannah Proposal.

In its deliberations and in making its determination that the transactions
contemplated by the Merger Agreement are fair to and in the best interests of
Savannah Foods and its stockholders, and in authorizing and approving the Merger
Agreement and the Merger on September 11, 1997, the Savannah Board consulted
with Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and The
Robinson-Humphrey Company, Inc. ("Robinson-Humphrey"), and with Savannah Foods'
outside counsel, and considered a number of factors. See "Description of
Merger -- Background" and "-- Recommendations of the Boards of Directors;
Reasons for the Merger."

IN CONSULTATION WITH HIS OR HER OWN FINANCIAL AND/OR TAX ADVISORS, AS TO WHETHER
OR NOT TO MAKE A CASH ELECTION.

RECOMMENDATION OF THE IMPERIAL BOARD AND IMPERIAL HOLLY'S REASONS FOR THE
MERGER. The Imperial Board has unanimously determined that the transactions
contemplated by the Merger Agreement are fair to and in the best interests of
Imperial Holly and recommends that the holders of Imperial Common Stock vote FOR
approval of the Imperial Proposal.

In its deliberations and in making its determination that the transactions
contemplated by the Merger Agreement are fair to and in the best interests of
Imperial Holly and its stockholders, and in authorizing the Merger Agreement on
September 10, 1997, the Imperial Board consulted with Lehman Brothers and
Imperial Holly's outside counsel, and considered a number of factors. See
"Description of Merger -- Background" and "-- Recommendations of the Boards of
Directors; Reasons for the Merger."

SAVANNAH FOODS' FINANCIAL ADVISORS

DONALDSON LUFKIN & JENRETTE SECURITIES CORPORATION. DLJ was retained as
financial advisor to the Savannah Board in connection with the Offer and the
Merger and has delivered to the Savannah Board a written opinion dated September
11, 1997 to the effect that, as of the date of such opinion and based upon and
subject to the assumptions, limitations and qualifications set forth therein,
the consideration to be received by the stockholders of Savannah Foods pursuant
to the Merger Agreement is fair to such stockholders from a financial point of
view. The full text of the opinion of DLJ, which sets forth the assumptions
made, matters considered and limitations on the review undertaken, is attached
as Annex B to this Joint Proxy Statement/Prospectus. The opinion of DLJ was
prepared for the Savannah Board, is directed only to the fairness from a
financial point of view of the consideration to be received by the stockholders
of Savannah Foods and does not constitute a recommendation to any Savannah Foods
stockholder as to how such stockholder should vote on the Savannah Proposal. See
"Description of Merger -- Savannah Foods' Financial Advisors."

Savannah Foods paid DLJ a retainer advisory fee of $100,000 and a fee of
$500,000 at the time DLJ delivered its opinion. In addition, Savannah Foods paid
DLJ a transaction fee, which was contingent upon the consummation of the Offer,
in an amount equal to 0.7% of the aggregate consideration payable in the Offer
and the Merger, less the fees previously paid.

THE ROBINSON-HUMPHREY COMPANY, INC. Robinson-Humphrey was retained by
Savannah Foods to evaluate the fairness from a financial point of view of the
Offer Price and the Merger Consideration but was not asked to and did not render
an opinion as to such fairness. In connection with its analysis, Robinson-
Humphrey was paid a fee of $250,000, none of which was contingent upon the
consummation of the Offer or the Merger. See "Description of Merger -- Savannah
Foods' Financial Advisors."

IMPERIAL HOLLY'S FINANCIAL ADVISOR

LEHMAN BROTHERS INC. Lehman Brothers was retained as financial advisor to
the Imperial Board in connection with the Offer and the Merger and has delivered
to the Imperial Board a written opinion dated September 11, 1997 to the effect
that, as of the date of such opinion and based upon and subject to the
assumptions, limitations and qualifications set forth therein, the Offer Price
and the Merger Consideration proposed to be paid by Imperial Holly in the Offer
and Merger were fair to Imperial Holly from a financial point of view. The full
text of the opinion of Lehman Brothers, which sets forth the assumptions made,
matters considered and limitations on the review undertaken, is attached as
Annex C to this Joint Proxy Statement/ Prospectus. The opinion of Lehman
Brothers is for the use and benefit of the Imperial Board and relates only to
the fairness to Imperial Holly from a financial point of view of the
consideration to be paid in the Offer and the Merger by Imperial Holly, does not
address any other aspect of the Offer or the Merger, including business
decisions to proceed with or effect the Merger, and does not constitute a
recommendation to any Imperial Holly stockholder as to how such stockholder
should vote on the Imperial Proposal. See "Description of Merger -- Imperial
Holly's Financial Advisor."

Imperial Holly paid Lehman Brothers (i) a fee of $100,000, upon execution
of the engagement letter with Lehman Brothers and (ii) a fee of $900,000, upon
announcement of Imperial Holly's intent to acquire Savannah Foods. In addition,
Imperial Holly paid Lehman Brothers a fee of 0.75% of the aggregate
5
<PAGE> 21

consideration to be paid to holders of Savannah Common Stock in the Offer and
the Merger, which was contingent upon the consummation of the Offer and against
which the fees previously paid were credited.

INTEREST OF CERTAIN PERSONS IN THE MERGER

Savannah Foods stockholders should note that a number of directors and
executive officers of Savannah Foods have interests in the Merger as directors
and employees that are different from, or in addition to, yours as a
stockholder, as described below.

BOARD OF DIRECTORS; MANAGEMENT. On October 24, 1997, upon payment for the
shares of Savannah Common Stock purchased in the Offer and pursuant to the
Merger Agreement, a majority of the Savannah Foods directors resigned as
directors, and members of the senior management of Imperial Holly were elected
to the Savannah Board to replace such resigning directors. Such Imperial Holly
representatives currently constitute a majority of the Savannah Board. In
addition, if the Merger is consummated, it is anticipated that certain existing
or resigning directors of Savannah Foods will be appointed to the Imperial
Board. See "The Merger Agreement -- Board Representation."

SAVANNAH FOODS OPTIONS. At November 14, 1997, an aggregate of approximately
171,893 shares of Savannah Common Stock were subject to options granted to
directors and employees of Savannah under Savannah's stock option plan and
certain stock option agreements, of which options to purchase all of such shares
of Savannah Common Stock were exercisable. Generally, all such options became
fully vested and exercisable upon consummation of the Offer, if not previously
vested. The Merger Agreement gives holders of options which are vested and
exercisable certain rights, including the right to receive, for each such
option, an amount in cash equal to the difference between $20.25 and the
exercise price of such option. The stock options held by Savannah Foods'
directors and executive officers as of September 28, 1997 represented less than
one percent of the outstanding Savannah Common Stock. See "Interest of Certain
Persons in the Merger -- Savannah Foods Options."

DIRECTOR SHARE UNITS. Pursuant to the terms of the Savannah Foods'
Non-Employee Directors' Compensation Plan (the "Compensation Plan"), the
non-employee directors of Savannah hold share units (each of which represents
the right to receive cash, subject to certain conditions, based on the value of
a share of Savannah Common Stock (the "Share Units")) granted subject to certain
vesting requirements. Under the terms of the Compensation Plan, upon
consummation of the Offer, the Share Units to which certain of the non-employee
directors are entitled became fully vested and the directors were entitled to
elect to receive a payout of the value of their Share Units, based on the Offer
Price, aggregating approximately $1.9 million.

Pursuant to the terms of the Savannah Foods' Non-Employee Directors'
Supplemental Share Unit Plan (the "Supplemental Share Unit Plan"), certain of
the non-employee directors of Savannah hold additional Share Units. Under the
terms of the Supplemental Share Unit Plan, upon consummation of the Offer, the
directors were entitled to elect to receive a payout of the value of their Share
Units, based on the Offer Price, aggregating approximately $2.3 million. See
"Interest of Certain Persons in the Merger -- Director Share Units."

DIRECTORS' DEFERRED COMPENSATION PLAN. Pursuant to the terms of the
Deferred Compensation Plan for Directors of Savannah Foods (the "Deferred
Compensation Plan"), the non-employee directors of Savannah Foods are entitled
to defer their meeting fees for payment at various times after termination of
their service on the Savannah Board. Under the terms of the Deferred
Compensation Plan, upon consummation of the Offer, the directors were entitled
to elect to receive a payout of the value of their deferred compensation
accounts. Seven of the eight directors participating in the Directors' Deferred
Compensation Plan have elected to receive a lump sum payment of such value,
aggregating approximately $2.6 million. See "Interest of Certain Persons in the
Merger -- Directors' Deferred Compensation Plan."

than $430,000 per year (his previous salary) for the term of the agreement, Mr.
Sprague is entitled to participate in an annual bonus program, which provides
him with a maximum bonus opportunity equal to 75% of his base salary, and to
certain other benefits. In addition, Imperial Holly expects to enter into
agreements with certain other members of Savannah Foods' management providing
for certain payments in the event of a change of control. See "Interest of
Certain Persons in the Merger -- Employment and Related Agreements."

INDEMNIFICATION. Pursuant to the Merger Agreement, Imperial Holly will
maintain all rights of indemnification existing in favor of, and indemnify, each
person who served at the request of Savannah Foods 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 their capacity as an officer, director, employee or
fiduciary of Savannah Foods. Imperial Holly and IHK Sub have also agreed that
all rights to indemnification existing in favor of the Indemnified Parties as
provided in the Savannah Bylaws (as defined below) with respect to matters
occurring through the Effective Time will survive the Merger and will continue
in effect for a period of not less than six years from the Effective Time. See
"Interest of Certain Persons in the Merger -- Indemnification" and "The Merger
Agreement -- Indemnification of Directors."

BENEFIT TRUST. In connection with the Merger, the Savannah Foods Benefit
Trust (the "Benefit Trust"), a trust established to fund the payment of certain
employee benefits payable by Savannah Foods, will receive approximately $38.3
million in exchange for the Savannah Common Stock held in the Benefit Trust.
These proceeds will be used to retire approximately $27.6 million in
indebtedness owed to Savannah Foods (the "Benefit Trust Note") and to purchase
approximately $10.7 million of Imperial Common Stock at a purchase price per
share equal to the fair market value of Imperial Common Stock. See "The Merger
Agreement -- Employee Benefit Matters."

The Savannah Board recognized all the interests described above and
concluded that these interests did not detract from the fairness of the Offer
and the Merger to the holders of Savannah Common Stock who are not officers or
directors of Savannah Foods.

CERTAIN OTHER AGREEMENTS

SAVANNAH FOODS STOCKHOLDERS AGREEMENT. As a condition and inducement to
entering into the Merger Agreement, Imperial Holly and IHK Sub required that all
of the directors and executive officers of Savannah Foods enter into a
stockholders agreement, dated September 12, 1997. Pursuant to such agreement,
each such stockholder agreed to tender all shares of Savannah Common Stock owned
by such stockholder in the Offer prior to the expiration of the Offer and not to
withdraw any shares of Savannah Common Stock so tendered so long as the per
share price was not less than $20.25 in cash, net to the seller.

IMPERIAL HOLLY PROXY AGREEMENTS. As a condition and inducement to entering
into the Merger Agreement, Savannah Foods required that certain stockholders of
Imperial Holly, representing approximately 66.3% of the issued and outstanding
shares of Imperial Common Stock, enter into proxy agreements granting Savannah
Foods, R. Eugene Cartledge, a director of Savannah Foods, and William W. Sprague
III, the President of Savannah Foods, proxies to vote all of such shares of
Imperial Common Stock in favor of the Imperial Proposal.

ACCOUNTING TREATMENT

The Merger will be accounted for as a purchase by Imperial Holly in
accordance with generally accepted accounting principles.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The receipt of cash or shares of Imperial Common Stock by Savannah Foods
stockholders pursuant to the Merger will be a taxable transaction for federal
income tax purposes. See "Certain Federal Income Tax Consequences."
7
<PAGE> 23

BUSINESS FOLLOWING THE MERGER

Following the Merger, Imperial Holly will be the largest producer and
marketer of refined sugar products in the United States with annual pro forma
revenues of approximately $2.0 billion in the fiscal year ended March 31, 1997.
Imperial Holly will also possess the most balanced and geographically diverse
production capacity of any domestic sugar producer, with cane sugar operations
constituting approximately 65% of its production capacity and beet sugar
operations constituting the remaining 35%. Imperial Holly will refine raw cane
sugar at four refineries located in Texas, Georgia, Louisiana and Florida and
will produce beet sugar at 12 processing plants located in California, Wyoming,
Montana, Texas and Michigan. After the consummation of the Merger, certain
functions of Savannah Foods and Imperial Holly will be combined. Savannah Foods
will be operated as a separate, wholly owned subsidiary of Imperial Holly, with
management and operating personnel principally consisting of existing management
and operating personnel. See "Business of Imperial Holly Following the Merger."

STOCKHOLDERS' RIGHTS OF APPRAISAL

Following a statutory appraisal proceeding in the Delaware Court of
Chancery, holders of shares of Savannah Common Stock who do not vote in favor of
the Savannah Proposal and who perfect their appraisal rights in accordance with
Section 262 of the DGCL will be entitled to receive, in lieu of the Merger
Consideration, cash in the amount of the fair value of their shares (exclusive
of any element of value arising from the accomplishment or expectation of the
Merger), as determined by the court in such appraisal proceeding, plus interest,
if any, at such rate as shall be determined by such court. Because of the
complexity of the procedures for exercising these rights, Savannah Foods
stockholders who consider exercising such rights are urged to seek the advice of
counsel. A stockholder who votes for the Savannah Proposal will be deemed to
have waived appraisal rights with respect to such shares of Savannah Common
Stock. FAILURE TO TAKE ANY REQUIRED STEP ON A TIMELY BASIS IN CONNECTION WITH
THE EXERCISE OF APPRAISAL RIGHTS MAY RESULT IN THE TERMINATION OR WAIVER OF SUCH
RIGHTS. SEE "STOCKHOLDERS' RIGHTS OF APPRAISAL." A COPY OF SECTION 262 OF THE
DGCL IS ATTACHED HERETO AS ANNEX D.

Imperial Holly stockholders will not have the right to an appraisal of the
value of their shares in connection with the Merger under the provisions of the
Texas Business Corporation Act (the "TBCA").

DIFFERENCES IN RIGHTS OF STOCKHOLDERS

Rights of stockholders of Savannah Foods are currently governed by the DGCL
and by Savannah Foods' Certificate of Incorporation (the "Savannah Charter") and
Bylaws (the "Savannah Bylaws"). Upon consummation of the Merger, the rights of
Savannah Foods stockholders who receive shares of Imperial Common Stock in the
Merger will be governed by the TBCA and by Imperial Holly's Restated Articles of
Incorporation (the "Imperial Charter") and Bylaws (the "Imperial Bylaws"). There
are various differences between the rights of Savannah Foods stockholders and
Imperial Holly stockholders. See "Comparison of Stockholder Rights" and
"Description of Imperial Capital Stock."

RISK FACTORS

Savannah Foods stockholders and Imperial Holly stockholders are urged to
consider the matters set forth under "Risk Factors," beginning on page 12, in
deciding whether to vote for the approval of the Savannah Proposal or the
Imperial Proposal, respectively.
8
<PAGE> 24

SELECTED HISTORICAL FINANCIAL INFORMATION

The following tables set forth certain selected historical consolidated
financial information for Savannah Foods and Imperial Holly and are based upon
the respective historical financial statements of each company included in or
incorporated by reference in this Joint Proxy Statement/Prospectus. The selected
historical consolidated financial information for each company corresponds to
its respective annual reporting period.

SELECTED CONSOLIDATED FINANCIAL DATA FOR
SAVANNAH FOODS & INDUSTRIES, INC.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------------------------------------
JANUARY 3, OCTOBER 3, OCTOBER 2, OCTOBER 1, SEPTEMBER 29, SEPTEMBER 28,
1993 1993(1) 1994 1995 1996 1997
---------- ---------- ---------- ---------- ------------- --------------
(UNAUDITED)(6)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales.................................. $1,138,114 $ 818,116 $1,074,367 $1,098,544 $1,146,332 $1,191,839
Income from operations..................... 49,143 11,839 19,432 7,401 21,799(4) 57,658(5)
Income (loss) before change in accounting
principle, income taxes and extraordinary
item..................................... 40,968 3,141 8,606 (6,078) 9,681 51,217
Extraordinary item, net of tax(2).......... -- -- -- -- (971) (376)
Cumulative effect of change in accounting
principle(3)............................. (18,170) 600 -- -- -- --
Net income (loss).......................... 9,170 2,586 5,743 (3,493) 5,972 31,705
Per share:
Income (loss) before change in accounting
principle and extraordinary item....... $ 1.03 $ 0.08 $ 0.22 $ (0.13) $ 0.27 $ 1.22
Extraordinary item....................... -- -- -- -- (0.04) (0.01)
Accounting change........................ (0.68) 0.02 -- -- -- --
Net income (loss)........................ 0.35 0.10 0.22 (0.13) 0.23 1.21
Dividends................................ 0.525 0.405 0.54 0.32 0.10 0.125
Weighted average shares outstanding........ 26,490,701 26,238,196 26,238,196 26,238,196 26,238,196 26,238,196
BALANCE SHEET DATA
Current assets............................. $ 371,387 $ 269,990 $ 198,880 $ 197,802 $ 180,552 $ 180,395
Total assets............................... 635,755 567,852 486,127 476,507 398,261 399,071
Current liabilities........................ 233,519 154,760 85,140 114,740 85,946 87,224
Long-term debt............................. 126,464 142,078 140,224 106,864 59,754 26,100
Stockholders' equity....................... 210,620 194,714 188,174 169,649 173,727 216,689
</TABLE>

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

(1) During the fiscal period ended October 3, 1993, Savannah Foods changed its
year end from the Sunday closest to December 31 to the Sunday closest to
September 30. As a result, the fiscal period ended October 3, 1993
represents a 39 week period.

(2) Savannah Foods reported extraordinary items related to penalties incurred on
the prepayment of long-term debt during the fiscal years ended September 29,
1996 and September 28, 1997.

(3) Savannah Foods adopted Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions,
during the fiscal year ended January 3, 1993 and adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, during
the fiscal period ended October 3, 1993.

(4) Operating results for the fiscal year ended September 29, 1996 include
pre-tax charges of $10.3 million for the impairment of certain long-lived
assets and $3.8 million for the loss on the sale of a subsidiary.

(5) Operating results for the fiscal year ended September 28, 1997 include
pre-tax charges totaling $13.4 million for merger related costs.

(6) The audit of Savannah Foods' consolidated financial statements for the
fiscal year ended September 28, 1997 is in progress.
9
<PAGE> 25

SELECTED CONSOLIDATED FINANCIAL DATA FOR
IMPERIAL HOLLY CORPORATION

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, SEPTEMBER 30,(2)
-------------------------------------------------------------- -----------------------
1993 1994 1995 1996 1997(3) 1996(3) 1997(3)
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)(2)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales............................. $ 647,825 $ 655,498 $ 586,925 $ 616,450 $ 752,595 $ 393,955 $ 406,682
Operating Income (loss)............... 7,139 (4,566) (2,091) (2,431) 28,423 16,448 20,359
Income (loss) before income taxes and
extraordinary item.................. (274) (11,277) (8,649) (5,076) 17,688 11,157 15,793
Extraordinary item(1)................. (3,509) -- -- 604 -- -- --
Net income (loss)..................... (3,386) (7,965) (5,365) (2,614) 11,518 7,077 9,951
Per share:
Income (loss) before extraordinary
item.............................. 0.01 (0.78) (0.52) (0.31) 0.92 0.64 0.70
Extraordinary item.................. (0.34) -- -- 0.06 -- -- --
Net income (loss)................... (0.33) (0.78) (0.52) (0.25) 0.92 0.64 0.70
Cash dividends declared............. 0.36 0.32 0.16 0.04 -- -- 0.03
Weighted average shares outstanding... 10,187,184 10,220,172 10,266,229 10,300,487 12,576,489 11,009,476 14,247,193
BALANCE SHEET DATA
Current assets........................ $ 232,385 $ 235,651 $ 226,525 $ 183,350 $ 285,147 $ 269,597 $ 282,575
Total assets.......................... 398,202 393,660 374,124 325,319 449,933 450,983 457,899
Current liabilities................... 140,061 151,607 140,183 101,804 151,241 143,153 152,712
Long-term debt........................ 108,181 100,044 100,010 89,800 90,619 90,947 81,304
Stockholders' equity.................. 122,462 114,737 109,977 111,043 176,956 169,993 192,959
</TABLE>

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

(1) In fiscal 1993, Imperial Holly paid a make-whole premium in connection with
the prepayment of a series of senior notes. In fiscal 1996, Imperial Holly
purchased and retired a portion of a series of senior notes at a price below
book value.

(2) In October 1997, Imperial Holly changed its fiscal year end to September 30.
The audit of Imperial Holly's consolidated financial statements for the six
months ended September 30, 1997 is in progress.

(3) The results of Spreckels Sugar Company, which was acquired in a purchase
transaction, are included in Imperial Holly's consolidated results
commencing April 19, 1996.
10
<PAGE> 26

SUMMARY PRO FORMA COMBINED FINANCIAL INFORMATION

The following table sets forth certain selected pro forma combined
condensed financial data assuming the Offer, the Merger and the related
financing transactions had been completed at the beginning of the periods, in
the case of the income statement data and as of September 30, 1997, in the case
of the balance sheet data. This pro forma combined financial information does
not give effect to the cost savings and revenue enhancements Imperial Holly
expects to achieve as a result of the combined operations, as discussed in Note
8 to the Pro Forma Combined Statements of Earnings. See "Pro Forma Financial
Statements."

UNAUDITED SELECTED PRO FORMA COMBINED CONDENSED FINANCIAL DATA

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1997 SIX MONTHS ENDED SEPTEMBER 30, 1997
------------------------------------------------- -------------------------------------------------
HISTORICAL HISTORICAL
--------------------- -------------------
IMPERIAL SAVANNAH PRO FORMA PRO FORMA IMPERIAL SAVANNAH PRO FORMA PRO FORMA
HOLLY FOODS ADJUSTMENTS COMBINED HOLLY FOODS ADJUSTMENTS COMBINED
-------- ---------- ----------- ----------- -------- -------- ----------- -----------
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales............. $752,595 $1,170,729 $ -- $ 1,923,324 $406,682 $612,229 $ -- $ 1,018,911
Operating income
(loss).............. 28,423 46,225 (5,668) 68,980 20,359 24,896 8,934 54,189
Income before income
taxes............... 17,688 36,368 (39,512) 14,544 15,793 22,222 (8,328) 29,687
Income before
extraordinary
item................ 11,518 23,420 (28,202) 6,736 9,951 14,104 (6,897) 17,158
Average shares
outstanding......... 12,576,489 14,247,193
Shares sold to H.
Kempner Trust....... 377,358(1) 377,358(1)
Shares issued in
Merger.............. 12,029,962(1) 12,029,962(1)
Pro forma average
shares
outstanding......... 24,983,809 26,654,513
Pro forma earnings per
share............... $ 0.27 $ $ 0.64
BALANCE SHEET DATA
Current assets........ $282,575 $180,395 $ 26,696 $ 489,666
Total assets.......... 457,899 399,071 395,891 1,252,861
Current liabilities... 152,712 87,224 (37,491) 202,445
Long-term debt........ 81,304 26,100 432,669(2) 540,073
Stockholders'
equity.............. 192,959 216,689 (54,078) 355,570
</TABLE>

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

(1) Represents the additional shares issued in the Merger and the H. Kempner
Trust Financing, assuming the Closing Price of Imperial Common Stock is
$13.25.

(2) Represents the adjustment to reflect the borrowings under the Alternative A
Credit Facility. See "Plan of Financing -- Senior Credit Facility."
11
<PAGE> 27

RISK FACTORS

Stockholders of Savannah Foods and Imperial Holly should carefully consider
the matters discussed in this section of the Joint Proxy Statement/Prospectus.
These matters should be considered in conjunction with the other information
included and incorporated by reference in this Joint Proxy Statement/Prospectus.

LEVERAGE AND LIQUIDITY

In connection with the Offer and the Merger, Imperial Holly has entered
into the Tender Credit Facility and will enter into the Debt Financing (i) to
finance the payment of cash consideration payable to holders of Savannah Common
Stock in the Offer and the Merger, (ii) to refinance certain outstanding
indebtedness of Imperial Holly and Savannah Foods, (iii) to pay fees and
expenses related to the Offer and the Merger and (iv) to provide working capital
for Imperial Holly. Upon completion of the Debt Financing, Imperial Holly's
consolidated indebtedness including capitalized leases will exceed $550 million.
The increased indebtedness and higher debt-to-equity ratio of Imperial Holly in
comparison to that of either Imperial Holly or Savannah on a historical basis
will reduce the flexibility of Imperial Holly to respond to changing business
and economic conditions, and could limit capital expenditures and acquisitions
by Imperial Holly. The terms of the Tender Credit Facility include significant
operating covenants and restrictions, such as limits on Imperial Holly's ability
to incur additional indebtedness, make investments or repurchase shares of its
capital stock. Imperial Holly expects the terms of the Senior Credit Facility
and the Senior Subordinated Notes to contain similar restrictions. In addition,
the Tender Credit Facility is and the Senior Credit Facility will be secured by
a lien on substantially all of the assets of Imperial Holly. The Tender Credit
Facility, the Senior Credit Facility and the Senior Subordinated Notes will be
guaranteed by Imperial Holly's subsidiaries , including Savannah Foods and its
subsidiaries in the case of the Senior Credit Facility and the Senior
Subordinated Notes.

A substantial portion of the indebtedness to be incurred by Imperial Holly
is expected to bear interest at variable rates. While Imperial Holly may enter
into one or more interest rate protection agreements to limit its exposure to
increases in such interest rates, such agreements would not entirely eliminate
such exposure. In the event that Imperial Holly is not able to consummate an
offering of the Senior Subordinated Notes prior to the Effective Time of the
Merger, Imperial Holly will be required to rely on the Alternative B Senior
Credit Facility (as defined below), which facility accrues interest at a
variable rate. Any increase in the interest rate on Imperial Holly's
indebtedness will reduce funds available to Imperial Holly for its operations
and future business opportunities and will exacerbate the consequences of
Imperial Holly's leveraged capital structure.

Imperial Holly's high degree of leverage may have important consequences
including the following: (i) the ability of Imperial Holly to obtain additional
financing for acquisitions, working capital, capital expenditures or other
purposes, if necessary, may be impaired or such financing may not be on terms
favorable to Imperial Holly; (ii) a substantial portion of Imperial Holly's cash
flow will be used to make debt service payments, which will reduce the funds
that would otherwise be available to Imperial Holly for its operations and
future business opportunities; (iii) a substantial decrease in operating cash
flow or an increase in expenses of Imperial Holly could make it difficult for
Imperial Holly to meet its debt service requirements and force it to modify its
operations; (iv) Imperial Holly's high degree of leverage may make it more
vulnerable to a downturn in its business or the economy generally; and (v)
dividends to stockholders will be restricted under the Senior Credit Facility
and the Senior Subordinated Notes. Imperial Holly's ability to service its
additional indebtedness will depend on Imperial Holly's future performance,
including its ability to manage its cash flows and working capital. See "Source
and Uses of Funds" and "Plan of Financing."

In addition, Imperial Holly's ability to make scheduled payments of
principal of, or to pay the interest on, or to refinance, its indebtedness, or
to fund planned capital expenditures, will depend upon its future operating
performance, which, in turn, is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond its
control. Based upon current levels of operations, Imperial Holly's management
believes that Imperial Holly's cash flow from operations, amounts available
under the Senior Credit Facility and available cash will be adequate to meet its
anticipated future requirements for working capital, capital expenditure and
scheduled payments of principal and interest on its indebtedness. There can be
no assurance, however, that Imperial Holly's business will generate cash flow at
or above anticipated levels or

12
<PAGE> 28

that Imperial Holly will be able to borrow funds under the Senior Credit
Facility in an amount sufficient to enable Imperial Holly to service its
indebtedness, or make anticipated capital expenditures. If Imperial Holly is
unable to generate sufficient cash from operations or to borrow sufficient funds
in the future to service its debt, it may be required to sell assets, reduce
capital expenditures, refinance all or a portion of its existing debt or obtain
additional financing. There can be no assurance that any such financing could be
obtained, particularly in view of Imperial Holly's high level of debt, the
restrictions on Imperial Holly's ability to incur debt under the Senior Credit
Facility and the terms of the Senior Subordinated Notes, and the fact that
substantially all of Imperial Holly's assets will be pledged to secure
obligations under the Senior Credit Facility.

INTEGRATION OF OPERATIONS

While Savannah Foods will continue to operate as a wholly owned subsidiary
of Imperial Holly after the consummation of the Merger, the success of the
Merger nevertheless will depend in part on the ability of management of Imperial
Holly and Savannah Foods to consolidate the operations of Savannah Foods and
Imperial Holly and to integrate departments, systems and procedures. The
integration of the operations of Savannah Foods and Imperial Holly may require
substantial attention of management. The management of Imperial Holly
anticipates that it will begin to realize cost savings in its current fiscal
year, with the full impact, which Imperial Holly expects could be $40 million
annually, achieved in the fiscal year ended September 30, 1999; however, no
assurance can be given that such cost savings will be realized over such period
or in such amount. Any inability of Imperial Holly to integrate the operations
of the two companies in a timely and efficient manner would adversely affect
Imperial Holly's ability to realize its planned synergies and cost savings.

FLUCTUATION IN VALUE OF STOCK CONSIDERATION

The number and market price of shares of Imperial Common Stock to be issued
in the Merger is subject to fluctuation. The number of shares of Imperial Common
Stock to be issued to Savannah Foods stockholders who receive the Stock
Consideration will depend upon the Closing Price of Imperial Common Stock. If
the Closing Price of Imperial Common Stock is greater than $13.25 and less than
$17.25, the Savannah Foods stockholders will receive $20.25 of Imperial Common
Stock. However, if the Closing Price of Imperial Common Stock is $13.25 or lower
or $17.25 or greater, the Savannah Foods stockholders will receive a number of
shares of Imperial Common Stock equal to the quotient of $20.25 divided by
$13.25 or $17.25, as the case may be. Accordingly, the value of the Stock
Consideration will be less than $20.25 if the Closing Price of Imperial Common
Stock is less than $13.25 and will be greater than $20.25 if the Closing Price
of Imperial Common Stock is greater than $17.25. See cover page, "Merger
Agreement -- Consideration to be Paid in the Merger" and "Market Price and
Dividend Data; Stock Exchange Listing."

MARKET RISK AND GOVERNMENT REGULATION

Imperial Holly's results of operations are substantially affected by market
factors, principally domestic prices for refined sugar and raw cane sugar and
the quality and quantity of sugar beets available to Imperial Holly. These
market factors are influenced by a variety of external forces that Imperial
Holly is unable to predict, including the number of domestic acres contracted to
grow sugar beets, prices of competing crops, weather conditions and United
States farm and trade policy. Certain segments of the beet sugar industry in the
recent past have expanded sugar beet acreage at rates exceeding the rate of
growth in the demand for refined sugar, which along with large crop yields, put
downward pressure on refined sugar prices. Although smaller sugar beet crops in
the fall of 1995 and 1996 caused an increase in refined sugar prices, a larger
crop in the fall of 1997 has recently caused a decrease in refined sugar prices.
The domestic sugar industry is also subject to substantial influence by
legislative and regulatory actions. The current Farm Bill (as defined herein)
limits the importation of raw cane sugar, affecting the supply and increasing
the cost of raw cane sugar available to Imperial Holly's cane sugar refineries.
See "-- Industry Competition" and "Government Regulation -- Regulation of Sugar
Industry."

A significant portion of Imperial Holly's industrial sales are made under
fixed price, forward sales contracts, most of which commence each year on
October 1 and extend for up to one year. As a result, changes in Imperial
Holly's realized sales prices tend to lag market price changes. To mitigate its
exposure to

13
<PAGE> 29

future price changes, Imperial Holly enters into forward purchase contracts for
raw cane sugar and utilizes futures contracts and other pricing techniques.
Sugar beets are purchased under participatory contracts which provide for a
percentage sharing of the net selling price realized on refined beet sugar sales
between Imperial Holly and the grower. Use of participatory contracts also
reduces Imperial Holly's exposure to refined sugar price risk.

SUGAR BEET CROP AND STORAGE RISKS

Imperial Holly's and Savannah Foods' beet sugar operations are dependent
upon the quantity, quality and proximity of sugar beets available to its
factories. Sugar beet acreage varies depending on factors such as prices
anticipated by growers for sugar beets versus alternative crops, prior crop
quality, availability of irrigation and weather conditions. In the fiscal year
ended March 31, 1997, Imperial Holly's sugar beet acreage under contract
increased after several years of decline. In addition, the quantity of refined
sugar subsequently produced from the sugar beet crop may be materially affected
by, among other things, the acreage harvested, diseases, insects and weather
conditions during the growing, harvesting, processing and storage seasons. Sugar
beets are purchased from the growers after the harvest and, in some locations,
stored in piles until processed. Under Savannah Food's contracts, the beet
growers continue to share the risk of adverse consequences affecting the stored
sugar beets with Savannah Foods. However, Imperial Holly, which purchases
substantially more sugar beets, contractually accepts the majority of the risk
with respect to stored sugar beets. The management of Imperial Holly believes
that the geographic diversity of its growing areas reduces the risk that adverse
conditions will occur company-wide; however, there can be no assurance that
Imperial Holly's results of operations will not be adversely affected in future
years by such risks.

RAW SUGAR SUPPLY

The United States Sugar Corporation ("U.S. Sugar"), a supplier of raw sugar
which supplies approximately 18% of Savannah Foods' supply of raw cane sugar,
(and supplies approximately 14% of Imperial Holly's and Savannah Foods' combined
supply of raw cane sugar) recently notified Savannah Foods that it intends to
terminate its supply contract with Savannah Foods effective October 31, 2001. In
addition, in March 1997, U.S. Sugar began construction of an approximately
10,000,000 cwt. capacity refinery in Florida. Imperial Holly expects that
adequate supplies of raw cane sugar from other sources will be available upon
the expiration of such contract. No assurance can be given, however, that such
supplies will be available. The amount of raw sugar available from offshore
supplies to all United States cane sugar refiners including Imperial Holly and
Savannah Foods is directly dependent upon quotas set by the United States
Department of Agriculture (the "USDA"). See " -- Market Risk and Government
Regulation."

DEMAND FOR REFINED SUGAR

Demand for refined sugar has increased each year since 1986, and the
average rate of growth over the past five years has been 1.6%. Imperial Holly,
however, is not able to predict future rates of growth. Demand for refined sugar
in the future could be adversely affected by numerous factors including the
impact of changes in the availability, development or potential use of various
types of sweeteners or future changes in consumer sweetener preferences or in
population size, any of which could adversely affect such demand.

The decline in demand for refined sugar products attributable to the
replacement of refined sugar by high fructose corn syrup ("HFCS") and
non-nutritive sweeteners in the beverage market stabilized a decade ago.
Imperial Holly generally does not consider HFCS a significant competitive
threat, as refined sugar and HFCS support different markets. HFCS is a liquid
sweetener and generally does not compete in the dry sugar market. Moreover,
while HFCS did replace refined sugar in the beverage market over a decade ago, a
number of other consumer food products use both refined sugar and HFCS as
production ingredients. In certain applications, refined sugar also competes
with non-nutritive and low-calorie sweeteners, principally aspartame and, to a
lesser extent, saccharin and acesulfam-k. The level of per capita sugar
consumption in the United States has increased in recent years, and Imperial
Holly believes that future increases or decreases in sugar consumption will be
dependent upon technological improvements, changes in population, geographic
shifts in population and changes in consumer sweetener preferences.

14
<PAGE> 30

INDUSTRY COMPETITION

Imperial Holly competes with other cane sugar refiners and beet sugar
processors and, in certain product applications, with producers of other
nutritive and non-nutritive sweeteners. Selling price and the ability to supply
the buyer's quality and quantity requirements in a timely fashion are important
competitive factors. Certain competing beet sugar processors have expanded their
production capacity in the recent past. The additional sugar marketed as a
result of this expansion has acted to reduce sugar market prices at times during
this period.

ENVIRONMENTAL MATTERS

Imperial Holly's operations are governed by various federal, state and
local environmental regulations. These regulations impose effluent and emission
limitations and requirements regarding management of water resources, air
resources, toxic substances, solid waste and emergency planning. Additional
testing requirements and more stringent permit limitations have resulted in
increasing environmental costs, and Imperial Holly expects that the cost of
compliance will continue to increase. Imperial Holly's management does not
believe that compliance will have a material adverse impact on capital
resources.

BUSINESS OF IMPERIAL HOLLY FOLLOWING THE MERGER

Following the Merger, Imperial Holly will be the largest producer and
marketer of refined sugar products in the United States with annual pro forma
revenues of $2.0 billion in the fiscal year ended March 31, 1997. Imperial Holly
will also possess the most balanced and geographically diverse production
capacity of any domestic sugar producer and will have favorable access to all
refined sugar markets in the United States. Imperial Holly's production mix will
consist of approximately 65% refined cane sugar and 35% refined beet sugar.
Imperial Holly believes that this relatively balanced mix of production capacity
should serve to: (i) reduce Imperial Holly's exposure to any change in federal
trade and agricultural policy and (ii) reduce the volatility in Imperial Holly's
operating results. Imperial Holly will refine raw cane sugar at four refineries
located in Texas, Georgia, Florida and Louisiana and produce beet sugar at 12
processing plants located in California, Wyoming, Montana, Texas and Michigan.
Imperial Holly will also utilize a national network of 35 warehouses and
distribution stations in 16 states across the country.

Imperial Holly will produce, market and distribute a complete line of
refined sugars and related products to three groups of customers: (i) retail
grocers, (ii) food service companies, which include restaurants, schools and
other institutions, and (iii) industrial customers, which are principally food
manufacturers. Imperial Holly will market refined sugar, in packages ranging
from one-pound boxes to 25-pound bags, to retail grocers under the trade names
Imperial(R), Dixie Crystals(R), Holly(R), Spreckels(R), Pioneer(R) and
Evercane(R), and under the retailers' private labels. Imperial Holly also will
produce a variety of products, including sugar packets, artificial sweeteners,
salt, pepper, non-dairy creamer and plastic cutlery, which it will market to
food service customers in sizes ranging from single-serving packages to 50-pound
bags. Imperial Holly will sell refined sugar, including Savannah Gold(TM) (a
premium-priced free flowing sugar), to industrial customers in packaged, bulk or
liquid form for use in the preparation of confections, baked products, frozen
desserts, canned goods and various other food products. Imperial Holly will
market its products throughout the United States both by direct sales and
through brokers and wholesalers.

Imperial Holly's principal executive offices are located at One Imperial
Square, Suite 200, 8016 Highway 90-A, Sugar Land, Texas 77478, and its telephone
number is (218) 491-9181.

15
<PAGE> 31

SPECIAL MEETINGS

SAVANNAH SPECIAL MEETING

TIME, DATE AND PLACE; MATTERS TO BE CONSIDERED. The Savannah Special
Meeting will be held at the Hyatt Regency Hotel, 2 West Bay Street, Savannah,
Georgia on December 19, 1997 at 10:00 a.m., local time, to consider and vote
upon (i) the Savannah Proposal and (ii) such other matters as may be properly
brought before the Savannah Special Meeting. Only holders of record of shares of
Savannah Common Stock at the Savannah Record Date, which is the close of
business on November 17, 1997, will be entitled to receive notice of and to vote
at the Savannah Special Meeting.

REQUIRED VOTE, QUORUM. At the close of business on the Savannah Record
Date, there were 28,738,196 shares of Savannah Common Stock outstanding, each of
which entitles the registered holder thereof to one vote. A majority of the
issued and outstanding shares of Savannah Common Stock entitled to vote, present
in person or by proxy, will constitute a quorum at the Savannah Special Meeting.
The affirmative vote of the holders of a majority of the shares of Savannah
Common Stock outstanding and entitled to vote is necessary to approve the
Savannah Proposal. IHK Sub owns a sufficient number of shares of Savannah Common
Stock to assure approval and adoption of the Savannah Proposal at the Savannah
Special Meeting and has agreed to vote all of such shares in favor of the
Savannah Proposal. Accordingly, the affirmative vote of any other holder of
shares of Savannah Common Stock will not be required to approve the Savannah
Proposal.

THE SAVANNAH BOARD UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF SAVANNAH
COMMON STOCK VOTE FOR APPROVAL OF THE SAVANNAH PROPOSAL BY COMPLETING, SIGNING,
DATING AND RETURNING THE ENCLOSED PROXY CARD WHETHER OR NOT SUCH HOLDERS PLAN TO
ATTEND THE SAVANNAH SPECIAL MEETING.

IMPERIAL SPECIAL MEETING

TIME, DATE AND PLACE; MATTERS TO BE CONSIDERED. The Imperial Special
Meeting is scheduled to be held at the Sweetwater Country Club, 4400 Palm Royale
Boulevard, Sugar Land, Texas on December 19, 1997 at 9:00 a.m., local time, to
consider and vote upon (i) the issuance of Imperial Common Stock to stockholders
of Savannah Foods in the Merger and (ii) such other matters as may be properly
brought before the Imperial Special Meeting. Only holders of record of shares of
Imperial Common Stock at the Imperial Record Date, which is the close of
business on November 17, 1997, will be entitled to notice of and to vote at the
Imperial Special Meeting.

REQUIRED VOTE; QUORUM. At the close of business on the Imperial Record
Date, there were 14,285,767 shares of Imperial Common Stock outstanding, each of
which entitles the registered holder thereof to one vote. A majority of the
outstanding shares of Imperial Common Stock entitled to vote, represented in
person or by proxy, will constitute a quorum at the Imperial Special Meeting.
The affirmative vote of a majority of the votes cast at the Imperial Special
Meeting is required to approve the Imperial Proposal. Imperial Holly
stockholders holding 66.3% of the outstanding shares of Imperial Common Stock
have granted Savannah Foods and R. Eugene Cartledge, a director of Savannah
Foods, and William W. Sprague III, the President of Savannah Foods, proxies to
vote such shares in favor of the Imperial Proposal, thus assuring its approval.
Accordingly, the affirmative vote of any other holder of shares of Imperial
Common Stock will not be required to approve the Imperial Proposal.

THE IMPERIAL BOARD UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF IMPERIAL
COMMON STOCK VOTE FOR THE APPROVAL OF THE IMPERIAL PROPOSAL BY COMPLETING,
SIGNING, DATING AND RETURNING THE ENCLOSED PROXY CARD WHETHER OR NOT SUCH
HOLDERS PLAN TO ATTEND THE IMPERIAL SPECIAL MEETING.

16
<PAGE> 32

SOURCES AND USES OF FUNDS

The following table illustrates the estimated sources and uses of funds
assuming the consummation of the Offer and the Merger as of September 30, 1997.
See "Plan of Financing."

SOURCES OF FUNDS(1)
(DOLLARS IN MILLIONS)

<TABLE>
<S> <C>
Alternative A Term Loans.................................... $255.0
Alternative A Revolver...................................... 8.6(2)
Senior Subordinated Notes................................... 250.0
H. Kempner Trust Financing.................................. 5.0
------
$518.6
======
</TABLE>

USES OF FUNDS
(DOLLARS IN MILLIONS)

<TABLE>
<S> <C>
Cash Paid to Savannah Foods Stockholders in the Offer....... $292.0
Cash Paid to Savannah Foods Stockholders in the Merger...... 81.0(3)
Retirement of Imperial Holly Debt........................... 121.2(4)
Costs Related to Offer and Merger........................... 24.4
------
$518.6
======
</TABLE>

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

(1) Does not include the Tender Credit Facility which was entered into on
October 17, 1997.

(2) The total amount available under the Alternative A Revolver is $200 million.

(3) Includes $79.9 million paid to Savannah Foods stockholders in the Merger,
$1.1 million to be paid to the holders of currently exercisable options to
purchase shares of Savannah Common Stock. Excludes approximately $38.3
million in cash received in the Offer and the Merger in exchange for the
Savannah Common Stock held in the Benefit Trust, approximately $27.6 million
of which will be used to retire the Benefit Trust Note and approximately
$10.7 million of which will be used to purchase Imperial Common Stock at a
purchase price per share equal to the fair market value of Imperial Common
Stock. See "The Merger Agreement -- Employee Benefit Matters."

(4) Includes $78.1 million paid to purchase the Senior Notes in the Debt Tender
Offer, but does not include $5.8 million of the Senior Notes not purchased.
Also includes $43.1 million of outstanding borrowings under Imperial Holly's
prior revolving credit facility. Savannah Foods had no outstanding
borrowings under its revolving credit facility as of September 30, 1997.

17
<PAGE> 33

DESCRIPTION OF MERGER

BACKGROUND

SAVANNAH FOODS. In early 1996, the Savannah Board requested that its senior
management present a strategic plan to improve long-term stockholder value. At a
special meeting of the Savannah Board on March 27, 1996, Savannah Foods' senior
management presented a plan which outlined two strategies to improve long-term
stockholder value: (i) the maximization of the value of Savannah Foods' existing
sugar business and (ii) the acquisition of food-related product companies in
order to expand Savannah Foods' size, diversify its product lines and reduce its
dependence on the refined sugar business. Savannah Foods considered this second
strategy to be parallel but supplemental to its primary goal to maximize the
value of its existing business.

Efforts to Implement Diversification Strategy. Senior representatives of
Savannah Foods met with several investment banks from May 6 to May 8, 1996. At
such meetings, the investment banks were asked to present acquisition candidates
to Savannah Foods. Following these meetings, several potential candidates were
presented to Savannah Foods. However, in each case, the discussions with such
candidates did not result in any acquisition proposals.

In November 1996, a candidate outside the sugar industry (the
"Diversification Candidate") expressed a high level of interest in engaging in a
strategic business combination with Savannah Foods, and preliminary
conversations between senior representatives of Savannah Foods and senior
representatives of the Diversification Candidate ensued. On December 10, 1996,
Savannah Foods engaged DLJ as its financial advisor on a short-term basis in
order to determine the feasibility of entering into a strategic business
combination with the Diversification Candidate.

At a special meeting of the Savannah Board on December 16, 1996 to discuss
the opportunity with the Diversification Candidate, DLJ advised the Board of
Directors that the proposed transaction, which would have resulted in a change
in control of Savannah Foods, involved a discount to the price of Savannah
Common Stock, did not have any meaningful synergies of combination and was not
compelling enough to pursue without first investigating potential interest by
certain strategic partners. After discussing the proposal of the Diversification
Candidate, considering the comments of DLJ and considering such other factors as
it deemed appropriate, the Savannah Board decided to reject the proposal of the
Diversification Candidate and to continue to investigate and evaluate strategic
options for Savannah Foods, with the advice and assistance of DLJ.

Efforts to Implement Strategy to Maximize Value; Agreement with Flo-Sun. In
an effort to maximize the value of Savannah Foods' existing sugar business,
management reduced costs, reduced debt, sold or closed non-strategic assets, and
developed higher value new products. In addition, senior management and the
Savannah Board believed that vertical integration was likely to benefit Savannah
Foods on a long-term basis. Savannah Foods also decided that it should
concurrently discuss transactions with other sugar industry participants that
would result in horizontal integration. As a result, Savannah Foods initiated
discussions with various participants in the sugar business, both domestically
and abroad. The objective in this process was to maximize stockholder value.

In March 1996, certain senior officers of Savannah Foods met with
representatives of a major raw sugar producer ("Candidate 1") to explore the
possibility of the two companies entering into a strategic business combination.
Over the next several months, senior officers from Savannah Foods and Candidate
1 continued their conversations concerning a possible business combination or
other alliance. In March 1997, Candidate 1 indicated that it was not interested
in further discussions.

Another alternative to strengthen Savannah Foods' sugar business was to
form alliances with, merge with or acquire beet sugar companies. In July 1996, a
Savannah Foods representative met with a representative of a beet sugar company
("Candidate 2") and discussed a proposal to form a joint venture or other
strategic combination. The discussions which ensued between Savannah Foods and
Candidate 2 failed to produce a mutually satisfactory proposal. A Savannah Foods
representative met with a senior executive of another beet

18
<PAGE> 34

processor ("Candidate 3") several times in 1996 and 1997 to discuss various
strategic combinations, including the possibility of merging. Proposals
discussed between Savannah Foods and Candidate 3, again, were never agreed upon.

In August 1996, Flo-Sun, a privately held Florida based sugarcane grower,
expressed a high level of interest in engaging in a strategic business
combination with Savannah Foods, and preliminary conversations between senior
representatives of Savannah Foods and Flo-Sun commenced. On December 20, 1996,
Savannah Foods entered into a letter agreement with DLJ pursuant to which
Savannah Foods retained DLJ as its exclusive financial advisor with respect to a
possible acquisition by a third party, or a sale, merger, consolidation or any
other business combination. From late December 1996 until May 1997, certain
senior officers of Savannah Foods and DLJ proceeded to contact a number of
potential candidates, both domestic and foreign, in addition to those already
referred to, who might be expected to have an interest in engaging in a
strategic business combination with Savannah Foods.

On February 26, 1997, as part of the process of gaining further information
about Savannah Foods, Flo-Sun entered into a confidentiality agreement with
Savannah Foods. On March 7, 1997, another party ("Candidate 4") similarly
entered into a confidentiality agreement with Savannah Foods. In May 1997,
Candidate 4, after reviewing certain information about Savannah Foods, informed
Savannah Foods that it did not desire to pursue a strategic business
combination.

From mid-December 1996 until April 1997, certain senior officers of
Savannah Foods also continued to periodically engage in informal discussions and
meetings with certain senior officers from the Diversification Candidate. On
April 15, 1997, the Diversification Candidate made another proposal to engage in
a strategic business combination with Savannah Foods. At a regular meeting of
the Savannah Board on April 17, 1997, R. Eugene Cartledge, Chairman of the
Savannah Board, reported that the Executive Committee of the Savannah Board had
voted the day earlier to recommend that he and Savannah Foods' President and
Chief Executive Officer, William W. Sprague III, continue to investigate all
available options with respect to a strategic transaction, and the Savannah
Board approved such recommendation.

On April 30, 1997, another party ("Candidate 5") approached Savannah Foods
concerning a strategic merger, and entered into a confidentiality agreement with
Savannah Foods. Subsequently, Savannah Foods concluded that a merger with
Candidate 5 would not meet its strategic objectives. Accordingly, Savannah Foods
notified Candidate 5 in May 1997 that it did not desire to pursue a strategic
business combination with Candidate 5 at that time.

On May 12, 1997, Flo-Sun indicated that it was in the planning stages with
respect to a restructuring transaction involving certain of its subsidiaries.
Flo-Sun stated that such restructuring would combine all of the U.S. operations
of Flo-Sun under one corporate entity, XSF Holdings, Inc. ("XSF"), and that such
restructuring could be consummated in connection with a business combination
with Savannah Foods. On that date, Flo-Sun proposed to Savannah Foods a business
combination with XSF, pursuant to which the resulting combined company would be
a public company, Savannah Foods stockholders would receive 40% of the
outstanding common stock of the combined company and Flo-Sun and certain
stockholders of Flo-Sun would receive 60% of the outstanding common stock of the
combined company. Also on May 12, 1997, as part of the process of gaining
further information about XSF and Flo-Sun, Savannah Foods entered into a
confidentiality agreement with Flo-Sun.

On May 22, 1997, the Savannah Board met to consider the two most recent
proposals made by each of Flo-Sun and the Diversification Candidate. During this
meeting, DLJ advised the Savannah Board that the likelihood of concluding the
proposed transaction with the Diversification Candidate on a basis that would be
fair to Savannah Foods stockholders was favorable, but that the proposed
transaction with Flo-Sun could possibly be more favorable, depending on further
negotiations and additional information. The Savannah Board, based on DLJ's
advice and on certain other factors it deemed appropriate, decided that Mr.
Cartledge and DLJ should continue to aggressively negotiate both alternatives
until a choice could be made.

On May 23, 1997, Messrs. Cartledge, Sprague, Alfonso Fanjul, Chairman and
Chief Executive Officer of Flo-Sun, Jose Pepe Fanjul, Vice Chairman and Chief
Operating Officer of Flo-Sun, and other representatives

19
<PAGE> 35

of Flo-Sun and Savannah Foods, along with representatives of DLJ and Savannah's
outside counsel met to discuss a possible strategic business combination.

On May 24, 1997, the Savannah Board met telephonically for the purpose of
having Mr. Cartledge update the Savannah Board of Directors on the status of
Savannah Foods' discussions and to discuss the relative merits of the two
alternatives.

Late on May 25, 1997, the Diversification Candidate and Savannah Foods
terminated their discussions. At a special meeting of the Savannah Board on May
26, 1997, the Savannah Board directed the Savannah Foods management, Mr.
Cartledge and DLJ to negotiate an agreement with Flo-Sun to be presented to the
Savannah Board for its consideration. After the Savannah Board meeting on May
26, 1997, Mr. Cartledge contacted Mr. Alfonso Fanjul to indicate that Savannah
Foods was interested in pursuing an alliance with Flo-Sun. The companies then
commenced a detailed mutual due diligence process.

During the following weeks, representatives of Savannah Foods and Flo-Sun
and their respective advisors continued to discuss matters relating to the
structuring of the proposed transaction and the terms to be included in the
documentation of the transaction and to exchange information regarding their
respective businesses. On June 30, 1997, Flo-Sun delivered a draft merger
agreement to Savannah Foods and its outside advisors pursuant to which Savannah
Foods would merge with a wholly owned subsidiary of XSF. At a special meeting on
July 1, 1997, the Savannah Board convened and received reports from Messrs.
Cartledge and Sprague with respect to the ongoing merger negotiations with
Flo-Sun.

From June 30 through July 10, 1997, Savannah Foods, Flo-Sun and their
respective legal counsel and investment bankers held several meetings in person
and by telephone in which various terms of the proposed Flo-Sun Merger
Agreement, among Savannah Foods, XSF, DXE Merger Corp., a Delaware corporation
("DXE") and a wholly owned subsidiary of XSF, and Flo-Sun, were discussed and
negotiated. Pursuant to the terms of the Flo-Sun Merger Agreement, DXE would be
merged with and into Savannah Foods, resulting in Savannah Foods becoming a
wholly owned subsidiary of XSF.

On July 10, 1997, Messrs. Cartledge and Sprague met with Alfonso Fanjul and
Jose Pepe Fanjul to discuss the exchange ratio of the proposed transaction.
While Savannah Foods' representatives negotiated for an increased percentage of
the combined company on behalf of Savannah Foods stockholders, there were
discussions by the Messrs. Fanjul about the relative book values of Flo-Sun and
its affiliates which supported the exchange ratio of 40% that they had proposed.
After vigorous debate, the Fanjuls agreed to accept an exchange ratio whereby
Savannah Foods stockholders would receive 41.5% of the combined company (the
"Flo-Sun Exchange Ratio"). Messrs. Cartledge and Sprague agreed to recommend
this transaction to the Savannah Board.

On July 14, 1997, the Savannah Board met to review the proposed Flo-Sun
Merger Agreement and the terms of the Flo-Sun Merger and the transactions
contemplated thereby. At such meeting, DLJ rendered to the Savannah Board its
oral opinion (confirmed in writing later that day) to the effect that, as of
such date, and based upon and subject to the assumptions, limitations and
qualifications set forth therein, the aggregate number of shares of the common
stock of the combined company to be received in the Flo-Sun Merger by Savannah
Foods stockholders was fair to Savannah Foods stockholders from a financial
point of view. The Savannah Board, by a unanimous vote of all directors present,
then approved the Flo-Sun Merger, the Flo-Sun Merger Agreement and the
transactions contemplated thereby.

Following the conclusion of the Savannah Board special meeting on the
evening of July 14, 1997, the Flo-Sun Merger Agreement was executed and
delivered by all the parties thereto. On July 15, 1997, Savannah Foods and
Flo-Sun issued a joint press release announcing the execution of the Flo-Sun
Merger Agreement.

Actions Leading to the Merger Agreement with Imperial Holly. On August 25,
1997, Imperial Holly submitted a proposal to acquire Savannah Foods in a
transaction pursuant to which Savannah Foods stockholders would receive $18.75
in value per share of Savannah Common Stock, comprised of 70% cash and 30%
Imperial Common Stock. On August 26, 1997, the Savannah Board met by telephone
to evaluate the acquisition proposal submitted by Imperial Holly. At such
meeting, DLJ advised the Savannah Board that Imperial Holly's proposal was
superior to the Flo-Sun Merger. The Savannah Board instructed Savannah

20
<PAGE> 36

Foods' management to begin discussions with Imperial Holly in order to improve
the terms and conditions of its proposal. On August 26, 1997, Savannah Foods
entered into a confidentiality agreement with Imperial Holly.

From August 25, 1997 through September 4, 1997, Savannah Foods, Imperial
Holly and their respective financial and legal advisors held several meetings in
person and by telephone in which various terms of the Merger were discussed and
negotiated. On August 27, 1997, Imperial Holly delivered a draft merger
agreement to Savannah Foods and its outside advisors, and Imperial Holly and
Savannah Foods both commenced a detailed mutual due diligence process.

On September 4, 1997, Imperial Holly delivered to Savannah Foods an
executed merger agreement, together with a commitment to leave its offer to
acquire Savannah Foods set forth in the merger agreement for $18.75 in value per
share of Savannah Common Stock, comprised of 70% cash and 30% Imperial Common
Stock, open through noon on September 12, 1997.

On September 4, 1997, the Savannah Board held a special meeting to review
the Imperial Holly proposal and the transactions contemplated thereby. Prior to
the commencement of such special meeting, Savannah Foods received from Flo-Sun a
letter proposing certain changes to the Flo-Sun Merger Agreement, including
increasing the Flo-Sun Exchange Ratio to 45% of the combined company and
providing $4.00 in cash per share of Savannah Common Stock (the "Revised Flo-Sun
Proposal"). DLJ advised the Savannah Board that it was prepared to render an
opinion to the effect that the consideration of $18.75 per share to be received
by the Savannah Foods stockholders pursuant to the proposed merger agreement
with Imperial Holly was fair to the Savannah Foods stockholders from a financial
point of view. The Savannah Board determined that, based in part on the advice
of DLJ, the Imperial Holly proposal was superior to the Flo-Sun Merger.
Accordingly, the Savannah Board determined to terminate the Flo-Sun Merger
Agreement and to pursue a strategy to obtain the highest bid from both Flo-Sun
and Imperial Holly.

Pursuant to the terms of the Flo-Sun Merger Agreement, prior to termination
Flo-Sun had to be given five business days to make adjustments in the terms and
conditions of such agreement. Accordingly, immediately following the September
4, 1997 meeting, Savannah Foods sent Flo-Sun a letter terminating the Flo-Sun
Merger Agreement effective on September 11, 1997, subject to Flo-Sun's right to
adjust the terms of the Flo-Sun Merger Agreement as would enable Savannah Foods
to proceed with a transaction with Flo-Sun. On September 5, 1997, Savannah Foods
received a draft of a proposed amendment to the Flo-Sun Merger Agreement
incorporating the terms of the Revised Flo-Sun Proposal (the "Flo-Sun
Amendment"). Representatives of Savannah Foods and Flo-Sun subsequently
negotiated the terms of the Flo-Sun Amendment.

On September 8, 1997, Savannah Foods notified both Flo-Sun and Imperial
Holly that the Savannah Board would meet on September 11, 1997 to consider the
Flo-Sun Amendment, and that both parties should submit their best and final
proposals by September 10, 1997. In addition, on September 8, 1997, Savannah
Foods engaged a second financial adviser, Robinson-Humphrey, in connection with
reviewing the competing offers to acquire Savannah Foods.

On September 10, 1997, Imperial Holly's financial advisor, Lehman Brothers,
informed DLJ that the Imperial Board had approved a revised offer to acquire
Savannah Foods, increasing the proposed purchase price to $20.25 per share of
Savannah Common Stock. Following such meeting, Imperial Holly sent Savannah
Foods a revised Merger Agreement reflecting such price and certain other changes
negotiated between the parties. Upon receipt of the revised Merger Agreement,
Mr. Sprague contacted Mr. Alfonso Fanjul and informed him of the revised
proposal from Imperial Holly. Mr. Fanjul stated that the Flo-Sun Amendment was
Flo-Sun's final offer. On September 10, 1997, Flo-Sun sent Savannah Foods a
definitive copy of the Flo-Sun Amendment and informed Savannah Foods that its
revised offer would remain open until 4:00 p.m. on September 11, 1997.

At a special meeting held on September 11, 1997, the Savannah Board
unanimously approved the Offer, the Merger, the Merger Agreement and the other
transactions contemplated thereby, and resolved to recommend that the Savannah
Foods stockholders tender their shares of Savannah Common Stock pursuant to the
Offer and vote for adoption of the Merger Agreement and approval of the
transactions contemplated

21
<PAGE> 37

thereby. On September 12, 1997, the Flo-Sun Merger Agreement was terminated, and
Savannah Foods executed and delivered the Merger Agreement, as previously
executed and delivered by Imperial Holly.

IMPERIAL HOLLY. 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 and financing and structure for a
potential offer to acquire Savannah Foods. The Imperial Board met on July 25,
1997 and considered a presentation by Lehman Brothers and Imperial Holly's
management of structuring and financing alternatives for the acquisition of
Savannah Foods by Imperial Holly. The Imperial Board authorized Imperial Holly's
management and Lehman Brothers to continue to refine their financial and
strategic analyses and to pursue financing alternatives for such a transaction.
In August 1997, Imperial Holly engaged outside counsel to assist in evaluating
such a transaction.

On August 8, 1997, the Imperial Board met to consider and discuss a
presentation by Imperial Holly's management and Lehman Brothers of their
analysis of a proposal for the acquisition of Savannah Foods by Imperial Holly
for a combination of cash and Imperial Common Stock. The Imperial Board, after
consulting with its outside counsel, Imperial Holly's 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
Savannah Foods and the financing required for such a transaction.

The Imperial Board met on August 22, 1997 and discussed with Imperial
Holly's management, Lehman Brothers and Imperial Holly's outside counsel a
proposal to acquire Savannah Foods in a cash and stock merger for $18.75 per
share of Savannah Common Stock, consisting of 70% cash and 30% Imperial Common
Stock. The Imperial Board authorized management to deliver a letter setting
forth the terms of such a proposal to Savannah Foods. On August 24, 1997, Gerald
Grinstein, an Imperial Holly director, contacted Mr. Cartledge to indicate that
Imperial Holly was considering such an offer.

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 Mr. Sprague.

On August 26, 1997, Imperial Holly signed a customary confidentiality
agreement with Savannah Foods relating to the information to be provided by
Savannah Foods (which agreement, among other things, prohibited Imperial Holly
from making an unsolicited acquisition proposal for Savannah Foods, or engaging
in certain other activities relating to control of Savannah Foods, for a two
year period).

On August 27, 1997, Imperial Holly delivered a draft merger agreement to
Savannah Foods and its financial and legal advisors, and Imperial Holly and
Savannah Foods 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 Savannah Foods' management and Savannah Foods' financial and legal
advisors to discuss Imperial Holly's offer. Savannah Foods and Imperial Holly
discussed a proposed structure for the acquisition of Savannah Foods, pursuant
to which Imperial Holly would make a cash tender offer for 50.1% of the Savannah
Common Stock followed by a merger at a price of $18.75 per share of Savannah
Common Stock, with 70% of the consideration being in cash and 30% in Imperial
Common Stock. On August 30, 1997, Messrs. Kempner, Cartledge and Sprague, and
other members of Imperial Holly's and Savannah Foods' management, DLJ, Lehman
Brothers, Savannah Foods' outside counsel 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.

On September 4, 1997, the Imperial 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 Board that the consideration to be paid by Imperial
Holly in the proposed transaction was fair to Imperial Holly from a financial
point of view. The Imperial Board unanimously approved the proposed transactions
with Savannah Foods at $18.75 per share, consisting of 70% cash and 30% Imperial
Common Stock. The Imperial Board also directed Lehman Brothers to communicate
the offer, including the copy of the proposed merger agreement containing such
terms and signed by Imperial Holly, to DLJ, conditioned upon Savannah Foods
terminating the Flo-Sun Merger Agreement.

22
<PAGE> 38

On September 4, 1997, 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 negotiated with
Savannah Foods' management, DLJ and Savannah Foods' outside counsel concerning
certain revisions to the terms of Imperial Holly's offer.

The Imperial Board met on September 10, 1997 and reviewed the terms of a
revised offer at $20.25 per share of Savannah Common Stock, consisting of 70%
cash and 30% Imperial Common Stock, with Imperial Holly's management, Lehman
Brothers and Imperial Holly's outside counsel. Lehman Brothers rendered its oral
opinion (subsequently confirmed in writing) to the Imperial Board that such a
transaction was fair from a financial point of view to Imperial Holly, and the
Imperial Board unanimously approved such an offer and directed Lehman Brothers
to communicate the revised offer to DLJ. Also on September 10, 1997, Imperial
Holly delivered an executed copy of the Merger Agreement to Savannah Foods.

RECOMMENDATIONS OF THE BOARDS OF DIRECTORS; REASONS FOR THE MERGER

RECOMMENDATION OF SAVANNAH BOARD AND SAVANNAH FOODS' REASONS FOR THE
MERGER. The Savannah Board has determined that the transactions contemplated by
the Merger Agreement are fair to and in the best interests of Savannah Foods and
its stockholders and recommends that the holders of Savannah Common Stock vote
FOR approval of the Savannah Proposal.

In its deliberations and in making its unanimous determination that the
transactions contemplated by the Merger Agreement are fair to and in the best
interests of Savannah Foods and its stockholders, and in authorizing and
approving the Merger Agreement and the Merger on September 11, 1997, the
Savannah Board consulted with DLJ and Robinson-Humphrey and with Savannah Foods'
outside counsel. The Savannah Board considered a number of factors including,
among others, the following principal factors:

(i) the fact that the price of $20.25 per share represents a premium of
approximately 36% over the closing sale price of $14.9375 per share as reported
on the NYSE on August 25, 1997, the last trading date prior to the date Savannah
Foods first publicly announced it had received an acquisition proposal from
Imperial Holly;

(ii) the recent historical market prices and trading information for
Savannah Common Stock;

(iii) the presentation by DLJ to the Savannah Board on September 11, 1997
of the DLJ Opinion to the effect that, as of such date and based upon and
subject to the assumptions, limitations and qualifications set forth therein,
the Merger Consideration to be received by the Savannah Foods stockholders
pursuant to the Merger Agreement is fair to Savannah Foods stockholders from a
financial point of view. The full text of the DLJ Opinion is attached as Annex B
hereto and should be read in its entirety;

(iv) the fact that DLJ had informed the Savannah Board that the DLJ Opinion
had superseded the written opinion, dated July 14, 1997, of DLJ relating to the
fairness from a financial point of view to the stockholders of Savannah Foods of
the consideration to be received pursuant to the Flo-Sun Merger Agreement and
that DLJ had withdrawn such opinion;

(v) the presentation by Robinson-Humphrey of its financial analysis of the
relative values of the Flo-Sun Merger and the Merger;

(vi) the business, operations, properties, assets, financial condition and
operating results of Savannah Foods and Imperial Holly;

(vii) the estimated impact of the potential operating efficiencies and
other synergies resulting from the Merger, including economies of scale; the
Savannah Board also considered the degree of risk that such synergies and cost
savings will not be achieved, that the operations of the two companies will not
be successfully integrated and that key management personnel of Savannah Foods
might not remain with Savannah Foods after announcement of the Merger;

(viii) the benefit of geographic and production diversification achieved as
a result of the Merger, including (A) a balance of beet (approximately 35% of
production) and cane sugar (approximately 65% of

23
<PAGE> 39

production) refining which would enhance the combined company's ability to
withstand near term pressure in connection with the supply of cane sugar, (B)
broadened market participation and (C) geographically dispersed production
facilities allowing for efficient sourcing for customers;

(ix) the increased refining capacity resulting from the Merger, enhancing
the combined company's ability to secure sufficient supplies of cane sugar
through, among other means, partnering arrangements with raw sugar suppliers, as
it does with its sugar-beet growers;

(x) the opportunity for Savannah Foods stockholders to maintain an
ownership stake in the combined entity and realize the potential long-term
benefits of the Merger described above;

(xi) Savannah Foods' uncertain future as an independent sugar refiner in
light of, among other things, (A) the historical and anticipated future rate of
growth of sugar consumption in the United States, (B) the anticipated growth of
production capacity for the refined sugar market in the United States caused by
the shift toward vertical integration of the refined sugar industry by raw sugar
producers, including the construction of a refinery in Florida by U.S. Sugar, a
significant raw sugar producer, expected to be completed in 1998, and (C) the
anticipated impact of such vertical integration on the availability to Savannah
Foods of raw sugar to be refined (including the determination by U.S. Sugar to
terminate its supply contract with Savannah Foods effective October 31, 2001),
and the prices at which raw sugar might be available;

(xii) the results of the inquiries made by Savannah Foods' management and
DLJ to major companies in the sugar industry, both domestic and foreign,
regarding a possible strategic alliance, partnership, business combination,
acquisition or similar transaction with Savannah Foods and the fact that, in
light of such inquiries, Savannah Foods' management did not receive nor did it
believe it likely that any other party would propose a strategic alliance,
partnership, business combination, acquisition or similar transaction that,
taken as a whole, would be more favorable to Savannah Foods and its stockholders
than the Offer, the Merger and the transactions contemplated thereby;

(xiii) the strategic alternatives available to Savannah Foods (including
continuing Savannah Foods' business in its present configuration without
significant changes), none of which the Savannah Board believed to be as
favorable to Savannah Foods stockholders as a merger with Imperial Holly;

(xiv) the regulatory approvals required to consummate the Merger and the
transactions contemplated thereby, and the prospects for receiving all such
approvals;

(xv) the provision through the Offer for a prompt cash tender offer for a
significant number of shares of Savannah Common Stock, thereby enabling Savannah
Foods stockholders who wanted to receive cash in exchange for their shares of
Savannah Common Stock to obtain certain benefits of the Merger at the earliest
possible time;

(xvi) the likelihood that the Offer and the Merger will be consummated, and
the effects on Savannah Foods' business, operations and financial condition
should it not be possible to consummate the Merger following public announcement
that the Merger Agreement had been entered into;

(xvii) the terms and conditions of the Merger, the Merger Agreement and the
transactions contemplated thereby, which were the product of arm's-length
negotiations, including the parties' representations, warranties and covenants,
the conditions to their respective obligations, and the limited ability of
Imperial Holly and IHK Sub to terminate the Offer or the Merger Agreement;

(xviii) the provisions of the Merger Agreement that permit Savannah Foods
to consider additional bona fide third party offers to acquire Savannah Foods,
provide information to and negotiate with such parties and terminate the Merger
Agreement prior to the consummation of the Offer, subject to the payment of
agreed upon fees and expenses to Imperial Holly, if the Savannah Board
determines that its fiduciary duties require that a superior third party
proposal be accepted; and

(xix) the interests that the Savannah Board and Savannah Foods' management
may be deemed to have in the Offer, the Merger, the Merger Agreement and the
transactions contemplated thereby.

24
<PAGE> 40

RECOMMENDATION OF IMPERIAL BOARD AND IMPERIAL HOLLY'S REASONS FOR THE
MERGER. The Imperial Board has determined that the transactions contemplated by
the Merger Agreement are fair to and in the best interests of Imperial Holly and
recommends that the holders of Imperial Common Stock vote FOR approval of the
Imperial Proposal.

In its deliberations and in making its unanimous determination that the
transactions contemplated by the Merger Agreement are fair to and in the best
interests of Imperial Holly, and in authorizing the Merger Agreement on
September 11, 1997, the Imperial Board consulted with Lehman Brothers and
Imperial Holly's outside counsel, and considered a number of factors including,
among others, the following principal factors:

(i) the Imperial Board's knowledge of Imperial Holly's business, operations
and prospects and the Imperial Board's review of the financial performance and
prospects of Savannah Foods, including the prospects of Imperial Holly after
giving effect to the Merger;

(ii) the opinion of Lehman Brothers to the effect that, as of the date of
such opinion and based upon and subject to certain matters stated therein, the
Merger Consideration was fair to Imperial Holly from a financial point of view
(see "-- Imperial Holly's Financial Advisor");

(iii) the fact that the Merger would result in a larger company with
increased participation in both the cane and beet sectors of the industry, with
the prospect of increased stability in Imperial Holly's operating results; the
Imperial Board discussed the fact that, after the Merger, Imperial Holly would
derive approximately 65% of its revenue from cane sugar operations and
approximately 35% from beet sugar operations, which should enable Imperial Holly
to better withstand any near term pricing pressures in the cane sugar segment
while allowing Imperial Holly to benefit from what it believes to be the longer
term trend of a reduced government role in the domestic sugar industry;

(iv) the fact that, after the Merger, Imperial Holly should benefit from
substantially broadened market participation, with significant activity in
consumer and industrial sectors in virtually every important refined sugar
market in the United States, resulting in minimized risks from market
disruptions or weather variations in any single geographic area;

(v) the fact that the more geographically dispersed portfolio of production
facilities available to Imperial Holly after the Merger (12 sugar beet factories
in five states and four cane refineries in four states) will allow more reliable
and efficient sourcing of refined sugar products for both consumer and
industrial customers in all market areas and should produce significant
logistical efficiencies and cost savings;

(vi) the fact that, after the Merger, the larger sugarcane refinery
portfolio of Imperial Holly would enable Imperial Holly to more actively pursue
partnering arrangements with raw sugar suppliers, as it does with its sugar beet
growers;

(vii) the fact that, with Imperial Holly's greater experience in beet sugar
operations and its emphasis on close relations with beet sugar growers, it could
increase beet sugar acreage efficiently available to Savannah Foods' sugar beet
factories and thus increase their production and enhance their profitability;

(viii) the fact that the acquisition of Savannah Foods would substantially
increase Imperial Holly's institutional food service business and should result
in enhanced product mix profitability and reduced unit costs as a result of
increased volumes; and

(ix) an analysis of the cost savings and revenue enhancements anticipated
to be available by integrating certain operations of the two companies (which
management preliminarily estimated to approximate $38.5 million for the fiscal
year ending March 31, 2000, which estimate was subsequently revised to $40
million for the fiscal year ended September 30, 1999).

25
<PAGE> 41

SAVANNAH FOODS' FINANCIAL ADVISORS

DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION. DLJ, as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The Savannah Board selected DLJ as
its financial advisor because it is an internationally recognized investment
banking firm, and DLJ has substantial experience in transactions similar to the
Merger and is familiar with Savannah Foods and its businesses.

As part of its role as financial advisor to Savannah Foods, DLJ was asked
to render an opinion to the Savannah Board as to the fairness from a financial
point of view to the stockholders of Savannah Foods of the Merger Consideration
to be received by such stockholders. On September 11, 1997, DLJ delivered a
written opinion (the "DLJ Opinion"), to the effect that as of such date, and
based upon and subject to the assumptions, limitations and qualifications set
forth in such opinion, the Merger Consideration to be received by such
stockholders is fair to the stockholders of Savannah Foods from a financial
point of view.

THE FULL TEXT OF THE DLJ OPINION IS ATTACHED AS ANNEX B TO THIS JOINT PROXY
STATEMENT/PROSPECTUS. STOCKHOLDERS OF SAVANNAH FOODS ARE URGED TO READ SUCH
OPINION IN ITS ENTIRETY FOR ASSUMPTIONS MADE, PROCEDURES FOLLOWED, OTHER MATTERS
CONSIDERED AND THE LIMITS OF THE REVIEW BY DLJ.

The DLJ Opinion was prepared for the Savannah Board and is directed only to
the fairness from a financial point of view to the stockholders of Savannah
Foods of the Merger Consideration to be received by Savannah Foods stockholders.
The DLJ Opinion does not constitute a recommendation to any stockholder of
Savannah Foods as to how such stockholder should vote on the Savannah Proposal.

The DLJ Opinion does not constitute an opinion as to the price at which
shares of Imperial Common Stock will actually trade at any time. DLJ was not
requested by the Savannah Board to make, nor did DLJ make, any recommendation as
to the amount or type of consideration to be received by Savannah Foods
stockholders, which determination was reached through negotiations between
Savannah Foods and Imperial Holly, in which negotiations DLJ advised Savannah
Foods. No restrictions or limitations were imposed by the Savannah Board upon
DLJ with respect to the investigation made or the procedures followed by DLJ in
rendering its opinion.

In arriving at its opinion, DLJ reviewed the Merger Agreement and the
exhibits thereto. DLJ also reviewed financial and other information that was
publicly available or furnished by Savannah Foods, Imperial Holly and Flo-Sun,
including information provided during discussions with their respective
managements. Included in the information provided during discussions with the
respective managements were certain financial projections of Savannah Foods for
the fiscal years ending September 28, 1997 through September 29, 2002 prepared
by the management of Savannah Foods (the "Savannah Projections"), certain
financial projections of Imperial Holly for the fiscal years ending March 31,
1997 through March 31, 2003 prepared by the management of Imperial Holly (the
"Imperial Projections") and certain financial projections of Flo-Sun and certain
of its affiliates for the fiscal years ending March 31, 1998 and 1999 prepared
by the management of Flo-Sun (the "Flo-Sun Projections"). In addition, DLJ
compared certain financial and securities data of Savannah Foods, Imperial Holly
and Flo-Sun with various other companies whose securities are traded in public
markets, reviewed the historical stock prices and trading volumes of the
Savannah Common Stock and Imperial Common Stock, reviewed prices and premiums
paid in certain other business combinations and conducted such other financial
studies, analyses and investigations as DLJ deemed appropriate for purposes of
its opinion.

In rendering its opinion, DLJ relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
it from public sources, that was provided to DLJ by Savannah Foods, Imperial
Holly and Flo-Sun or their respective representatives, or that was otherwise
reviewed by DLJ. In addition, DLJ relied upon the estimates of the managements
of Savannah Foods, Imperial Holly and Flo-Sun as to the operating synergies
projected as a result of the Offer and the Merger. With respect to the financial
projections supplied to DLJ, DLJ assumed that they had been reasonably prepared
on the basis reflecting the best currently available estimates and judgments of
the managements of

26
<PAGE> 42

Savannah Foods, Imperial Holly and Flo-Sun as to the future operating and
financial performance of Savannah Foods, Imperial Holly and Flo-Sun,
respectively. DLJ assumed no responsibility for making an independent evaluation
of any of the information received by it. DLJ relied as to certain legal matters
on advice of counsel to Savannah Foods.

The DLJ Opinion is necessarily based on economic, market, financial and
other conditions as they existed on, and on the information made available to
DLJ as of, the date of the DLJ Opinion. It should be understood that, although
subsequent developments may affect its opinion, DLJ does not have any obligation
to update, revise or reaffirm its opinion.

The following is a summary of certain financial analyses performed by DLJ
and presented to the Savannah Board at its September 11, 1997 board meeting.

Discounted Cash Flow Analysis. DLJ analyzed the sensitivity of the value of
each of the pro forma combined companies of Savannah Foods with Flo-Sun and
certain of its affiliates (the "Flo-Sun Combined Company") and Savannah Foods
with Imperial Holly (the "Imperial Combined Company") on a discounted cash flow
("DCF") basis to changes in the estimated spread between refined sugar selling
prices and raw sugar cost (the "Sugar Spread"). Based upon the Savannah
Projections, the Flo-Sun Projections and the Imperial Projections, DLJ worked
with the management of Savannah Foods to create a five year projections model
for both the Flo-Sun and Imperial Combined Companies. DLJ first performed a DCF
analysis for the five-year period ending with the 2002 fiscal year on the
stand-alone unlevered free cash flows of the Flo-Sun Combined Company and the
Imperial Combined Company. Unlevered free cash flows were calculated as the
after-tax operating earnings of the Flo-Sun Combined Company and the Imperial
Combined Company plus depreciation and amortization, plus (or minus) net changes
in working capital, minus projected capital expenditures. DLJ calculated
terminal values by applying a range of multiples of 7.0x to 8.0x to each
Combined Company's projected fiscal 2002 estimated earnings before interest,
taxes, depreciation, amortization and non-recurring items ("EBITDA"). The
unlevered free cash flows and terminal values were then discounted to September
30, 1997 using a discount rate of 10.0%, representing an estimated weighted
average cost of capital for each of the Flo-Sun Combined Company and the
Imperial Combined Company. DLJ then aggregated the present value of the free
cash flows and the present value of the residual value of each of the Flo-Sun
Combined Company and the Imperial Combined Company to derive a range of implied
values ("Total Enterprise Values") for each. The range of Total Enterprise
Values for each was then adjusted for their respective total debts, cash and
certain other items, including certain other long-term obligations and minority
investments, to yield a range of implied values ("Total Equity Values") for
each.

DLJ then calculated Total Equity Value utilizing Sugar Spreads ranging from
$2.00 per cwt. to $3.75 per cwt. commencing September 30, 1999 for each of the
Flo-Sun Combined Company and the Imperial Combined Company. Based on this
analysis, DLJ calculated Total Equity Value (including cash payments
constituting part of the consideration) per share for the Imperial Combined
Company ranging from $14.18 to $23.58 and Total Equity Value (including cash
payments constituting part of the consideration) per share for the Flo-Sun
Combined Company ranging from $11.61 to $21.30.

EBITDA Trading Multiple Analysis. DLJ also compared Total Equity Value per
share as a multiple of 1997 EBITDA and average 1994-1997 EBITDA for each of the
Flo-Sun Combined Company and the Imperial Combined Company. The range of 1997
EBITDA multiples considered was 5.0x, 6.0x and 7.0x and the range of average
1994-1997 EBITDA multiples considered was 6.0x, 7.0x and 8.0x. On the basis of
such varying assumptions, DLJ calculated a Total Equity Value (including cash
payments constituting part of the consideration) per share as a multiple of 1997
EBITDA of $18.93, $23.09 and $26.02 for the Imperial Combined Company and
$15.68, $18.89 and $22.09 for the Flo-Sun Combined Company, and a Total Equity
Value (including cash payments constituting part of the consideration) per share
as a multiple of average 1994-1997 EBITDA of $20.16, $23.09 and $26.02 for the
Imperial Combined Company and $15.68, $18.89 and $22.09 for the Flo-Sun Combined
Company.

Comparable Public Company and Transaction Multiple Analyses. Based upon the
views of Savannah Foods' management regarding the fundamental challenges facing
nonintegrated U.S. sugar refiners, DLJ believed that comparable public company
and transaction multiple analyses were not meaningful.

27
<PAGE> 43

The summary set forth above does not purport to be a complete description
of the analyses performed by DLJ, but describes, in summary form, the principal
elements of the presentation by DLJ to the Savannah Board in connection with the
DLJ Opinion. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances
and, therefore, such an opinion is not readily summarized. Each of the analyses
conducted by DLJ was carried out in order to provide a different perspective on
the transaction and add to the total mix of information available. DLJ did not
form a conclusion as to whether any individual analysis, considered in
isolation, supported or failed to support an opinion as to fairness from a
financial point of view. Rather, in reaching its conclusion, DLJ considered the
results of the analyses in light of each other and ultimately reached its
opinion based on the results of the analyses taken as a whole. DLJ did not place
particular reliance or weight on any individual factor, but instead concluded
that its analyses, taken as a whole, supported its determination. Accordingly,
notwithstanding the separate factors summarized above, DLJ believes that its
analyses must be considered as a whole and that selecting portions of its
analysis and the factors considered by it, without considering all analyses and
factors, could create an incomplete or misleading view of the evaluation process
underlying its opinion. In performing each of its analyses, however, DLJ made
numerous assumptions with respect to industry performance, business and economic
conditions and other matters on the Sugar Spread, which assumptions are outlined
above. The analyses performed by DLJ are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analyses.

Pursuant to the terms of an engagement letter dated December 20, 1996 and
subsequently revised on July 11, 1997, Savannah Foods agreed to pay DLJ (i) a
retainer fee of $100,000, payable upon execution of the letter (the "DLJ
Retainer Fee"), (ii) a fee of $500,000 at the time DLJ notified the Savannah
Board that it was prepared to deliver DLJ's opinion (the "DLJ Opinion Fee") and
(iii) a transaction fee, payable upon consummation of the Offer, equal to 0.7%
of the aggregate consideration payable in the Offer and the Merger, less the DLJ
Retainer Fee and the DLJ Opinion Fee. Savannah Foods has agreed to reimburse DLJ
for certain out-of-pocket expenses and to indemnify DLJ and certain related
persons for certain potential liabilities and expenses relating to its services
provided to the Savannah Board. DLJ previously was engaged on December 10, 1996
to review a proposal by Candidate 1, for which services DLJ received $100,000.

In the ordinary course of its business, DLJ may trade securities of
Savannah Foods and Imperial Holly for its own account or for the account of its
customers and, accordingly, may at any time hold long or short positions in such
securities.

THE ROBINSON-HUMPHREY COMPANY, INC. Robinson-Humphrey was retained by
Savannah Foods to evaluate the fairness from a financial point of view of the
Offer Price and the Merger Consideration but was not asked to and did not render
an opinion as to such fairness. In connection with its analysis, Robinson-
Humphrey was paid a fee of $250,000, none of which was contingent upon the
consummation of the Offer and the Merger. Savannah Foods has agreed to reimburse
Robinson-Humphrey for reasonable out-of-pocket expenses, including attorneys'
fees, and to indemnify Robinson-Humphrey against certain liabilities, including
certain liabilities under the federal securities laws.

IMPERIAL HOLLY'S FINANCIAL ADVISOR

LEHMAN BROTHERS INC. In July of 1997, Imperial Holly engaged Lehman
Brothers to act as its financial advisor with respect to pursuing an acquisition
of Savannah Foods. Imperial Holly instructed Lehman Brothers, in its role as
financial advisor, to evaluate the fairness, from a financial point of view, to
Imperial Holly of the consideration to be paid in the Offer and the Merger.

On September 11, 1997, Lehman Brothers delivered its oral opinion to the
Imperial Board (subsequently confirmed in writing as of such date) to the effect
that as of such date and based upon and subject to certain matters stated
therein, the consideration to be paid by Imperial Holly in the Offer and the
Merger was fair, from a financial point of view, to Imperial Holly.

THE FULL TEXT OF THE WRITTEN OPINION OF LEHMAN BROTHERS, WHICH SETS FORTH
THE ASSUMPTIONS MADE, FACTORS CONSIDERED AND LIMITATIONS ON THE REVIEW
UNDERTAKEN BY LEHMAN BROTHERS IN RENDERING ITS OPINION, IS

28
<PAGE> 44

ATTACHED AS ANNEX C TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED
HEREIN BY REFERENCE. THE FOLLOWING IS A SUMMARY OF LEHMAN BROTHERS' OPINION
DATED SEPTEMBER 11, 1997 AND THE ANALYSES UNDERTAKEN BY LEHMAN BROTHERS TO
ARRIVE AT ITS OPINION.

No limitations were imposed by Imperial Holly on the scope of Lehman
Brothers' investigation or the procedures to be followed by Lehman Brothers in
rendering its opinion. In arriving at its opinion, Lehman Brothers did not
ascribe a specific value to Savannah Foods, but rather made its determination as
to the fairness, from a financial point of view, of the consideration to be paid
by Imperial Holly in the Offer and the Merger on the basis of the financial and
comparative analyses described below. Lehman Brothers' opinion is for the use
and benefit of the Imperial Board and was rendered to the Imperial Board in
connection with its consideration of the Offer and the Merger. Lehman Brothers'
opinion is not intended to be and does not constitute a recommendation to any
stockholder of Imperial Holly as to how such stockholder should vote with
respect to the Merger. Lehman Brothers was not requested to opine as to, and its
opinion does not address, Imperial Holly's underlying business decision to
proceed with or effect the Offer and the Merger. Lehman Brothers also did not
express any opinion as to the prices at which shares of Imperial Common Stock
actually will trade following the consummation of the Offer and the Merger.

In arriving at its opinion, Lehman Brothers reviewed and analyzed: (1) the
Merger Agreement and the specific terms of the Offer and the Merger, (2)
Savannah Foods' historical financial statements, including, but not limited to,
financial statements for the years ended October 1, 1995 and September 29, 1996
and for the nine months ended June 29, 1997 and such other publicly available
information concerning Savannah Foods that Lehman Brothers believed to be
relevant to its analysis, (3) Imperial Holly's historical financial statements,
including, but not limited to, financial statements for the years ended March
31, 1996 and 1997 and for the three months ended June 30, 1997 and such other
publicly available information concerning Imperial Holly that Lehman Brothers
believed to be relevant to its analysis, (4) financial and operating information
with respect to the business, operations and prospects of Savannah Foods
furnished to Lehman Brothers by Savannah Foods and Imperial Holly, (5) financial
and operating information with respect to the business, operations and prospects
of Imperial Holly furnished to Lehman Brothers by Imperial Holly, (6) a trading
history of Savannah Foods' common stock from January 1, 1993 to the present and
a comparison of that trading history with those of other companies that Lehman
Brothers deemed relevant, (7) a trading history of Imperial Holly's common stock
from January 1, 1993 to the present and a comparison of that trading history
with those of other companies that Lehman Brothers deemed relevant, (8) a
comparison of the historical financial results and present financial conditions
of Savannah Foods and Imperial Holly with those of other companies that Lehman
Brothers deemed relevant, (9) a comparison of the financial terms of the Offer
and the Merger with the financial terms of certain other recent transactions
that Lehman Brothers deemed relevant, and (10) the potential pro forma financial
effects of the Offer and the Merger including the cost savings, operating
synergies and strategic benefits expected to result from a combination of the
businesses of Imperial Holly and Savannah Foods. In addition, Lehman Brothers
had discussions with the management of Savannah Foods and Imperial Holly
concerning their respective businesses, operations, assets, financial conditions
and prospects and undertook such other studies, analyses and investigations as
they deemed appropriate.

In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by it
without assuming any responsibility for independent verification of such
information and further relied upon the assurances of the management of Imperial
Holly that they were not aware of any facts or circumstances that would make
such information inaccurate or misleading. With respect to the financial
projections of Imperial Holly, Savannah Foods and the combined company following
the consummation of the Merger provided to Lehman Brothers by management of
Imperial Holly, upon advice of Imperial Holly, Lehman Brothers assumed that such
projections were reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the management of Imperial Holly as to the
future financial performance of Imperial Holly, Savannah Foods and the combined
company (including, without limitation, the cost savings, operating synergies
and strategic benefits expected to result from a combination of the businesses),
and Lehman Brothers relied upon such projections in arriving at its opinion. In
arriving at its opinion, Lehman Brothers did not conduct a physical inspection
of the properties and

29
<PAGE> 45

facilities of Imperial Holly or Savannah Foods and did not make or obtain any
evaluations or appraisals of the assets or liabilities of Imperial Holly or
Savannah Foods. Lehman Brothers' opinion states that it is necessarily based
upon market, economic and other conditions as they existed on, and could be
evaluated as of, the date of its opinion.

In connection with the preparation and delivery of its opinion to the
Imperial Board, Lehman Brothers performed certain financial and comparative
analyses as described below. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial and comparative analysis and the application of those methods to the
particular circumstances, and therefore, such an opinion is not readily
susceptible to summary description. Furthermore, in arriving at its opinion,
Lehman Brothers did not attribute any particular weight to any analysis or
factor considered by it, but rather made qualitative judgments as to the
significance and relevance of each analysis and factor. Accordingly, Lehman
Brothers believes that its analyses must be considered as a whole and that
considering any portion of such analyses and factors without considering all
analyses and factors, could create a misleading or incomplete view of the
process underlying its opinion. In its analyses, Lehman Brothers made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the control of Savannah
Foods or Imperial Holly. Any estimates contained in these analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than as set forth
therein. In addition, analyses relating to the value of businesses do not
purport to be appraisals or to reflect the prices at which businesses actually
may be sold.

Valuation and Pro Forma Earnings Analyses. In determining the valuation of
Savannah Foods, Lehman Brothers used the following methodologies: discounted
cash flow analysis ("DCF Analysis"), comparable transactions analysis and
comparable company trading analysis. Each of these methodologies was used to
generate a reference enterprise value range for Savannah Foods. The enterprise
value range was adjusted for appropriate on and off balance sheet assets and
liabilities to arrive at a common equity value range (in aggregate dollars and
dollars per common share) for Savannah Foods. The per share equity value range
(the "Per Share Equity Value Range") was then used to evaluate the consideration
to be paid by Imperial Holly in the Offer and the Merger. The implied valuation
ranges derived using the various valuation methodologies described above all
supported the conclusion that the consideration to be paid by Imperial Holly in
the Offer and the Merger is fair, from a financial point of view, to Imperial
Holly. In addition, Lehman Brothers used a pro forma earnings analysis to
determine the impact of the Offer and the Merger on Imperial Holly's net income
per share. The various analyses used by Lehman Brothers are summarized below:

(i) DCF Analysis -- Lehman Brothers prepared an after-tax cash flow
model that was based upon financial projections, including cost savings and
operating synergies resulting from the combination of the businesses, of
Savannah Foods prepared by management of Imperial Holly. Lehman Brothers
used discount rates of 10% to 11% and a terminal value based on the
perpetuity value of after-tax unlevered free cash flow assuming a growth
rate of 2.0% to 4.0% annually. The discount rates were based on Lehman
Brothers' analysis of the weighted average cost of capital for comparable
companies selected by Lehman Brothers.

(ii) Comparable Transactions Analysis -- Lehman Brothers reviewed
certain publicly available information on selected transactions which took
place from 1987 to 1997 that Lehman Brothers deemed comparable. For each
transaction, relevant transaction multiples were analyzed including the
total purchase price (equity purchase price plus any assumed obligations)
divided by (i) latest twelve months ("LTM") revenues, (ii) LTM earnings
before interest, taxes, depreciation and amortization ("EBITDA") and (iii)
LTM earnings before interest and taxes ("EBIT"). The selected transactions
provided mean and median valuation multiples of 0.8x and 0.9x, 6.8x and
6.7x, and 9.0x and 9.4x, respectively, which were used to arrive at an
enterprise value of Savannah Foods.

However, because the market conditions, rationale and circumstances
surrounding each of the transactions analyzed were specific to each
transaction and because of the inherent differences between the businesses,
operations, financial conditions and prospects of Savannah Foods and the
acquired businesses analyzed, Lehman Brothers believed that it was
inappropriate to, and therefore did not, rely solely on the quantitative
results of the analysis, and accordingly, also made qualitative judgments

30
<PAGE> 46

concerning differences between the characteristics of these transactions
and the Merger that would affect the acquisition values of Savannah Foods
and such acquired companies.

(iii) Comparable Company Trading Analysis-- Lehman Brothers reviewed
the public stock market trading multiples for selected companies that
Lehman Brothers deemed comparable. Using publicly available information,
Lehman Brothers calculated and analyzed the common equity market value
multiples of certain historical and projected financial criteria (such as
net income and book value) and the enterprise value multiples of certain
historical financial criteria (such as revenues, EBITDA and EBIT). The
enterprise value of each company was obtained by adding its long-term debt
to the sum of the market value of its common equity, the value of its
preferred stock (market value if publicly traded, liquidation value if not)
and the book value of any minority interest minus its cash and cash
equivalent balance. Lehman Brothers placed the most emphasis on net income,
EBIT and EBITDA multiples. The appropriate LTM and projected September 30,
1997 net income mean and median multiples were determined to be 12.8x and
12.9x, and 12.6x and 12.9x, respectively. The appropriate LTM EBIT and LTM
EBITDA mean and median multiples were determined to be 9.9x and 10.0x, and
7.1x and 6.6x, respectively.

However, because of the inherent differences between the businesses,
operations, financial conditions and prospects of Savannah Foods and the
businesses, operations, financial conditions and prospects of the companies
included in the comparable company group, Lehman Brothers believed that it
was inappropriate to, and therefore did not, rely solely on the
quantitative results of the analysis, and accordingly, also made
qualitative judgments concerning differences between the financial and
operating characteristics of Savannah Foods and companies in the comparable
company group that would affect the public trading values of Savannah Foods
and such comparable companies.

(iv) Pro Forma Earnings Analysis -- Lehman Brothers prepared a pro
forma earnings model of Imperial Holly including the operating results of
Savannah Foods and including the effects of the Offer and the Merger. The
pro forma earnings analysis was based upon the financial projections
prepared by the management of Imperial Holly, including cost savings,
operating synergies and strategic benefits expected to result from a
combination of the businesses of Imperial Holly and Savannah Foods, and the
capital structure proposed by Imperial Holly. Based upon the pro forma
earnings analysis, the Offer and the Merger are expected to be dilutive to
earnings in the initial year after the Effective Time and strongly
accretive thereafter.

Lehman Brothers is an internationally recognized investment banking firm
and, as part of its investment banking activities, is regularly engaged in,
among other things, the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
bids, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes. The Imperial Board
selected Lehman Brothers because of its expertise, reputation and familiarity
with Imperial Holly and because its investment banking professionals have
substantial experience in transactions comparable to the Offer and the Merger.

Lehman Brothers has previously rendered various investment banking services
for Imperial Holly in the past and received customary fees for such services. In
addition, Mr. Henry E. Lentz, a Managing Director of Lehman Brothers, is also a
director of Imperial Holly.

In the ordinary course of its business, Lehman Brothers may actively trade
in the debt or equity securities of Savannah Foods and Imperial Holly for its
own account and for the accounts of its customers and, accordingly, may at any
time hold a long or short position in such securities.

Imperial Holly paid Lehman Brothers a fee of $100,000, upon execution of
the engagement letter with Lehman Brothers, and a fee of $900,000, upon
announcement of Imperial Holly's intent to acquire Savannah Foods. In addition,
Imperial Holly paid Lehman Brothers a fee of 0.75% of the aggregate
consideration to be paid to holders of Savannah Common Stock in the Offer and
the Merger, which was contingent upon the consummation of the Offer and, against
which the fees previously paid were credited.

31
<PAGE> 47

RESALES OF IMPERIAL COMMON STOCK RECEIVED IN THE MERGER

Shares of Imperial Common Stock issued in connection with the Merger will
be freely tradeable except for shares issued to affiliates of Savannah Foods,
which will be subject to the provisions of Rule 145 under the Securities Act.
Pursuant to the Merger Agreement, Imperial Holly will maintain the effectiveness
of the Registration Statement so as to register the resale by affiliates of
Savannah Foods of Imperial Common Stock received in the Merger for a period of
one year after the Effective Time. However, during such one-year period,
Imperial Holly may, no more than twice, request that such resales not be
permitted for a period of 45 days upon the occurrence of certain events. See
"The Merger Agreement -- Registration Statement."

DELISTING AND DEREGISTRATION OF SAVANNAH COMMON STOCK

Following the consummation of the Merger, the Savannah Common Stock will be
delisted from the NYSE and deregistered under the Exchange Act.

INTEREST OF CERTAIN PERSONS IN THE MERGER

Savannah Foods stockholders should note that a number of directors and
executive officers of Savannah Foods have interests in the Merger as employees
and directors that are different from, or in addition to, yours as a
stockholder, as described below.

BOARD OF DIRECTORS; MANAGEMENT. On October 24, 1997, upon the consummation
of the Offer and pursuant to the Merger Agreement, a majority of the Savannah
Foods directors resigned as directors, and members of the senior management of
Imperial Holly were elected to the Savannah Board to replace such resigning
directors. Such Imperial Holly representatives currently constitute a majority
of the Savannah Board. In addition, if the Merger is consummated, it is
anticipated that certain existing or resigning directors of Savannah Foods will
be appointed to the Imperial Board. See "The Merger Agreement -- Board
Representations."

SAVANNAH FOODS OPTIONS. At November 14, 1997 an aggregate of approximately
171,893 shares of Savannah Common Stock were subject to options granted to
directors and employees of Savannah Foods under Savannah Foods' stock option
plan and certain stock option agreements, all of which were exercisable. All
such options became fully vested and exercisable upon consummation of the Offer,
if not previously vested. The stock options held by Savannah Foods' directors
and executive officers as of October 31, 1997 were as follows: William W.
Sprague III, 9,256; David H. Roche, 5,274; James M. Kelly, 5,274; F. Sprague
Exley, 4,111; and Gregory H. Smith, 4,197. These options represent less than one
percent of the outstanding Savannah Common Stock.

Pursuant to the Merger Agreement, each unexpired and unexercised option to
purchase shares of Savannah Common Stock issued pursuant to Savannah Foods' 1996
Equity Incentive Plan (the "Savannah Incentive Plan"), or otherwise granted by
Savannah Foods (in each case, an "Option"), will, at the Effective Time and at
the election of the holder of such Option, either (i) be assumed by Imperial
Holly and will constitute an option to acquire, on the same terms and conditions
as were applicable under such assumed Option, a number of shares of Imperial
Common Stock equal to the product of (A) the Stock Consideration and (B) the
number of shares of Savannah Common Stock 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) each Option which is vested or exercisable or
will become vested or exercisable as a result of the Offer will be canceled by
Savannah Foods, and each holder of an Option so canceled will be entitled to
receive an amount in cash equal to the difference between $20.25 and the
exercise price of such Option. Imperial Holly will adopt and comply with the
terms of the Savannah Incentive Plan as it applies to Options assumed as set
forth above.

DIRECTOR SHARE UNITS. Under the terms of the Compensation Plan, upon
consummation of the Offer, each of the 10,020 Share Units (each Share Unit
representing the right to receive cash, subject to certain conditions, based on
the value of a share of Savannah Common Stock) to which each of the non-employee
directors are entitled became fully vested (other than James M. Reed who holds
2,285 fully vested Share Units). Seven of the ten participant directors have
elected to receive a payout of the value of their Share Units upon consummation
of the Merger. Lee B. Durham, Jr.'s existing election under the Compensation
Plan provided for him to receive payment upon the termination of his service on
the Savannah Board, which

32
<PAGE> 48

occurred on October 24, 1997. Robert L. Harrison has elected to retain his
original deferral election, which will result in his receiving payout of his
benefits quarterly over a fifteen year period beginning the January 1 after his
66th birthday. John D. Carswell has elected to retain his original deferral
election, which will result in his receiving payout of his benefits quarterly
over a ten year period beginning the quarter following the date of his departure
from the Savannah Board. In each case, the value of a Share Unit will be based
on the Offer Price, with deferred payouts accruing interest at the prime rate in
effect on the first business day of each year until payment in full. The value
of the Share Units outstanding under the Compensation Plan (net of any interest
accruing after completion of the Offer), based on the Offer Price, is $1,872,447
($46,274 for Mr. Reed and $202,908 for each of the other nine participant
directors).

Six of the eight directors participating in the Supplemental Share Unit
Plan (Messrs. Cartledge and Reed were not eligible to participate) have elected
to receive, upon consummation of the Merger, a lump sum payment of the value of
their Share Units granted under the Supplemental Share Unit Plan. Mr. Durham's
existing election under the Supplemental Share Unit Plan provided for him to
receive payment upon the termination of his service on the Savannah Board, which
occurred on October 24, 1997. Mr. Harrison has elected to retain his original
deferral election, which will result in his receiving payout of his benefits
quarterly over a fifteen year period beginning on January 1 after his 66th
birthday. In each case, the value of a Share Unit will be based on the Offer
Price, with deferred payouts accruing interest at the prime rate in effect on
the first business day of each year until payment in full. The aggregate value
of the Share Units outstanding under the Supplemental Share Unit Plan (net of
any interest accruing after completion of the Offer), based on the Offer Price,
is $2,282,397, as follows: W. Waldo Bradley, $495,081; John D. Carswell,
$401,369; Dale C. Critz, $73,428; Lee B. Durham, Jr., $380,471; Arthur M.
Gignilliat, Jr., $194,683; Robert L. Harrison, $158,122; Hugh M. Tarbutton,
$504,303; and Arnold Tenenbaum, $74,941.

DIRECTORS' DEFERRED COMPENSATION PLAN. Pursuant to the provisions of the
Savannah Deferred Compensation Plan, six of the eight directors participating in
the Deferred Compensation Plan (Messrs. Cartledge and Reed elected not to
participate) have elected to receive, upon consummation of the Merger, a lump
sum payment of the value of their deferral accounts under the Directors'
Deferred Compensation Plan aggregating $2,135,824. Mr. Durham's existing
election under the Deferred Compensation Plan provided for him to receive
payment upon the termination of his service on the Savannah Board, which
occurred on October 24, 1997. Mr. Harrison has elected to retain his original
deferral election, which will result in his receiving payout of his benefits
quarterly over a fifteen year period beginning the January 1 after his 66th
birthday. Deferred payouts will accrue interest at the prime rate in effect on
the first business day of each year until payment in full. The aggregate value
of the deferral accounts under the Deferred Compensation Plan (net of any
interest accruing after completion of the Offer) is $2,818,289 (of which amount
$2,605,755 will be paid upon consummation of the Merger); the amount owed to the
current and former directors of Savannah Foods is as follows: Mr. Bradley,
$592,549; Mr. Carswell, $480,404; Mr. Critz, $107,905; Mr. Durham, $469,931; Mr.
Gignilliat, $233,012; Mr. Harrison, $212,534; Mr. Tarbutton, $622,421; and Mr.
Tenenbaum, $99,452.

EMPLOYMENT AND RELATED AGREEMENTS. In connection with the Merger, Imperial
Holly has entered into a new employment agreement with William W. Sprague III,
the President and Chief Executive Officer of Savannah Foods, providing for a
five-year term beginning on the date of the consummation of the Merger. Pursuant
to the employment agreement, Mr. Sprague will continue as the President of
Savannah Foods and will be nominated to serve on the Imperial Board. In addition
to his base salary, which will continue at no less than $430,000 per year (his
previous salary), 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, and to certain other benefits. In addition, Imperial Holly expects
to enter into agreements with certain other members of Savannah Foods'
management, providing for certain payments in the event of a change of control.

INDEMNIFICATION. Pursuant to the Merger Agreement, Imperial Holly will
maintain all rights of indemnification existing in favor of, and indemnify, 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
their capacity as an officer, director, employee or fiduciary of Savannah Foods.
Imperial Holly and IHK Sub have also agreed that all rights to indemnification
existing in favor of the Indemnified Parties as provided in the Savannah Bylaws
with respect to matters occurring through the Effective Time will survive the
Merger and will continue in effect for a period of not less than six years from
the Effective Time.

33
<PAGE> 49

BENEFIT TRUST. In connection with the Merger, the Benefit Trust will
receive approximately $38.3 million in exchange for the Savannah Common Stock
held in the Benefit Trust. These proceeds will be used to retire approximately
$27.6 million in indebtedness evidenced by the Benefit Trust Note and to
purchase approximately $10.7 million of Imperial Common Stock at a purchase
price per share equal to the fair market value of Imperial Common Stock. See
"The Merger Agreement -- Employee Benefit Matters."

The Savannah Board recognized all the interests described above, and
concluded that these interests did not detract from the fairness of the Offer
and the Merger to the holders of Savannah Common Stock who are not officers or
directors of Savannah Foods.

THE MERGER AGREEMENT

The following summary of the Merger Agreement is qualified in its entirety
by reference to the Merger Agreement (including the exhibits and annexes
thereto), a copy of which is attached as Annex A hereto and incorporated herein
by reference.

THE OFFER. The Merger Agreement provides for the making of the Offer. The
obligation of IHK Sub to accept for payment or pay for shares of Savannah Common
Stock tendered pursuant to the Offer was conditioned upon, among other things,
(i) there being validly tendered and not withdrawn as of the date of expiration
of the Offer (the "Expiration Date") at least 14,397,836 shares of Savannah
Common Stock constituting at least 50.1% of the Shares of Savannah Common Stock
outstanding, (ii) the expiration of any applicable waiting period under the HSR
Act, (which waiting period expired on October 2, 1997), and (iii) Imperial Holly
having obtained the necessary financing to consummate the Offer and the Merger.

RECOMMENDATION. The Savannah Board determined, based in part upon the
opinion of DLJ that the proposed consideration to be received by holders of
shares of Savannah Common Stock pursuant to the Merger Agreement is fair from a
financial point of view to the Savannah Foods stockholders, unanimously
determined that the Offer and the Merger are fair to and in the best interests
of the stockholders of Savannah Foods, approved the Offer and the Merger and
recommended acceptance of the Offer and approval and adoption of the Merger
Agreement by the Savannah Foods stockholders and approved the amendment to
Savannah Foods' Rights Plan so as to provide that no purchase rights under such
agreement would 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 and the Merger).

BOARD REPRESENTATION. The Merger Agreement provides that, upon IHK Sub's
acquisition of a majority of the outstanding shares of Savannah Common Stock
pursuant to the Offer, IHK Sub will be entitled to designate such number of
directors, rounded up to the next whole number, on the Board of Directors as
will give IHK Sub 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 of Savannah Common Stock
beneficially owned by IHK Sub at such time bears to the total number of shares
of Savannah Common Stock then outstanding, and Savannah Foods will, at such
time, promptly take all actions necessary to cause IHK Sub's designees to be
elected as directors of Savannah Foods, including increasing the size of the
Board of Directors or securing the resignations of incumbent directors or both.
At the request and expense of IHK Sub, Savannah Foods has taken 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. On October 24, 1997, pursuant to such provisions of the Merger
Agreement, Dale C. Critz, John Carswell, F. Sprague Exley, Lee B. Durham, Arthur
M. Gignilliat, Jr., Robert L. Harrison and James M. Reed resigned from the
Savannah Board and Roger W. Hill, James C. Kempner, Peter C. Carrothers, Douglas
W. Ehrenkranz, Karen L. Mercer, John A. Richmond and William F. Schwer were
elected directors of Savannah Foods as designees of Imperial Holly.

Notwithstanding the foregoing, at all times prior to the Effective Time of
the Merger, the Board of Directors of Savannah Foods will 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 IHK Sub's designees and prior to the Effective Time,
such designees will abstain from acting upon, and the approval of a majority of
the Continuing Directors will be required to authorize and will be sufficient to
authorize, any resolution with respect to any termination of the Merger
Agreement by Savannah

34
<PAGE> 50

Foods, any amendment of the Merger Agreement requiring action by the Board of
Directors of Savannah Foods, any extension of time for the performance of any of
the obligations or other acts of Imperial Holly or IHK Sub under the Merger
Agreement, any waiver of compliance with any of the agreements or conditions
under the Merger Agreement for the benefit of Savannah Foods and any action to
seek to enforce any obligation of Imperial Holly or IHK Sub under the Merger
Agreement.

THE MERGER. The Merger Agreement provides that, unless the Merger Agreement
is terminated or abandoned, at the Effective Time, IHK Sub will be merged with
and into Savannah Foods, whereupon the separate corporate existence of IHK Sub
will cease, and Savannah Foods will be the surviving corporation in the Merger.
The Merger Agreement also provides that (i) subject to certain requirements in
the Merger Agreement, the Certificate of Incorporation and the bylaws of IHK Sub
as in effect at the Effective Time will be the Certificate of Incorporation and
the bylaws of the surviving corporation, (ii) the directors of IHK Sub
immediately prior to the Effective Time will be the initial directors of the
surviving corporation, and (iii) the officers of Savannah Foods immediately
prior to the Effective Time will be the initial officers of the surviving
corporation.

CONSIDERATION TO BE PAID IN THE MERGER. The Merger Agreement provides that
each share of Savannah Common Stock issued and outstanding immediately prior to
the Effective Time (other than Excluded Shares (which includes shares of
Savannah Common Stock purchased in the Offer) and Dissenting Shares) will be
converted into the right to receive (i) the Cash Consideration or (ii) the Stock
Consideration. The number of shares of Savannah Common Stock to be converted
into the right to receive, subject to stockholder elections and proration, the
Cash Consideration in the Merger shall be (x) 70% of the number of shares of
Savannah Common Stock outstanding immediately prior to the Effective Time (which
include shares of Savannah Common Stock purchased in the Offer) less (y) the sum
of Excluded Shares (which include shares of Savannah Common Stock purchased in
the Offer) and the Dissenting Shares. In connection with the Merger, each
stockholder of Savannah Foods holding shares of Savannah Common Stock not
tendered in the Offer (other than Excluded Shares) will be entitled to make an
election to receive the Cash Consideration. In the event that the number of
shares of Savannah Common Stock 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. In the event that
the number of shares of Savannah Common Stock 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 of
Savannah Common Stock 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. The Stock Consideration also includes with
each share of Imperial Common Stock the right to purchase 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 "Description of Imperial Capital Stock -- Rights to Purchase Preferred
Stock."

SAVANNAH FOODS OPTIONS. At November 14, 1997 an aggregate of approximately
171,893 shares of Savannah Common Stock were subject to Options granted to
directors and employees of Savannah Foods under the Savannah Incentive Plan and
certain stock option agreements, all of which were exercisable. All such Options
became fully vested and exercisable upon consummation of the Offer, if not
previously vested. Pursuant to the Merger Agreement, each unexpired and
unexercised Option, will, at the Effective Time and at the election of the
holder of such Option, either (i) be assumed by Imperial Holly and will
constitute an option to acquire, on the same terms and conditions as were
applicable under such assumed Option, a number of shares of Imperial Common
Stock equal to the product of (A) the Stock Consideration and (B) the number of
shares of Savannah Common Stock 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) each Option which is vested or exercisable or
will become vested or exercisable as a result of the Offer will be canceled by
Savannah Foods, and each holder of an Option so canceled will be entitled to
receive an amount in cash equal to the difference between $20.25 and the
exercise price of such Option. Imperial Holly will adopt and comply with the
terms of the Savannah Incentive Plan as it applies to Options assumed as set
forth above.

35
<PAGE> 51

STOCKHOLDERS' MEETINGS. In the Merger Agreement, each of Savannah Foods and
Imperial Holly agreed to take all action necessary in accordance with applicable
law to duly call, give notice of, convene and hold the Savannah Special Meeting
and the Imperial Special Meeting to approve the Savannah Proposal and the
Imperial Proposal, respectively. Subject to their fiduciary duties under
applicable law, the respective Boards of Directors of Savannah Foods and
Imperial Holly will recommend that their respective stockholders approve such
actions.

EXCHANGE OF CERTIFICATES. The Merger Agreement provides for Imperial Holly
to deposit the aggregate Merger Consideration with the Exchange Agent for the
benefit of the holders of shares of Savannah Common Stock. As soon as
practicable after the Effective Time, each holder of an outstanding certificate
which prior thereto represented shares of Savannah Common Stock will, upon
proper surrender to the Exchange Agent of such certificate, be entitled to a
certificate representing the number of full shares of Imperial Common Stock
received as the Stock Consideration and the Cash Consideration, if any, into
which the number of shares of Savannah Common Stock previously represented by
such certificate surrendered shall have been converted pursuant to the Merger
Agreement. The Exchange Agent may impose reasonable terms and conditions to
accept the surrender of a certificate in accordance with normal exchange
practices. If any certificate for shares of Imperial Common Stock is to be
issued in, or if cash is to be remitted to, a name other than that in which the
certificate representing shares of Savannah Common Stock 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 will pay any transfer or other taxes
required by reason of the issuance of certificates for such shares of Imperial
Common Stock 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 of Savannah
Common Stock will 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 of Savannah Common Stock 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 of Savannah Common
Stock delivered by such holder) will 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 shares of Imperial
Common Stock with a record date after the Effective Time will be paid to the
holder of any unsurrendered certificate representing shares of Savannah Common
Stock and no cash payment in lieu of fractional shares of Imperial Common Stock
will be paid to any such holder until the surrender of such certificate
representing shares of Savannah Common Stock. However, following surrender of
any such certificates, but subject to applicable laws, the holder of a
certificate representing whole shares of Imperial Common Stock will be paid,
without interest, at the time of such surrender (i) cash in lieu of fractional
shares of Imperial Common Stock to which such holder is entitled and (ii) the
proportionate amount of dividends or other distributions with a record date
after the Effective Time previously paid with respect to such shares of Imperial
Common Stock.

Any portion of the Merger Consideration deposited with the Exchange Agent
which remains undistributed to the holders of the certificates representing
shares of Savannah Common Stock for six months after the Effective Time will be
delivered to Imperial Holly, and any holder of shares of Savannah Common Stock
prior to the Effective Time who has not theretofore complied with the exchange
provisions of the Merger Agreement will thereafter look only to Imperial Holly
and only as a general creditor for payment of his or her claim for cash or
shares of Imperial Common Stock. None of IHK Sub, Savannah Foods, Imperial Holly
or the Exchange Agent will be liable to any person in respect of any cash or any
shares of Imperial Common Stock delivered to a public office pursuant to any
applicable abandoned property, escheat or similar law. If any certificates
representing shares of Savannah Common Stock have not 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 will, at 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. Savannah Foods will pay
all charges and expenses of the Exchange Agent.

36
<PAGE> 52

ELECTIONS. The Merger Agreement provides that each person who, on or prior
to the Election Date, is a record holder of shares of Savannah Common Stock
(other than Excluded Shares) will be entitled, with respect to all or any
portion of his shares of Savannah Common Stock, to make a Cash Election prior to
the Election Date to receive the Cash Consideration. Savannah Foods will prepare
and mail a Cash Election Form with the Joint Proxy Statement/Prospectus to the
record holders of shares of Savannah Common Stock as of the record date for the
Savannah Special Meeting to be used by each such record holder who wishes to
make a Cash Election with respect to any or all shares of Savannah Common Stock
held by such holder. Savannah Foods will use commercially reasonable efforts to
make the Cash Election Form and this Joint Proxy Statement/Prospectus available
to all persons who become holders of shares of Savannah Common Stock during the
period between such record date and the Election Date. Any such holder's Cash
Election will have been properly made only if the Exchange Agent has received at
its designated office, by 5:00 p.m., New York City time on the Election Date, a
Cash Election Form properly completed and signed and accompanied by certificates
for the shares of Savannah Common Stock to which such Cash Election Form relates
(or by an appropriate guarantee of delivery of such certificates as set forth in
such Cash Election Form 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 of Savannah Common Stock
covered by such a guarantee of delivery within such time will invalidate an
otherwise properly made Cash Election.

Any Cash Election Form 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 Savannah Special Meeting, if (and to the extent that) the Exchange
Agent is legally required to permit revocations and the Effective Time has not
occurred. In addition, all Cash Election Forms will automatically be revoked if
the Exchange Agent is notified in writing by Imperial Holly, IHK Sub and
Savannah Foods that the Merger has been abandoned. If a Cash Election Form is
revoked, the certificate (or guarantees of delivery, as appropriate) for shares
of Savannah Common Stock to which such Cash Election Form relates will be
promptly returned to the stockholder submitting the certificate to the Exchange
Agent.

The determination of the Exchange Agent will be binding as to whether or
not elections to receive the Cash Consideration have been properly made or
revoked with respect to shares of Savannah Common Stock and when elections and
revocations were received. If the Exchange Agent determines that any Cash
Election was not properly made with respect to shares of Savannah Common Stock,
such shares will be exchanged in the Merger for the Stock Consideration, except
to the extent the proration procedures result in such shares receiving the Cash
Consideration. See "-- Consideration to be Paid in the Merger." The Exchange
Agent will also make all computations as to the allocation and the proration
contemplated in connection with any exchange, and any such computation will be
conclusive and binding on the holders of Savannah Common Stock.

APPRAISAL RIGHTS. If the Merger is consummated, persons who hold shares of
Savannah Common Stock at that time will have the right to appraisal of their
Savannah Common Stock in accordance with Section 262 of the DGCL. Such appraisal
rights, if the statutory procedures are complied with, will result in a judicial
determination of the "fair value" of Savannah Common Stock (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 Savannah
Common Stock. Any such judicial determination of the fair value of Savannah
Common Stock 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 Savannah Common Stock, including asset values, the investment value of
Savannah Common Stock and any other valuation considerations generally accepted
in the investment community. The value so determined for Savannah Common Stock
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

37
<PAGE> 53

Merger. Savannah Foods will not, without the prior written consent of IHK Sub
and Imperial Holly, make any payment with respect to, or settle or offer to
settle, any such dissenter's rights of appraisal. See "Stockholders' Rights of
Appraisal."

REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains customary
representations and warranties by Savannah Foods, and IHK Sub and Imperial
Holly, 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 effect since the end of
Savannah Foods' and Imperial Holly's last fiscal year, (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 financial advisors, (xviii) majority vote necessary for
stockholder approval, (xix) no brokers other than financial advisors and (xx) no
material misstatements or omissions in documents filed with the Commission in
connection with Offer and Merger. Savannah Foods also represented and warranted
that it (a) amended the Savannah Foods' Rights Agreement and (b) terminated the
Flo-Sun Merger Agreement. In addition, IHK Sub 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 Savannah Foods to
provide all employees of Savannah Foods who continue to be employed by Imperial
Holly or Savannah Foods 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.

In addition, the Merger Agreement provides that Imperial Holly shall, for
the purposes of all employee benefit plans of Imperial Holly or any of its
respective affiliates in which Continuing Employees participate after the
Effective Time and under which an employee's benefit depends, in whole or in
part, on length of service, give credit to Continuing Employees for service
previously credited with Savannah Foods or its subsidiaries prior to the
Effective Time to the extent that such crediting of service does not result in
duplication of benefits. Imperial Holly also agreed to guarantee all obligations
of Savannah Foods under any employee benefit plan of Savannah Foods.

Prior to the execution of the Merger Agreement, Savannah Foods amended (i)
the Savannah Foods' Supplemental Executive Retirement Plan and (ii) the Deferred
Compensation Plan for Key Employees of Savannah Foods, as amended and restated
as of August 1, 1990 (collectively, the "Savannah Executive Deferred
Compensation Plans"), to provide that neither the execution of the Merger
Agreement, nor the consummation of the transactions contemplated by the Merger
Agreement, will constitute a "change of control" for purposes of such Savannah
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, Savannah Foods amended the Benefit Trust in order to, among other
things, (i) provide for the prepayment of the Benefit Trust 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 shares of Imperial Common Stock
to be acquired from Imperial Holly; (iii) provide that the corpus of the Benefit
Trust will not be immediately 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, Savannah Foods 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

38
<PAGE> 54

shares of Imperial Common Stock only after giving Imperial Holly a right of
first refusal; (vii) provide that, from and after consummation of the Offer,
shares of Imperial Common Stock held by the Benefit Trust will be voted in
proportion to all other outstanding shares of Imperial Common Stock; and (viii)
provide that, from and after consummation of the Offer, the Trustee will tender
or exchange shares of Imperial Common Stock held by the Benefit Trust as
directed by the Savannah Board. The Merger Agreement provides that the cash
received by the Benefit Trust in the Offer and the Merger will be used to repay
the Benefit Trust Note and to purchase shares of Imperial Common Stock.

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, Savannah Foods and Imperial Holly will 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 additional covenants of both Savannah Foods
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
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 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 plan, (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 Savannah Foods
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 any party 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
representation or warranty or prevent the conditions to the Merger from being
satisfied.

Neither Savannah Foods, 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 Savannah Foods
nor any subsidiary will 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, Savannah Foods 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 Savannah Foods nor any subsidiary
of Savannah Foods 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. However, nothing in the Merger Agreement will
prevent Savannah Foods or Savannah Foods' 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 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 Savannah Foods
stockholders if and only to the extent that, in any such case as is referred to
in (ii) and (iii), (A) the

39
<PAGE> 55

Savannah Board 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 Savannah Foods stockholders than the transactions contemplated
by the Merger Agreement (any such more favorable Acquisition Proposal being
hereinafter referred to as a "Superior Proposal"), (B) the Savannah Board
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 Savannah Board 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
Savannah Foods 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 Savannah Board 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, Savannah Foods or any
subsidiary, indicating the name of such person or entity and the terms and
conditions of any proposals or offers. Savannah Foods also agreed to cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal.

INDEMNIFICATION OF DIRECTORS. As provided in the Merger Agreement, Imperial
Holly will maintain all rights of indemnification existing in favor of, and
indemnify, each Indemnified Party to the fullest extent permitted under
applicable law against all losses and claims arising out of or pertaining to any
action or omission in their capacity as an officer, director, employee or
fiduciary of Savannah Foods. Under the Merger Agreement, all rights to
indemnification existing in favor of the Indemnified Parties as provided in the
Savannah Bylaws with respect to matters occurring through the Effective Time
will survive the Merger and 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 defense of any Claim
(provided that Imperial Holly will not be liable for any settlement of any Claim
effected without its written consent).

For a period of six years after the Effective Time, Imperial Holly will
cause to be maintained in effect the current directors' and officers' liability
insurance policies maintained by Savannah Foods (provided that Imperial Holly
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. However,
Imperial Holly is not required to expend more than an amount per year equal to
200% of current annual premiums paid by Savannah Foods for such insurance.

SAVANNAH FOODS' RIGHTS AGREEMENT. The Savannah Board has taken further
action necessary to render the preferred stock purchase rights under Savannah
Foods' Rights Agreement inapplicable to the Offer, the Merger and the other
transactions contemplated by the Merger Agreement, to terminate Savannah Foods'
Rights Agreement as of the Effective Time and to ensure that Imperial Holly and
IHK Sub will not have any obligations in connection with the Savannah Foods'
Rights Agreement or such related purchase rights.

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 Savannah
Foods in accordance with the DGCL and the Savannah Charter and the approval of
the issuance of the shares of Imperial Common Stock 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 Savannah Foods, Imperial Holly and IHK Sub 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 will have expired or been terminated (which waiting period expired on
October 2, 1997); (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 will have been declared effective, (which occurred on
November 19, 1997), and the absence of a stop order suspending such
effectiveness; (iv) the shares of

40
<PAGE> 56

Imperial Common Stock 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) IHK Sub will have
purchased a majority of shares of Savannah Common Stock pursuant to the Offer
(which occurred on October 24, 1997).

(i) by mutual written consent of Imperial Holly and Savannah Foods; or

(ii) by Imperial Holly or Savannah Foods if the Effective Time has not
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

(iii) by either Imperial Holly or Savannah Foods, if any court of
competent jurisdiction in the United States or other governmental entity,
based otherwise than on any antitrust law, (A) 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 and
nonappealable or (B) 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

(iv) (A) by either Imperial Holly or Savannah Foods, if the Merger
Agreement and the transactions contemplated thereby shall fail to receive
the requisite vote for approval and adoption at the Savannah Meeting or (B)
by Savannah Foods, if the issuance of the shares of Imperial Common Stock
as part of the Merger shall fail to receive the requisite vote for approval
at the Imperial Meeting.

FEES AND EXPENSES. The Merger Agreement provides that except as set forth
therein, all expenses incurred in connection with the Merger Agreement will be
paid by the party incurring such expenses, whether or not the Merger is
consummated, except that Savannah Foods and Imperial Holly each will pay
one-half of all expenses relating to printing, filing and mailing the
Registration Statement and the Joint Proxy Statement/ Prospectus and all
Commission and other regulatory filing fees incurred in connection with the
Registration Statement and the Joint Proxy Statement/Prospectus.

TERMINATION FEES. The Merger Agreement provides that if (i) Imperial Holly
or Savannah Foods terminates the Merger Agreement due to the failure of Savannah
Foods stockholders to approve and adopt the Merger Agreement and (ii) at the
time of such failure to so approve and adopt the Merger Agreement there shall
exist an Acquisition Proposal with respect to Savannah Foods and, within 12
months of the termination of the Merger Agreement, Savannah Foods enters into a
definitive agreement with any third party with respect to an Acquisition
Proposal with respect to Savannah Foods, then Savannah Foods shall pay to
Imperial Holly an amount equal to $8 million.

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. However, after approval and adoption of the Merger
Agreement and the transactions contemplated thereby by the stockholders of
Savannah Foods, no amendment may be made which would reduce the amount or change
the type of consideration payable in the Merger.

OTHER AGREEMENTS

SAVANNAH FOODS STOCKHOLDERS AGREEMENT. As a condition and inducement to
entering into the Merger Agreement, Imperial Holly and IHK Sub required that
substantially all of the directors and executive officers

41
<PAGE> 57

of Savannah Foods enter into a stockholders agreement, dated September 12, 1997.
Pursuant to such agreement, each such stockholder agreed to tender all shares of
Savannah Common Stock owned by such stockholder into the Offer prior to the
expiration of the Offer and not to withdraw any shares of Savannah Common Stock
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
into the Merger Agreement, Savannah Foods required that certain stockholders of
Imperial Holly, holding approximately 66.3% of the issued and outstanding shares
of Imperial Common Stock, enter into proxy agreements granting Savannah Foods,
R. Eugene Cartledge and William W. Sprague III proxies to vote all of such
shares of Imperial Common Stock in favor of the Imperial Proposal.

PLAN OF FINANCING

In order to (i) finance the cash consideration to be paid to Savannah Foods
stockholders in the Offer and the Merger, (ii) refinance certain indebtedness of
Imperial Holly and Savannah Foods and purchase the Senior Notes tendered in the
Debt Tender Offer, (iii) pay fees and expenses related to the Offer and the
Merger and (iv) provide working capital to Imperial Holly, Imperial Holly will
replace its and Savannah Foods' existing credit facilities with the credit
facilities described below pursuant to the Financing Commitment Letter.

TENDER CREDIT FACILITY. In order to finance the Offer, to repay
approximately $121 million of indebtedness of Imperial Holly (including the
purchase of the Senior Notes in the Debt Tender Offer) and certain related
expenses and to provide for Imperial Holly's working capital needs pending the
closing of the Merger, Imperial Holly has entered into the Tender Credit
Facility in an amount of up to $505 million. The Tender Credit Facility is
comprised of a term loan facility in the amount of $292 million and a revolving
credit facility in the amount of $210 million. The Tender Credit Facility is
guaranteed by each of Imperial Holly's direct and indirect subsidiaries (other
than Savannah Foods and its subsidiaries), and is secured by substantially all
the assets of Imperial Holly and each of such guarantors. The term loan will be
repayable on the earlier of (i) the date of the closing of the Merger and (ii)
January 15, 1998 (the "Maturity Date"). The revolving credit facility,
approximately $128.4 million of which was outstanding on November 14, 1997, will
be available on a revolving basis to refinance certain existing indebtedness and
will mature on the Maturity Date. The Tender Credit Facility will bear interest,
at Imperial Holly's election, at either (i) the highest 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"), in each case 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%.

SENIOR CREDIT FACILITY. In connection with the consummation of the Merger,
the Tender Credit Facility will be replaced by the Senior Credit Facility
arranged by LCPI. The Senior Credit Facility will be comprised of either (i)
senior credit facilities of up to $455 million (the "Alternative A Senior Credit
Facility"), 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 Senior Subordinated
Notes or (ii) in the event the Senior Subordinated Notes are not issued and sold
as of the date of the consummation of the Merger, senior credit facilities of up
to $705 million (the "Alternative B Senior Credit Facility") 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 Senior Credit Facility will provide the
financing necessary to repay amounts owing under the Tender Credit Facility, to
provide a portion of the Cash Consideration payable upon consummation of the
Merger and certain expenses related to the Merger, and to provide financing for
future working capital and other general corporate purposes. The Senior Credit
Facility will be guaranteed by each of Imperial Holly's direct and indirect
subsidiaries, including Savannah Foods and its subsidiaries, and will be secured
by substantially all the assets of Imperial Holly and each of the guarantors.

42
<PAGE> 58

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 Credit Facility and the Senior Credit Facility to other lenders, the
Financing Commitment Letter provides that LCPI will, subject to customary
conditions, underwrite the entire amount of the Tender Credit Facility and the
Senior Credit Facility.

SENIOR SUBORDINATED NOTES. Imperial Holly intends to issue the Senior
Subordinated Notes in an aggregate principal amount of approximately $250
million at or prior to the time of the consummation of the Merger in a private
placement exempt from registration pursuant to Rule 144A under the Securities
Act. In the event the offering of the Senior Subordinated Notes is not
consummated on or prior to the consummation of the Merger, pursuant to the
Financing Commitment Letter, LCPI has agreed to increase the amount of the
Senior Credit Facility in the aggregate amount of $250 million.

The Senior Subordinated Notes will be general unsecured obligations of
Imperial Holly and guaranteed by the direct and indirect existing and future
subsidiaries of Imperial Holly and Savannah Foods. The Senior Subordinated Notes
and such guarantees will be subordinated to the obligations of Imperial Holly
and its subsidiaries under the Senior Credit Facility, other borrowed money,
capital lease and certain other obligations of Imperial Holly and its
subsidiaries.

The indenture under which the Senior Subordinated Notes will be issued will
limit the ability of Imperial Holly and its subsidiaries to make dividends or
distributions on their stock, prepay subordinated debt and make certain
restricted investments. The indenture also will limit the ability of Imperial
Holly and its subsidiaries to incur other indebtedness or issue preferred stock,
create liens other than certain permitted liens, merge, consolidate or sell its
assets with certain exceptions, guarantee certain other indebtedness, enter into
certain transactions with affiliates and sale and leaseback transactions, issue
other senior subordinated debt, change its business, consent and enter into
certain other transactions. In the event of a change of control or certain asset
sales, Imperial Holly may be required, at the option of the holders of the
Senior Subordinated Notes, to repurchase all or a part of the Senior
Subordinated Notes, subject to the limitations set forth in the indenture.

EQUITY FINANCING. Imperial Holly has entered into an agreement to sell
shares of Imperial Common Stock to the H. Kempner Trust Association concurrently
with the consummation of the Merger for an aggregate consideration of $5 million
at a purchase price equal to the lesser of $14.50 per share and the per share
price of Imperial Common Stock used to determine the Stock Consideration.

DEBT TENDER OFFER

On October 16, 1997, Imperial Holly successfully completed a tender offer
(the "Debt Tender Offer") and solicitation of consents for its 8 3/8% Senior
Notes due 1999 (the "Senior Notes"). Pursuant to the terms of the solicitation
of consents, Imperial Holly amended the indenture under which the Senior Notes
were issued

43
<PAGE> 59

to remove certain restrictive covenants. Pursuant to the Debt Tender Offer,
approximately $75.4 million of the $81.2 million total outstanding principal
amount of the Senior Notes was tendered to and paid for by Imperial Holly.

GOVERNMENT REGULATION

REGULATORY APPROVALS

The Offer and the Merger are subject to the requirements of the HSR Act and
the regulations that have been promulgated thereunder by the Federal Trade
Commission (the "FTC"). The HSR Act requires, among other things, that certain
information regarding the Offer and the Merger be furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the FTC and
that certain waiting period requirements be satisfied before the Merger can be
consummated. 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 of Savannah Common Stock pursuant to the Offer with the FTC and the
Antitrust Division. Imperial Holly received no request from the FTC for
additional information with respect to the Offer or the Merger within fifteen
days of such filing. Accordingly, Imperial Holly has satisfied all filing and
waiting period requirements under the HSR Act with respect to the Offer and the
Merger.

REGULATION OF SUGAR INDUSTRY

Federal government programs, in the form of legislative or regulatory
action, have existed to support the price of domestic crops of sugar beets and
sugarcane almost continually since 1934. The principal legislation affecting the
domestic sugar industry is the Federal Agricultural Improvement and Reform Act
of 1996 (the "Farm Bill"), which became effective July 1, 1996 and extended the
sugar price support program for sugarcane and sugar beets until June 30, 2003.

CCC LOANS. Pursuant to the Farm Bill, the Commodity Credit Corporation
("CCC") is obligated annually to make loans available to domestic sugar
processors on existing sugar inventories from the current crop year production
at 18.0 cents per pound of raw cane sugar and 22.9 cents per pound of refined
beet sugar (subject to a limited right of reduction by the USDA). CCC loans
under the Farm Bill are recourse loans unless the tariff rate quota for import
sugar is set at a level in excess of 1.5 million short tons raw value ("STRV").
If the tariff rate quota exceeds 1.5 million STRV, CCC loans will become
non-recourse and processors will be obligated to pay participating growers a
predetermined minimum support price. If the tariff rate quota is below 1.5
million STRV and the collateral for the loan is inadequate to cover the loan
amount, the USDA may proceed against the processor for the difference between
the loan amount and the proceeds from the sale of the forfeited sugar.
Additionally, a processor will be penalized approximately one cent per pound for
each pound of sugar forfeited. Although Imperial Holly does not currently
utilize this program, it has in the past and may do so again in the future.

TARIFF RATE QUOTA. Under the Farm Bill, the USDA utilizes the import quota
and the forfeiture penalty to affect sugar price supports and prevent
forfeitures under the CCC loan program. The USDA annually implements a
tariff-rate quota for foreign sugar, which has the effect of limiting the total
available supply of sugar in the United States. The tariff-rate quota controls
the supply of sugar by setting a punitive tariff on all sugar imported for
domestic consumption that exceeds the determined permitted imported quantity and
is designed to make the importation of the excess sugar uneconomical. To the
extent a processor sells refined sugar for export from the United States, it is
entitled to import an equivalent quantity of non-quota eligible foreign raw
sugar. The tariff-rate quota for sugar to be allowed entry into the United
States during the year ended September 30, 1997 was 2.3 million STRV; for the
year ended September 30, 1998 the tariff-rate quota is expected to be 2.0
million STRV. The USDA manages the tariff-rate quota by targeting an ending
stocks-to-use ratio. Based on an estimate of the upcoming beet crop, the USDA
has announced the above quota amount, which brought the estimated ending
stocks-to-use ratio to 14.6%. A portion of the quota will be made available
immediately with separate allocations made available periodically depending upon
adjustments to estimated supply and demand.

NAFTA. The North American Free Trade Agreement ("NAFTA") contains
provisions that allow Mexico to increase its sugar exports to the United States
if Mexico is projected to produce a net surplus of sugar. The terms of NAFTA
restrict Mexico's exports, which may be in the form of raw or refined sugar, to

44
<PAGE> 60

the United States to no more than 25,000 STRV annually until the year 2000.
Mexico's exports to the United States will be increased in the event Mexico
produced a sugar surplus for two consecutive years prior to the year 2000 or at
any time thereafter. The Company's management believes that increased
importation of raw sugar from Mexico would benefit the Company thereafter
because the proximity of its Sugar Land, Texas refinery to Mexico would allow
the Company to import raw sugar more efficiently than its competition. However,
if imports are in the form of refined cane sugar, the domestic refined sugar
market may be adversely affected.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The receipt of cash or shares of Imperial Common Stock by Savannah Foods
Stockholders pursuant to the Offer and the Merger will be a taxable transaction
for federal income tax purposes. In general, for federal income tax purposes, a
beneficial owner of shares of Savannah Common Stock will recognize gain or loss
equal to the difference between the beneficial owner's adjusted tax basis in the
shares of Savannah Common Stock converted to cash and shares of Imperial Common
Stock in the Merger and the amount of cash and the value of the shares of
Imperial Common Stock, determined as of the Effective Time, received therefor.
Gain or loss must be determined separately for each block of shares of Savannah
Common Stock (i.e., shares acquired at the same cost in a single transaction)
converted to cash or shares of Imperial Common Stock 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 of Savannah Common Stock for more than
18 months, (b) mid-term capital gain or loss if the beneficial owner held the
shares of Savannah Common Stock 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) or (c) short-term capital gain, if the beneficial owner held
the shares of Savannah Common Stock for 12 months or less. 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%.
Short-term capital gain of individuals is currently taxed at the tax rate for
ordinary income.

BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH BENEFICIAL OWNER OF
SAVANNAH COMMON STOCK SHOULD CONSULT SUCH BENEFICIAL OWNER'S OWN TAX ADVISOR TO
DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED ABOVE TO SUCH BENEFICIAL
OWNER AND THE PARTICULAR TAX EFFECTS TO SUCH BENEFICIAL OWNER OF THE MERGER,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.

45
<PAGE> 61

MARKET PRICE AND DIVIDEND DATA; STOCK EXCHANGE LISTING

Savannah Common Stock is listed for trading under the symbol "SFI" on the
NYSE. Imperial Common Stock is listed for trading under the symbol "IHK" on the
AMEX. The following table sets forth, for the calendar quarters indicated, the
high and low closing sales price per share and the dividends paid. All prices
set forth below are as reported in published financial sources:

<TABLE>
<CAPTION>
SAVANNAH COMMON STOCK IMPERIAL COMMON STOCK
--------------------- ---------------------
CALENDAR QUARTER HIGH LOW DIVIDEND HIGH LOW DIVIDEND
---------------- ---- --- -------- ---- --- --------
<S> <C> <C> <C> <C> <C> <C>
1995
First Quarter.................................... $143/8 $101/2 $ 0.135 $10 $ 83/8 $0.04
Second Quarter................................... 113/4 91/8 0.025 93/8 83/4 0.04
Third Quarter.................................... 135/8 101/2 0.025 93/16 77/8 --
Fourth Quarter................................... 137/8 113/8 0.025 83/8 53/4 --
1996
First Quarter.................................... $127/8 $105/8 $ 0.025 $ 95/8 $ 53/8 $ --
Second Quarter................................... 131/2 103/4 0.025 121/2 75/8 --
Third Quarter.................................... 14 113/8 0.025 163/8 113/8 --
Fourth Quarter................................... 165/8 131/4 0.025 16 145/8 --
1997
First Quarter.................................... $151/4 $127/8 $ 0.025 $151/4 $101/2 $ --
Second Quarter................................... 173/4 121/2 0.0375 127/8 915/16 --
Third Quarter.................................... 191/16 131/16 0.0375 153/4 1111/16 0.03
Fourth Quarter (through November 17)............. 193/8 17 --(1) 141/4 1013/16 --(1)
</TABLE>

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

(1) On October 24, 1997, Savannah Foods declared a dividend of $0.0375 per share
to stockholders of record as of December 5, 1997, payable on December 26,
1997. On October 31, 1997, Imperial Holly declared a dividend of $0.03 per
share to stockholders of record as of November 11, 1997, payable on November
19, 1997.

On August 25, 1997, the last trading day prior to the date Savannah Foods
first publicly announced it had received an acquisition proposal from Imperial
Holly, the closing sales prices of Savannah Common Stock and Imperial Common
Stock, as reported on the NYSE Composite Tape and the AMEX Composite Tape, were
$14 15/16 and $14 1/2, respectively. On September 11, 1997, the last trading day
prior to the announcement of the execution of the Merger Agreement, the closing
sales prices of Savannah Common Stock and Imperial Common Stock, as reported on
the NYSE Composite Tape and the AMEX Composite Tape, were $18 1/16 and $14 9/16,
respectively. On November 17, 1997, the most recent practicable date prior to
the date of this Joint Proxy Statement/Prospectus, the last sales prices per
share of Savannah Common Stock and Imperial Common Stock, as reported on the
NYSE Composite Tape and the AMEX Composite Tape, were $17 3/8 and $11 5/16,
respectively.

Savannah Foods and Imperial Holly have agreed to use commercially
reasonable efforts to cause the shares of Imperial Common Stock issued in the
Merger to be listed for trading on the AMEX. At the effective time of the
Merger, the Savannah Common Stock will cease trading and be delisted from the
NYSE.

46
<PAGE> 62

STOCKHOLDERS' RIGHTS OF APPRAISAL

Pursuant to Section 262 of the DGCL ("Section 262"), any Savannah Foods
stockholders who do not vote for the Savannah Proposal may dissent from the
Merger and elect to have the fair value of such stockholder's shares of Savannah
Common Stock (exclusive of any element of value arising from the accomplishment
or expectation of the Merger) judicially determined and paid to such stockholder
in cash, together with a fair rate of interest. The following discussion is not
a complete statement of the law pertaining to appraisal rights under Delaware
law, and is qualified in its entirety by the full text of Section 262, which is
set forth in its entirety as Annex D to this Joint Proxy Statement/Prospectus,
and any future amendments thereto.

Imperial Holly stockholders will not have the right to an appraisal of the
value of their shares in connection with the Merger under the provisions of the
TBCA.

Any Savannah Foods stockholder who wishes to exercise such appraisal rights
or who wishes to preserve the right to do so should review carefully Annex D to
this Joint Proxy Statement/Prospectus because failure to comply with the
procedures specified in Section 262 in a proper and timely fashion will result
in the loss of appraisal rights. Moreover, because of the complexity of the
procedures for exercising the right to seek appraisal of the Savannah Common
Stock, Savannah Foods recommends that Savannah Foods stockholders who consider
exercising such rights seek the advice of counsel.

Any holder of Savannah Common Stock wishing to exercise the right to
dissent from the Merger and demand appraisal under Section 262 must satisfy each
of the following conditions:

(i) Such stockholder must deliver to Savannah Foods a written demand
for appraisal of such stockholder's shares of the Savannah Common Stock
before the vote on the Savannah Proposal at the Savannah Special Meeting.
Savannah Foods stockholders should forward demands for appraisal to
Savannah Foods & Industries, Inc., 2 East Bryan Street, Savannah, Georgia
31401 Attention: Secretary. Written demands for appraisal must be in
addition to and separate from any vote against the Savannah Proposal;
merely voting against, abstaining from voting or failing to vote in favor
of approval and adoption of the Savannah Proposal will not constitute a
demand for appraisal within the meaning of Section 262.

(ii) Such stockholder must not vote for approval and adoption of the
Savannah Proposal. Accordingly, a stockholder who desires to perfect
appraisal rights with respect to any of such stockholder's shares of
Savannah Common Stock must, as one of the procedural steps involved in such
perfection, either (A) refrain from executing and returning the enclosed
proxy card and from voting in person in favor of the proposal to approve
the Savannah Proposal or (B) check either the "Against" or "Abstain" box
next to the Savannah Proposal on the Savannah Foods proxy card or vote in
person against the Savannah Proposal or register in person an abstention
with respect thereto.

(iii) Such stockholder must continuously hold their shares of Savannah
Common Stock from the date of making their demand through the Effective
Time. Accordingly, a stockholder who is the record holder of shares of
Savannah Common Stock on the date the written demand for appraisal is made
but who thereafter transfers such shares prior to the Effective Time will
lose any right to appraisal in respect of such shares.

A demand for appraisal should be executed by or on behalf of the
stockholder of record, fully and correctly, as such stockholder's name appears
on such stockholder's stock certificates and should specify the stockholder's
name and mailing address, the number of shares of Savannah Common Stock owned
and that such stockholder intends thereby to demand appraisal of such
stockholder's Savannah Common Stock. However, such demand will be sufficient if
it reasonably informs Savannah Foods of the stockholder's identity and intent to
demand the appraisal of his shares. If the shares are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, execution of
the demand should be made in that capacity, and if the shares of Savannah Common
Stock are owned of record by more than one person, as in a joint tenancy or
tenancy in common, the demand should be executed by or on behalf of all joint
owners. An authorized agent, including one or more joint owners, may execute a
demand for appraisal on behalf of a holder of record;

47
<PAGE> 63

however, the agent must identify the record owner or owners and expressly
disclose the fact that in executing the demand for appraisal, the agent is agent
for such owner or owners. A record holder such as a broker who holds shares of
Savannah Common Stock as a nominee for several beneficial owners may exercise
appraisal rights with respect to the shares of Savannah Common Stock held for
one or more beneficial owners while not exercising such rights with respect to
the shares of Savannah Common Stock held for other beneficial owners; in such
case, the written demand should set forth the number of shares as to which
appraisal is sought and where no number of shares is expressly mentioned, the
demand will be presumed to cover all shares of Savannah Common Stock held in the
name of the record owner. Holders of shares of Savannah Common Stock who hold
their shares in brokerage accounts or nominee form and who wish to exercise
appraisal rights are urged to consult promptly with their broker or nominee to
determine the appropriate procedures for the making of a demand for appraisal by
such broker or nominee.

Within ten days after the Effective Time, Imperial Holly must give written
notice that the Merger has become effective to each stockholder who has filed a
written demand meeting the requirements of Section 262. Within 120 days after
the Effective Time, but not thereafter, either Imperial Holly or any former
Savannah Foods stockholder who has complied with the requirements of Section 262
may file a petition in the Delaware Court of Chancery demanding a determination
of the value of the shares of Savannah Common Stock held by all dissenting
stockholders of Savannah Foods. Imperial Holly does not presently intend to file
such a petition, and Savannah Foods stockholders seeking to exercise appraisal
rights should not assume that Imperial Holly will file such petition or that
Imperial Holly will initiate any negotiations with respect to the fair value of
such shares. Accordingly, Savannah Foods stockholders who desire to have their
shares appraised should initiate any petition necessary for the perfection of
their appraisal rights within the time periods and in the manner prescribed in
Section 262. Since Imperial Holly does not have an obligation to file such a
petition, the failure of a Savannah Foods stockholder to do so within the period
specified could nullify such stockholder's previous written demand for
appraisal.

Within 120 days after the effective time of the Merger, any Savannah Foods
stockholder who has complied with the provisions of Section 262 to that point in
time will be entitled to receive from Savannah Foods, upon written request, a
statement setting forth the aggregate number of shares seeking appraisal and the
aggregate number of holders of such shares. Savannah Foods must mail such
statement to the requesting stockholder within 10 days of receipt of such
request or within ten days of the expiration of the period for delivery of
demands for appraisal.

If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Chancery Court will determine which stockholders are
entitled to appraisal rights and will appraise the "fair value" of their shares,
exclusive of any element of value arising from the accomplishment or expectation
of the Merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. The costs of the action may be
determined by the Delaware Chancery Court and taxed upon the parties as the
Delaware Chancery Court deems equitable. Upon application of a stockholder, the
Delaware Chancery Court may also order that all or a portion of the expenses
incurred by any stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys' fees and expenses of
experts, be charged pro rata against the value of all of the shares entitled to
appraisal. SAVANNAH FOODS STOCKHOLDERS CONSIDERING SEEKING APPRAISAL WITH
RESPECT TO THEIR SHARES OF SAVANNAH COMMON STOCK SHOULD BE AWARE THAT THE FAIR
VALUE OF THEIR SHARES AS DETERMINED UNDER SECTION 262 COULD BE MORE THAN, THE
SAME AS OR LESS THAN THE CONSIDERATION THEY WOULD RECEIVE PURSUANT TO THE MERGER
AGREEMENT IF THEY DID NOT SEEK APPRAISAL OF THEIR SHARES.

In determining fair value, the Delaware Chancery Court is to take into
account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme
Court has discussed the factors that can be considered in determining fair value
in an appraisal proceeding, stating that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered, and that "fair price
obviously requires consideration of all relevant factors involving the value of
a company." In Weinberger, the Delaware Supreme Court has stated that, in making
this determination of fair value, the court must consider market value, asset
value, dividends, earnings prospects, the nature of the enterprise and any other
facts which could be ascertained as of the date of the merger that

48
<PAGE> 64

throw any light on future prospects of the merged corporation. The Delaware
Supreme Court has also stated that "elements of future value, including the
nature of the enterprise, which are known or susceptible of proof as of the date
of the merger and not the product of speculation, may be considered." Section
262 provides that fair value is to be "exclusive of any element of value arising
from the accomplishment or expectation of the merger."

Any stockholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the Effective Time, be entitled to vote the shares
subject to such demand for any purpose or be entitled to the payment of
dividends or other distributions on those shares (except dividends or other
distributions payable to holders of record of shares as of a record date prior
to the Effective Time) unless the demand is withdrawn or the appraisal rights
are not perfected.

At any time within 60 days after the Effective Time any stockholder who has
demanded appraisal rights will have the right to withdraw such demand for
appraisal and to accept the terms offered in the Merger Agreement; after this
period, the stockholder may withdraw such demand for appraisal only with the
consent of Imperial Holly. If no petition for appraisal is filed with the
Delaware Chancery Court within 120 days after the Effective Time, or if such
stockholder has withdrawn such demand for appraisal as discussed in the
preceding sentence, such stockholder's rights to appraisal shall cease, and such
stockholder's shares of Savannah Common Stock will be entitled to receive the
Merger Consideration applicable thereto. Any stockholder may withdraw such
stockholder's demand for appraisal by delivering to Imperial Holly a written
withdrawal of such stockholder's demand for appraisal and acceptance of the
terms of the Merger Agreement, except that (i) any such attempt to withdraw made
more than 60 days after the Effective Time will require written approval of
Imperial Holly and (ii) no appraisal proceeding in the Delaware Chancery Court
will be dismissed as to any stockholder without the approval of the Delaware
Chancery Court, and such approval may be conditioned upon such terms as the
Delaware Chancery Court deems just.

FAILURE TO COMPLY STRICTLY WITH THE PROCEDURES SET FORTH IN SECTION 262
WILL RESULT IN THE LOSS OF A SAVANNAH FOODS STOCKHOLDER'S STATUTORY APPRAISAL
RIGHTS WITH RESPECT TO SHARES OF SAVANNAH COMMON STOCK. CONSEQUENTLY, ANY
SAVANNAH FOODS STOCKHOLDER WISHING TO EXERCISE APPRAISAL RIGHTS IS URGED TO
CONSULT LEGAL COUNSEL BEFORE ATTEMPTING TO EXERCISE SUCH RIGHTS.

49
<PAGE> 65

PRO FORMA FINANCIAL STATEMENTS

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION

The following unaudited pro forma combined condensed financial statements
give effect to the Offer and the Merger, using the purchase method of accounting
for Imperial Holly's acquisition of Savannah Foods, after giving effect to the
pro forma reclassifications and adjustments described in the accompanying notes.
These unaudited pro forma combined condensed financial statements have been
prepared from, and should be read in conjunction with, the historical
consolidated financial statements and notes thereto of Imperial Holly and of
Savannah Foods, which are incorporated by reference in this Joint Proxy
Statement/Prospectus.

The Unaudited Pro Forma Combined Condensed Balance Sheet gives effect to
the Offer, the Debt Tender Offer, the Debt Financing, the H. Kempner Trust
Financing and the Merger as if each had occurred on September 30, 1997. The
Unaudited Pro Forma Combined Condensed Statements of Earnings for the year ended
March 31, 1997 and the six months ended September 30, 1997 and 1996 give effect
to the Offer, the Debt Tender Offer, the Debt Financing, the H. Kempner Trust
Financing and the Merger as if each had occurred at the beginning of the
earliest period presented. Savannah Foods' results of operations, which are
reported on a fiscal year ending on the Sunday closest to September 30, have
been adjusted to a March 31 year end. The estimates of the fair value of
Savannah Foods' assets and liabilities are based on valuations which are
preliminary. Such valuations will be updated to the effective date of the Merger
and may change from the amounts shown herein; however Imperial Holly and
Savannah Foods do not expect such changes to be material. The unaudited pro
forma combined condensed financial statements are intended for informational
purposes and are not necessarily indicative of the future financial position or
future results of the combined companies or of the financial position or the
results of operations that would have actually occurred had the Merger been in
effect as of the date or for the periods presented. The Unaudited Pro Forma
Combined Condensed Statements of Earnings do not reflect any benefits from cost
savings or revenue enhancements that are anticipated to result from the
integration of operations of Imperial Holly and Savannah Foods. Such cost
savings and revenue enhancements are discussed in Note 8 to the Unaudited Pro
Forma Combined Condensed Statements of Earnings.

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
FOR THE YEAR ENDED MARCH 31, 1997

<TABLE>
<CAPTION>
HISTORICAL
--------------------------
IMPERIAL SAVANNAH PRO FORMA PRO FORMA
HOLLY FOODS ADJUSTMENTS COMBINED
---------- ------------ ------------- -------------
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales................................ $752,595 $1,170,729 $ -- $ 1,923,324
Cost of sales............................ 651,677 1,031,475 (944)(1) 1,682,208
Selling, general and administrative...... 57,722 56,255 -- 113,977
Depreciation & amortization.............. 14,773 25,771 9,328(2) 47,156
(2,716)(3)
Impairment of long-lived assets.......... -- 10,280 -- 10,280
Cost of workforce reduction.............. -- 723 -- 723
-------- ---------- -------- -----------
Operating income............... 28,423 46,225 (5,668) 68,980
Interest expense......................... 12,430 9,572 33,844(5) 55,846
Other (income) expense................... (1,695) 285 -- (1,410)
-------- ---------- -------- -----------
Income before income taxes............... 17,688 36,368 (39,512) 14,544
Income tax provision..................... 6,170 12,948 (11,310)(6) 7,808
-------- ---------- -------- -----------
Income before extraordinary item......... $ 11,518 $ 23,420 $(28,202) $ 6,736
======== ========== ======== ===========

Average shares outstanding............... 12,576,489
Shares sold to H. Kempner Trust.......... 377,358(7)
Shares issued in Merger.................. 12,029,962(7)
-----------
Pro forma average shares outstanding..... 24,983,809
===========
Pro forma earnings per share............. $ 0.27
===========
</TABLE>

50
<PAGE> 66

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
HISTORICAL
--------------------------
IMPERIAL SAVANNAH PRO FORMA PRO FORMA
HOLLY FOODS ADJUSTMENTS COMBINED
----------- ----------- -------------- --------------
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales................................. $406,682 $612,229 -- $ 1,018,911
Cost of sales............................. 348,869 531,899 (308)(1) 880,460
Selling, general and administrative....... 30,668 30,711 -- 61,379
Depreciation & amortization............... 6,786 11,329 4,664(2) 22,883
104(3)
Merger related costs...................... -- 13,394 (13,394)(4) --
-------- -------- -------- -----------
Operating income................ 20,359 24,896 8,934 54,189
Interest expense.......................... 5,301 2,968 17,262(5) 25,531
Other (income) expense.................... (735) (294) -- (1,029)
-------- -------- -------- -----------
Income before income taxes................ 15,793 22,222 (8,328) 29,687
Income tax provision...................... 5,842 8,118 (1,431)(6) 12,529
-------- -------- -------- -----------
Income before extraordinary item.......... $ 9,951 $ 14,104 $ (6,897) $ 17,158
======== ======== ======== ===========

Average shares outstanding................ 14,247,193
Shares sold to H. Kempner Trust........... 377,358(7)
Shares issued in Merger................... 12,029,962(7)
-----------
Pro forma average shares outstanding...... 26,654,513
===========
Pro forma earnings per share.............. $ 0.64
===========
</TABLE>

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
HISTORICAL
--------------------------
IMPERIAL SAVANNAH PRO FORMA PRO FORMA
HOLLY FOODS ADJUSTMENTS COMBINED
----------- ----------- -------------- --------------
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales................................. $393,955 $591,119 $ -- $ 985,074
Cost of sales............................. 341,157 525,872 (636)(1) 866,393
Selling, general and administrative....... 29,057 27,116 -- 56,173
Depreciation & amortization............... 7,293 13,665 4,664(2) 24,618
(1,004)(3)
Cost of workforce reduction............... -- 723 -- 723
Impairment of long-lived assets........... -- 10,280 -- 10,280
-------- -------- -------- -----------
Operating income................ 16,448 13,463 (3,024) 26,887
Interest expense.......................... 6,337 5,690 16,765(5) 28,792
Other (income) expense.................... (1,046) 400 -- (646)
-------- -------- -------- -----------
Income before income taxes................ 11,157 7,373 (19,789) (1,259)
Income tax provision...................... 4,080 1,930 (5,667)(6) 343
-------- -------- -------- -----------
Income before extraordinary item.......... $ 7,077 $ 5,443 $(14,122) $ (1,602)
======== ======== ======== ===========

Average shares outstanding................ 11,009,476
Shares sold to H. Kempner Trust........... 377,358(7)
Shares issued in Merger................... 12,029,962(7)
-----------
Pro forma average shares outstanding...... 23,416,796
===========
Pro forma earnings per share.............. (0.07)
===========
</TABLE>

51
<PAGE> 67

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF EARNINGS
FOR THE YEAR ENDED MARCH 31, 1997 AND THE SIX MONTHS ENDED SEPTEMBER 30, 1997
AND 1996

(1) Represents the adjustment of pension and other employee benefit costs due to
elimination of the amortization of deferred gains and losses on a purchase
accounting basis.

(2) Represents the amortization of goodwill and brand related intangibles over
40 years and debt issuance costs related to the Debt Financing over the
terms of the respective loans.

(3) Represents the adjustment in depreciation due to the step-up of Savannah
Foods' property, plant and equipment to fair value. Pro forma depreciation
is calculated on the straight-line method over estimated useful lives of
eight to 37 years for real property improvements and five to ten years for
machinery and equipment.

(4) Represents elimination of the charge for costs related to the Merger
recognized in the Savannah Foods historical financial results.

(5) Represents additional interest under the Alternative A Senior Credit
Facility. Interest rates on the Alternative A Senior Credit Facility are
assumed to be:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED SEPTEMBER 30,
MARCH 31, -------------
1997 1997 1996
----------- ---- ----
<S> <C> <C> <C>
Six-year Senior Secured Loan...................... 7.31% 7.44% 7.23%
Eight-year Senior Secured Loan.................... 7.56 7.69 7.48
Ten-year Senior Subordinated Notes................ 9.32 9.32 9.32
Revolving Credit Facility......................... 7.31 7.44 7.23
</TABLE>

If interest rates were 1/8% higher during the periods, pro forma interest
expense on variable rate debt for the year ended March 31, 1997 and the six
months ended September 30, 1997 and 1996 would have increased $338,000,
$173,000 and $165,000, respectively.

(6) Represents the tax effect of the adjustments above, excluding amortization
of goodwill and brand related intangibles, based on the statutory rate in
effect for the periods shown.

(7) Represents the additional shares issued in the Merger and the H. Kempner
Trust Financing, assuming the Closing Price of Imperial Common Stock is
$13.25. If the Closing Price were assumed to be $17.25, the number of
additional shares issued in the Merger and the H. Kempner Trust Financing
would be 9,585,234, and pro forma earnings per share would be $0.30, $0.72
and $(0.08) for the year ended March 31, 1997 and the six months ended
September 30, 1997 and 1996, respectively.

52
<PAGE> 68

(8) The Unaudited Pro Forma Combined Condensed Statements of Earnings do not
give any effect to the costs savings and revenue enhancements which Imperial
Holly expects will result from integrating the operations of the companies
after the Merger. Management expects to begin to realize such cost savings
and revenue enhancements in the fiscal year ending September 30, 1998. The
full annual impact of such cost savings and revenue enhancements is expected
to be achieved in the fiscal year ending September 30, 1999, and is
preliminarily estimated to include the following (in millions of dollars):

<TABLE>
<S> <C>
Reduction of administrative costs resulting from elimination
of duplicate functions.................................... $13.5
Reduction of freight and distribution costs resulting from
more efficient sourcing of customer orders................ 7.0
Reductions in costs resulting from refocused selling,
marketing and promotion expense........................... 7.5
Reduction of costs resulting from optimizing the operating
schedules of the combined production facilities........... 5.0
Reduction of costs of procuring operating and packaging
supplies of the combined production facilities............ 7.0
-----
Total............................................. $40.0
=====
</TABLE>

Additionally, Imperial Holly believes, based upon preliminary analysis, that
there are potential opportunities to achieve improved operating results by
expanding the distribution of high value added products to each companies
respective markets, to expand sugar beet acreage supplying Savannah Foods'
sugar beet processing plants and to achieve reductions in working capital by
negotiating new arrangements with suppliers.

53
<PAGE> 69

UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
HISTORICAL
---------------------
IMPERIAL SAVANNAH PRO FORMA PRO FORMA
HOLLY FOODS ADJUSTMENTS COMBINED
-------- --------- ------------ ----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Cash...................................... $ 9,354 $ 14,677 $ -- $ 24,031
Marketable securities..................... 55,883 -- -- 55,883
Accounts receivable....................... 62,158 68,635 -- 130,793
Inventories............................... 127,375 90,908 9,949(1) 228,232
Manufacturing costs prior to production... 22,357 -- 16,747(2) 39,104
Prepaid expenses.......................... 5,448 6,175 -- 11,623
-------- -------- --------- ----------
Total current assets............ 282,575 180,395 26,696 489,666
Notes receivable & other investments...... 13,250 -- -- 13,250
Property, plant & equipment -- net........ 154,309 179,993 73,000(3) 407,302
Intangible assets......................... -- -- 302,954(4) 302,954
Investment in Savannah Foods.............. 3,123 -- (3,123)(11) --
Other assets.............................. 4,642 38,683 (3,636)(5) 39,689
-------- -------- --------- ----------
Total Assets.................... $457,899 $399,071 $ 395,891 $1,252,861
======== ======== ========= ==========
Accounts payable.......................... $ 53,923 $ 55,756 $ -- $ 109,679
Short-term borrowings..................... 43,091 -- (43,091)(7) --
Current maturities of long-term debt...... 1,173 7,824 5,600 14,597
Other current liabilities................. 54,525 23,644 -- 78,169
-------- -------- --------- ----------
Total current liabilities....... 152,712 87,224 (37,491) 202,445
Long-term debt............................ 81,304 26,100 432,669(7) 540,073
Deferred taxes and other credits.......... 30,924 69,058 33,086(6) 154,773
21,705(8)
Common stock.............................. 83,707 17,365 164,397(9) 271,485
23,381(10)
(17,365)(11)
Additional paid in capital................ -- 43,639 (43,639)(11) --
Retained earnings......................... 90,870 221,949 (221,949)(11) 89,084
(1,786)(7)
Treasury stock............................ -- (15,849) 15,849(11) --
Benefit Trust............................. -- (46,875) 46,875(11) (23,381)
(23,381)(10)
Other equity.............................. 18,382 (3,540) 3,540(11) 18,382
-------- -------- --------- ----------
Total equity.................... 192,959 216,689 (54,078) 355,570
-------- -------- --------- ----------
Total........................... $457,899 $399,071 $ 395,891 $1,252,861
======== ======== ========= ==========
</TABLE>

54
<PAGE> 70

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1997

(1) Represents the adjustment of Savannah Foods' finished goods inventories to
net realizable value, less an allowance for a normal profit margin, and of
raw material inventories to replacement cost.

(2) Represents an adjustment to conform Savannah Foods' accounting policy for
certain manufacturing costs incurred between processing periods which are
necessary to prepare the factory for the next processing campaign, to that
of Imperial Holly's.

(3) Represents the adjustment to fair value of Savannah Foods' property, plant
and equipment as follows (in thousands):

<TABLE>
<S> <C>
Land............................................... $10,000
Real property improvements......................... 39,000
Machinery and equipment............................ 24,000
-------
Total.................................... $73,000
=======
</TABLE>

(4) Represents intangible assets including an estimate of the excess purchase
price over the book value of Savannah Foods' net assets acquired
("Goodwill"), brand related intangibles and debt acquisition cost.

(5) Represents the adjustment of other assets to fair value.

(6) Represents the adjustment to fair value of pension and other employee
benefit plan liabilities.

(7) Represents the adjustment to reflect the borrowings under the Alternative A
Senior Credit Facility to finance the cash consideration paid in the Offer
and the Merger, to purchase the Senior Notes in the Debt Tender Offer and
to pay related fees and expenses estimated at $24.4 million. (The cash
consideration paid in the Offer, the amount required to repurchase the
Senior Notes in the Debt Tender Offer and certain of such expenses were
originally financed with borrowings under the Tender Credit Facility, which
amounts were repaid with borrowings under the Senior Credit Facility).

(8) Represents the net deferred tax effect of various adjustments to the
Combined Condensed Balance Sheet.

(9) Represents the issuance of Imperial Common Stock to Savannah Foods
stockholders in the Merger, and sale of Imperial Common Stock in the H.
Kempner Trust Financing, the proceeds of which were used to reduce the
borrowing requirements.

(10) Represents the effect of transactions with the Benefit Trust as a result of
the Offer, the Merger and the use of the Cash Consideration to repay the
Benefit Trust Note and purchase additional shares of Imperial Common Stock.

(11) Represents the elimination of Savannah Foods' historical equity and
Imperial Holly's costs of the acquisition capitalized at September 30,
1997.

55
<PAGE> 71

SECURITY OWNERSHIP OF IMPERIAL HOLLY

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

The following table sets forth certain information with respect to the
ownership of Imperial Common Stock as of September 30, 1997 of each director of
Imperial Holly, the chief executive officer and the four other most highly
compensated executive officers of Imperial Holly, each person known to Imperial
Holly to be the beneficial owner of 5% or more of Imperial Common Stock and all
directors and executive officers of Imperial Holly as a group. Unless otherwise
indicated, the beneficial owners have sole voting and investment power over the
shares of Imperial Common Stock listed below.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF COMMON STOCK
-----------------------
NUMBER PERCENTAGE
NAME OF SHARES OF CLASS
---- --------- ----------
<S> <C> <C>
Peter C. Carrothers(1)(2)................................... 39,902 *
John D. Curtin, Jr.(1)...................................... 8,142 *
David J. Dilger(3).......................................... 3,800,000 26.6%
Edward O. Gaylord........................................... 18,942 *
Greencore Group plc......................................... 3,800,000 26.6%
St. Stephen's Green House
Earlsfort Terrace
Dublin 2, Ireland
Gerald Grinstein............................................ 2,466 *
Ann O. Hamilton(4)(5)....................................... 361,307 2.5%
Roger W. Hill(1)(2)......................................... 68,298 *
Harris L. Kempner, Jr.(6)(7)................................ 456,944 3.2%
I. H. Kempner, III(6)(4)(1)(8).............................. 718,179 5.0%
P. O. Box 25
Sugar Land, Texas 77487-0025
James C. Kempner(6)(1)(2)(9)................................ 539,159 3.8%
H. E. Lentz................................................. 19,142 *
Robert L. K. Lynch(4)(10)................................... 414,304 2.9%
Kevin C. O'Sullivan(3)...................................... 3,800,000 26.6%
John A. Richmond(1)(2)...................................... 30,903 *
Fayez Sarofim............................................... 681,142 4.8%
William F. Schwer(1)(2)..................................... 45,258 *
Daniel K. Thorne(11)(4)..................................... 695,718 4.9%
United States National Bank(12)............................. 1,937,456 13.6%
P. O. Box 179
Galveston, Texas 77553
Harris K. Weston(6)(13)..................................... 1,347,563 9.4%
Dinsmore & Shohl
1900 Chemed Center
255 East 5th Street
Cincinnati, Ohio 45202
All directors and executive officers as a group (20
persons)(1)(2)............................................ 3,088,660 21.6%
</TABLE>

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

* Percentage of shares of Imperial Common Stock beneficially owned does not
exceed 1% of the class.

(1) Includes shares subject to stock options exercisable within 60 days as
follows: I. H. Kempner, III, 81,425 shares; Peter C. Carrothers, 21,250
shares; John D. Curtin, Jr., 750 shares; Roger W. Hill, 44,475 shares;
James C. Kempner, 71,475 shares; William F. Schwer, 27,000 shares; and John
A. Richmond 12,700 shares and all directors and executive officers as a
group, 378,975 shares.

56
<PAGE> 72

(2) Includes restricted shares as follows: Mr. Carrothers, 14,792; Mr. Hill,
14,290; Mr. James C. Kempner, 23,052; Mr. Richmond, 10,466; Mr. Schwer,
14,792 and all executive officers as a group, 86,811 shares.

(3) Includes the shares held by Greencore Group plc, of which Mr. Dilger is the
Chief Executive Officer and a director and Mr. O'Sullivan is the Chief
Financial Officer and a director. Messrs. Dilger and O'Sullivan disclaim
beneficial ownership of such shares.

(4) Includes 134,187 shares of Imperial Common Stock owned by the Harris and
Eliza Kempner Fund, a charitable foundation, as to which Ms. Hamilton, Mr.
I. H. Kempner, III, Mr. Lynch and Mr. Thorne share voting power and
investment power as co-trustees along with other trustees.

(5) Includes 49,072 shares of Imperial Common Stock owned by a testamentary
trust as to which Mrs. Hamilton is successor trustee and has voting and
investment power.

(6) Includes 332,363 shares of Imperial Common Stock owned by the H. Kempner
Trust Association, over which I. H. Kempner, III, James C. Kempner, Harris
L. Kempner, Jr. and Harris K. Weston share voting power and investment
power as co-trustees with one other co-trustee.

(7) Includes 6,420 shares of Imperial Common Stock held by Mr. Kempner's wife,
as to which he shares voting and investment power. Mr. Kempner disclaims
beneficial ownership as to such shares.

(8) Includes 4,443 shares of Imperial Common Stock held by Mr. Kempner's wife,
as to which Mr. Kempner disclaims beneficial ownership.

(9) Includes 6,750 shares of Imperial Common Stock owned by a trust of which
Mr. Kempner is a beneficiary.

(10) Includes 188,891 shares of Imperial Common Stock owned by a testamentary
trust as to which Mr. Lynch is the income beneficiary and has a power of
appointment. Mr. Lynch does not have voting or investment power with
respect to such shares. Also includes 45,367 shares of Imperial Common
Stock held by a revocable trust for the benefit of Mr. Lynch's sister of
which Mr. Lynch is co-trustee and shares voting and investment power with
two other co-trustees. Mr. Lynch disclaims beneficial ownership over the
shares held in trust for his sister.

(11) Includes 327,142 shares of Imperial Common Stock owned by a testamentary
trust as to which Mr. Thorne is the sole beneficiary and a co-trustee. Also
includes 166,947 shares owned by the Alan Pryce-Jones Trust, of which Mr.
Thorne is a co-trustee and 18,722 shares owned by the Daniel K. Thorne
Foundation of which Mr. Thorne is President. Also includes 875 shares owned
by his wife of which Mr. Thorne disclaims beneficial ownership.

(12) Consists of 1,937,906 shares of Imperial Common Stock which United States
National Bank holds as trustee of various trusts for descendants of H.
Kempner, including the 188,891 shares listed in Note 12 but not including
any shares that are held in nominee form for others. United States National
Bank has sole voting power over 1,937,456 shares. The information given is
based on a Statement on Form 4 filed by the stockholder with the Commission
and other information furnished by the stockholder.

(13) Includes 2,700 shares of Imperial Common Stock held by Mr. Weston's wife
and 46,800 shares of Imperial Common Stock held by Mr. Weston's daughters.
Mr. Weston disclaims beneficial ownership as to such shares. Also includes
106,200 shares of Imperial Common Stock owned by Mr. Weston as trustee for
two trusts for the benefit of Mr. Weston's daughters and 396,000 shares of
Imperial Common Stock owned by Mr. Weston as trustee of three charitable
annuity lead trusts, as to all of which shares Mr. Weston disclaims
beneficial ownership.

57
<PAGE> 73

DESCRIPTION OF IMPERIAL CAPITAL STOCK

The following descriptions of certain provisions of the Imperial Charter
and the Imperial Bylaws are necessarily general and do not purport to be
complete and are qualified in their entirety by reference to the Imperial
Charter and Imperial Bylaws, which are included as exhibits to the Registration
Statement of which this Joint Proxy Statement/Prospectus is a part.

IMPERIAL COMMON STOCK. The Imperial Board is authorized to issue 50,000,000
shares of Imperial Common Stock. The holders of Imperial Common Stock are
entitled to one vote for each share on all matters submitted to a vote of
stockholders, and, except as described below, a majority vote is required for
all action to be taken by stockholders. Holders of Imperial Common Stock are
entitled to such dividends as may be declared from time to time by the Imperial
Board out of funds legally available therefor, subject to the dividend and
liquidation rights of any preferred stock of Imperial that may be issued, and
subject to the dividend restrictions contained in the Debt Financing (which
permit the payment of Imperial Holly's regular quarterly dividend). In the event
of liquidation, dissolution or winding-up of Imperial Holly, the holders of
Imperial Common Stock are entitled to share equally and ratably in the assets of
Imperial Holly, if any, remaining after provision for payment of all debts and
liabilities of Imperial Holly and satisfaction of the liquidation preference of
any shares of preferred stock of Imperial Holly that may be outstanding. The
holders of Imperial Common Stock have no preemptive, subscription, redemptive or
conversion rights. The outstanding shares of Imperial Common Stock are fully
paid and nonassessable.

RIGHTS TO PURCHASE PREFERRED STOCK. On September 14, 1989, the Imperial
Board declared a dividend of one right (a "Purchase Right") to record holders of
Imperial Common Stock as of the close of business on September 25, 1989. The
Purchase Rights will be issuable with respect to all shares of Imperial Common
Stock issued after such record date but before the earlier of (i) ten days
following a public announcement that a person or group of affiliate persons (an
"Acquiring Person") has acquired or obtained the right to acquire beneficial
ownership of 25% or more of the outstanding shares of Imperial Common Stock as
of the date of such announcement or (ii) ten business days following the
announcement of a tender offer or exchange offer that would result in a person
becoming an Acquiring Person.

Each Purchase Right entitles the registered holder to purchase from
Imperial Holly a unit consisting of one one-hundredth of a share of Series A
Junior Participating Preferred Stock, without par value ("Series A Preferred
Stock"), at a purchase price of $90 per unit, subject to adjustment, or under
certain circumstances, the right to purchase shares of Imperial Common Stock at
one-half their market price. The description and terms of the Purchase Rights
are set forth in the Rights Agreement, dated September 14, 1989, as amended, as
it may from time to time be supplemented and amended, between Imperial Holly and
the Bank of New York, as rights agent. The Purchase Rights may have certain
anti-takeover effects, including deterring someone from acquiring control of
Imperial Holly in a manner or on terms not approved by the Imperial Board. The
Purchase Rights should not interfere with any merger or other business
combination approved by the Imperial Board.

PREFERRED STOCK. Imperial Holly is authorized to issue 5,000,000 shares of
preferred stock, without par value ("Imperial Preferred Stock"), of which
334,000 shares have been designated as Series A Preferred Stock and which may be
issued in connection with exercise of Purchase Rights. No shares of Imperial
Preferred Stock were outstanding at the date of this Joint Proxy
Statement/Prospectus. The Imperial Board has the authority, without stockholder
approval, to issue shares of Imperial Preferred Stock in one or more series and
to determine the number of shares, designations, dividend rights, conversion
rights, voting power, redemption rights, liquidation preferences and other terms
of any such series. The issuance of Imperial Preferred Stock, while providing
desired flexibility in connection with possible acquisitions and other corporate
purposes, could adversely affect the voting power of holders of Imperial Common
Stock and the likelihood that such holders will receive dividend payments and
payments upon liquidation and could have the effect of delaying, deferring or
preventing a change in control of Imperial Holly. Imperial Holly has no present
plans for the issuance of Imperial Preferred Stock, other than the shares of
Series A Preferred Stock issuable pursuant to Purchase Rights.

58
<PAGE> 74

Any shares of Series A Preferred Stock that may be issued upon the exercise
of the Purchase Rights will be redeemable in whole or in part for cash in a per
share amount equal to 100 times the market price of a share of Imperial Common
Stock. The holders of shares of Series A Preferred Stock will be entitled to
receive, when, as and if declared, a preferential quarterly dividend in an
amount per share effectively equal to the greater of $8.00 per share or 100
times any cash dividend or other distribution declared on the Imperial Common
Stock, in like kind. In the event of liquidation, the holder of the Series A
Preferred Stock will be entitled to receive a liquidation payment per share in
an amount effectively equal to the greater of $100 per share or 100 times the
per share amount distributed to holders of Imperial Common Stock. In the event
of any merger, consolidation or other transaction in which shares of Imperial
Common Stock are exchanged, the holder of shares of Series A Preferred Stock
will be entitled to receive 100 times the amount received per share of Imperial
Common Stock. Holders of Series A Preferred Stock will have 100 votes per share
of Series A Preferred Stock and, except as otherwise provided in the Imperial
Charter or required by law, will vote together with holders of Imperial Common
Stock as a single class. The rights of the Series A Preferred Stock as to
dividends, liquidation and voting are protected by anti-dilution provisions.
Whenever dividend payments on the Series A Preferred Stock are in arrears,
Imperial Holly may not (i) purchase or redeem any shares of Series A Preferred
Stock or shares ranking on a parity with respect to the Series A Preferred Stock
except in accordance with a purchase offer to all holders, (ii) declare or pay
dividends on or purchase or redeem any shares of stock ranking junior to the
Series A Preferred Stock or (iii) declare or pay dividends on or purchase or
redeem any shares of stock ranking on a parity with the Series A Preferred
Stock, except dividends paid ratably on the Series A Preferred Stock and all
such parity stock and except purchases or redemptions of such parity stock in
exchange for junior stock. If dividend payments on the Series A Preferred Stock
are in arrears for six quarters, the holders of the Series A Preferred Stock
(together with holders of any other Preferred Stock with similar rights) will
have the right to elect two directors of Imperial Holly.

TRANSFER AGENT AND REGISTRAR. The transfer agent and registrar for the
Imperial Common Stock is the Bank of New York.

COMPARISON OF STOCKHOLDER RIGHTS

As a result of the Merger, holders of Savannah Common Stock who receive the
Stock Consideration will become holders of Imperial Common Stock. Savannah Foods
is a Delaware corporation and Imperial Holly is a Texas corporation. Following
the Merger, the rights of all former holders of such Savannah Common Stock will
be governed by the Imperial Charter, the Imperial Bylaws and the laws of Texas.
The following is a summary comparison of the material differences between the
rights of holders of Savannah Common Stock and holders of Imperial Common Stock
and more particularly certain material differences between the Savannah Charter
and the Imperial Charter, the Savannah Bylaws and the Imperial Bylaws and
between certain provisions of the DGCL and the TBCA. This summary is qualified
in its entirety by reference to the full text of such documents. For information
on how to obtain copies of such documents, see "Available Information" and
"Incorporation of Documents by Reference." Furthermore, the description of the
differences between the DGCL and the TBCA is a summary only and does not purport
to be a complete description of the differences between the corporation laws of
Texas and Delaware.

MERGERS AND OTHER FUNDAMENTAL TRANSACTIONS

Texas law generally requires that a merger, consolidation, sale of all or
substantially all of the assets or dissolution of a corporation be approved by
the holders of at least two-thirds of the outstanding shares entitled to vote,
unless a corporation's charter provides otherwise. The Imperial Charter provides
that certain business combinations (including mergers and sales of all or
substantially all of the assets of Imperial Holly) involving a beneficial owner
of at least 10% of the outstanding shares of Imperial Common Stock (a "Related
Person") require the affirmative vote of 75% of the shares of capital stock
entitled to vote generally in the election of directors of Imperial Holly and
the affirmative vote of a majority of the capital stock entitled to vote
generally in the election of directors not owned by the Related Person unless
certain board approval requirements are met.

Under Delaware law, all such transactions generally must be approved by the
holders of at least a majority of all outstanding shares entitled, unless a
corporation's charter requires the approval of a greater

59
<PAGE> 75

number of shares. The Savannah Charter provides that certain business
combinations (including mergers and sales of all or substantially all of the
assets of Savannah Foods) require the affirmative vote of at least 75% of the
Voting Stock of Savannah Foods and the affirmative vote of a majority of the
shares of capital stock entitled to vote generally in the election of directors
and not owned by the acquiring person unless certain board approval requirements
are met. The Merger Agreement has received such board approval.

STATUTORY ANTI-TAKEOVER PROVISIONS

Part Thirteen of the TBCA ("Part Thirteen"), which became effective
September 1, 1997, restricts certain transactions between a corporation
organized under Texas law (or its majority owned subsidiaries) and any person
holding 20% or more of a corporation's outstanding voting stock, together with
the affiliates or associates of such person (an "Affiliated Stockholder"). Part
Thirteen generally prohibits a publicly-held Texas corporation from engaging in
the following transactions with an Affiliated Stockholder (unless certain
conditions are met), for a period of three years from the date the stockholder
becomes an Affiliated Stockholder: (i) any merger, share exchange or conversion,
(ii) sales, leases, exchanges or other transfers of 10% or more of the aggregate
assets of a corporation, (iii) issuances or transfers by a corporation of any
stock of a corporation which would have the effect of increasing the Affiliated
Stockholder's proportionate share of the stock of a corporation, (iv) the
adoption of a plan or proposal for the liquidation or dissolution of a
corporation proposed by or pursuant to any arrangement with Affiliated
Stockholder, (v) any other transaction which has the effect of increasing the
proportionate share of stock of a corporation which is owned by the Affiliated
Stockholder and (vi) receipt by the Affiliated Stockholder of the benefit
(except proportionately as a stockholder) of loans, advances, guarantees,
pledges or other financial benefits provided by a corporation.

The three-year ban does not apply if either the proposed transaction or the
transaction by which the Affiliated Stockholder became an Affiliated Stockholder
is approved by the board of directors of a corporation prior to the date such
stockholder became an Affiliated Stockholder. Business combinations are also
permitted within the three-year period if authorized at a meeting of
stockholders called for that purpose within six months after such stockholder
becomes an Affiliated Stockholder, by the holders of at least 66 2/3% of the
outstanding voting stock not owned by the Affiliated Stockholder. Prior to
December 31, 1997, a corporation has the option of electing to exclude itself
from the coverage of Part Thirteen by amending its charter or Bylaws. After
December 31, 1997, a corporation may, at its option, exclude itself from the
coverage of Part Thirteen by amending its charter or bylaws by action of its
stockholders to exempt itself from coverage, provided that such charter or
bylaws amendment will not become effective until 18 months after the date it is
adopted and will not apply to any business combination with an Affiliated
Stockholder who became such prior to the effective date of such amendment.
Imperial Holly has not adopted such a charter or bylaw amendment.

Section 203 of the DGCL generally prohibits a publicly-held Delaware
corporation from engaging in a business combination with an interested
stockholder for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless (i) prior to the date
of such business combination, the board of directors of a corporation approved
the transaction or business combination which resulted in the stockholder
becoming an interested stockholder, (ii) upon consummation of the transaction
which resulted in the stockholder becoming an interested stockholder, the
interested stockholder owns at least 85% of the outstanding voting stock of a
corporation outstanding at the time the transaction commenced, or (iii) on or
after such date the business combination is approved by the board of directors
and by the affirmative vote of at least 66 2/3% of the outstanding voting stock
which is not owned by the interested stockholder. A "business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the stockholder. An "interested stockholder" is a person who,
together with affiliates and associates, owns (or if such stockholder is an
affiliate or associate, within three years, did own) 15% or more of a
corporation's voting stock.

RESTRICTION ON PURCHASE OF SHARES OF COMMON STOCK

The Imperial Charter provides that Imperial Holly shall not have the power
to purchase or otherwise acquire for value, in any single transaction or series
of related transactions occurring within a period of 12 months, shares of its
capital stock representing in excess of 8% of any class, unless (i) the purchase
or

60
<PAGE> 76

acquisition is approved by the holders of a majority of the shares of such class
that will remain outstanding, (ii) the purchase or acquisition is in accordance
with an offer made to the holders of all outstanding shares of such class, or
(iii) solely in the case of stock ranking prior to the Imperial Common Stock,
such purchase is or acquisition is in accordance with mandatory redemption
provisions expressly applicable to such stock. The Savannah Charter contains no
such restriction.

MERGERS WITHOUT STOCKHOLDER APPROVAL

Under Article 5.03 of the TBCA, unless a corporation's charter provides
otherwise (the Imperial Charter does not), action by the stockholders of a
corporation on a plan of merger will not be required if: (i) a corporation is
the sole surviving corporation in the merger, (ii) a corporation's charter
following the merger will not differ from the pre-merger charter, (iii) each
stockholder of a corporation prior to the merger will hold the same number of
shares, with identical designations, preferences, limitations and relative
rights, immediately after the merger as such stockholder held prior to the
merger, (iv) the voting power of the voting shares outstanding immediately after
the merger, plus the voting power of the voting shares issuable as a result of
the merger, will not exceed by more than 20% the voting power of the voting
shares outstanding immediately prior to the merger, (v) the number of
participating shares outstanding immediately after the merger will not exceed by
more than 20% the total number of participating shares outstanding immediately
prior to the merger, (vi) the board of directors of a corporation adopts a
resolution approving the plan of merger. Additionally, no vote of stockholders
is required for the merger of a Texas corporation with a corporation in which it
holds at least 90% of the outstanding shares of each class and series of capital
stock of such corporation.

Unless a corporation otherwise provides (the Savannah Charter does not)
Delaware law permits a corporation to consummate a merger in which a corporation
is the surviving entity without stockholder approval (and stockholders do not
have the right to dissent from the merger and exercise appraisal rights) if (i)
the merger does not result in an amendment to a corporation's charter, (ii) each
share of stock of a corporation outstanding immediately prior to the merger is
to be an identical outstanding or treasury share of the corporation after the
merger, (iii) the shares of common stock of the surviving corporation to be
issued or delivered under the plan of merger plus those initially issuable upon
conversion of any other shares, securities or obligations to be issued under
such plan of merger do not exceed 20% of the shares of common stock of the
corporation outstanding immediately prior to the merger. Additionally, when
certain conditions are met, no vote of stockholders is required for the merger
of a Delaware corporation with a corporation in which it holds at least 90% of
the outstanding shares of each class of such corporation.

APPRAISAL RIGHTS

Article 5.11 of the TBCA provides for appraisal rights in the case of a
plan or merger or exchange or a sale of all or substantially all of the
corporation's assets where stockholder approval is required. However, no
appraisal rights are available for a plan of merger or plan of exchange if (i)
the shares of the corporation held by the stockholder are listed on a national
securities exchange or held of record by at least 2,000 holders and (ii) the
stockholder is not required to accept any consideration other than (A) shares of
a corporation that will be listed on a national securities exchange or will be
held of record by at least 2,000 holders and (B) cash in lieu of fractional
shares.

Section 262 of the DGCL provides for appraisal rights only in the case of a
statutory merger or consolidation of the corporation where the petitioning
stockholder does not consent to the transaction. No appraisal rights are
available where the corporation is to be the surviving corporation and a vote of
its stockholders is not required under Section 251(g) of the DGCL. There are
also no appraisal rights for shares of stock listed on a national exchange or
held of record by more than 2,000 holders, unless such stockholders would be
required to accept anything other than (i) shares of stock of the surviving
corporation, (ii) shares of another corporation listed on a national exchange or
held of record by more than 2,000 holders, (iii) cash in lieu of fractional
shares or (iv) any combination thereof. Under Delaware law, unless otherwise
provided by a corporation's charter (the Savannah Charter contains no such
provision), stockholders are not entitled to appraisal rights upon a sale of all
or substantially all of the assets of a corporation as they are under the TBCA.

61
<PAGE> 77

AMENDMENTS TO CHARTERS

Article 4.02 of the TBCA provides that an amendment to a corporation's
charter must be approved by the board of directors and by the affirmative vote
of holders of at least two-thirds of the outstanding shares entitled to vote,
unless the corporation's charter provides otherwise. The Imperial Charter
provides that the provisions of such charter with respect to business
combinations with related persons may not be amended or repealed without the
affirmative vote of at least 75% of the voting stock and the affirmative vote of
a majority of the voting stock not beneficially owned by a related person.
Section 242 of the DGCL provides that an amendment to a corporation's charter
must be approved by the board of directors and by the affirmative vote of the
holders of at least a majority of the outstanding stock entitled to vote. The
Savannah Charter provides that the provisions of such charter with respect to
business combinations with related persons may not be amended or repealed
without the affirmative vote of at least 75% of the voting stock.

PREFERRED STOCK PURCHASE RIGHTS

Each share of Imperial Common Stock issued in connection with the Merger
will include one Purchase Right. Each Purchase Right entitles the registered
holder to purchase from Imperial Holly a unit consisting of one one-hundredth of
a share of Series A Preferred Stock, at a purchase price of $90 per unit,
subject to adjustment, or under certain circumstances, to purchase shares of
Imperial Common Stock at one-half their market price. The Purchase Rights have
the effect of making more difficult the acquisition of Imperial Holly by means
of a tender offer, proxy contest or otherwise. See "Description of Imperial
Capital Stock -- Rights to Purchase Preferred Stock." Each share of Savannah
Common Stock also included one right to purchase from Savannah Foods a unit
consisting of one one-hundredth of a share of Series A Junior Participating
Preferred Stock, par value $0.50 per share, at a purchase price of $150 per
unit, subject to adjustment, or under certain circumstances, to purchase shares
of Savannah Common Stock at one-half their market price. As required by the
Merger Agreement, the Savannah Board has taken all necessary action to render
such preferred stock purchase rights inapplicable to the Offer or the Merger.
See "The Merger Agreement -- Savannah Foods' Rights Agreement."

SPECIAL MEETINGS OF STOCKHOLDERS

The Imperial Bylaws provide that a special meeting of the stockholders may
be called by the board of directors, the chairman of the board of directors, the
president or any vice president or secretary or any director or the holders of
not less than 10% of shares outstanding and entitled to vote at such meeting.
The Savannah Bylaws provide that a special meeting of the stockholders may be
called by the chairman of the board of directors, the president or by order of
the board of directors.

CUMULATIVE VOTING

Neither the Imperial Charter nor the Savannah Charter provide for
cumulative voting in the election of directors.

PREEMPTIVE RIGHTS

Article 2.22-1 of the TBCA states that stockholders of a corporation shall
have preemptive rights, except to the extent limited or denied by the
corporation's charter. The Imperial Charter explicitly provides that no
stockholder of Imperial Holly shall have any preemptive or preferential right to
acquire or subscribe for any additional, unissued or treasury shares of any
class of the corporation currently authorized or authorized in the future. The
absence of preemptive rights increases Imperial Holly's flexibility to issue
additional shares of Imperial Common Stock, or securities convertible to
Imperial Common Stock, in connection with acquisitions, employee benefit plans
and other purposes without affording Imperial Holly's stockholders a right to
subscribe for their proportionate share of those additional securities. Unlike
the TBCA, the DGCL does not affirmatively grant preemptive rights to
stockholders of a corporation, and the Savannah Charter does not grant
preemptive rights to Savannah Foods stockholders.

62
<PAGE> 78

STOCKHOLDER ACTION BY WRITTEN CONSENT

Article 9.10 of the TBCA provides that stockholders may act without a
meeting only by the unanimous consent of all stockholders, unless the
corporation's charter provides otherwise (the Imperial Charter contains no such
provision). Section 228 of the DGCL provides that stockholders may act without a
meeting by consent of the holders of the outstanding stock representing the
number of shares necessary to take such action at a meeting at which all shares
entitled to vote were present and voted, unless the corporation's charter
provides otherwise (the Savannah Charter contains no such provision).

VACANCIES; NEWLY CREATED DIRECTORSHIPS

Under Article 2.34 of the TBCA and the Imperial Bylaws, vacancies resulting
from any increase in the number of directors may be filled by election at an
annual or special meeting of the stockholders called for that purpose or by the
affirmative vote of a majority of the remaining directors, though less than a
quorum. However, any directorship filled by the board of directors by reason of
an increase in the number of directors may be filled only until the next
election of one or more directors by the stockholders and the board of directors
may not fill more than two directorships created by reason of an increase in the
number of directors during the period between any two successive annual meetings
of stockholders.

Section 223 of the DGCL and the Savannah Bylaws provide that vacancies and
newly created directorships resulting from the any increase in the number of
directors may be filled by a majority of the directors then in office (even
though less than a quorum) unless otherwise provided in the charter (the
Savannah Charter does not contain any such provision). Each director so chosen
will hold office for the unexpired term of the director replaced, or in the case
of directors chosen as a result of an increase in the number of directors will
be elected for a term to be designated by the board of directors at the time of
such election.

CLASSIFICATION OF BOARD OF DIRECTORS

The Imperial Charter and Bylaws provide that the number of directors of on
the Imperial Board will be not less than nine nor more than 14 as fixed by
resolution of the board of directors from time to time. The directors of
Imperial Holly will be divided into three classes as nearly equal in number as
possible serving staggered three-year terms such that approximately one-third of
the Imperial Board is elected each year. The Savannah Bylaws provide that the
number of directors on the Savannah Board will be not less than three nor more
than 15 as fixed by resolution of the board of directors and such directors will
be elected for three-year terms. The Savannah Bylaws do not provide for
staggered terms. In addition, the Savannah Bylaws provide that no person will be
eligible to serve as a director beyond December 31 of the year in which he or
she reaches age 68.

REMOVAL OF DIRECTORS

Under Article 2.32 of the TBCA, the corporation's charter or bylaws may
provide that any director or the entire board of directors may be removed, with
or without cause, at any meeting of stockholders expressly called for that
purpose by the vote of not less than a majority of the shares entitled to vote
in the election of directors. The Imperial Charter and Bylaws state that no
director may be removed by the stockholders except for cause.

Under Section 141 of the DGCL, any director or the entire board of
directors may be removed, with or without cause, by the holders of a majority of
the shares entitled to vote at an election of directors, unless the
corporation's charter provides otherwise. The Savannah Bylaws provide that any
director or the entire board may be removed, with or without cause, by an
affirmative vote of 75% of the holders of outstanding stock of Savannah Foods
entitled to vote in the election of directors, considered for this purpose as
one class, taking such action at an annual meeting of stockholders or at a
special meeting duly called for such purpose. Alternatively, any director may be
removed for cause at any time by the affirmative vote of a majority of the
directors then in office.

63
<PAGE> 79

AMENDMENT OF BYLAWS

The Imperial Bylaws provide that they may be amended, repealed or new
bylaws may be adopted, (i) by the board of directors, unless the stockholders in
amending, repealing or adopting a particular bylaw expressly provide that the
board of directors may not amend or repeal that bylaw or (ii) by the
stockholders, unless a bylaw adopted by the stockholders provides otherwise with
respect to all or some portion of the bylaws. The Savannah Bylaws provide that
they may be altered, amended or repealed (i) at any regular meeting of the board
of directors or (ii) by the affirmative vote of majority of the stock of
Savannah Foods issued and entitled to vote in respect thereof, provided that
notice of such alteration, amendment or repeal is contained in the notice of
such meeting.

LEGAL OPINION

The legality of the Imperial Common Stock issued in the Merger will be
passed upon by Andrews & Kurth L.L.P., Houston, Texas.

EXPERTS

The consolidated financial statements incorporated in this Joint Proxy
Statement/Prospectus by reference from Imperial Holly Corporation's Annual
Report on Form 10-K for the year ended March 31, 1997 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report which is
incorporated herein by reference, and has been so incorporated in reliance upon
such report given upon their authority as experts in accounting and auditing.

The consolidated financial statements incorporated in this Joint Proxy
Statement/Prospectus by reference to the Savannah Foods & Industries, Inc.
Annual Report on Form 10-K for the year ended September 29, 1996, have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.

STOCKHOLDER PROPOSALS

Imperial Holly's 1998 annual meeting of stockholders is scheduled for
January 30, 1998. Whether or not the Merger is consummated, any stockholder
proposal intended to be presented at Imperial Holly's 1999 annual meeting of
stockholders must have been received by Imperial Holly by 120 days before the
date of its 1999 annual meeting in order to be included in Imperial Holly's
proxy statement with respect to such annual meeting. If the Merger is not
consummated, any stockholder proposal to be presented at Savannah Foods' 1998
annual meeting must be received by Savannah Foods by 120 days before the date of
its 1998 Annual Meeting (which is expected to be in the spring of 1998) in order
to be included in Savannah Foods' proxy statement with respect to such annual
meeting.

64
<PAGE> 80

GLOSSARY OF SELECT TERMS

TERM DEFINED AS (PART OF JOINT INFORMATION
STATEMENT/PROSPECTUS)

Acquiring Person........... Person or group of affiliate persons who has
acquired or obtained the right to acquire
beneficial ownership of 25% or more of the
outstanding shares of Imperial Common Stock
(Description of Imperial Capital Stock -- Rights to
Purchase Preferred Stock)

Acquisition Proposal....... A proposal or offer relating to a merger,
reorganization, share exchange, consolidation,
business combination, recapitalization,
liquidation, dissolution or similar transaction
(The Merger Agreement -- No Solicitation)

Affiliated Stockholder..... Any person holding 20% or more of a corporation's
outstanding voting stock, together with affiliates
or associates of such person (Comparison of
Stockholder Rights -- Statutory Anti-Takeover
Provisions)

Alternative A Senior Credit
Facility................. Senior credit facilities of up to $455 million
arranged for Imperial Holly by LCPI and comprising
part of the Senior Credit Facility (Plan of
Financing -- Senior Credit Facility)

Alternative A Revolver..... $200 million revolving credit facility arranged for
Imperial Holly by LCPI, comprising part of the
Senior Credit Facility and to be implemented in
conjunction with the issuance of $250 million in
proceeds of Senior Subordinated Notes (Plan of
Financing -- Senior Credit Facility)

Alternative A Term Loans... Term loan facilities aggregating not more than $255
million arranged for Imperial Holly by LCPI and
comprising part of the Senior Credit Facility (Plan
of Financing -- Senior Credit Facility)

Alternative B Revolver..... $200 million revolving credit facility arranged for
Imperial Holly by LCPI in the event the Senior
Subordinated Notes are not issued and sold as of
the date of the Merger, and which comprise part of
the Senior Credit Facility (Plan of
Financing -- Senior Credit Facility)

Alternative B Senior Credit
Facility................. Senior credit facilities of up to $705 million
arranged for Imperial Holly by LCPI in the event
the Senior Subordinated Notes are not issued and
sold as of the date of the Merger, and which
comprise part of the Senior Credit Facility (Plan
of Financing -- Senior Credit Facility)

Alternative B Term Loans... Term loan facilities aggregating not more than $505
million arranged for Imperial Holly by LCPI in the
event the Senior Subordinated Notes are not issued
and sold as of the date of the Merger, and which
comprise part of the Senior Credit Facility (Plan
of Financing -- Senior Credit Facility)

AMEX....................... American Stock Exchange (Available Information)

Antitrust Division......... Antitrust Division of the Department of Justice
(Government Regulation -- Regulatory Approvals)

Base Rate.................. The rate at which the Tender Credit Facility will
bear interest, being, 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

65
<PAGE> 81

TERM DEFINED AS (PART OF JOINT INFORMATION
STATEMENT/PROSPECTUS)

federal funds effective rate plus 0.50% (Plan of
Financing -- Tender Credit Facility)

Benefit Trust.............. The Savannah Foods Benefit Trust (Summary -- The
Merger Agreement -- Benefit Trust)

Benefit Trust Note......... Approximately $27.6 million in indebtedness owed to
Savannah Foods by the Benefit Trust (Summary -- The
Merger Agreement -- Benefit Trust)

Candidate 1................ Major raw sugar producer with whom Savannah Foods
met in March 1996 to explore strategic business
combination (Description of
Merger -- Background -- Savannah Foods)

Candidate 2................ Beet sugar company with whom Savannah Foods met in
July 1996 to discuss formation of a joint venture
or other strategic combination (Description of
Merger -- Background -- Savannah Foods)

Candidate 3................ Beet processor with whom Savannah Foods met in 1996
and 1997 to discuss various strategic combinations
(Description of Merger -- Background -- Savannah
Foods)

Candidate 4................ Party with whom Savannah Foods entered into a
confidentiality agreement on March 7, 1997
(Description of Merger -- Background -- Savannah
Foods)

Candidate 5................ Party with whom Savannah Foods entered into a
confidentiality agreement on April 30, 1997
(Description of Merger -- Background --Savannah
Foods)

Cash Consideration......... $20.25 in cash, without interest thereon, the
consideration to be received per share of Savannah
Common Stock by stockholders electing to convert
their shares into cash (Joint Proxy
Statement/Prospectus Cover Pages)

Cash Election.............. The election by a holder of Savannah Common Stock
to receive the Cash Consideration (Joint Proxy
Statement/Prospectus Cover Pages)

Cash Election Form......... Form of election to be completed and submitted by
each record holder of Savannah Common Stock who
makes a Cash Election (Joint Proxy
Statement/Prospectus Cover Pages)

Cash Election Number....... The number of shares of Savannah Common Stock to be
converted into the right to receive the Cash
Consideration in the Merger (Joint Proxy
Statement/Prospectus Cover Pages)

CCC........................ Commodity Credit Corporation (Government
Regulation -- Regulation of Sugar Industry)

Claim...................... Claim, action, suit, proceeding or investigation
brought against any Indemnified Party (The Merger
Agreement -- Indemnification of Directors)

Closing Price.............. Volume weighted average of the trading prices of
Imperial Common Stock, rounded to three decimal
places, as reported by Bloomberg Financial Markets,
for each of the first 15 consecutive days upon
which both the NYSE and the AMEX are open for
trading in the period

66
<PAGE> 82

TERM DEFINED AS (PART OF JOINT INFORMATION
STATEMENT/PROSPECTUS)

commencing 20 trading days prior to the date of the
closing of the Merger (Joint Proxy
Statement/Prospectus Cover Pages)

Commission................. The Securities and Exchange Commission (Joint Proxy
Statement/Prospectus Cover Pages)

Compensation Plan.......... Savannah Foods' Non-Employee Directors'
Compensation Plan (Summary -- Interest of Certain
Persons in the Merger -- Director Share Units)

Continuing Director........ Any director of Savannah Foods remaining in office
after the Effective Time of the Merger (The Merger
Agreement -- Board Representation)

Continuing Employees....... Employees of Savannah Foods who continue to be
employed by Imperial Holly or Savannah Foods or any
of their respective affiliates as of the Effective
Time (The Merger Agreement -- Employee Benefit
Matters)

cwt........................ hundred weight (100 pounds)

DCF........................ Discounted cash flow (Description of the
Merger -- Savannah Foods' Financial
Advisors -- Donaldson, Lufkin & Jenrette Securities
Corporation)

DCF Analysis............... Discounted cash flow analysis (Description of the
Merger -- Imperial Holly's Financial
Advisor -- Lehman Brothers Inc.)

Debt Financing............. The Senior Credit Facility and the Senior
Subordinated Notes (Summary -- Plan of
Financing -- Senior Subordinated Notes)

Debt Tender Offer.......... Tender offer by Imperial Holly of its Senior Notes
(Debt Tender Offer)

Deferred Compensation
Plan....................... Deferred Compensation Plan for Directors of
Savannah Foods (Interests of Certain Persons in the
Merger -- Directors' Deferred Compensation Plan)

DGCL....................... Delaware General Corporation Law (Joint Proxy
Statement/Prospectus Cover Pages)

Dissenting Shares.......... Shares of Savannah Common Stock held by
stockholders who perfect their appraisal rights
under Delaware law (Joint Proxy
Statement/Prospectus Cover Pages)

Diversification
Candidate.................. Candidate outside the sugar industry who expressed
a high level of interest in engaging in a strategic
business combination with Savannah Foods in
November 1996 (Description of
Merger -- Background -- Savannah Foods)

DLJ........................ Donaldson, Lufkin & Jenrette Securities Corporation
(Summary -- Recommendations of the Boards of
Directors; Reasons for the Merger -- Recommendation
of Savannah Board and Savannah Foods' Reasons for
the Merger)

DLJ Opinion................ Written opinion of DLJ to the Savannah Board
(Description of the Merger -- Savannah Foods'
Financial Advisors -- Donaldson, Lufkin & Jenrette
Securities Corporation)

DLJ Opinion Fee............ Fee charged by DLJ to deliver its opinion
(Description of the Merger -- Savannah Foods'
Financial Advisors -- Donaldson, Lufkin & Jenrette
Securities Corporation)

67
<PAGE> 83

TERM DEFINED AS (PART OF JOINT INFORMATION
STATEMENT/PROSPECTUS)

DLJ Retainer Fee........... Retainer fee payable to DLJ upon execution of the
engagement letter between Savannah Foods and DLJ
(Description of the Merger -- Savannah Foods'
Financial Advisors -- Donaldson, Lufkin & Jenrette
Securities Corporation)

DXE........................ DXE Merger Corp. (Description of
Merger -- Background -- Savannah Foods)

EBIT....................... Earnings before interest and taxes (Description of
the Merger -- Imperial Holly's Financial
Advisor -- Lehman Brothers Inc.)

EBITDA..................... Earnings before interest, taxes, depreciation,
amortization and non-recurring items (Description
of the Merger -- Savannah Foods' Financial
Advisors -- Donaldson, Lufkin & Jenrette Securities
Corporation; Description of the Merger -- Imperial
Holly's Financial Advisor -- Lehman Brothers Inc.)

Effective Time............. The effective time of the Merger (Joint Proxy
Statement/Prospectus Cover Pages)

Election Date.............. 5:00 p.m., New York City time, on the business day
next preceding the day on which the vote is taken
at the Savannah Special Meeting (Joint Proxy
Statement/Prospectus Cover Pages)

Eurodollar Rate............ The rate for Eurodollar deposits in the interbank
Eurodollar market (Plan of Financing -- Tender
Credit Facility)

Exchange Act............... Securities Exchange Act of 1934, as amended
(Available Information)

Exchange Agent............. The Bank of New York (Joint Proxy
Statement/Prospectus Cover Pages)

Excluded Shares............ Shares of Savannah Common Stock held by Imperial
Holly, IHK Sub or any of their subsidiaries
(including the shares purchased in the Offer), or
held in the treasury of Savannah Foods (Joint Proxy
Statement/Prospectus Cover Pages)

Expiration Date............ Date of expiration of the Offer (The Merger
Agreement -- The Offer)

Farm Bill.................. Federal Agricultural Improvement and Reform Act of
1996 (Government Regulation -- Regulation of Sugar
Industry)

Financing Commitment
Letter..................... Commitment letter from LCPI (Summary -- Plan of
Financing -- Senior Credit Facility)

Flo-Sun Amendment.......... Proposed amendment to the Flo-Sun Merger Agreement
incorporating the terms of the Revised Flo-Sun
Proposal (Description of Merger --
Background -- Savannah Foods)

Flo-Sun Combined Company... Pro forma combined company created by combination
of Savannah Foods with Flo-Sun and certain of its
affiliates (Description of the Merger -- Savannah
Foods' Financial Advisors -- Donaldson, Lufkin &
Jenrette Securities Corporation)

Flo-Sun Exchange Ratio..... Exchange ratio whereby Savannah Foods stockholders
would receive 41.5% of the combined company
resulting from the combination of Flo-Sun and
Savannah Foods (Description of
Merger -- Background -- Savannah Foods)

68
<PAGE> 84

TERM DEFINED AS (PART OF JOINT INFORMATION
STATEMENT/PROSPECTUS)

Flo-Sun Merger............. The merger of an affiliate of Flo-Sun with and into
Savannah Foods (Description of
Merger -- Background -- Savannah Foods)

Flo-Sun Merger Agreement... Merger agreement, dated July 14, 1997, among
Savannah Foods, Flo-Sun and certain of its
affiliates (Description of
Merger -- Background -- Savannah Foods)

Flo-Sun Projections........ Financial projections of Flo-Sun and certain of its
affiliates for the fiscal years ending March 31,
1998 and 1999 (Description of the Merger --
Savannah Foods' Financial Advisors -- Donaldson,
Lufkin & Jenrette Securities Corporation)

FTC........................ Federal Trade Commission (Government
Regulation -- Regulatory Approvals)

Goodwill................... Excess purchase price over the book value of net
assets acquired (Pro Forma Financial
Statements -- Notes to Unaudited Pro Forma Combined
Condensed Balance Sheet)

HFCS....................... High fructose corn syrup (Risk Factors -- Demand
for Refined Sugar)

H. Kempner Trust
Financing.................. Sale of shares of Imperial Common Stock to the H.
Kempner Trust Association concurrently with the
consummation of the Merger for an aggregate
consideration of $5 million at a purchase price
equal to the lesser of $14.50 per share or the
Closing Price (Summary -- Plan of
Financing -- Equity Financing)

HSR Act.................... Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (Summary -- The Merger
Agreement -- Conditions)

IHK Sub.................... IHK Merger Sub Corporation, a wholly owned
subsidiary of Imperial Holly (Joint Proxy
Statement/Prospectus Cover Pages)

Imperial Board............. The Board of Directors of Imperial Holly (Joint
Proxy Statement/Prospectus Cover Page)

Imperial Bylaws............ Bylaws of Imperial Holly (Summary -- Differences in
Rights of Stockholders)

Imperial Charter........... Restated Articles of Incorporation of Imperial
Holly (Summary -- Differences in Rights of
Stockholders)

Imperial Combined
Company.................... Pro forma combined company created by combination
of Savannah Foods with Imperial Holly (Description
of the Merger -- Savannah Foods' Financial
Advisors -- Donaldson, Lufkin & Jenrette Securities
Corporation)

Imperial Common Stock...... Common stock, no par value, of Imperial Holly
(Joint Proxy Statement/Prospectus Cover Pages)

Imperial Holly............. Imperial Holly Corporation (Joint Proxy
Statement/Prospectus Cover Pages)

Imperial Preferred Stock... The preferred stock, without par value, of Imperial
Holly (Description of Imperial Capital
Stock -- Preferred Stock)

Imperial Projections....... Financial projections of Imperial Holly for the
fiscal years ending March 31, 1997 through March
31, 2003 (Description of the Merger --

69
<PAGE> 85

TERM DEFINED AS (PART OF JOINT INFORMATION
STATEMENT/PROSPECTUS)

Savannah Foods' Financial Advisors -- Donaldson,
Lufkin & Jenrette Securities Corporation)

Imperial Proposal.......... The proposal to approve the issuance of Imperial
Common Stock to stockholders of Savannah Foods in
the Merger to be considered and voted upon by
holders of Imperial Common Stock at the Imperial
Special Meeting(Joint Proxy Statement/Prospectus
Cover Pages)

Imperial Record Date....... Close of business on November 17, 1997 (Joint Proxy
Statement/Prospectus Cover Pages)

Imperial Special Meeting... Special Meeting of Stockholders of Imperial Holly
to be held at the Sweetwater Country Club, 4400
Palm Royale Boulevard, Sugar Land, Texas, on
December 19, 1997 at 9:00 a.m., local time, and at
any and all adjournments or postponements thereof
(Joint Proxy Statement/Prospectus Cover Pages)

Indemnified Parties........ Persons who served at the request of Savannah Foods
or any subsidiary and are indemnified by Imperial
Holly pursuant to the Merger Agreement
(Summary -- Interest of Certain Persons in the
Merger -- Indemnification)

Joint Proxy
Statement/Prospectus..... This Proxy Statement for Savannah Foods, Proxy
Statement/Prospectus for Imperial Holly and Joint
Proxy Statement for Special Meetings of
Stockholders of Imperial Holly and Savannah Foods
(Joint Proxy Statement/Prospectus Cover Pages)

LCPI....................... Lehman Commercial Paper Inc. (Summary -- Plan of
Financing -- Tender Credit Facility)

Lehman Brothers............ Lehman Brothers Inc., financial advisor to Imperial
Holly (Summary -- Plan of Financing -- Tender
Credit Facility)

LTM........................ Latest twelve months (Description of the
Merger -- Imperial Holly's Financial
Advisors -- Lehman Brothers Inc.)

Maturity Date.............. The date which is the earlier of the date of the
closing of the Merger and January 15, 1998 (Plan of
Financing -- Tender Credit Facility)

Merger..................... The merger of IHK Sub with and into Savannah Foods,
with Savannah Foods as the surviving corporation,
as contemplated by the Merger Agreement (Joint
Proxy Statement/Prospectus Cover Pages)

Merger Agreement........... The Agreement and Plan of Merger, dated September
12, 1997, among Imperial Holly, IHK Sub and
Savannah Foods (Joint Proxy Statement/Prospectus
Cover Pages)

Merger Consideration....... The Stock Consideration and the Cash Consideration
(Joint Proxy Statement/Prospectus Cover Pages)

NAFTA...................... The North American Free Trade Agreement (Government
Regulation -- Regulation of Sugar Industry)

NYSE....................... New York Stock Exchange (Available Information)

Offer...................... Tender offer by IHK Sub for the Target Number of
Shares of Savannah Common Stock (Joint Proxy
Statement/Prospectus Cover Pages)

70
<PAGE> 86

TERM DEFINED AS (PART OF JOINT INFORMATION
STATEMENT/PROSPECTUS)

Offer Price................ $20.25 per share of Savannah Common Stock (Joint
Proxy Statement/Prospectus Cover Pages)

Option..................... Option to purchase shares of Savannah Common Stock
issued pursuant to the Savannah Incentive Plan or
otherwise granted by Savannah Foods (Interest of
Certain Persons in the Merger -- Savannah Foods
Options)

Part Thirteen.............. Part Thirteen of the TCBA (Comparison of
Stockholder Rights -- Statutory Anti-Takeover
Provisions)

Per Share Equity Value
Range...................... The per share equity value range for Savannah
Common Stock (Description of the Merger -- Imperial
Holly's Financial Advisor -- Lehman Brothers Inc.)

Proposals.................. The Imperial Proposal and the Savannah Proposal
(Joint Proxy Statement/Prospectus Cover Pages)

Purchase Right............. Dividend of one right declared by the Imperial
Board to record holders of Imperial Common Stock
(Description of Imperial Capital Stock -- Rights to
Purchase Preferred Stock)

Registration Statement..... The Registration Statement filed by Imperial Holly
with the Commission under the Securities Act with
respect to the Imperial Common Stock offered hereby
(Available Information)

Related Person............. A beneficial owner of at least 10% of the
outstanding stock of Imperial Common Stock
(Comparison of Stockholder's Rights -- Mergers and
Other Fundamental Transactions)

Revised Flo-Sun Proposal... Letter from Flo-Sun to Savannah proposing certain
changes to the Flo-Sun Merger Agreement
(Description of Merger -- Background -- Savannah
Foods)

Robinson-Humphrey.......... The Robinson-Humphrey Company, Inc.
(Summary -- Recommendations of the Boards of
Directors; Reasons for the Merger -- Recommendation
of Savannah Board and Savannah Foods' Reasons for
the Merger)

Savannah 1996 10-K......... Savannah Foods' Annual Report on Form 10-K for the
fiscal year ended September 29, 1996 (Incorporation
of Documents by Reference)

Savannah Board............. The Board of Directors of Savannah Foods (Joint
Proxy Statement/Prospectus Cover Pages)

Savannah Bylaws............ Bylaws of Savannah Foods (Summary -- Differences in
Rights of Stockholders)

Savannah Charter........... Certificate of Incorporation of Savannah Foods
(Summary -- Differences in Rights of Stockholders)

Savannah Common Stock...... Common stock, par value $0.25 per share, of
Savannah Foods (Joint Proxy Statement/Prospectus
Cover Pages)

Savannah Executive Deferred
Compensation Plans....... Collectively, the Savannah Foods' Supplemental
Executive Retirement Plan and the Deferred
Compensation Plan for Key Employees of Savannah
Foods, as amended and restated as of August 1, 1990
(The Merger Agreement -- Employee Benefit Matters)

71
<PAGE> 87

TERM DEFINED AS (PART OF JOINT INFORMATION
STATEMENT/PROSPECTUS)

Savannah Foods............. Savannah Foods & Industries, Inc. (Joint Proxy
Statement/Prospectus Cover Pages)

Savannah Incentive Plan.... Savannah Foods' 1996 Equity Incentive Plan
(Interest of Certain Persons in the
Merger -- Savannah Foods Options)

Savannah Projections....... Financial projections of Savannah Foods for the
fiscal years ending September 28, 1997 through
September 29, 2002 (Description of the
Merger -- Savannah Foods' Financial
Advisors -- Donaldson, Lufkin & Jenrette Securities
Corporation)

Savannah Proposal.......... The proposal to approve the Merger Agreement to be
considered and voted upon by holders of Savannah
Common Stock at the Savannah Special Meeting (Joint
Proxy Statement/Prospectus Cover Pages)

Savannah Record Date....... Close of business on November 17, 1997 (Joint Proxy
Statement/Prospectus Cover Pages)

Savannah Special Meeting... Special Meeting of Stockholders of Savannah Foods
to be held at the Hyatt Regency Hotel, 2 West Bay
Street, Savannah, Georgia on December 19, 1997 at
10:00 a.m., local time, and at any and all
adjournments or postponements thereof (Joint Proxy
Statement/Prospectus Cover Pages)

Section 262................ Section 262 of the DGCL (Stockholders' Rights of
Appraisal)

Securities Act............. Securities Act of 1933, as amended (Available
Information)

Senior Credit Facility..... Senior credit facilities arranged by LCPI for
Imperial Holly, comprised of either the Alternative
A Senior Credit Facility or the Alternative B
Senior Credit Facility (Summary -- Plan of
Financing -- Senior Credit Facility)

Senior Notes............... 8 3/8% Senior Notes due 1999 of Imperial Holly
(Debt Tender Offer)

Senior Subordinated
Notes...................... Approximately $250 million of senior subordinated
notes due in 2007 to be issued by Imperial Holly
prior to or at the time of the consummation of the
Merger in a private placement exempt from
registration pursuant to Rule 144A under the
Securities Act (Summary -- Plan of
Financing -- Senior Subordinated Notes)

Series A Preferred Stock... The shares of Imperial Preferred Stock designated
as Series A Junior Participating Preferred Stock
(Description of Imperial Capital Stock -- Rights to
Purchase Preferred Stock)

Share Units................ Share units (each of which represents the right to
receive cash, subject to certain conditions, based
on the value of a share of Savannah Common Stock),
which, upon consummation of the Offer, became fully
vested and eligible for payment, pursuant to the
terms of the Compensation Plan (Summary -- Interest
of Certain Persons in the Merger -- Director Share
Units)

Special Meetings........... Imperial Special Meeting and Savannah Special
Meeting (Joint Proxy Statement/Prospectus Cover
Pages)

Stock Consideration........ The formula consideration to be received by holders
of shares of Savannah Common Stock electing to
convert their shares into shares of Imperial Common
Stock (Joint Proxy Statement/Prospectus Cover
Pages)

72
<PAGE> 88

TERM DEFINED AS (PART OF JOINT INFORMATION
STATEMENT/PROSPECTUS)

STRV....................... Short tons raw value (Government
Regulation -- Regulation of Sugar Industry)

Sugar Spread............... Estimated spread between refined sugar selling
prices and raw sugar cost (Description of the
Merger -- Savannah Foods' Financial Advisors --
Donaldson, Lufkin & Jenrette Securities
Corporation)

Superior Proposal.......... An Acquisition Proposal that would, if consummated,
result in a transaction more favorable to Savannah
Foods stockholders than the transactions
contemplated by the Merger Agreement (The Merger
Agreement -- No Solicitation)

Supplemental Share Unit
Plan....................... Savannah Food's Non-Employee Directors'
Supplemental Share Unit Plan (Summary -- Interest
of Certain Persons in the Merger -- Director Share
Units)

Target Number of Shares.... The minimum number of shares of Savannah Common
Stock to be tendered as a condition to the
obligation of IHK Sub to accept for payment or pay
for such shares pursuant to the Offer (Joint Proxy
Statement/Prospectus Cover Pages)

TBCA....................... Texas Business Corporation Act
(Summary -- Stockholders' Rights of Appraisal)

Tender Credit Facility..... The $505 million credit facility entered into by
Imperial Holly to fund the Offer and to retire
certain indebtedness of Imperial Holly, to purchase
the Senior Notes in the Debt Tender Offer and to
pay certain related fees and expenses, and to be
used as a source of working capital for Imperial
Holly through the consummation of the Merger
(Summary -- Plan of Financing -- Tender Credit
Facility)

Total Enterprise Values.... The aggregated present value of the free cash flows
and the present value of the residual value of each
of the Flo-Sun Combined Company and the Imperial
Combined Company (Description of the
Merger -- Savannah Foods' Financial
Advisors -- Donaldson, Lufkin & Jenrette Securities
Corporation)

Total Equity Values........ Range of Total Enterprise Values as adjusted for
total debts, cash and certain other items
(Description of the Merger -- Savannah Foods'
Financial Advisors -- Donaldson, Lufkin & Jenrette
Securities Corporation)

USDA....................... United States Department of Agriculture (Risk
Factors -- Raw Sugar Supply)

U.S. GAAP.................. U.S. generally accepted accounting principles (The
Merger Agreement -- Representations and Warranties)

U.S. Sugar................. The United States Sugar Corporation (Risk
Factors -- Raw Sugar Supply)

XSF........................ XSF Holdings, Inc. (Description of
Merger -- Background -- Savannah Foods)

73
<PAGE> 89

ANNEX A

AGREEMENT AND PLAN OF MERGER

AMONG

IMPERIAL HOLLY CORPORATION,

IHK MERGER SUB CORPORATION

AND

SAVANNAH FOODS & INDUSTRIES, INC.

DATED AS OF SEPTEMBER 12, 1997
<PAGE> 90

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I THE OFFER
SECTION 1.01 The Offer................................................... A-1
SECTION 1.02 Company Actions............................................. A-2
SECTION 1.03 Stockholder Lists........................................... A-3
SECTION 1.04 Directors................................................... A-3
ARTICLE II THE MERGER
SECTION 2.01 The Merger.................................................. A-4
SECTION 2.02 Effective Time; Closing..................................... A-4
SECTION 2.03 Effects of the Merger....................................... A-4
SECTION 2.04 Certificate of Incorporation and By-Laws.................... A-4
SECTION 2.05 Directors and Officers...................................... A-4
SECTION 2.06 Conversion of Shares........................................ A-4
SECTION 2.07 Conversion of Common Stock of Merger Sub.................... A-6
SECTION 2.08 Stockholders' Meetings...................................... A-6
SECTION 2.09 Rights Under Stock Plans.................................... A-6
SECTION 2.10 Exchange of Certificates.................................... A-7
SECTION 2.11 Elections................................................... A-9
SECTION 2.12 Dissenting Shares........................................... A-9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01 Organization and Qualification; Subsidiaries................ A-10
SECTION 3.02 Certificate of Incorporation and By-Laws.................... A-10
SECTION 3.03 Capitalization.............................................. A-11
SECTION 3.04 Authority Relative to this Agreement........................ A-11
SECTION 3.05 No Conflict; Required Filings and Consents.................. A-12
SECTION 3.06 Permits; Compliance......................................... A-12
SECTION 3.07 SEC Filings; Financial Statements........................... A-12
SECTION 3.08 Absence of Certain Changes or Events........................ A-13
SECTION 3.09 Absence of Litigation....................................... A-14
SECTION 3.10 Employee Benefit Plans; Labor Matters....................... A-14
SECTION 3.11 Intellectual Property....................................... A-16
SECTION 3.12 Taxes....................................................... A-17
SECTION 3.13 Environmental Matters....................................... A-17
SECTION 3.14 Products.................................................... A-18
SECTION 3.15 Properties and Assets; Real Property and Leases............. A-18
SECTION 3.16 Insurance................................................... A-18
SECTION 3.17 Opinion of Financial Advisor................................ A-19
SECTION 3.18 Vote Required............................................... A-19
SECTION 3.19 Brokers..................................................... A-19
SECTION 3.20 Company Rights Agreement.................................... A-19
SECTION 3.21 Information Supplied........................................ A-19
SECTION 3.22 Termination of Existing Merger Agreement.................... A-20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF IHK AND MERGER SUB
SECTION 4.01 Organization and Qualification; Subsidiaries................ A-20
SECTION 4.02 Certificate of Incorporation and By-Laws.................... A-21
SECTION 4.03 Capitalization.............................................. A-21
SECTION 4.04 Authority Relative to this Agreement........................ A-22
SECTION 4.05 No Conflict; Required Filings and Consents.................. A-22
SECTION 4.06 Permits; Compliance......................................... A-22
SECTION 4.07 SEC Filings; Financial Statements........................... A-23
</TABLE>

A-ii
<PAGE> 91
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 4.08 Absence of Certain Changes or Events........................ A-23
SECTION 4.09 Absence of Litigation....................................... A-24
SECTION 4.10 Employee Benefit Plans; Labor Matters....................... A-24
SECTION 4.11 Intellectual Property....................................... A-26
SECTION 4.12 Taxes....................................................... A-26
SECTION 4.13 Environmental Matters....................................... A-27
SECTION 4.14 Products.................................................... A-27
SECTION 4.15 Properties and Assets; Real Property and Leases............. A-27
SECTION 4.16 Insurance................................................... A-28
SECTION 4.17 Opinion of Financial Advisor................................ A-28
SECTION 4.18 Vote Required............................................... A-28
SECTION 4.19 Brokers..................................................... A-28
SECTION 4.20 Information Supplied........................................ A-28
SECTION 4.21 Financing................................................... A-29
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01 Conduct of Business by the Company Pending the Merger....... A-29
Conduct of Business by IHK and the IHK Subsidiaries Pending
SECTION 5.02 the Merger.................................................. A-31
SECTION 5.03 Government Filings.......................................... A-33
ARTICLE VI ADDITIONAL AGREEMENTS
SECTION 6.01 Stockholders' Meetings...................................... A-34
SECTION 6.02 Registration Statement; Proxy Statement..................... A-34
SECTION 6.03 Access to Information; Confidentiality...................... A-36
SECTION 6.04 Approvals and Consents; Cooperation......................... A-36
SECTION 6.05 No Solicitation of Transactions............................. A-36
SECTION 6.06 Employee Benefits Matters................................... A-37
SECTION 6.07 Directors' and Officers' Indemnification and Insurance...... A-37
SECTION 6.08 Obligations of IHK and Merger Sub........................... A-38
SECTION 6.09 Affiliates' Letters......................................... A-38
SECTION 6.10 Letters of Accountants...................................... A-38
SECTION 6.11 Listing Market.............................................. A-39
SECTION 6.12 IHK Board Representation.................................... A-39
SECTION 6.13 Company Rights Plan......................................... A-39
SECTION 6.14 Public Announcements........................................ A-39
SECTION 6.15 Subsequent Financial Statements............................. A-39
ARTICLE VII CONDITIONS TO THE MERGER
Conditions to Each Party's Obligation to Effect the
SECTION 7.01 Merger...................................................... A-40
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination................................................. A-40
SECTION 8.02 Effect of Termination....................................... A-42
SECTION 8.03 Amendment................................................... A-42
SECTION 8.04 Waiver...................................................... A-42
SECTION 8.05 Fees and Expenses........................................... A-42
ARTICLE IX GENERAL PROVISIONS
Non-Survival of Representations, Warranties and
SECTION 9.01 Agreements.................................................. A-43
SECTION 9.02 Notices..................................................... A-43
SECTION 9.03 Severability................................................ A-44
SECTION 9.04 Assignment.................................................. A-44
SECTION 9.05 Interpretation.............................................. A-44
SECTION 9.06 Specific Performance........................................ A-45
SECTION 9.07 Governing Law............................................... A-45
</TABLE>

A-iii
<PAGE> 92
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 9.08 Parties in Interest......................................... A-45
SECTION 9.09 Counterparts................................................ A-45
SECTION 9.10 Waiver of Jury Trial........................................ A-45
SECTION 9.11 Entire Agreement............................................ A-45
SECTION 9.12 Certain Definitions......................................... A-45
</TABLE>

A-iv
<PAGE> 93

TABLE OF DEFINED TERMS

(NOT A PART OF THE AGREEMENT)

<TABLE>
<CAPTION>
SECTION
-------
<S> <C>
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)
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)
</TABLE>

<TABLE>
<CAPTION>
SECTION
-------
<S> <C>
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)
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)
</TABLE>

A-v
<PAGE> 94

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").

RECITALS:

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

A-1
<PAGE> 95

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 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

A-2
<PAGE> 96

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 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.

(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

A-3
<PAGE> 97

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.

(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

A-4
<PAGE> 98

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 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.

(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.

A-5
<PAGE> 99

(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 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

A-6
<PAGE> 100

"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.

(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

A-7
<PAGE> 101

Effective Time of the Merger to represent only the right to receive upon such
surrender the Merger Consideration as contemplated by Section 2.06.

(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 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.

A-8
<PAGE> 102

(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 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

A-9
<PAGE> 103

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 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.

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

A-10
<PAGE> 104

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 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

A-11
<PAGE> 105

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 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 Exchange Act, as the case may be, and (ii) did not at the time they
were filed contain

A-12
<PAGE> 106

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.

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,

A-13
<PAGE> 107

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, 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

A-14
<PAGE> 108

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)
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 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

A-15
<PAGE> 109

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 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,

A-16
<PAGE> 110

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, 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 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.

A-17
<PAGE> 111

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 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

A-18
<PAGE> 112

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 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 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

A-19
<PAGE> 113

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:

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

A-20
<PAGE> 114

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.

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

A-21
<PAGE> 115

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.

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
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,

A-22
<PAGE> 116

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).

(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

A-23
<PAGE> 117

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, (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. 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

A-24
<PAGE> 118

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 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

A-25
<PAGE> 119

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 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

A-26
<PAGE> 120

Section 4.12 of the IHK Disclosure Schedule, neither IHK nor any IHK 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 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.

(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

A-27
<PAGE> 121

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 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

A-28
<PAGE> 122

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.

(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.

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

A-29
<PAGE> 123

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, 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

A-30
<PAGE> 124

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);

(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, 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;

A-31
<PAGE> 125

(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 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 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;

A-32
<PAGE> 126

(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
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.

A-33
<PAGE> 127

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 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

A-34
<PAGE> 128

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.

(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.

A-35
<PAGE> 129

(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 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.

(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

A-36
<PAGE> 130

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 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

A-37
<PAGE> 131

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 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 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.

A-38
<PAGE> 132

(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).

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

A-39
<PAGE> 133

(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

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
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

A-40
<PAGE> 134

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 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

A-41
<PAGE> 135

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.

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,

A-42
<PAGE> 136

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

(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.

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

A-43
<PAGE> 137

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.

(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

A-44
<PAGE> 138

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.

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;

(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

A-45
<PAGE> 139

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 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;

A-46
<PAGE> 140

(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.

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

A-47
<PAGE> 141

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 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

A-48
<PAGE> 142

(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-49
<PAGE> 143

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:

(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

A-50
<PAGE> 144

(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.

A-51
<PAGE> 145

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 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.

A-52
<PAGE> 146

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."

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.

A-53
<PAGE> 147

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:

A-54
<PAGE> 148

ANNEX B

DONALDSON, LUFKIN & JENRETTE
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
277 PARK AVENUE, NEW YORK, NEW YORK 10172 * (212) 892-3000

September 11, 1997

Board of Directors
Savannah Foods & Industries, Inc.
Two East Bryan Street
Savannah, GA 31401-0339

Dear Sirs:

You have requested our opinion as to the fairness from a financial point of
view to the stockholders of Savannah Foods & Industries, Inc. (the "Company") of
the consideration to be received by such stockholders pursuant to the terms of
the Agreement and Plan of Merger, to be dated as of September 12, 1997 (the
"Agreement"), by and among Imperial Holly Corporation ("IHK"), the Company and
IHK Merger Sub Corporation, a wholly owned subsidiary of IHK.

Pursuant to the Agreement, IHK Merger Sub Corporation will commence an
offer to purchase at least 50.1% of the outstanding shares (on a fully-diluted
basis) of the Company's common stock, par value, $0.25 per share (the "Common
Stock") at a price of $20.25 (the "Offer Price") per share (the "Tender Offer").
Following consummation of the Tender Offer, each share of Common Stock not
previously tendered and accepted for payment in the Tender Offer will, by virtue
of a Merger of IHK Merger Sub Corporation with and into the Company (the
"Merger" and together with the Tender Offer, the "Transaction"), be converted
into the right to receive, subject to proration, either (i) the Stock
Consideration (as defined below) or (ii) cash in an amount equal to the Offer
Price (the "Cash Consideration" and together with the Stock Consideration, the
"Consideration"). The agreement provides that the Stock Consideration is (i) if
the Closing Price (as defined in the Agreement) of common stock, no par value,
of IHK (the "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; (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;
and (iii) if the Closing Price of IHK Common Stock is greater than $13.25 but
less than $17.25, a number of shares of IHK Common Stock equal to the quotient
of the Offer Price divided by the Closing Price of the IHK Common Stock. The
Agreement provides that the number of shares of Common Stock to be converted
into the right to receive the Cash Consideration in the Merger shall be equal to
70% of the shares of Common Stock issued and outstanding immediately prior to
the effective time of the Merger, less the sum of (i) the number of dissenting
shares of Common Stock and (ii) shares of Common Stock to be canceled.

In arriving at out opinion, we have reviewed the Agreement and the exhibits
thereto. We also have reviewed financial and other information that was publicly
available or furnished to us by the Company and IHK, including information
provided during discussions with their respective managements. Included in the
information provided during discussions with the respective managements were
certain financial projections of the Company for the fiscal years ending
September 30, 1997 through September 30, 2002 prepared by the management of the
Company and certain financial projections of IHK for the fiscal years ending
March 31, 1997 through March 31, 2003 prepared by the management of IHK. In
addition, we have compared certain financial and securities data of the Company
and IHK with various other companies whose securities are traded in public
markets, reviewed the historical stock prices and trading volumes of the Common
Stock and the IHK Common Stock, reviewed prices and premiums paid in certain
other business combinations and conducted such other financial studies, analyses
and investigations as we deemed appropriate for purposes of this opinion.

B-1
<PAGE> 149

Board of Directors September 11, 1997
Savannah Foods & Industries, Inc.

In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company and IHK or their
respective representatives, or that was otherwise reviewed by us. In addition,
we have relied upon the estimates of the managements of the Company and IHK as
to the operating synergies projected as a result of the Transaction. With
respect to the financial projections supplied to us, we have assumed that they
have been reasonably prepared on the basis reflecting the best currently
available estimates and judgments of the managements of the Company and IHK as
to the future operating and financial performance of the Company and IHK,
respectively. We have not assumed any responsibility for making an independent
evaluation of any assets or liabilities or for making any independent
verification of any of the information reviewed by us. We have relied as to
certain legal matters on advice of counsel to the Company.

Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion herein as to the
price which IHK Common Stock will trade at any time. Our opinion does not
address the merits of the Transaction nor does it address the Board's decision
to proceed with the Transaction. Our opinion does not constitute a
recommendation to whether such stockholder should tender shares in the Tender
Offer or how such stockholder should vote on the proposed Merger.

Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes.

Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Consideration to be received by the stockholders of the
Company pursuant to the Agreement is fair to such stockholders from a financial
point of view.

Very truly yours,

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

By: /s/ LAWRENCE N. LAVINE
-------------------------------------
Lawrence N. Lavine
Managing Director

B-2
<PAGE> 150

ANNEX C

LEHMAN BROTHERS

September 11, 1997

Board of Directors
Imperial Holly Corporation
One Imperial Square, Suite 200
8016 Highway 90-A
Sugar Land, Texas 77478

Members of the Board:

We understand that Imperial Holly Corporation ("Imperial Holly" or the
"Company") has proposed to Savannah Food & Industries, Inc. ("Savannah") a
transaction (the "Proposed Transaction") pursuant to which the Company would
acquire all of the issued and outstanding capital stock of Savannah. Pursuant to
the Proposed Transaction, the Company would purchase 50.1% of the outstanding
shares of common stock of Savannah through a tender offer at a price of $20.25
in cash per share, and each remaining share of Savannah would be exchanged, in a
subsequent merger, for either (i) $20.25 in cash per share or (ii) a number of
shares of common stock of Imperial Holly equal to the quotient of $20.25 divided
by a weighted average closing price of such common stock over a specified period
of time, with such number of shares not to be greater than 1.5283 nor less than
1.1739. The cash component of the second step merger would be limited to 19.9%
of the outstanding shares of the common stock of Savannah. The terms and
conditions of the Proposed Transaction are set forth in more detail in the draft
Agreement and Plan of Merger among Imperial Holly, IHK Merger Sub Corporation
and Savannah (the "Agreement").

We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
Company of the consideration to be paid by the Company in the Proposed
Transaction. We have not been requested to opine as to, and out opinion does not
in any manner address, the Company's underlying business decision to proceed
with or effect the Proposed Transaction.

In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
the specific terms of the Proposed Transaction, (2) Savannah's historical
financial statements, including, but not limited to, financial statements for
the fiscal years ended September 29, 1995 and 1996 and for the nine months ended
June 29, 1997 and such other publicly available information concerning Savannah
that we believe to be relevant to our analysis, (3) the Company's historical
financial statements, including, but not limited to, financial statements for
the fiscal years ended March 31, 1996 and 1997 and for the three months ended
June 30, 1997 and such other publicly available information concerning the
Company that we believe to be relevant to our analysis, (4) financial and
operating information with respect to the business, operations and prospects of
Savannah furnished to us by Savannah and the Company, (5) financial and
operating information with respect to the business, operations and prospects of
the Company furnished to us by the Company, (6) a trading history of Savannah's
common stock from January 1, 1993 to the present and a comparison of that
trading history with those of other companies that we deemed relevant, (7) a
trading history of the Company's common stock from January 1, 1993 to the
present and a comparison of that trading history with those of other companies
that we deemed relevant, (8) a comparison of the historical financial results
and present financial conditions of Savannah and the Company with those of other
companies that we deemed relevant, (9) a comparison of the financial terms of
the Proposed Transaction with the financial terms of certain other recent
transactions that we deemed relevant, and (10) the potential pro forma financial
effects of the Proposed Transaction including the cost savings, operating
synergies and strategic benefits expected to result from a combination of the
businesses of the Company and Savannah. In addition, we have discussions with
the management of Savannah and the Company concerning their respective
businesses, operations, assets, financial conditions and prospects and have
undertaken such other studies, analyses and investigations as we deemed
appropriate.

C-1
<PAGE> 151

Lehman Brothers
Board of Directors
Imperial Holly Corporation
September 11, 1997
Page 2

In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of management of the Company that they
are not aware of any facts or circumstances that would make such information
inaccurate or misleading. With respect to the financial projections of the
Company, Savannah and the combined company following consummation of the
Proposed Transaction provided to us by management of the Company, upon advice of
the Company we have assumed that such projections have been reasonably prepared
on a basis reflecting the best currently available estimates and judgments of
the management of the Company as to the future financial performance of the
Company, Savannah and the combined company (including without limitation, the
cost savings, operating synergies and strategic benefits expected to result from
a combination of the businesses), and we have relied upon such projections in
arriving at our opinion. In addition, we have not conducted a physical
inspection of the properties and facilities of the Company or Savannah and have
not made or obtained any evaluations or appraisals of the assets or liabilities
of the Company or Savannah. Our opinion necessarily is based upon market,
economic and other conditions as they exist on, and can be evaluated as of, the
date of this letter.

Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that from a financial point of view, the consideration to be paid by
the Company in the Proposed Transaction is fair to the Company.

We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is contingent
upon the consummation of the Proposed Transaction. In addition, the Company has
agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. We also have performed various investment banking
services for the Company in the past and have received customary fees for such
services. Mr. Henry E. Lentz, a Managing Director of Lehman Brothers, is also a
director of the Company. In the ordinary course of our business, we may actively
trade in the debt or equity securities of the Company and Savannah for our own
account and for the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities.

This opinion is for the use and benefit of the Board of Directors of the
Company in connection with its consideration of the Proposed Transaction. This
opinion is not intended to be and does not constitute a recommendation to any
shareholder of the Company as to how such shareholder should vote with respect
to the Proposed Transaction.

Very truly yours,

LEHMAN BROTHERS

C-2
<PAGE> 152

ANNEX D

SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
DELAWARE -- GENERAL CORPORATION LAW

SEC. 262. APPRAISAL RIGHTS.

(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 288 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record in a stock corporation and also a member
of record of a nonstock corporation; the words "stock" and "share" mean and
include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.

(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec.sec. 251 (other than a merger effected pursuant to
subsection (g) of sec. 251), 252, 254, 257, 258, 263 or 264 of this title:

(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement or merger or
consolidation, were either (i) listed on a national securities exchange or
designated a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.

(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:

a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;

b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;

c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or

d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.

D-1
<PAGE> 153

(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.

(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.

(d) Appraisal rights shall be perfected as follows:

(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or

(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation that are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Any stockholder entitled to appraisal rights may, within
twenty days after the date of mailing of such notice, demand in writing
from the surviving or resulting corporation the appraisal of such holder's
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send a second notice to all such holders on or
within 10 days after such effective date; provided, however, that if such
second notice is sent more than 20 days following the sending of the first
notice, such second notice need only to be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of such
holder's shares in accordance with this subsection. An affidavit of the
secretary or assistant secretary or of the transfer agent of the
corporation that is required to give either notice that such notice has
been given shall in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes of determining the stockholders entitled
to receive such notice, each constituent corporation may fix in advance, a
record date that shall be not more than 10 days prior to the date the
notice is given; provided that, if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be the
effective

D-2
<PAGE> 154

date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the next
day preceding the day on which the notice is given. If the merger or
consolidation was approved pursuant to sec. 228 or 253 of this title, the
surviving or resulting corporation, either before the effective date of the
merger or consolidation or within 10 days thereafter, shall notify each of
the stockholders entitled to appraisal rights of the effective date of the
merger or consolidation and that appraisal rights are available for any or
all of the shares of the constituent corporation, and shall include in such
notice a copy of this section. The notice shall be sent by certified or
registered mail, return receipt requested, addressed to the stockholder at
his address as its appears on the records of the corporation. Any
stockholder entitled to appraisal rights may, within 20 days after the date
of mailing of the notice, demand in writing from the surviving or resulting
corporation the appraisal of his shares. Such demand will be sufficient if
it reasonably informs the corporation of the identity of the stockholder
and that the stockholder intends thereby to demand the appraisal of his
shares.

(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written requires for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.

(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.

(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.

(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account relevant

D-3
<PAGE> 155

factors. In determining the fair rate of interest, the Court may consider all
relevant factors, including the rate of interest which the surviving or
resulting corporation would have had to pay to borrow money during the pendency
of the proceeding. Upon application by the surviving or resulting corporation or
by any stockholder entitled to participate in the appraisal proceeding, the
Court may, in its discretion, permit discovery or other pretrial proceedings and
may proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted his certificates of stock to the Register
in Chancery, if such is required, may participate fully in all proceedings until
it is finally determined that he is not entitled to appraisal rights under this
section.

(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.

(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.

(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.

(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.

D-4
<PAGE> 156

PART II

ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Imperial Charter provides that a director will not be liable to the
corporation or its stockholders for monetary damages for an act or omission in
such director's capacity as director, except in the case of: (i) breach of such
director's duty of loyalty to the corporation or its stockholders, (ii) an act
or omission not in good faith or that involves intentional misconduct or a
knowing violation of the law, (iii) a transaction from which the director
received an improper benefit, (iv) an act or omission for which the liability of
a director is expressly provided for by statute or (v) an act related to an
unlawful stock repurchase or payment of a dividend.

The Imperial Bylaws provide that the corporation will indemnify and advance
expenses (including court costs and attorney's fees) any officer, director,
employee or agent to the fullest extent permitted by applicable law at the time
of the adoption of the Imperial Bylaws and such greater extent as applicable law
may thereafter permit.

Under the Texas Business Corporation Act (the "TBCA"), directors, officers,
employees or agents are entitled to indemnification against expenses (including
attorneys' fees) whenever they successfully defend legal proceedings brought
against them by reason of the fact that they hold such a position with the
corporation. In addition, with respect to actions not brought by or in the right
of the corporation, indemnification is permitted under the TBCA for expenses
(including attorneys' fees), judgments, fines, penalties and reasonable
settlement if it is determined that the person seeking indemnification acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the corporation or its shareholders and, with respect
to criminal proceedings he or she had no reasonable cause to believe that his or
her conduct was unlawful. With respect to actions brought by or in the right of
the corporation, indemnification is permitted under the TBCA for expenses
(including attorneys' fees) and reasonable settlements, if it is determined that
the person seeking indemnification acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation or its shareholders; provided, indemnification is not permitted if
the person is found liable to the corporation, unless the court in which the
court or suit was brought has determined that indemnification is fair and
reasonable in view of all the circumstances of the case.

Under an insurance policy maintained by Imperial Holly, the directors and
officers of Imperial Holly are insured within the limits and subject to the
limitations of the policy, against certain expenses in connection with the
defense of certain claims, actions, suits or proceedings, and certain
liabilities which might be imposed as a result of such claims, action, suits or
proceedings, which may be brought against them by reason of being or having been
such directors and officers.

ITEM 21. EXHIBITS

II-1
<PAGE> 157
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
4.1 -- Registration Rights Agreement dated August 29, 1996 by
and among the Company, Greencore Group plc and Earlsfort
Holdings B.V. (incorporated by reference to Exhibit 4.2
to the September 5, 1996 Form 8-K).
4.2* -- Stockholders Agreement, dated September 12, 1997, among
Imperial Holly Corporation, IHK Merger Sub Corporation
and the executive officers and directors of Savannah
Foods & Industries, Inc. listed therein.
4.3* -- Form of Agreement and Irrevocable Proxy between Savannah
Foods & Industries, Inc. and certain stockholders of
Imperial Holly Corporation.
5.1* -- Opinion of Andrews & Kurth L.L.P. as to the legality of
the securities being registered.
10.1* -- Credit Agreement, dated as of October 17, 1997, among
Imperial Holly Corporation, as Borrower, the Several
Lenders from time to time Parties thereto, Lehman
Brothers, Inc., as Arranger, Lehman Brothers Commercial
Paper, Inc., as Syndication Agent and Lehman Brothers
Commercial Paper, Inc., as Administrative Agent.
10.2* -- Guarantee and Collateral Agreement, dated as of October
17, 1997, made by Imperial Holly Corporation and certain
of its Subsidiaries in favor of Harris Trust and Savings
Bank, as Collateral Agent.
23.1* -- Consent of Deloitte & Touche LLP, Independent Auditors.
23.2* -- Consent of Price Waterhouse LLP, Independent Accountants.
24.1* -- Powers of Attorney (included as part of the signature
page on page II-4 hereof).
99.1* -- Consent of Lehman Brothers Inc.
99.2* -- Consent of Donaldson, Lufkin & Jenrette Securities
Corporation.
99.3* -- Consent of Andrews & Kurth L.L.P. (included in opinion
filed herewith as Exhibit 5.1).
99.5* -- Form of Imperial Holly Proxy Card.
99.6* -- Form of Savannah Foods Proxy Card.
99.7* -- Form of Savannah Foods Cash Election.
</TABLE>

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

* Filed herewith.

ITEM 22. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

(b) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.

(c) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the

II-2
<PAGE> 158

Securities Act and is used in connection with an offering of securities subject
to Rule 415, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

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

(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy
Statement/Prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.

(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.

II-3
<PAGE> 159

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, in the City of Sugar Land, State of Texas, on the
17th day of November, 1997.

IMPERIAL HOLLY CORPORATION

By: /s/ JAMES C. KEMPNER
----------------------------------
James C. Kempner
President, Chief Executive Officer
and
Chief Financial Officer

POWER OF ATTORNEY

Each person whose signature appears below does hereby appoint James C.
Kempner, H.P. Mechler and William F. Schwer, and each of them severally, his or
her true and lawful attorneys or attorney-in-fact and agents or agent with power
to act with or without the others and with full power of substitution and
resubstitution, to execute for him or her and in his or her name, place and
stead, in his or her capacity as a director or officer or both, as the case may
be, of Imperial Holly Corporation, any and all amendments to this Registration
Statement, including post-effective amendments, as said attorneys or any of them
shall deem necessary or appropriate, together with all instruments necessary or
incidental in connection therewith, and to file the same or cause the same to be
filed with the Securities and Exchange Commission. Each of said attorneys shall
have full power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys and each of them.

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

<TABLE>
<CAPTION>
SIGNATURE POSITION DATE
--------- -------- ----
<C> <S> <C>

/s/ JAMES C. KEMPNER President, Chief Executive November 17, 1997
- ----------------------------------------------------- Officer and Chief
James C. Kempner Financial Officer and
Director (Principal
Executive and Financial
Officer)

/s/ H. P. MECHLER Vice President -- Accounting November 17, 1997
- ----------------------------------------------------- (Principal Accounting
H. P. Mechler Officer)

/s/ JOHN D. CURTIN, JR. Director November 17, 1997
- -----------------------------------------------------
John D. Curtin, Jr.

/s/ DAVID J. DILGER Director November 17, 1997
- -----------------------------------------------------
David J. Dilger

/s/ E. O. GAYLORD Director November 17, 1997
- -----------------------------------------------------
E. O. Gaylord

* Director November 17, 1997
- -----------------------------------------------------
Gerald Grinstein
</TABLE>

II-4
<PAGE> 160
<TABLE>
<CAPTION>
SIGNATURE POSITION DATE
--------- -------- ----
<C> <S> <C>

* Director November 17, 1997
- -----------------------------------------------------
Ann O. Hamilton

/s/ ROGER W. HILL Director November 17, 1997
- -----------------------------------------------------
Roger W. Hill

/s/ HARRIS C. KEMPNER, JR. Director November 17, 1997
- -----------------------------------------------------
Harris C. Kempner, Jr.

/s/ I. H. KEMPNER, III Director November 17, 1997
- -----------------------------------------------------
I. H. Kempner, III

/s/ H. E. LENTZ Director November 17, 1997
- -----------------------------------------------------
H. E. Lentz

/s/ ROBERT L. K. LYNCH Director November 17, 1997
- -----------------------------------------------------
Robert L. K. Lynch

/s/ KEVIN C. O'SULLIVAN Director November 17, 1997
- -----------------------------------------------------
Kevin C. O'Sullivan

/s/ FAYEZ SAROFIM Director November 17, 1997
- -----------------------------------------------------
Fayez Sarofim

* Director November 17, 1997
- -----------------------------------------------------
Daniel K. Thorne
</TABLE>

II-5
<PAGE> 161

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1 -- Agreement and Plan of Merger, dated September 12, 1997,
among Imperial Holly Corporation, IHK Merger Sub
Corporation and Savannah Foods & Industries, Inc.
(incorporated by reference to Annex A hereto).
3.1 -- Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3(b) to the
Company's Registration Statement on Form S-4
(Registration No. 33-20959)).
3.2 -- Articles of Amendment to Restated Articles of
Incorporation (incorporated by reference to Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1990 (File No. 1-10307)).
3.3 -- By-Laws of the Company (incorporated by reference to
Exhibit 3(b) to the Company's Annual Report on Form 10-K
for the year ended March 31, 1989 (File No. 0-16674)).
4.1 -- Registration Rights Agreement dated August 29, 1996 by
and among the Company, Greencore Group plc and Earlsfort
Holdings B.V. (incorporated by reference to Exhibit 4.2
to the September 5, 1996 Form 8-K).
4.2* -- Stockholders Agreement, dated September 12, 1997, among
Imperial Holly Corporation, IHK Merger Sub Corporation
and the executive officers and directors of Savannah
Foods & Industries, Inc. listed therein.
4.3* -- Form of Agreement and Irrevocable Proxy between Savannah
Foods & Industries, Inc. and certain stockholders of
Imperial Holly Corporation.
5.1* -- Opinion of Andrews & Kurth L.L.P. as to the legality of
the securities being registered.
10.1* -- Credit Agreement, dated as of October 17, 1997, among
Imperial Holly Corporation, as Borrower, the Several
Lenders from time to time Parties thereto, Lehman
Brothers, Inc., as Arranger, Lehman Brothers Commercial
Paper, Inc., as Syndication Agent and Lehman Brothers
Commercial Paper, Inc., as Administrative Agent.
10.2* -- Guarantee and Collateral Agreement, dated as of October
17, 1997, made by Imperial Holly Corporation and certain
of its Subsidiaries in favor of Harris Trust and Savings
Bank, as Collateral Agent.
23.1* -- Consent of Deloitte & Touche LLP, Independent Auditors.
23.2* -- Consent of Price Waterhouse LLP, Independent Accountants.
24.1* -- Powers of Attorney (included as part of the signature
page on page II-4 hereof).
99.1* -- Consent of Lehman Brothers Inc.
99.2* -- Consent of Donaldson, Lufkin & Jenrette Securities
Corporation.
99.3* -- Consent of Andrews & Kurth L.L.P. (included in opinion
filed herewith as Exhibit 5.1).
99.5* -- Form of Imperial Holly Proxy Card.
99.6* -- Form of Savannah Foods Proxy Card.
99.7* -- Form of Savannah Foods Cash Election.
</TABLE>

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

* Filed herewith.

<PAGE> 1
EXHIBIT 4.2

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

<PAGE> 2

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 beside the name of such Stockholder shall be adjusted
appropriately and this Agreement and the

- 2 -

<PAGE> 3

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 -

<PAGE> 4

(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 -

<PAGE> 5
IMPERIAL HOLLY CORPORATION

By:
--------------------------------------
Name:
Title:

IHK MERGER SUB CORPORATION

By:
--------------------------------------
Name:
Title:

- 5 -

<PAGE> 6

SCHEDULE A

<TABLE>
<CAPTION>
NUMBER OF SHARES OF
NUMBER OF SHARES OF COMMON STOCK ISSUABLE
STOCKHOLDER (INCLUDING ADDRESS) COMMON STOCK OWNED UPON EXERCISE OF OPTIONS
- ------------------------------- ------------------- ------------------------
<S> <C> <C>
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
</TABLE>

- 6 -

<PAGE> 1
EXHIBIT 4.3

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

<PAGE> 2

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 -

<PAGE> 3

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 -

<PAGE> 4

(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 -

<PAGE> 5

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 -

<PAGE> 6

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:

----------------------------------------
Shares Owned:

Address:

COMPANY

SAVANNAH FOODS & INDUSTRIES, INC.

Name:
----------------------------------
Title:

- 6 -

<PAGE> 1
EXHIBIT 5.1
[ANDREWS & KURTH L.L.P. ATTORNEYS LETTERHEAD]

November 17, 1997

Imperial Holly Corporation
One Imperial Square, Suite 200
8016 Highway 90-A
Sugar Land, Texas 77478

Gentlemen:

We have acted as counsel for Imperial Holly Corporation, a
Texas corporation (the "Company"), in connection with the Company's
Registration Statement on Form S-4 (the "Registration Statement") relating to
the registration under the Securities Act of 1933, as amended, of the offer
and issuance of the following shares of common stock, no par value ("Common
Stock"), of the Company: (i) [8,621,459] shares (the "Merger Shares") to be
issued to the stockholders of Savannah Foods & Industries, Inc., a Delaware
corporation ("Savannah Foods"), in connection with the merger (the "Merger") of
Savannah Foods with IHK Merger Sub Corporation, a wholly owned subsidiary of
the Company ("IHK Sub"), pursuant to the Merger Agreement, dated September 12,
1997 (the "Merger Agreement"), among the Company, IHK Sub and Savannah Foods,
(ii) [ ] shares (the "Benefit Trust Shares") to be
issued to the [Savannah Foods Benefit Trust] immediately following the
consummation of the Merger and (iii) [377,358] shares (the "H. Kempner Shares")
to be issued to the H. Kempner Trust Association concurrently with the
consummation of the Merger.

As the basis of the opinion hereinafter expressed, we have
examined such statutes, regulations, corporate records and documents,
certificates of corporate and public officials, and other instruments as we
have deemed necessary or advisable for the purposes of this opinion. In such
examination, we have assumed the authenticity of all documents submitted to us
as originals and the conformity with the original documents of all documents
submitted to us as copies.

Based on the foregoing and on such legal considerations as we
deem relevant, we are of the opinion that the Merger Shares, the Benefit Trust
Shares and the H. Kempner Shares to be issued and sold by the Company will,
when issued in accordance with the terms of the Merger Agreement (with respect
to the Merger Shares) and as described in the Registration Statement, be
validly issued, fully paid and nonassessable.

<PAGE> 2

We hereby consent to the use of this opinion as an exhibit to
the Registration Statement and the reference to our firm under the caption
"Legal Opinion" therein.

Very truly yours,

ANDREWS & KURTH L.L.P.

<PAGE> 1
EXHIBIT 10.1

EXECUTION FORM

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

$505,000,000

CREDIT AGREEMENT

among

IMPERIAL HOLLY CORPORATION,
as Borrower,

The Several Lenders
from Time to Time Parties Hereto,

LEHMAN BROTHERS, INC.,
as Arranger

LEHMAN COMMERCIAL PAPER INC.,
as Syndication Agent

and

LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent

Dated as of October 17, 1997

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

<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

SECTION 2. AMOUNT AND TERMS OF COMMITMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.1 Term Loan Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.2 Procedure for Term Loan Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.3 Revolving Credit Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.4 Procedure for Revolving Credit Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.5 Repayment of Loans; Evidence of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.6 Commitment Fees, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.7 Termination or Reduction of Revolving Credit Commitments . . . . . . . . . . . . . . . . . . . . . . . 23
2.8 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.9 Conversion and Continuation Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.10 Minimum Amounts and Maximum Number of Eurodollar Tranches . . . . . . . . . . . . . . . . . . . . . . 24
2.11 Interest Rates and Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.12 Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.13 Inability to Determine Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.14 Pro Rata Treatment and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.15 Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.16 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.17 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.18 Change of Lending Office; Claims Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.19 Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.20 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

SECTION 3. LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.1 L/C Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.2 Procedure for Issuance of Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.3 Commissions, Fees and Other Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.4 L/C Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.5 Reimbursement Obligation of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.6 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.7 Letter of Credit Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.8 Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

SECTION 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.1 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.2 No Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.3 Corporate Existence; Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.4 Corporate Power; Authorization; Enforceable Obligations . . . . . . . . . . . . . . . . . . . . . . . . 37
4.5 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.6 No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.7 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.8 Ownership of Property; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>

-i-

<PAGE> 3

Page

<TABLE>
<S> <C>
4.9 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.11 Federal Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.13 Investment Company Act; Other Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.14 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.15 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.17 Accuracy of Information, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.18 Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.19 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.20 Regulation H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

SECTION 5. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.1 Conditions to Initial Revolving Extension of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.2 Conditions to Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.3 Conditions to Each Extension of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

SECTION 6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.2 Certificates; Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.3 Payment of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.4 Conduct of Business and Maintenance of Existence, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.5 Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.6 Inspection of Property; Books and Records; Discussions . . . . . . . . . . . . . . . . . . . . . . . . 51
6.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.8 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.9 Additional Collateral, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.10 Merger Consummation; Merger Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

SECTION 7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.1 Limitation on Activities of IHK Merger Sub. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.2 Limitation on Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.3 Limitation on Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.4 Limitation on Fundamental Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.5 Limitation on Sale of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.6 Limitation on Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.7 Limitation on Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.8 Limitation on Investments, Loans and Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.9 Limitation on Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.10 Limitation on Sales and Leasebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.11 Limitation on Changes in Fiscal Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.12 Limitation on Negative Pledge Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.13 Limitation on Restrictions on Subsidiary Distributions . . . . . . . . . . . . . . . . . . . . . . . . 61
7.14 Limitation on Lines of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.15 Limitation on Amendments to Transaction Documentation . . . . . . . . . . . . . . . . . . . . . . . . 61
7.16 Limitation on Optional Payments and Modifications of Debt Instruments and Organizational
Documentation, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

SECTION 8. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

SECTION 9. THE AGENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

</TABLE>

-ii-

<PAGE> 4

Page

<TABLE>
<S> <C>
9.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.4 Reliance by Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.6 Non-Reliance on Agents and Other Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.8 Agent in Its Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.9 Successor Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
9.10 Authorization to Release Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
9.11 The Arranger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
10.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.4 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.5 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.6 Successors and Assigns; Participations and Assignments . . . . . . . . . . . . . . . . . . . . . . . . 71
10.7 Adjustments; Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.10 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.12 Submission To Jurisdiction; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.13 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.14 WAIVERS OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.15 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
</TABLE>

-iii-

<PAGE> 5

SCHEDULES:

1.1A Commitments
1.1B Mortgaged Property
1.1C Permitted Investors
1.1D Non-Subsidiary Guarantor Subsidiaries
4.4 Consents, Authorizations, Filings and Notices
4.14 Subsidiaries
4.17 Real Property Located in Flood Zone
4.18(a) UCC Filing Jurisdictions
4.18(b) Mortgage Filing Jurisdictions
5.2(c) Governmental and Third Party Approvals
7.2(e) Existing Indebtedness
7.3(f) Existing Liens
7.8(i) Extensions of Credit

EXHIBITS:

A Form of Guarantee and Collateral Agreement
B Form of Compliance Certificate
C Form of Closing Certificate
D Form of Mortgage
E Form of Assignment and Acceptance
F-1 Form of Legal Opinion of Andrews & Kurth L.L.P.
F-2 Form of Legal Opinion of Borrower's General Counsel
G-1 Form of Term Note
G-2 Form of Revolving Credit Note
H Form of Exemption Certificate
I Form of Target Pledge Agreement
J Form of Depositary Agency Agreement
K-1 Form of Notice of Borrowing (Drawings)
K-2 Form of Notice of Borrowing (Conversions)
K-3 Form of Notice of Borrowing (Continuations)

-iv-

<PAGE> 6

EXHIBIT 10.1

CREDIT AGREEMENT, dated as of October 17, 1997, among IMPERIAL HOLLY
CORPORATION, a Texas corporation (the "Borrower"), the several banks and other
financial institutions or entities from time to time parties to this Agreement
(the "Lenders"), LEHMAN BROTHERS, INC., as arranger (in such capacity, the
"Arranger"), LEHMAN COMMERCIAL PAPER INC., as syndication agent (in such
capacity, the "Syndication Agent"), HARRIS TRUST AND SAVINGS BANK, as
collateral agent (in such capacity, the "Collateral Agent") and LEHMAN
COMMERCIAL PAPER INC., as administrative agent (in such capacity, the
"Administrative Agent").

W I T N E S S E T H:

WHEREAS, IHK Merger Sub Corporation, a Delaware corporation
("IHK Merger Sub"), a wholly owned subsidiary of the Borrower, has made an
offer (the "Tender Offer") to purchase a number (the "Specified Number of
Shares") of the outstanding shares (the "Shares") of common stock equal to
14,397,836 or such other number of Shares which represents approximately 50.1%
of the Shares outstanding at the date of such purchase, par value $0.25, of
Savannah Foods & Industries, Inc., a Delaware corporation (the "Target"),
pursuant to an Offer to Purchase dated September 18, 1997 (as amended,
supplemented or otherwise modified from time to time in accordance with the
terms hereof, the "Offer to Purchase") at a price of $20.25 per Share;

WHEREAS, the Offer to Purchase is being made pursuant to an
Agreement and Plan of Merger, dated as of September 12, 1997 (including the
schedules thereto, the "Merger Agreement"), among the Borrower, IHK Merger Sub
and Target, which provides that (i) as soon as practicable after the purchase
of Shares (the "Tender Offer Purchase") pursuant to the Offer to Purchase
(subject to certain conditions), each of the Borrower and the Target acting
through its respective Board of Directors shall give notice of, and convene a
special meeting of, its respective stockholders for the purpose of (in the case
of Target) approving and adopting the Merger Agreement and the Merger or (in
the case of the Borrower) approving the issuance of shares of common stock of
the Borrower in the Merger and subject to such stockholder approvals, IHK
Merger Sub will be merged with and into the Target (the "Merger"; together with
the Tender Offer, the Tender Offer Purchase and the transactions contemplated
in connection therewith, the "Acquisition"), with the Target surviving as a
wholly owned subsidiary of the Borrower; (ii) at the effective time of the
Merger, each of the Shares (other than Shares held by the Borrower, IHK Merger
Sub or any of their subsidiaries or in the treasury of the Target, all of which
will be canceled, and Shares held by Target stockholders who perfect their
appraisal rights under Delaware law) will be converted into the right to
receive a combination of cash consideration and shares of common stock, without
par value, of the Borrower pursuant to the proration and stock price
determination procedures set forth in the Merger Agreement and the Offer to
Purchase such that the aggregate cash consideration paid for Shares pursuant to
the Tender Offer Purchase and the Merger equals approximately 70% of the total
such consideration so paid;

<PAGE> 7
2

WHEREAS, (i) in order to provide the financing for the Tender
Offer Purchase, the repayment of up to approximately $136,000,000 in existing
indebtedness of the Borrower and certain related expenses, and to provide for
the Borrower's working capital needs pending the Merger, the Borrower will
require senior tender and revolving credit facilities in the aggregate amount
of $505,000,000, comprised of a term loan facility of $295,000,000 and a
revolving credit facility of $210,000,000 and (ii) in order to provide a
portion of the financing for the Merger and certain related expenses, the
refinancing of certain indebtedness of Target, the repayment of amounts owing
under the Tender Facilities and to provide financing for future working capital
and other general corporate purposes, the Borrower will require financing
comprised of either (A) (1) senior credit facilities of up to $455,000,000 (the
"Alternative A Merger Facilities"), comprised of term loan facilities
aggregating not more than $255,000,000 and a $200,000,000 revolving credit
facility and (2) $250,000,000 in proceeds of unsecured senior subordinated
notes issued by the Borrower (the "Senior Subordinated Notes") or (B) in the
event that the Senior Subordinated Notes are not issued and sold on the date of
consummation of the Merger, senior credit facilities of up to $705,000,000 (the
"Alternative B Merger Facilities"), comprised of term loan facilities
aggregating not more than $505,000,000 and a $200,000,000 revolving credit
facility; and

WHEREAS, the Lenders are willing to make the senior tender and
revolving credit facilities referred to above available upon and subject to the
terms and conditions hereinafter set forth;

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

SECTION 1. DEFINITIONS

1.1 Defined Terms. As used in this Agreement, the terms
listed in this Section 1.1 shall have the respective meanings set forth in this
Section 1.1.

"Acquisition": as defined in the recitals hereto.

"Administrative Agent": as defined in the preamble hereto.

"Affiliate": as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. For purposes of this
definition, "control" of a Person means the power, directly or
indirectly, either to (a) vote 10% or more of the securities having
ordinary voting power for the election of directors (or persons
performing similar functions) of such Person or (b) direct or cause
the direction of the management and policies of such Person, whether
by contract or otherwise.

"Agents": the collective reference to the Syndication Agent,
the Administrative Agent and the Collateral Agent.

"Agreement": this Credit Agreement, as amended, supplemented
or otherwise modified from time to time.

<PAGE> 8

"Alternative A Merger Facilities": as defined in the recitals
hereto.

"Alternative B Merger Facilities": as defined in the recitals
hereto.

"Applicable Margin": for each Type of Loan, the rate per
annum set forth under the relevant column heading below:

<TABLE>
<CAPTION>
Base Rate Eurodollar
Loans Loans
--------- ----------
<S> <C> <C>
Revolving Credit Loans 1.50% 2.50%
Term Loans 1.50% 2.50%
</TABLE>

"Application": an application, in such form as the Issuing
Lender may specify from time to time, requesting the Issuing Lender to
open a Letter of Credit.

"Arranger": as defined in the preamble hereto.

"Assignee": as defined in Section 10.6(c).

"Assignor": as defined in Section 10.6(c).

"Available Revolving Credit Commitment": as to any Revolving
Credit Lender at any time, an amount equal to the excess, if any, of
(a) such Lender's Revolving Credit Commitment over (b) such Lender's
Revolving Extensions of Credit.

"Available Commitment": as to any Lender at any time, an
amount equal to the sum of (a) such Lender's Available Revolving
Credit Commitment at such time plus (b) the excess, if any, of such
Lender's Term Loan Commitment over the aggregate principal amount of
the Term Loans made by such Lender.

"Base Rate": for any day, a rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Prime Rate in effect on such day, (b) the Base CD Rate in effect on
such day plus 1% and (c) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean
the rate of interest per annum publicly announced from time to time by
the Reference Lender as its prime rate in effect at its principal
office in New York City (the Prime Rate not being intended to be the
lowest rate of interest charged by the Reference Lender in connection
with extensions of credit to debtors); "Base CD Rate" shall mean the
sum of (a) the product of (i) the Three-Month Secondary CD Rate and
(ii) a fraction, the numerator of which is one and the denominator of
which is one minus the C/D Reserve Percentage and (b) the C/D
Assessment Rate; and "Three-Month Secondary CD Rate" shall mean, for
any day, the secondary market rate for three-month certificates of
deposit reported as being in effect on such day (or, if such day shall
not be a Business Day, the next preceding Business Day) by the Board
through the public information telephone line of the Federal Reserve
Bank of New

<PAGE> 9

York (which rate will, under the current practices of the Board, be
published in Federal Reserve Statistical Release H.15(519) during the
week following such day), or, if such rate shall not be so reported on
such day or such next preceding Business Day, the average of the
secondary market quotations for three-month certificates of deposit of
major money center banks in New York City received at approximately
10:00 A.M., New York City time, on such day (or, if such day shall not
be a Business Day, on the next preceding Business Day) by the
Reference Lender from three New York City negotiable certificate of
deposit dealers of recognized standing selected by it. Any change in
the Base Rate due to a change in the Prime Rate, the Three-Month
Secondary CD Rate or the Federal Funds Effective Rate shall be
effective as of the opening of business on the effective day of such
change in the Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate, respectively.

"Base Rate Loans": Loans the rate of interest applicable to
which is based upon the Base Rate.

"Board": the Board of Governors of the Federal Reserve System
of the United States (or any successor).

"Borrower": as defined in the preamble hereto.

"Borrowing Date": any Business Day specified by the Borrower
as a date on which the Borrower requests the relevant Lenders to make
Loans hereunder.

"Business Day": (i) for all purposes other than as covered by
clause (ii) below, a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by
law to close and (ii) with respect to all notices and determinations
in connection with, and payments of principal and interest on,
Eurodollar Loans, any day which is a Business Day described in clause
(i) and which is also a day for trading by and between banks in Dollar
deposits in the interbank eurodollar market.

"Capital Expenditures": for any period, with respect to any
Person, the aggregate of all expenditures by such Person and its
Subsidiaries for the acquisition or leasing (pursuant to a capital
lease) of fixed or capital assets or additions to equipment (including
replacements, capitalized repairs and improvements during such period)
which should be capitalized under GAAP on a consolidated balance sheet
of such Person and its Subsidiaries.

"Capital Lease Obligations": as to any Person, the
obligations of such Person to pay rent or other amounts under any
lease of (or other arrangement conveying the right to use) real or
personal property, or a combination thereof, which obligations are
required to be classified and accounted for as capital leases on a
balance sheet of such Person under GAAP and, for the purposes of this
Agreement, the amount of such obligations at any time shall be the
capitalized amount thereof at such time determined in accordance with
GAAP.

"Capital Stock": any and all shares, interests,
participations or other equivalents (however designated) of capital
stock of a corporation, any and all equivalent ownership

<PAGE> 10

interests in a Person (other than a corporation) and any and all
warrants, rights or options to purchase any of the foregoing.

"Cash Equivalents": (a) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or
issued by any agency thereof and backed by the full faith and credit
of the United States, in each case maturing within one year from the
date of acquisition; (b) certificates of deposit, time deposits,
eurodollar time deposits or overnight bank deposits having maturities
of six months or less from the date of acquisition issued by any
Lender or by any commercial bank organized under the laws of the
United States of America or any state thereof having combined capital
and surplus of not less than $500,000,000; (c) commercial paper of an
issuer rated at least A-2 by Standard & Poor's Ratings Services
("S&P") or P-2 by Moody's Investors Service, Inc. ("Moody's"), or
carrying an equivalent rating by a nationally recognized rating
agency, if both of the two named rating agencies cease publishing
ratings of commercial paper issuers generally, and maturing within six
months from the date of acquisition; (d) repurchase obligations of any
Lender or of any commercial bank satisfying the requirements of clause
(b) of this definition, having a term of not more than 30 days with
respect to securities issued or fully guaranteed or insured by the
United States government; (e) securities with maturities of one year
or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United states, by any
political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities
of which state, commonwealth, territory, political subdivision, taxing
authority or foreign government (as the case may be) are rated at
least A by S&P or A by Moody's; (f) securities with maturities of six
months or less from the date of acquisition backed by standby letters
of credit issued by any Lender or any commercial bank satisfying the
requirements of clause (b) of this definition; or (g) shares of money
market mutual or similar funds which invest exclusively in assets
satisfying the requirements of clauses (a) through (f) of this
definition.

"C/D Assessment Rate": for any day as applied to any Base
Rate Loan, the annual assessment rate in effect on such day which is
payable by a member of the Bank Insurance Fund maintained by the
Federal Deposit Insurance Corporation (the "FDIC") classified as
well-capitalized and within supervisory subgroup "B" (or a comparable
successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.4 (or any successor provision) to the FDIC (or any
successor) for the FDIC's (or such successor's) insuring time deposits
at offices of such institution in the United States.

"C/D Reserve Percentage": for any day as applied to any Base
Rate Loan, that percentage (expressed as a decimal) which is in effect
on such day, as prescribed by the Board, for determining the maximum
reserve requirement for a Depositary Institution (as defined in
Regulation D of the Board as in effect from time to time) in respect
of new non-personal time deposits in Dollars having a maturity of 30
days or more.

"Closing Date": the date on which the conditions precedent
set forth in Section 5.1 shall have been satisfied, which date shall
not occur later than November 30, 1997.

<PAGE> 11

"Code": the Internal Revenue Code of 1986, as amended from
time to time.

"Collateral": all Property of the Loan Parties, now owned or
hereafter acquired, upon which a Lien is purported to be created by
any Security Document.

"Collateral Agent": as defined in the preamble hereto.

"Commitment": as to any Lender, the sum of the Term Loan
Commitment and the Revolving Credit Commitment of such Lender.

"Commitment Fee Rate": 3/8 of 1% per annum.

"Commitment Letter Date": September 10, 1997, the date of the
commitment letter executed by the Borrower and the Syndication Agent
in respect of the credit facilities provided for herein (as amended on
September 18, 1997).

"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within
the meaning of Section 4001 of ERISA or is part of a group which
includes the Borrower and which is treated as a single employer under
Section 414 of the Code.

"Compliance Certificate": a certificate duly executed by a
Responsible Officer substantially in the form of Exhibit B.

"Continuing Directors": the directors of the Borrower on the
Closing Date, after giving effect to the Tender Offer and the other
transactions contemplated hereby to occur prior to the Closing Date,
and each other director, if, in each case, such other director's
nomination for election to the board of directors of the Borrower is
recommended by at least 66-2/3% of the then Continuing Directors.

"Contractual Obligation": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or
any of its Property is bound.

"Control Agreement": the Custody and Control Agreement, dated
as of the date hereof, among Goldman Sachs & Co., as securities
intermediary, the Collateral Agent and the Borrower, as the same may
be amended, supplemented or otherwise modified from time to time.

"Control Investment Affiliate": as to any Person, any other
Person which (a) directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person and (b) is
organized by such Person primarily for the purpose of making equity or
debt investments and/or holding investments or funds in trust or
similar arrangements for the benefit of such Person's family members.
For purposes of this definition, "control" of a

<PAGE> 12

Person means the power, directly or indirectly, to direct or cause the
direction of the management and policies of such Person whether by
contract or otherwise.

"Debt Tender Offer": the Offer to Purchase and Consent
Solicitation Statement, dated September 18, 1997, in respect of the
Senior Notes.

"Default": any of the events specified in Section 8, whether
or not any requirement for the giving of notice, the lapse of time, or
both, has been satisfied.

"Depositary": Wachovia Bank, N.A., in its capacity as
depositary under the Depositary Agency Agreement.

"Depositary Agency Agreement": the Depositary Agency
Agreement to be executed and delivered by the Depositary, the
Administrative Agent and the Borrower, substantially in the form of
Exhibit J, as the same may be amended, supplemented or otherwise
modified from time to time.

"Disposition": with respect to any Property, any sale, lease,
sale and leaseback, assignment, conveyance, transfer or other
disposition thereof; and the terms "Dispose" and "Disposed of" shall
have correlative meanings.

"Dollars" and "$": dollars in lawful currency of the United
States of America.

"Domestic Subsidiary": any Subsidiary of the Borrower
organized under the laws of any jurisdiction within the United States
of America.

"Environmental Laws": any and all laws, rules, orders,
regulations, statutes, ordinances, codes, decrees, or other legally
enforceable requirement (including, without limitation, Environmental
Permits) of any Governmental Authority, regulating, relating to or
imposing liability or standards of conduct concerning protection of
the environment or of human health, or employee health and safety, as
has been, is now, or may at any time hereafter be, in effect.

"Environmental Permits": any and all permits, licenses,
registrations, notifications, exemptions and any other authorization
required under any Environmental Law.

"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.

"Eurocurrency Reserve Requirements": for any day as applied
to a Eurodollar Loan, the aggregate (without duplication) of the
maximum rates (expressed as a decimal fraction) of reserve
requirements in effect on such day (including, without limitation,
basic, supplemental, marginal and emergency reserves under any
regulations of the Board or other Governmental Authority having
jurisdiction with respect thereto) dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as
"Eurocurrency

<PAGE> 13

Liabilities" in Regulation D of the Board) maintained by a member bank
of the Federal Reserve System.

"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
determined on the basis of the rate for deposits in Dollars for a
period equal to such Interest Period commencing on the first day of
such Interest Period appearing on Page 3750 of the Telerate screen as
of 11:00 A.M., London time, two Business Days prior to the beginning
of such Interest Period. In the event that such rate does not appear
on Page 3750 of the Telerate Service (or otherwise on such service),
the "Eurodollar Base Rate" for purposes of this definition shall be
determined by reference to such other comparable publicly available
service for displaying eurodollar rates as may be selected by the
Administrative Agent and acceptable to Borrower or, in the absence of
such availability, by reference to the rate at which the
Administrative Agent is offered Dollar deposits at or about 11:00
A.M., New York City time, two Business Days prior to the beginning of
such Interest Period in the interbank eurodollar market where its
eurodollar and foreign currency and exchange operations are then being
conducted for delivery on the first day of such Interest Period for
the number of days comprised therein.

"Eurodollar Loans": Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.

"Eurodollar Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum
determined for such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):

Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements

"Eurodollar Tranche": the collective reference to Eurodollar
Loans the then current Interest Periods with respect to all of which
begin on the same date and end on the same later date (whether or not
such Loans shall originally have been made on the same day).

"Event of Default": any of the events specified in Section 8,
provided that any requirement for the giving of notice, the lapse of
time, or both, has been satisfied.

"Excluded Foreign Subsidiaries": any Foreign Subsidiary the
pledge of all of whose Capital Stock as Collateral would, in the good
faith judgment of the Borrower, result in adverse tax consequences to
the Borrower.

"Existing Borrower Indebtedness": the collective reference to
the Senior Notes and the Existing Credit Facility.

"Existing Credit Facility": the Credit Agreement, dated as of
June 10, 1993, among the Borrower, Harris Trust and Savings Bank, as
agent, Texas Commerce Bank National

<PAGE> 14

Association, as co-agent and the Banks, as the same may be amended,
supplemented or otherwise modified from time to time.

"Facility": each of (a) the Term Loan Commitments and the
Term Loans made thereunder (the "Term Loan Facility") and (b) the
Revolving Credit Commitments and the extensions of credit made
thereunder (the "Revolving Credit Facility").

"Federal Funds Effective Rate"; for any day, the weighted
average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds
brokers, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for
the day of such transactions received by the Reference Lender from
three federal funds brokers of recognized standing selected by it.

"Foreign Subsidiary": any Subsidiary of the Borrower that is
not a Domestic Subsidiary.

"Funding Office": the office specified from time to time by
the Administrative Agent as its funding office by notice to the
Borrower and the Lenders.

"GAAP": generally accepted accounting principles in the
United States of America as in effect from time to time set forth in
the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and the
statements and pronouncements of the Financial Accounting Standards
Board, or in such other statements by such other entity as may be in
general use by significant segments of the accounting profession,
which are applicable to the circumstances of the Borrower as of the
date of determination.

"Governmental Authority": any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government (including, without
limitation, the National Association of Insurance Commissioners).

"Guarantee and Collateral Agreement": the Guarantee and
Collateral Agreement to be executed and delivered by the Borrower and
each Subsidiary Guarantor, substantially in the form of Exhibit A, as
the same may be amended, supplemented or otherwise modified from time
to time.

"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has
issued a reimbursement, counterindemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends or other obligations (the "primary obligations") of
any other third Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation
of the guaranteeing

<PAGE> 15

person, whether or not contingent, (i) to purchase any such primary
obligation or any Property constituting direct or indirect security
therefor, (ii) to advance or supply funds (1) for the purchase or
payment of any such primary obligation or (2) to maintain working
capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (iii) to
purchase Property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation or (iv)
otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided, however, that
the term Guarantee Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of
business or purchases of inventory (including crops and raw materials)
in the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower
of (a) an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Guarantee Obligation is
made and (b) the maximum amount for which such guaranteeing person may
be liable pursuant to the terms of the instrument embodying such
Guarantee Obligation, unless such primary obligation and the maximum
amount for which such guaranteeing person may be liable are not stated
or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated
liability in respect thereof as determined by the Borrower in good
faith.

"H-S-R Act": the Hart-Scott-Rodino Antitrust Improvement Act
of 1976 as amended.

"IHK Merger Sub": as defined in the recitals hereto.

"Incur": as defined in Section 7.2.

"Indebtedness": of any Person at any date, without
duplication, (a) all indebtedness of such Person for borrowed money,
(b) all obligations of such Person for the deferred purchase price of
Property or services (other than current trade payables incurred in
the ordinary course of such Person's business), (c) all obligations of
such Person evidenced by notes, bonds, debentures or other similar
instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to
Property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such Property), (e) all Capital
Lease Obligations of such Person, (f) all obligations of such Person,
contingent or otherwise, as an account party under acceptance, letter
of credit or similar facilities, (g) all obligations of such Person,
contingent or otherwise, to purchase, redeem, retire or otherwise
acquire for value any Capital Stock (other than common stock) of such
Person, (h) all Guarantee Obligations of such Person in respect of
obligations of the kind referred to in clauses (a) through (g) above;
(i) all obligations of the kind referred to in clauses (a) through (h)
above secured by (or for which the holder of such obligation has an
existing right, contingent or otherwise, to be secured by) any Lien on
Property (including, without limitation, accounts and contract rights)
owned by such Person, whether or not such Person has assumed or become
liable for the payment of such obligation (for purposes of calculating

<PAGE> 16

the amount of indebtedness referred to in this clause (i) the amount
of indebtedness shall be limited to the value of such Property) and
(j) for the purposes of Section 8(e) only, all obligations of such
Person in respect of Interest Rate Protection Agreements and (k) the
liquidation value of any preferred Capital Stock of such Person or its
Subsidiaries (i) held by any Person other than such Person and its
Wholly Owned Subsidiaries and (ii) providing for any scheduled or
mandatory payment, redemption or sinking fund prior to one year after
the Maturity Date.

"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section
4245 of ERISA.

"Insolvent": pertaining to a condition of Insolvency.

"Intellectual Property": the collective reference to all
rights, priorities and privileges relating to intellectual property,
whether arising under United States, multinational or foreign laws or
otherwise, including, without limitation, copyrights, copyright
licenses, patents, patent licenses, trademarks, trademark licenses,
technology, and all rights to sue at law or in equity for any
infringement or other impairment thereof, including the right to
receive all proceeds and damages therefrom.

"Interest Payment Date": (a) as to any Base Rate Loan, the
last day of each March, June, September and December to occur while
such Loan is outstanding and the final maturity date of such Loan, (b)
as to any Eurodollar Loan, the last day of such Interest Period and
(c) as to any Loan (other than any Revolving Credit Loan that is a
Base Rate Loan), the date of any repayment or prepayment made in
respect thereof.

"Interest Period": as to any Eurodollar Loan, (a) initially,
the period commencing on the borrowing or conversion date, as the case
may be, with respect to such Eurodollar Loan and ending one month
thereafter; and (b) thereafter, each period commencing on the last day
of the next preceding Interest Period applicable to such Eurodollar
Loan and ending one month thereafter; provided that, all of the
foregoing provisions relating to Interest Periods are subject to the
following:

(i) if any Interest Period would otherwise end on a day
that is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless the result
of such extension would be to carry such Interest Period into
another calendar month in which event such Interest Period
shall end on the immediately preceding Business Day;

(ii) any Interest Period that would otherwise extend
beyond the Revolving Credit Termination Date or beyond the
date final payment is due on the Term Loans, as the case may
be, shall end on the Revolving Credit Termination Date or such
due date, as applicable; and

<PAGE> 17

(iii) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of
a calendar month.

"Interest Rate Protection Agreement": any interest rate
protection agreement, interest rate futures contract, interest rate
option, interest rate cap or other interest rate hedge arrangement, to
or under which the Borrower or any of its Subsidiaries is a party or a
beneficiary on the date hereof or becomes a party or a beneficiary
after the date hereof.

"Issuing Lender": Lehman Commercial Paper Inc., in its
capacity as issuer of any Letter of Credit.

"L/C Commitment": $10,000,000.

"L/C Fee Payment Date": the last day of each March, June,
September and December and the Revolving Credit Termination Date.

"L/C Obligations": at any time, an amount equal to the sum of
(a) the aggregate then undrawn and unexpired amount of the then
outstanding Letters of Credit and (b) the aggregate amount of drawings
under Letters of Credit which have not then been reimbursed pursuant
to Section 3.5.

"L/C Participants": the collective reference to all the
Revolving Credit Lenders other than the Issuing Lender.

"Lenders": as defined in the preamble hereto.

"Letters of Credit": as defined in Section 3.1(a).

"Lien": any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or
other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature
whatsoever, whether or not filed, recorded or otherwise perfected
under applicable law (including, without limitation, any conditional
sale or other title retention agreement and any capital lease having
substantially the same economic effect as any of the foregoing and any
filing of or agreement to give any financing statement under the
Uniform Commercial Code (or equivalent statutes) of any jurisdiction).

"Loan": any loan made by any Lender pursuant to this
Agreement.

"Loan Documents": this Agreement, the Security Documents, the
Syndication Letter and the Notes.

<PAGE> 18

"Loan Parties": the Borrower and each Subsidiary of the
Borrower which is a party to a Loan Document.

"Loan Percentage": as to any Lender at any time, the
percentage which such Lender's Commitment then constitutes of the
aggregate Commitments (or, at any time after the Tender Funding Date,
the percentage which the aggregate principal amount of such Lender's
Revolving Credit Commitments (or, if the Revolving Credit Commitments
have been terminated, such Lender's Revolving Extensions of Credit)
and Term Loans then outstanding constitutes of the aggregate principal
amount of the Revolving Credit Commitments (or, ifthe Revolving Credit
Commitments have been terminated, the Total Revolving Extensions of
Credit) and Term Loans then outstanding).

"Majority Facility Lenders": with respect to any Facility,
the holders of more than 50% of the aggregate unpaid principal amount
of the Term Loans or the Total Revolving Extensions of Credit, as the
case may be, outstanding under such Facility (or, in the case of the
Revolving Credit Facility, prior to any termination of the Revolving
Credit Commitments, the holders of more than 50% of the Total
Revolving Credit Commitments).

"Majority Revolving Credit Facility Lenders": the Majority
Facility Lenders in respect of the Revolving Credit Facility.

"Margin Stock": as defined in Regulation U.

"Margin Stock Collateral": all Margin Stock of the Borrower
and its Subsidiaries by which the Loans are secured pursuant to the
Security Documents or are deemed "indirectly secured" within the
meaning of Regulation U.

"Material Adverse Effect": a material adverse effect on (a)
the Acquisition, (b) the business, assets, property, operations,
liabilities (including, without limitation, contingent liabilities),
or condition (financial or otherwise) of the Borrower, the Target or
their respective Subsidiaries taken as a whole, (c) the consummation
of the Tender Offer or the Merger or (d) the validity or
enforceability of this Agreement or any of the other Loan Documents or
the rights or remedies of the Agents or the Lenders hereunder or
thereunder which materially affects the benefits intended to be
bestowed thereunder.

"Material Environmental Amount": an amount payable by the
Borrower and/or its Subsidiaries in excess of $10,000,000 in any
individual circumstance, or at the time of any determination,
$15,000,000 in the aggregate at any such time for remedial costs,
compliance costs, compensatory damages, punitive damages, fines,
penalties or any combination thereof.

"Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products, polychlorinated biphenyls, urea-formaldehyde insulation,
asbestos, pollutants, contaminants, radioactivity, and any other
substance that is regulated pursuant to or could give rise to
liability under any Environmental Law or common law.

<PAGE> 19

"Maturity Date": the earliest to occur of (i) the date of the
consummation of the Merger, and (ii) January 15, 1998.

"Merger": as defined in the recitals hereto.

"Merger Agreement": as defined in the recitals hereto.

"Mortgaged Properties": the real properties listed on
Schedule 1.1B, as to which the Administrative Agent for the benefit of
the Lenders shall be granted a Lien pursuant to the Mortgages.

"Mortgages": each of the mortgages and deeds of trust made by
any Loan Party in favor of, or for the benefit of, the Administrative
Agent for the benefit of the Lenders, substantially in the form of
Exhibit D (with such changes thereto as shall be advisable under the
law of the jurisdiction in which such mortgage or deed of trust is to
be recorded), as the same may be amended, supplemented or otherwise
modified from time to time.

"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.

"Non-Excluded Taxes": as defined in Section 2.16(a).

"Non-U.S. Lender": as defined in Section 2.16(d).

"Notes": the collective reference to any promissory note
evidencing Loans.

"Notice of Borrowing": (i) with respect to (a) any borrowing
of Loans, a Notice of Borrowing (Drawings), substantially in the form
of Exhibit K-1, (b) any conversion of Loans, a Notice of Borrowing
(Conversions), substantially in the form of Exhibit K-2 and (c) any
continuation of Eurodollar Loans, a Notice of Borrowing
(Continuations), substantially in the form of Exhibit K-3 or (ii)
telephonic notice of any such borrowing, conversion or continuation
promptly confirmed in writing (in a form reasonably acceptable to the
Administrative Agent).

"Obligations": the unpaid principal of and interest on
(including, without limitation, interest accruing after the maturity
of the Loans and Reimbursement Obligations and interest accruing after
the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the
Borrower, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) the Loans and all other
obligations and liabilities of the Borrower to the Administrative
Agent or to any Lender (or, in the case of Interest Rate Protection
Agreements, any Affiliate of any Lender), whether direct or indirect,
absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection
with, this Agreement, any other Loan Document, the Letters of Credit,
any Interest Rate Protection Agreement entered into with any Lender or
any Affiliate of any Lender or any other document made, delivered

<PAGE> 20

or given in connection herewith or therewith, whether on account of
principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses (including, without limitation, all fees, charges and
disbursements of counsel to the Administrative Agent or to any Lender
that are required to be paid by the Borrower pursuant hereto) or
otherwise.

"Offer to Purchase": as defined in the recitals hereto.

"Other Collateral": all assets of the Borrower and its
Subsidiaries (other than Margin Stock) by which the Loans are secured
pursuant to the Security Documents or are deemed "indirectly secured"
within the meaning of Regulation U.

"Other Taxes": any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or
similar levies arising from any payment made hereunder or from the
execution, delivery or enforcement of, or otherwise with respect to,
this Agreement.

"Participant": as defined in Section 10.6(b).

"Payment Office": the office specified from time to time by
the Administrative Agent as its payment office by notice to the
Borrower and the Lenders.

"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA (or any successor).

"Permitted Investors": the collective reference to the
Persons listed on Schedule 1.1C, and their respective Control
Investment Affiliates.

"Person": an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or
other entity of whatever nature.

"Plan": at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.

"Pro Forma Balance Sheets": as defined in Section 4.1(a).

"Projections": as defined in Section 6.2(c).

"Properties": as defined in Section 4.16.

"Property": any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible
or intangible, including, without limitation, Capital Stock.

<PAGE> 21

"Reference Lender": Administrative Agent.

"Register": as defined in Section 10.6(d).

"Regulation G": Regulation G of the Board as in effect from
time to time.

"Regulation U": Regulation U of the Board as in effect from
time to time.

"Regulation T": Regulation T of the Board as in effect from
time to time.

"Regulation X": Regulation X of the Board as in effect from
time to time.

"Reimbursement Obligation": the obligation of the Borrower to
reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn
under Letters of Credit.

"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.

"Reportable Event": any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty day
notice period is waived under subsection .13, .14, .16, .18, .19 or
.20 of PBGC Reg. Section 2615.

"Required Lenders": the holders of more than 50% of (a) until
the Tender Funding Date, the Commitments and (b) thereafter, the sum
of (i) the aggregate unpaid principal amount of the Term Loans and
(ii) the Total Revolving Credit Commitments or, if the Revolving
Credit Commitments have been terminated, the Total Revolving
Extensions of Credit.

"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its Property or to which such Person or any of its Property is
subject.

"Responsible Officer": the chief executive officer, president
or chief financial officer of the Borrower, but in any event, with
respect to financial matters, the chief financial officer of the
Borrower.

"Revolving Credit Commitment": as to any Lender, the
obligation of such Lender, if any, to make Revolving Credit Loans and
participate in Letters of Credit, in an aggregate principal and/or
face amount not to exceed the amount set forth under the heading
"Revolving Credit Commitment" opposite such Lender's name on Schedule
1.1A, as the same may be changed from time to time pursuant to the
terms hereof. The original amount of the Total Revolving Credit
Commitments is $210,000,000.

<PAGE> 22

"Revolving Credit Commitment Period": the period from and
including the Closing Date to the Revolving Credit Termination Date.

"Revolving Credit Lender": each Lender which has a Revolving
Credit Commitment or which has made Revolving Credit Loans.

"Revolving Credit Loans": as defined in Section 2.4.

"Revolving Credit Percentage": as to any Revolving Credit
Lender at any time, the percentage which such Lender's Revolving
Credit Commitment then constitutes of the Total Revolving Credit
Commitments (or, at any time after the Revolving Credit Commitments
shall have expired or terminated, the percentage which the aggregate
principal amount of such Lender's Revolving Credit Loans then
outstanding constitutes of the aggregate principal amount of the
Revolving Credit Loans then outstanding).

"Revolving Credit Termination Date": the earlier of (a) the
Maturity Date and (b) the date on which the Term Loans shall be paid
in full.

"Revolving Extensions of Credit": as to any Revolving Credit
Lender at any time, an amount equal to the sum of (a) the aggregate
principal amount of all Revolving Credit Loans made by such Lender
then outstanding and (b) such Lender's Revolving Credit Percentage of
the L/C Obligations then outstanding.

"SEC": the Securities and Exchange Commission (or successors
thereto or an analogous Governmental Authority).

"Security Documents": the collective reference to the
Guarantee and Collateral Agreement, the Mortgages, the Target Pledge
Agreement, the Control Agreement and all other security documents
hereafter delivered to the Administrative Agent granting a Lien on any
Property of any Person to secure the obligations and liabilities of
any Loan Party under any Loan Document.

"Senior Note Indenture": the Indenture, dated as of October
15, 1992, between the Borrower and Texas Commerce Bank National
Association, as trustee (as the same may be amended, supplemented or
otherwise modified from time to time), pursuant to which the Senior
Notes were issued.

"Senior Notes": the 8-3/8% Senior Notes Due October 15, 1999,
issued by the Borrower.

"Shares": as defined in the recitals hereto.

"Single Employer Plan": any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.

<PAGE> 23

"Solvent": when used with respect to any Person, means that,
as of any date of determination, (a) the amount of the "present fair
saleable value" of the assets of such Person will, as of such date,
exceed the amount of all "liabilities of such Person, contingent or
otherwise", as of such date, as such quoted terms are determined in
accordance with applicable Federal and state laws governing
determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be
greater than the amount that will be required to pay the liability of
such Person on its debts as such debts become absolute and matured, (c)
such Person will not have, as of such date, an unreasonably small
amount of capital with which to conduct its business, and (d) such
Person will be able to pay its debts as they mature.

"Specified Number of Shares": as defined in the recitals
hereto.

"Specified Change of Control": a "change of control" shall
occur as defined in the Senior Note Indenture, as amended,
supplemented or otherwise modified from time to time.

"Stockholders Agreement": the Stockholders Agreement, dated
as of September 12, 1997, among IHK Merger Sub, Imperial Holly and
each of the executive officers and directors of the Target, pursuant
to which each such stockholder has agreed to tender all Shares owned
by such stockholder into the Tender Offer.

"Subsidiary": as to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock or
other ownership interests having ordinary voting power (other than
stock or such other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation, partnership
or other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person. Unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower
and shall not include the Target or its Subsidiaries.

"Subsidiary Guarantor": each Subsidiary of the Borrower
(other than any Excluded Foreign Subsidiary, the Target and its
Subsidiaries and those Subsidiaries listed on Schedule 1.1D) that
guarantees the Obligations pursuant to the Guarantee and Collateral
Agreement.

"Syndication Letter": the letter agreement, dated as of
October 17, 1997, between the Borrower and the Syndication Agent
relating to the syndication of the Facilities.

"Target": as defined in the recitals hereto.

"Target Pledge Agreement": the Target Pledge Agreement to be
executed by the Borrower, substantially in the form of Exhibit I, as
the same may be amended, supplemented or otherwise modified from time
to time.

"Tender Funding Date": as defined in Section 2.2.

<PAGE> 24

"Tender Offer": as defined in the recitals hereto.

"Tender Offer Purchase": as defined in the recitals hereto.

"Term Loan Lender": each Lender which has a Term Loan
Commitment or which has made a Term Loan.

"Term Loan": as defined in Section 2.1.

"Term Loan Commitment": as to any Lender, the obligation of
such Lender, if any, to make a Term Loan to the Borrower hereunder in
a principal amount not to exceed the amount set forth under the
heading "Term Loan Commitment" opposite such Lender's name on Schedule
1.1A. The original aggregate amount of the Term Loan Commitments is
$295,000,000.

"Term Loan Percentage": as to any Term Loan Lender at any
time, the percentage which such Lender's Term Loan Commitment then
constitutes of the aggregate Term Loan Commitments (or, at any time
after the Tender Funding Date, the percentage which the aggregate
principal amount of such Lender's Term Loans then outstanding
constitutes of the aggregate principal amount of the Term Loans then
outstanding).

"Total Revolving Credit Commitments": at any time, the
aggregate amount of the Revolving Credit Commitments at such time.

"Total Revolving Extensions of Credit": at any time, the
aggregate amount of the Revolving Extensions of Credit of the
Revolving Credit Lenders at such time.

"Transaction Documentation": collectively, the Merger
Agreement, the Offer to Purchase (including all documents and
materials filed with the SEC in connection therewith) and all
documentation executed in connection with the Debt Tender Offer and
the other transactions contemplated thereby, in each case, including
all schedules, exhibits, certificates, documents and agreements
entered into, executed or delivered in connection therewith, and as
each such agreement, filing, schedule, exhibit, certificate or
document may be amended, supplemented or otherwise modified from time
to time in accordance with Section 7.15.

"Transferee": as defined in Section 10.15.

"Type": as to any Loan, its nature as a Base Rate Loan or a
Eurodollar Loan.

"Uniform Customs": the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be amended from time to time.

<PAGE> 25

"Wholly Owned Subsidiary": as to any Person, any other Person
all of the Capital Stock of which (other than directors' qualifying
shares required by law) is owned by such Person directly and/or
through other Wholly Owned Subsidiaries.

"Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor
that is a Wholly Owned Subsidiary of the Borrower.

1.2 Other Definitional Provisions. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in the other Loan Documents or any certificate or other
document made or delivered pursuant hereto or thereto.

(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Borrower and its Subsidiaries not defined in
Section 1.1 and accounting terms partly defined in Section 1.1, to the extent
not defined, shall have the respective meanings given to them under GAAP.

(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.

(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.

SECTION 2. AMOUNT AND TERMS OF COMMITMENTS

2.1 Term Loan Commitments. Subject to the terms and
conditions hereof, each Term Loan Lender severally agrees to make a term loan
(a "Term Loan") to the Borrower on the Tender Funding Date in an amount not to
exceed the amount of the Term Loan Commitment of such Lender. The Term Loans
may from time to time be Eurodollar Loans or Base Rate Loans, as determined by
the Borrower and notified to the Administrative Agent in accordance with
Sections 2.2 and 2.9.

2.2 Procedure for Term Loan Borrowing. The Borrower shall
give the Administrative Agent irrevocable Notice of Borrowing (which notice
must be received by the Administrative Agent one Business Day prior to the
anticipated funding of the Term Loans (the "Tender Funding Date"), in the case
of Base Rate Loans) requesting that the Term Loan Lenders make the Term Loans
on the Tender Funding Date and specifying the amount to be borrowed. The Term
Loans made on the Tender Funding Date shall initially be Base Rate Loans and no
Term Loan may be converted into or continued as a Eurodollar Loan if the last
day of the Interest Period with respect thereto would occur on or after the
Maturity Date. Upon receipt of such notice the Administrative Agent shall
promptly notify each Term Loan Lender thereof. Not later than 12:00 noon, New
York City time, on the Tender Funding Date each Term Loan Lender shall make
available to the Administrative Agent at the Funding Office an amount in
immediately available funds equal to the Term Loan or Term Loans to be made by
such Lender. The Administrative Agent

<PAGE> 26

shall make available to the Borrower the aggregate of the amounts made
available to the Administrative Agent by the Term Loan Lenders in immediately
available funds not later than 2:00 P.M., New York City time, on the Tender
Funding Date.

2.3 Revolving Credit Commitments. (a) Subject to the terms
and conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans ("Revolving Credit Loans") to the Borrower from time to
time during the Revolving Credit Commitment Period in an aggregate principal
amount at any one time outstanding which, when added to such Lender's Revolving
Credit Percentage of the L/C Obligations then outstanding does not exceed the
amount of such Lender's Revolving Credit Commitment. During the Revolving
Credit Commitment Period the Borrower may use the Revolving Credit Commitments
by borrowing, prepaying the Revolving Credit Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions hereof. The
Revolving Credit Loans may from time to time be Eurodollar Loans or Base Rate
Loans, as determined by the Borrower and notified to the Administrative Agent
in accordance with Sections 2.4 and 2.9, provided that no Revolving Credit Loan
shall be made as a Eurodollar Loan if the last day of the Interest Period with
respect thereto would occur on or after the Revolving Credit Termination Date.

(b) The Borrower shall repay all outstanding Revolving Credit
Loans on the Revolving Credit Termination Date.

2.4 Procedure for Revolving Credit Borrowing. The Borrower
may borrow under the Revolving Credit Commitments during the Revolving Credit
Commitment Period on any Business Day, provided that the Borrower shall give
the Administrative Agent irrevocable Notice of Borrowing (which notice must be
received by the Administrative Agent prior to 12:00 Noon, New York City time,
(a) three Business Days prior to the requested Borrowing Date, in the case of
Eurodollar Loans, or (b) 12:00 noon New York City time on the day of the
requested Borrowing Date, in the case of Base Rate Loans), specifying (i) the
amount and Type of Revolving Credit Loans to be borrowed and (ii) the requested
Borrowing Date. Any Revolving Credit Loans made on the Closing Date shall
initially be Base Rate Loans and no Revolving Credit Loan may be made as,
converted into or continued as a Eurodollar Loan if the last day of the
Interest Period with respect thereto would occur on or after the Revolving
Credit Termination Date. Each borrowing under the Revolving Credit Commitments
shall be in an amount equal to (x) in the case of Base Rate Loans, $100,000 or
a whole multiple thereof (or, if the then aggregate Available Revolving Credit
Commitments are less than $100,000, such lesser amount) and (y) in the case of
Eurodollar Loans, $1,000,000 or a whole multiple thereof. Upon receipt of any
such notice from the Borrower, the Administrative Agent shall promptly notify
each Revolving Credit Lender thereof. Each Revolving Credit Lender will make
the amount of its Revolving Credit Percentage of each borrowing available to
the Administrative Agent for the account of the Borrower at the Funding Office
prior to 1:00 P.M., New York City time, on the Borrowing Date requested by the
Borrower in funds immediately available to the Administrative Agent. Such
borrowing will then be made available to the Borrower by the Administrative
Agent in like funds as received by the Administrative Agent as soon as
practicable, in accordance with the Administrative Agent's normal practice,
after receipt thereof from the Lenders.

<PAGE> 27

2.5 Repayment of Loans; Evidence of Debt. (a) The Borrower
hereby unconditionally promises to pay to the Administrative Agent for the
account of the appropriate Revolving Credit Lender or Term Loan Lender, as the
case may be, (i) the then unpaid principal amount of each Revolving Credit Loan
of such Revolving Credit Lender on the Revolving Credit Termination Date (or
such earlier date on which the Loans become due and payable pursuant to Section
8) and (ii) the principal amount of each Term Loan of such Term Loan Lender on
the Maturity Date (or on such earlier date on which the Loans become due and
payable pursuant to Section 8). The Borrower hereby further agrees to pay
interest on the unpaid principal amount of the Loans from time to time
outstanding from the date hereof until payment in full thereof at the rates per
annum, and on the dates, set forth in Section 2.11.

(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing indebtedness of the Borrower to such
Lender resulting from each Loan of such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Agreement.

(c) The Administrative Agent, on behalf of the Borrower,
shall maintain the Register pursuant to Section 10.6(e), and a subaccount
therein for each Lender, in which shall be recorded (i) the amount of each Loan
made hereunder and any Note evidencing such Loan, the Type thereof and each
Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) both the amount of any sum received by the
Administrative Agent hereunder from the Borrower and each Lender's share
thereof.

(d) The entries made in the Register and the accounts of each
Lender maintained pursuant to Section 2.5(b) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans made
to such Borrower by such Lender in accordance with the terms of this Agreement.

(e) The Borrower agrees that, upon the request to the
Administrative Agent by any Lender, the Borrower will execute and deliver to
such Lender a promissory note of the Borrower evidencing any Term Loans or
Revolving Credit Loans, as the case may be, of such Lender, substantially in
the forms of Exhibit G-1 or G-2, respectively, with appropriate insertions as
to date and principal amount.

2.6 Commitment Fees, etc. (a) The Borrower agrees to pay to
the Administrative Agent for the account of each Lender, a commitment fee for
the period from and including the Closing Date to the Revolving Credit
Termination Date, computed at the Commitment Fee Rate on the average daily
amount of the Available Commitment of such Lender during the period for which
payment is made, payable quarterly in arrears on the last day of each March,
June, September and December and on the Revolving Credit Termination Date,
commencing on the first of such dates to occur after the date hereof.

<PAGE> 28

(b) The Borrower agrees to pay to the Syndication Agent the
fees in the amounts and on the dates previously agreed to in writing by the
Borrower and the Syndication Agent.

(c) The Borrower agrees to pay to the Administrative Agent
the fees in the amounts and on the dates from time to time agreed to in writing
by the Borrower and the Administrative Agent.

2.7 Termination or Reduction of Revolving Credit Commitments.
The Borrower shall have the right, upon not less than two Business Days' notice
to the Administrative Agent, to terminate the Revolving Credit Commitments or,
from time to time, to reduce the amount of the Revolving Credit Commitments;
provided that no such termination or reduction of Revolving Credit Commitments
shall be permitted if, after giving effect thereto and to any prepayments of
the Revolving Credit Loans made on the effective date thereof, the Total
Revolving Extensions of Credit would exceed the Total Revolving Credit
Commitments. Any such reduction shall be in an amount equal to $1,000,000, or
a whole multiple thereof, and shall reduce permanently the Revolving Credit
Commitments then in effect.

2.8 Optional Prepayments. The Borrower may at any time and
from time to time prepay the Loans, in whole or in part, without premium or
penalty, upon irrevocable notice delivered to the Administrative Agent at least
three Business Days prior thereto in the case of Eurodollar Loans and at least
one Business Day prior thereto in the case of Base Rate Loans, which notice
shall specify the date and amount of prepayment and whether the prepayment is
of Eurodollar Loans or Base Rate Loans; provided, that if a Eurodollar Loan is
prepaid on any day other than the last day of the Interest Period applicable
thereto, the Borrower shall also pay any amounts owing pursuant to Section
2.17. Upon receipt of any such notice the Administrative Agent shall promptly
notify each relevant Lender thereof. If any such notice is given, the amount
specified in such notice shall be due and payable on the date specified
therein, together with (except in the case of Revolving Credit Loans which are
Base Rate Loans) accrued interest to such date on the amount prepaid. Partial
prepayments of Term Loans and Revolving Credit Loans shall be in an aggregate
principal amount of $1,000,000 or a whole multiple thereof.

2.9 Conversion and Continuation Options. (a) The Borrower
may elect from time to time to convert Eurodollar Loans to Base Rate Loans by
giving the Administrative Agent at least two Business Days' prior irrevocable
Notice of Borrowing of such election, provided that any such conversion of
Eurodollar Loans may only be made on the last day of an Interest Period with
respect thereto. The Borrower may elect from time to time to convert Base Rate
Loans to Eurodollar Loans by giving the Administrative Agent at least three
Business Days' prior irrevocable notice of such election, provided that no Base
Rate Loan under a particular Facility may be converted into a Eurodollar Loan
(i) when any Event of Default has occurred and is continuing and the
Administrative Agent or the Majority Facility Lenders in respect of such
Facility have determined in its or their sole discretion not to permit such
conversions or (ii) after the date that is one month prior to the final
scheduled termination or maturity date of such Facility. Upon receipt of any
such notice the Administrative Agent shall promptly notify each relevant Lender
thereof.

<PAGE> 29

(b) Any Eurodollar Loan may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving irrevocable Notice of Borrowing to the Administrative Agent, in
accordance with the applicable provisions of the term "Interest Period" set
forth in Section 1.1, provided that no Eurodollar Loan under a particular
Facility may be continued as such (i) when any Event of Default has occurred
and is continuing and the Administrative Agent has or the Majority Facility
Lenders in respect of such Facility have determined in its or their sole
discretion not to permit such continuations or (ii) after the date that is one
month prior to the final scheduled termination or maturity date of such
Facility, and provided, further, that if the Borrower shall fail to give any
required notice as described above in this paragraph or if such continuation is
not permitted pursuant to the preceding proviso such Loans shall be
automatically converted to Base Rate Loans on the last day of such then
expiring Interest Period. Upon receipt of any such notice the Administrative
Agent shall promptly notify each relevant Lender thereof.

2.10 Minimum Amounts and Maximum Number of Eurodollar
Tranches. Notwithstanding anything to the contrary in this Agreement, all
borrowings, conversions, continuations and optional prepayments of Eurodollar
Loans hereunder and all selections of Interest Periods hereunder shall be in
such amounts and be made pursuant to such elections so that, (a) after giving
effect thereto, the aggregate principal amount of the Eurodollar Loans
comprising each Eurodollar Tranche shall be equal to $1,000,000 or a whole
multiple of $1,000,000 in excess thereof and (b) no more than ten Eurodollar
Tranches shall be outstanding at any one time.

2.11 Interest Rates and Payment Dates. (a) Each Eurodollar
Loan shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such
day plus the Applicable Margin.

(b) Each Base Rate Loan shall bear interest at a rate per
annum equal to the Base Rate plus the Applicable Margin.

(c) (i) If all or a portion of the principal amount of any
Loan or Reimbursement Obligation shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), all of such outstanding Loans
and Reimbursement Obligations shall bear interest at a rate per annum which is
equal to (x) in the case of the Loans, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this Section 2.11
plus 2% or (y) in the case of Reimbursement Obligations, the rate applicable to
Base Rate Loans under the Revolving Credit Facility plus 2%, and (ii) if all or
a portion of any interest payable on any Loan or Reimbursement Obligation or
any commitment fee or other amount payable hereunder shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise), such overdue
amount shall bear interest at a rate per annum equal to the rate applicable to
Base Rate Loans under the relevant Facility plus 2% (or, in the case of any
such other amounts that do not relate to a particular Facility, the Base Rate
plus 4%), in each case, with respect to clauses (i) and (ii) above, from the
date of such non-payment until such amount is paid in full (as well after as
before judgment).

<PAGE> 30

(d) Interest shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant to paragraph (c) of this
Section 2.11 shall be payable from time to time on demand.

2.12 Computation of Interest and Fees. (a) Interest, fees
and commissions payable pursuant hereto shall be calculated on the basis of a
360-day year for the actual days elapsed, except that, with respect to Base
Rate Loans the rate of interest on which is calculated on the basis of the
Prime Rate, the interest thereon shall be calculated on the basis of a 365- (or
366-, as the case may be) day year for the actual days elapsed. The
Administrative Agent shall as soon as practicable notify the Borrower and the
relevant Lenders of each determination of a Eurodollar Rate. Any change in the
interest rate on a Loan resulting from a change in the Base Rate or the
Eurocurrency Reserve Requirements shall become effective as of the opening of
business on the day on which such change becomes effective. The Administrative
Agent shall as soon as practicable notify the Borrower and the relevant Lenders
of the effective date and the amount of each such change in interest rate.

(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrower and the Lenders in the absence of
manifest error. The Administrative Agent shall, at the request of the
Borrower, deliver to the Borrower a statement showing the quotations used by
the Administrative Agent in determining any interest rate pursuant to Section
2.11(a).

2.13 Inability to Determine Interest Rate. If prior to the
first day of any Interest Period:

(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that,
by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period, or

(b) the Administrative Agent shall have received notice from
the Majority Facility Lenders in respect of the relevant Facility that
the Eurodollar Rate determined or to be determined for such Interest
Period will not adequately and fairly reflect the cost to such Lenders
(as conclusively certified by such Lenders) of making or maintaining
their affected Loans during such Interest Period,

the Administrative Agent shall give telecopy or telephonic notice thereof to
the Borrower and the relevant Lenders as soon as practicable thereafter. If
such notice is given (x) any Eurodollar Loans under the relevant Facility
requested to be made on the first day of such Interest Period shall be made as
Base Rate Loans, (y) any Loans under the relevant Facility that were to have
been converted on the first day of such Interest Period to Eurodollar Loans
shall be continued as Base Rate Loans and (z) any outstanding Eurodollar Loans
under the relevant Facility shall be converted, on the first day of such
Interest Period, to Base Rate Loans. Until such notice has been withdrawn by
the Administrative Agent which notice shall be withdrawn promptly upon notice
to the Administrative Agent confirming the termination of the events
precipitating same, no further Eurodollar Loans

<PAGE> 31

under the relevant Facility shall be made or continued as such, nor shall the
Borrower have the right to convert Loans under the relevant Facility to
Eurodollar Loans.

2.14 Pro Rata Treatment and Payments. (a) Each borrowing by
the Borrower from the Lenders hereunder, each payment by the Borrower on
account of any commitment fee and any reduction of the Commitments of the
Lenders shall be made pro rata according to the respective Term Loan
Percentages or Revolving Credit Percentages, as the case may be, of the
relevant Lenders.

(b) Each payment (including each prepayment) by the Borrower
on account of principal of and interest on the Term Loans shall be made pro
rata according to the respective outstanding principal amounts of the Term
Loans then held by the Term Loan Lenders. Amounts prepaid on account of the
Term Loans may not be reborrowed.

(c) Each payment (including each prepayment) by the Borrower
on account of principal of and interest on the Revolving Credit Loans shall be
made pro rata according to the respective outstanding principal amounts of the
Revolving Credit Loans then held by the Revolving Credit Lenders.

(d) All payments (including prepayments) to be made by the
Borrower hereunder, whether on account of principal, interest, fees or
otherwise, shall be made without setoff or counterclaim and shall be made prior
to 12:00 Noon, New York City time, on the due date thereof to the
Administrative Agent, for the pro rata account of the Lenders, at the Payment
Office, in Dollars and in immediately available funds. The Administrative
Agent shall distribute such payments to the Lenders promptly upon receipt in
like funds as received. If any payment hereunder (other than payments on the
Eurodollar Loans) becomes due and payable on a day other than a Business Day,
such payment shall be extended to the next succeeding Business Day. If any
payment on a Eurodollar Loan becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day unless the result of such extension would be to extend such
payment into another calendar month, in which event such payment shall be made
on the immediately preceding Business Day. In the case of any extension of any
payment of principal pursuant to the preceding two sentences, interest thereon
shall be payable at the then applicable rate during such extension.

(e) Unless the Administrative Agent shall have been notified
in writing by any Lender prior to a borrowing that such Lender will not make
the amount that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If such amount is not made available to
the Administrative Agent by the required time on the Borrowing Date therefor,
such Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available
to the Administrative Agent. A certificate of the Administrative Agent
submitted to any Lender with respect to any amounts owing under this Section
2.14(e) shall be conclusive in the absence of

<PAGE> 32

manifest error. If such Lender's share of such borrowing is not made available
to the Administrative Agent by such Lender within three Business Days of such
Borrowing Date, the Administrative Agent shall also be entitled to recover such
amount with interest thereon at the rate per annum applicable to Base Rate
Loans under the relevant Facility, on demand, from the Borrower.

(f) Unless the Administrative Agent shall have been notified
in writing by the Borrower prior to the date of any payment being made
hereunder that the Borrower will not make such payment to the Administrative
Agent, the Administrative Agent may assume that the Borrower is making such
payment, and the Administrative Agent may, but shall not be required to, in
reliance upon such assumption, make available to the Lenders their respective
pro rata shares of a corresponding amount. If such payment is not made to the
Administrative Agent by the Borrower within three Business Days of such
required date, the Administrative Agent shall be entitled to recover, on
demand, from each Lender to which any amount which was made available pursuant
to the preceding sentence, such amount with interest thereon at the rate per
annum equal to the daily average Federal Funds Effective Rate. Nothing herein
shall be deemed to limit the rights of the Administrative Agent or any Lender
against the Borrower.

2.15 Requirements of Law. (a) If the adoption of or any
change in any Requirement of Law or in the interpretation or application
thereof or compliance by any Lender with any request or directive (whether or
not having the force of law) from any central bank or other Governmental
Authority in all cases made subsequent to the date hereof:

(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Letter of Credit, any
Application or any Eurodollar Loan made by it, or change the basis of
taxation of payments to such Lender in respect thereof (except for
Non-Excluded Taxes covered by Section 2.16 and changes in the rate of
tax on the overall net income of such Lender);

(ii) shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement
against assets held by, deposits or other liabilities in or for the
account of, advances, loans or other extensions of credit by, or any
other acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or

(iii) shall impose on such Lender any other condition;

and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting
into, continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit, or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall promptly pay such Lender,
upon its demand, any additional amounts necessary to compensate such Lender for
such increased cost or reduced amount receivable. If any Lender becomes
entitled to claim any additional amounts pursuant to this Section 2.15, it
shall promptly notify the Borrower (with a copy to the Administrative Agent) of
the event by reason of which it has become so entitled.

<PAGE> 33

(b) If any Lender shall have determined that the adoption of
or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority in all cases made subsequent to the date hereof shall have the effect
of reducing the rate of return on such Lender's or such corporation's capital
as a consequence of its obligations hereunder or under or in respect of any
Letter of Credit to a level below that which such Lender or such corporation
could have achieved but for such adoption, change or compliance (taking into
consideration such Lender's or such corporation's policies with respect to
capital adequacy) by an amount deemed by such Lender to be material, then from
time to time, after submission by such Lender to the Borrower (with a copy to
the Administrative Agent) of a written request therefor, the Borrower shall
promptly pay to such Lender such additional amount or amounts as will
compensate such Lender for such reduction.

(c) A certificate as to any additional amounts payable
pursuant to this Section 2.15 shall be submitted by the relevant Lender to the
Borrower (with a copy to the Administrative Agent) and shall set forth in
detail the reason for such compensation together with a computation of the
amount claimed shall be conclusive in the absence of manifest error. The
obligations of the Borrower pursuant to this Section 2.15 shall survive the
termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder for a period of one year.

2.16 Taxes. (a) All payments made by the Borrower under
this Agreement shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on any Agent or any Lender as a result of
a present or former connection between such Agent or such Lender and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than any such
connection arising solely from such Agent or such Lender having executed,
delivered or performed its obligations or received a payment under, or
enforced, this Agreement or any other Loan Document). If any such non-excluded
taxes, levies, imposts, duties, charges, fees, deductions or withholdings
("Non-Excluded Taxes") or Other Taxes are required to be withheld from any
amounts payable to any Agent or any Lender hereunder, the amounts so payable to
such Agent or such Lender shall be increased to the extent necessary to yield
to such Agent or such Lender (after payment of all Non-Excluded Taxes and Other
Taxes) interest or any such other amounts payable hereunder at the rates or in
the amounts specified in this Agreement, provided, however, that the Borrower
shall not be required to increase any such amounts payable to any Lender with
respect to any Non-Excluded Taxes (i) that are attributable to such Lender's
failure to comply with the requirements of paragraph (d) or (e) of this
subsection or (ii) that are United States withholding taxes imposed on amounts
payable to such Lender at the time the Lender becomes a party to this
Agreement, except to the extent that such Lender's assignor (if any) was
entitled, at the time of assignment, to receive additional amounts from the
Borrower with respect to such Non-Excluded Taxes pursuant to Section 2.16(a).

<PAGE> 34

(b) In addition, the Borrower shall pay any Other Taxes to
the relevant Governmental Authority in accordance with applicable law upon
receipt of a written request complying with Section 2.15(c).

(c) Whenever any Non-Excluded Taxes or Other Taxes are
payable by the Borrower, as promptly as possible thereafter the Borrower shall
send to the Administrative Agent for the account of the relevant Agent or
Lender, as the case may be, a certified copy of an original official receipt
received by the Borrower showing payment thereof. If the Borrower fails to pay
any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing
authority or fails to remit to the Agents the required receipts or other
required documentary evidence, the Borrower shall indemnify the Administrative
Agent and the Lenders for any incremental taxes, interest or penalties that may
become payable by any Agent or any Lender as a result of any such failure. The
agreements in this Section 2.16 shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder for a
period of one year.

(d) Each Lender (or Transferee) that is not a citizen or
resident of the United States of America, a corporation, partnership or other
entity created or organized in or under the laws of the United States of
America (or any jurisdiction thereof), or any estate or trust that is subject
to federal income taxation regardless of the source of its income (a "Non-U.S.
Lender") shall deliver to the Borrower and the Administrative Agent (or, in the
case of a Participant, to the Lender from which the related participation shall
have been purchased) two copies of either U.S. Internal Revenue Service Form
1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming exemption from
U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with
respect to payments of "portfolio interest" a statement substantially in the
form of Exhibit H and a Form W-8, or any subsequent versions thereof or
successors thereto properly completed and duly executed by such Non-U.S. Lender
claiming complete exemption from, or a reduced rate of, U.S. federal
withholding tax on all payments by the Borrower under this Agreement and the
other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on
or before the date it becomes a party to this Agreement (or, in the case of any
Participant, on or before the date such Participant purchases the related
participation). In addition, each Non-U.S. Lender shall deliver such forms
promptly upon the obsolescence or invalidity of any form previously delivered
by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the
Borrower at any time it determines that it is no longer in a position to
provide any previously delivered certificate to the Borrower (or any other form
of certification adopted by the U.S. taxing authorities for such purpose).
Notwithstanding any other provision of this Section 2.16(d), a Non-U.S. Lender
shall not be required to deliver any form pursuant to this Section 2.16(d) that
such Non-U.S. Lender is not legally able to deliver.

(e) A Lender that is entitled to an exemption from or
reduction of non-U.S. withholding tax under the law of the jurisdiction in
which the Borrower is located, or any treaty to which such jurisdiction is a
party, with respect to payments under this Agreement shall deliver to the
Borrower (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law or reasonably requested by the Borrower, such
properly completed and executed documentation prescribed by applicable law as
will permit such payments to be made without withholding or at a reduced rate,
provided that such Lender is legally entitled to complete, execute and deliver
such

<PAGE> 35

documentation and in such Lender's reasonable judgment such completion,
execution or submission would not materially prejudice the legal position of
such Lender.

2.17 Indemnity. The Borrower agrees to indemnify each Lender
and to hold each Lender harmless from any loss or expense which such Lender may
sustain or incur as a consequence of (a) default by the Borrower in making a
borrowing of, conversion into or continuation of Eurodollar Loans after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in making any
prepayment after the Borrower has given a notice thereof in accordance with the
provisions of this Agreement or (c) the making of a prepayment of Eurodollar
Loans on a day which is not the last day of an Interest Period with respect
thereto. Such indemnification may include an amount equal to the excess, if
any, of (i) the amount of interest which would have accrued on the amount so
prepaid, or not so borrowed, converted or continued, for the period from the
date of such prepayment or of such failure to borrow, convert or continue to
the last day of such Interest Period (or, in the case of a failure to borrow,
convert or continue, the Interest Period that would have commenced on the date
of such failure) in each case at the applicable rate of interest for such Loans
provided for herein (excluding, however, the Applicable Margin included
therein, if any) over (ii) the amount of interest (as reasonably determined by
such Lender) which would have accrued to such Lender on such amount by placing
such amount on deposit for a comparable period with leading banks in the
interbank eurodollar market. A certificate as to any amounts payable pursuant
to this Section 2.17 submitted to the Borrower by any Lender and shall set
forth in detail the reason for such compensation together with a computation of
the amount claimed shall be conclusive in the absence of manifest error. This
covenant shall survive the termination of this Agreement and the payment of the
Loans and all other amounts payable hereunder.

2.18 Change of Lending Office; Claims Certificate. (a) Each
Lender agrees that, upon the occurrence of any event giving rise to the
operation of Section 2.15 or 2.16(a) with respect to such Lender, it will, if
requested by the Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender) to designate another lending office for any
Loans affected by such event with the object of avoiding the consequences of
such event; provided that such designation is made on terms that, in the sole
judgment of such Lender, cause such Lender and its lending office(s) to suffer
no economic, legal or regulatory disadvantage, and provided, further, that
nothing in this Section 2.18 shall affect or postpone any of the obligations of
the Borrower or the rights of any Lender pursuant to Section 2.15 or 2.16(a).

(b) In the event any Lender gives a notice to the Borrower
pursuant to Section 2.15, or any Lender is one of the Lenders notifying the
Agent pursuant to Section 2.13(d), or is unable to deliver the forms as
required by Section 2.16(d), or with respect to whom the Borrower is required
to pay additional amounts pursuant to Section 2.16 or any Lender is unable to
make Eurodollar Loans or cancels its commitment to make Eurodollar Loans
pursuant to Section 2.20, the Borrower may give notice in response, with copies
to the Administrative Agent, that it wishes to seek one or more financial
institutions to replace such Lender in accordance with the provisions set forth
in Section 10.6. Each Lender giving such a notice agrees that, at the request
of the Borrower, it will assign all of its interests thereunder and under the
Notes and the Commitment to a designated Assignee for the full amount then
owing to it, all in accordance with Section 10.6. Thereafter, said

<PAGE> 36

assignee shall have all of the rights hereunder and obligations of the
assigning Lender (except as otherwise expressly set forth herein) and such
Lender shall have no further obligations to the Borrower hereunder.

(c) Any notice given pursuant to this Section 2.18 shall be
deemed to contain a representation by the Lender issuing such notice that: (i)
such Lender has used reasonable efforts to minimize said costs or charges but
cannot, in its sole judgment, do so at reasonable expense, and (ii) the
increased costs and charges are common to substantially all of the comparable
loan customers of such Lender and are not unique to the Borrower.

2.19 Margin Regulations. (a) The Loans made by each Lender
shall at all times be treated for purposes of Regulation G and Regulation U as
two separate extensions of credit (the "A Credit" and the "B Credit" of such
Lender and, collectively, the "A Credits" and the "B Credits"), as follows:

(i) the aggregate amount of the A Credit of such Lender
shall be an amount equal to such Lender's pro rata share (based on the
amount of its Loan Percentage) of the maximum loan value (as
determined in accordance with Regulation G and Regulation U), of all
Margin Stock Collateral; and

(ii) the aggregate amount of the B Credit of such Lender
shall be an amount equal to such Lender's pro rata share (based on the
amount of its Loan Percentage) of all Loans outstanding hereunder
minus such Lender's A Credit.

In the event that any Margin Stock Collateral is acquired or sold, the amount
of the A Credit of such Lender shall be adjusted (if necessary), including, to
the extent necessary, by prepayment, to an amount equal to such Lender's pro
rata share (based on the amount of its Loan Percentage) of the maximum loan
value (determined in accordance with Regulation G and Regulation U) as of the
date of such acquisition or sale) of the Margin Stock Collateral immediately
after giving effect to such acquisition or sale. Nothing contained in this
subsection 2.19(a) shall be deemed to permit any sale of Margin Stock
Collateral in violation of any other provisions of this Agreement.

(b) Each Lender will maintain its records to identify the A
Credit of such Lender and the B Credit of such Lender, and, solely for the
purposes of complying with Regulation G and Regulation U, the A and B Credits
shall be treated as separate extensions of credit. Each Lender hereby
represents and warrants that the loan value of the Other Collateral is
sufficient for such Lender to lend its pro rata share of the B Credit.

(c) The benefits of the direct and indirect security in
Margin Stock Collateral created by any provisions of this Agreement and the
other Loan Documents shall be allocated first to the benefit and security of
the payment of the principal of and interest on the A Credits of the Lenders
and of all other amounts payable by the Borrower under this Agreement in
connection with the A Credits (collectively, the "A Credit Amounts") and
second, only after the payment in full of the A Credit Amounts, to the benefit
and security of the payment of the principal of and interest on the B Credits
of the Lenders and of all other amounts payable by the Borrower under this
Agreement in

<PAGE> 37

connection with the B Credits (collectively, the "B Credit Amounts"). The
benefits of the direct and indirect security in Other Collateral created by any
provisions of this Agreement and the other Loan Documents, shall be allocated
first to the benefit and security of the payment of the B Credit Amounts and
second, only after the payment in full of the B Credit Amounts, to the benefit
and security of the payment of the A Credit Amounts.

(d) The Borrower shall furnish to each Lender at the time of
each acquisition and sale of Margin Stock Collateral such information and
documents as the Administrative Agent or such Lender may require to determine
the A and B Credits, and at any time and from time to time, such other
information and documents as the Administrative Agent or such Lender may
reasonably require to determine compliance with Regulation U or Regulation G,
as applicable.

(e) Each Lender shall be responsible for its own compliance
with and administration of the provisions of this Section 2.19 and Regulation G
and Regulation U, and the Agents shall have no responsibility for any
determinations or allocations made or to be made by any Lender as required by
such provisions.

2.20 Illegality. Notwithstanding any other provision herein,
if the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender to
make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the
commitment of such Lender hereunder to make Eurodollar Loans, continue
Eurodollar Loans as such and convert Base Rate Loans to Eurodollar Loans shall
forthwith be cancelled and (b) such Lender's Loans then outstanding as
Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans
on the respective last days of the then current Interest Periods with respect
to such Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of the
then current Interest Period with respect thereto, the Borrower shall pay to
such Lender such amounts, if any, as may be required pursuant to subsection
2.17.

SECTION 3. LETTERS OF CREDIT

3.1 L/C Commitment. (a) Subject to the terms and conditions
hereof, the Issuing Lender, in reliance on the agreements of the other
Revolving Credit Lenders set forth in Section 3.4(a), agrees to issue letters
of credit ("Letters of Credit") for the account of the Borrower on any Business
Day during the Revolving Credit Commitment Period in such form as may be
approved from time to time by the Issuing Lender; provided that the Issuing
Lender shall have no obligation to issue any Letter of Credit if, after giving
effect to such issuance, (i) the L/C Obligations would exceed the L/C
Commitment or (ii) the aggregate amount of the Available Revolving Credit
Commitments would be less than zero. Each Letter of Credit shall (i) be
denominated in Dollars and (ii) expire no later than the date which is five
Business Days prior to January 31, 1998.

(b) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.

<PAGE> 38

(c) The Issuing Lender shall not at any time be obligated to
issue any Letter of Credit hereunder if such issuance would conflict with, or
cause the Issuing Lender or any L/C Participant to exceed any limits imposed
by, any applicable Requirement of Law.

3.2 Procedure for Issuance of Letter of Credit. The Borrower
may from time to time request that the Issuing Lender issue a Letter of Credit
by delivering to the Issuing Lender at its address for notices specified herein
an Application therefor, completed to the satisfaction of the Issuing Lender,
and such other certificates, documents and other papers and information as the
Issuing Lender may request. Upon receipt of any Application, the Issuing
Lender will process such Application and the certificates, documents and other
papers and information delivered to it in connection therewith in accordance
with its customary procedures and shall promptly issue the Letter of Credit
requested thereby (but in no event shall the Issuing Lender be required to
issue any Letter of Credit earlier than three Business Days after its receipt
of the Application therefor and all such other certificates, documents and
other papers and information relating thereto) by issuing the original of such
Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by
the Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy
of such Letter of Credit to the Borrower promptly following the issuance
thereof. The Issuing Lender shall promptly furnish to the Administrative
Agent, which shall in turn promptly furnish to the Lenders, notice of the
issuance of each Letter of Credit (including the amount thereof).

3.3 Commissions, Fees and Other Charges. (a) The Borrower
will pay a commission on all outstanding Letters of Credit at a per annum rate
equal to the Applicable Margin then in effect with respect to Eurodollar Loans
under the Revolving Credit Facility, shared ratably among the Revolving Credit
Lenders and payable quarterly in arrears on each L/C Fee Payment Date after the
issuance date.

(b) In addition to the foregoing fees and commissions, the
Borrower shall pay or reimburse the Issuing Lender for such normal and
customary costs and expenses as are incurred or charged by the Issuing Lender
in issuing, negotiating, effecting payment under, amending or otherwise
administering any Letter of Credit.

3.4 L/C Participations. (a) The Issuing Lender irrevocably
agrees to grant and hereby grants to each L/C Participant, and, to induce the
Issuing Lender to issue Letters of Credit hereunder, each L/C Participant
irrevocably agrees to accept and purchase and hereby accepts and purchases from
the Issuing Lender, on the terms and conditions hereinafter stated, for such
L/C Participant's own account and risk an undivided interest equal to such L/C
Participant's Revolving Credit Percentage in the Issuing Lender's obligations
and rights under each Letter of Credit issued hereunder and the amount of each
draft paid by the Issuing Lender thereunder. Each L/C Participant
unconditionally and irrevocably agrees with the Issuing Lender that, if a draft
is paid under any Letter of Credit for which the Issuing Lender is not
reimbursed in full by the Borrower in accordance with the terms of this
Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at
the Issuing Lender's address for notices specified herein an amount equal to
such L/C Participant's Revolving Credit Percentage of the amount of such draft,
or any part thereof, which is not so reimbursed.

<PAGE> 39

(b) If any amount required to be paid by any L/C Participant
to the Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed
portion of any payment made by the Issuing Lender under any Letter of Credit is
paid to the Issuing Lender within three Business Days after the date such
payment is due, such L/C Participant shall pay to the Issuing Lender on demand
an amount equal to the product of (i) such amount, times (ii) the daily average
Federal Funds Effective Rate during the period from and including the date such
payment is required to the date on which such payment is immediately available
to the Issuing Lender, times (iii) a fraction the numerator of which is the
number of days that elapse during such period and the denominator of which is
360. If any such amount required to be paid by any L/C Participant pursuant to
Section 3.4(a) is not made available to the Issuing Lender by such L/C
Participant within three Business Days after the date such payment is due, the
Issuing Lender shall be entitled to recover from such L/C Participant, on
demand, such amount with interest thereon calculated from such due date at the
rate per annum applicable to Base Rate Loans under the Revolving Credit
Facility. A certificate of the Issuing Lender submitted to any L/C Participant
with respect to any amounts owing under this Section shall be conclusive in the
absence of manifest error.

(c) Whenever, at any time after the Issuing Lender has made
payment under any Letter of Credit and has received from any L/C Participant
its pro rata share of such payment in accordance with Section 3.4(a), the
Issuing Lender receives any payment related to such Letter of Credit (whether
directly from the Borrower or otherwise, including proceeds of collateral
applied thereto by the Issuing Lender), or any payment of interest on account
thereof, the Issuing Lender will distribute to such L/C Participant its pro
rata share thereof; provided, however, that in the event that any such payment
received by the Issuing Lender shall be required to be returned by the Issuing
Lender, such L/C Participant shall return to the Issuing Lender the portion
thereof previously distributed by the Issuing Lender to it.

3.5 Reimbursement Obligation of the Borrower. The Borrower
agrees to reimburse the Issuing Lender on each date on which the Issuing Lender
notifies the Borrower of the date and amount of a draft presented under any
Letter of Credit and paid by the Issuing Lender for the amount of (a) such
draft so paid and (b) any taxes, fees, charges or other costs or expenses
incurred by the Issuing Lender in connection with such payment. Each such
payment shall be made to the Issuing Lender at its address for notices
specified herein in lawful money of the United States of America and in
immediately available funds. Interest shall be payable on any and all amounts
remaining unpaid by the Borrower under this Section from the date such amounts
become payable (whether at stated maturity, by acceleration or otherwise) until
payment in full at the rate set forth in Section 2.11(c). Each drawing under
any Letter of Credit shall (unless an event of the type described in clause (i)
or (ii) of Section 8(f) shall have occurred and be continuing with respect to
the Borrower, in which case the procedures specified in Section 3.4 for funding
by L/C Participants shall apply) constitute a request by the Borrower to the
Administrative Agent for a borrowing pursuant to Section 2.4 of Base Rate Loans
in the amount of such drawing. The Borrowing Date with respect to such
borrowing shall be the date of such drawing.

3.6 Obligations Absolute. The Borrower's obligations under
this Section 3 shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to
payment which the Borrower may have or have had against the Issuing

<PAGE> 40

Lender, any beneficiary of a Letter of Credit or any other Person. The
Borrower also agrees with the Issuing Lender that the Issuing Lender shall not
be responsible for, and the Borrower's Reimbursement Obligations under Section
3.5 shall not be affected by, among other things, the validity or genuineness
of documents or of any endorsements thereon, even though such documents shall
in fact prove to be invalid, fraudulent or forged, or any dispute between or
among the Borrower and any beneficiary of any Letter of Credit or any other
party to which such Letter of Credit may be transferred or any claims
whatsoever of the Borrower against any beneficiary of such Letter of Credit or
any such transferee. The Issuing Lender shall not be liable for any error,
omission, interruption or delay in transmission, dispatch or delivery of any
message or advice, however transmitted, in connection with any Letter of
Credit, except for errors or omissions resulting from the gross negligence or
willful misconduct of the Issuing Lender. The Borrower agrees that any action
taken or omitted by the Issuing Lender under or in connection with any Letter
of Credit or the related drafts or documents, if done in the absence of gross
negligence or willful misconduct and in accordance with the standards or care
specified in the Uniform Commercial Code of the State of New York, shall be
binding on the Borrower and shall not result in any liability of the Issuing
Lender to the Borrower.

3.7 Letter of Credit Payments. If any draft shall be
presented for payment under any Letter of Credit, the Issuing Lender shall
promptly notify the Borrower of the date and amount thereof. The
responsibility of the Issuing Lender to the Borrower in connection with any
draft presented for payment under any Letter of Credit shall, in addition to
any payment obligation expressly provided for in such Letter of Credit, be
limited to determining that the documents (including each draft) delivered
under such Letter of Credit in connection with such presentment are
substantially in conformity with such Letter of Credit.

3.8 Applications. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the provisions
of this Section 3, the provisions of this Section 3 shall apply.

SECTION 4. REPRESENTATIONS AND WARRANTIES

To induce the Agents and the Lenders to enter into this
Agreement and to make the Loans and issue or participate in the Letters of
Credit, the Borrower hereby represents and warrants to each Agent and each
Lender that:

4.1 Financial Condition. (a) Unaudited pro forma
consolidated balance sheet of the Borrower, IHK Merger Sub, the Target and
their consolidated Subsidiaries as at June 30, 1997 (including the notes
thereto) (the "Pro Forma Balance Sheets"), copies of which have heretofore been
furnished to each Lender, have been prepared giving effect (as if such events
had occurred on such date) to (i) the consummation of the Tender Offer, the
Loans to be made on the Closing Date and the Tender Funding Date and the use of
proceeds thereof, and, separately, (ii) the transactions described in the
foregoing clause (i) as well as the Merger and the financings contemplated by
the Alternative A Merger Facilities or the Alternative B Merger Facilities, as
contemplated hereby, together with, in the case of each of the Pro Forma
Balance Sheets, the other financings and

<PAGE> 41

transactions contemplated hereby and the payment of fees and expenses in
connection with the foregoing. The Pro Forma Balance Sheets have been prepared
based on the best information available to the Borrower as of the date of
delivery thereof, and present fairly on a pro forma basis the estimated
financial position of Borrower and its consolidated Subsidiaries as at June 30,
1997, assuming that the events specified in the preceding sentence had actually
occurred at such date and based upon good faith estimates and assumptions
believed by management of the Borrower to be reasonable at the time made, it
being recognized by the Lenders that such financial information as it relates
to future events is not viewed as fact and that actual results during the
period or periods covered by such financial information may differ from the
projected results set forth therein by a material amount .

(b) The audited consolidated balance sheets of the Borrower
as at March 31, 1995, March 31, 1996 and March 31, 1997, and the related
consolidated statements of income and of cash flows for the fiscal years ended
on such dates, reported on by and accompanied by an unqualified report from
Deloitte & Touche LLP, present fairly the consolidated financial condition of
the Borrower as at such date, and the consolidated results of its operations
and its consolidated cash flows for the respective fiscal years then ended.
The unaudited consolidated balance sheet of the Borrower as at June 30, 1997,
and the related unaudited consolidated statements of income and cash flows for
the three- month period ended on such date, present fairly the consolidated
financial condition of the Borrower as at such dates, and the consolidated
results of its operations and its consolidated cash flows for the three-month
period then ended (including all adjustments consisting only of normal
recurring accruals necessary for fair presentation of such interim periods).
All such financial statements, including the related schedules and notes
thereto, if any, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by the
aforementioned firm of accountants and disclosed therein). The Borrower and
its Subsidiaries do not have any material Guarantee Obligations, contingent
liabilities and liabilities for taxes, or any long-term leases or unusual
forward or long-term commitments, including, without limitation, any interest
rate or foreign currency swap or exchange transaction or other obligation in
respect of derivatives, which are not reflected in the most recent financial
statements referred to in this paragraph (b). During the period from March 31,
1997 to and including the date hereof there has been no Disposition by the
Borrower or its Subsidiaries of any material part of its business or Property
or any transfer of Capital Stock to any Person other than a Wholly Owned
Subsidiary Guarantor.

(c) The audited consolidated balance sheets of the Target as
at October 2, 1994, October 1, 1995 and September 29, 1996, and the related
consolidated statements of income and of cash flows for the fiscal years ended
on such dates, reported on by and accompanied by an unqualified report from
Price Waterhouse LLP, present fairly the consolidated financial condition of
the Target as at such dates, and the consolidated results of its operations and
its consolidated cash flows for the respective fiscal years then ended. The
unaudited consolidated balance sheet of the Target as at June 30, 1997, and the
related unaudited consolidated statements of income and cash flows for the
nine- month period ended on such date, present fairly the consolidated
financial condition of the Target as at such date, and the consolidated results
of its operations and its consolidated cash flows for the nine-month period
then ended (subject to normal year-end audit adjustments). All such financial
statements, including the related schedules and notes thereto, if any,

<PAGE> 42

have been prepared in accordance with GAAP applied consistently throughout the
periods involved (except as approved by the aforementioned firm of accountants
and disclosed therein). The Target and its Subsidiaries do not have any
material Guarantee Obligations, contingent liabilities and liabilities for
taxes, or any long-term leases or unusual forward or long-term commitments,
including, without limitation, any interest rate or foreign currency swap or
exchange transaction or other obligation in respect of derivatives, which are
not reflected in the most recent financial statements referred to in this
paragraph (c). During the period from September 30, 1996 to and including the
date hereof there has been no Disposition by the Target or its Subsidiaries of
any material part of its business or Property.

4.2 No Change. Since March 31, 1997 there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect.

4.3 Corporate Existence; Compliance with Law. Each of the
Borrower and its Subsidiaries (a) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (b) has
the corporate power and authority, and the legal right, to own and operate its
Property, to lease the Property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of Property or the conduct of its business
requires such qualification and (d) is in compliance with all Requirements of
Law except, in the case of clauses (c) and (d), to the extent that the failure
to so qualify, be in good standing or comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.

4.4 Corporate Power; Authorization; Enforceable Obligations.
Each Loan Party has the corporate power and authority, and the legal right, to
make, deliver and perform the Loan Documents to which it is a party and, in the
case of the Borrower, to borrow hereunder. Each Loan Party has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Loan Documents to which it is a party and, in the case of the Borrower,
to authorize the borrowings on the terms and conditions of this Agreement. No
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required in
connection with the Tender Offer, the Debt Tender Offer, the financing
transactions contemplated hereby and the borrowings hereunder or with the
execution, delivery, performance, validity or enforceability of this Agreement
or any of the Loan Documents, except (i) consents, authorizations, filings and
notices which have been obtained or made and are in full force and effect, (ii)
the filings referred to in Section 4.18(b) and (iii) with respect to the Tender
Offer and the Debt Tender Offer, those which if not obtained could not, in the
aggregate, reasonably be expected to materially affect the consummation
thereof. Each Loan Document has been duly executed and delivered on behalf of
each Loan Party party thereto. This Agreement constitutes, and each other Loan
Document upon execution will constitute, a legal, valid and binding obligation
of each Loan Party party thereto, enforceable against each such Loan Party in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (whether enforcement is sought by
proceedings in equity or at law).

<PAGE> 43

4.5 No Legal Bar. The execution, delivery and performance of
this Agreement and the other Loan Documents, the issuance of Letters of Credit,
the borrowings hereunder and the use of the proceeds thereof will not violate
any Requirement of Law or any Contractual Obligation of the Borrower or any of
its Subsidiaries and will not result in, or require, the creation or imposition
of any Lien on any of their respective material properties or revenues pursuant
to any Requirement of Law or any such Contractual Obligation (other than the
Liens created by the Security Documents). No Requirement of Law or Contractual
Obligation applicable to the Borrower or any of its Subsidiaries could
reasonably be expected to have a Material Adverse Effect.

4.6 No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Borrower, threatened by or against the Borrower or any
of its Subsidiaries or against any of their respective properties or revenues
(a) with respect to any of the Loan Documents or any of the transactions
contemplated hereby or thereby, or (b) which if adversely determined could
reasonably be expected to have a Material Adverse Effect.

4.7 No Default. Neither the Borrower nor any of its
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which could reasonably be expected to have a
Material Adverse Effect. No Default or Event of Default has occurred and is
continuing.

4.8 Ownership of Property; Liens. Each of the Borrower and
its Subsidiaries has indefeasible title to, or a valid leasehold interest in,
all its material real property necessary for the conduct of its business as
currently conducted, and good title to, or a valid leasehold interest in, all
its other material Property necessary for the conduct of its business as
currently conducted, and none of such Property is subject to any Lien except as
permitted by Section 7.3.

4.9 Intellectual Property. The Borrower and each of its
Subsidiaries owns, or is licensed to use, all Intellectual Property necessary
to conduct its business as currently conducted. No material claim has been
asserted and is pending by any Person challenging or questioning the use of any
Intellectual Property or the validity or effectiveness of any Intellectual
Property. The use of Intellectual Property by the Borrower and its
Subsidiaries does not infringe on the rights of any Person in any material
respect.

4.10 Taxes. Each of the Borrower and each of its
Subsidiaries has filed or caused to be filed all Federal, state and other
material tax returns which are required to be filed and has paid all taxes
shown to be due and payable on said returns or on any assessments made against
it or any of its Property and all other taxes, fees or other charges imposed on
it or any of its Property by any Governmental Authority (other than amounts the
validity of which are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have
been provided on the books of the Borrower or its Subsidiaries, as the case may
be); no material tax Lien has been filed, and, to the knowledge of the
Borrower, no material claim is being asserted, with respect to any such tax,
fee or other charge.

<PAGE> 44

4.11 Federal Regulations. Assuming compliance by the Lenders
with Section 2.19 and the accuracy of the representations in Section 2.19(b),
no part of the proceeds of any Loans will be used for any purpose which
violates the provisions of Regulations G, T, U or X of the Board.

4.12 ERISA. Except for the Merger of Spreckels Sugar
Company, Inc. into Holly Sugar Company on March 31, 1997, neither a Reportable
Event nor an "accumulated funding deficiency" (within the meaning of Section
412 of the Code or Section 302 of ERISA) has occurred during the five-year
period prior to the date on which this representation is made or deemed made
with respect to any Plan, and each Plan has complied in all material respects
with the applicable provisions of ERISA and the Code. No termination of a
Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan
has arisen, during such five-year period. The present value of all accrued
benefits under each Single Employer Plan (based on those assumptions used to
fund such Plans) did not, as of the last annual valuation date prior to the
date on which this representation is made or deemed made, exceed the value of
the assets of such Plan allocable to such accrued benefits by an amount
material in light of such amounts and related circumstances. Neither the
Borrower nor any Commonly Controlled Entity has had a complete or partial
withdrawal from any Multiemployer Plan which has resulted or could reasonably
be expected to result in a material liability under ERISA, and neither the
Borrower nor any Commonly Controlled Entity would become subject to any
material liability under ERISA if the Borrower or any such Commonly Controlled
Entity were to withdraw completely from all Multiemployer Plans as of the
valuation date most closely preceding the date on which this representation is
made or deemed made. No such Multiemployer Plan is in Reorganization or
Insolvent.

4.13 Investment Company Act; Other Regulations. No Loan
Party is an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
No Loan Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) which limits its ability to incur Indebtedness.

4.14 Subsidiaries. The Subsidiaries listed on Schedule 4.14
constitute all the Subsidiaries of the Borrower at the date hereof.

4.15 Use of Proceeds. The proceeds of the Term Loans shall
be used to finance the acquisition by the Borrower of the Specified Number of
Shares pursuant to the Tender Offer. The proceeds of the Revolving Credit
Loans and the Letters of Credit shall be used for (a) the repayment of the
principal of, and accrued interest on and premium, if any, in respect of, the
Existing Borrower Debt, (b) the payment of interest, fees and other expenses
incurred in connection with the Tender Offer and the Merger and (iii) working
capital purposes and other general corporate purposes of the Borrower and its
Subsidiaries.

<PAGE> 45

4.16 Environmental Matters. Other than exceptions to any of
the following that could not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect or the payment of a Material
Environmental Amount:

(a) The Borrower and its Subsidiaries: (i) are, and within
the period of all applicable statutes of limitation have been, in compliance
with all applicable Environmental Laws; (ii) hold all Environmental Permits
(each of which is in full force and effect) required for any of their current
operations or for any property owned, leased, or otherwise operated by any of
them; (iii) are, and within the period of all applicable statutes of limitation
have been, in compliance with all of their Environmental Permits; and (iv)
reasonably believe that there are no pending changes in applicable
Environmental Laws.

(b) Materials of Environmental Concern are not present at, on,
under, in, or about any real property now or formerly owned, leased or operated
by the Borrower or any of its Subsidiaries or, to the Borrower's knowledge, at
any other location (including, without limitation, any location to which
Materials of Environmental Concern have been sent for re-use or recycling or
for treatment, storage, or disposal) which could reasonably be expected to (i)
give rise to liability of the Borrower or any Subsidiary, or (ii) interfere
with the Borrower's or any Subsidiary's continued operations, or (iii) impair
the fair saleable value, as a component of a going business, of any real
property owned or leased by the Borrower or any Subsidiary.

(c) There is no judicial, administrative, or arbitral
proceeding (including any notice of violation or alleged violation) under or
relating to any Environmental Law to which the Borrower or any of its
Subsidiaries is, or to the knowledge of the Borrower will be, named as a party
that is pending or, to the knowledge of the Borrower, threatened.

(d) Neither the Borrower nor any of its Subsidiaries has
received any written request for information, or been notified that it is a
potentially responsible party under or relating to the federal Comprehensive
Environmental Response, Compensation, and Liability Act or any similar
Environmental Law, or with respect to any Materials of Environmental Concern.

(e) Neither the Borrower nor any of its Subsidiaries has
entered into or agreed to any consent decree, order, or settlement or other
agreement, nor is subject to any judgment, decree, or order or other agreement,
in any judicial, administrative, arbitral, or other forum, relating to
compliance with or liability under any Environmental Law.

(f) Neither the Borrower nor any of its Subsidiaries has
assumed or retained, by contract or operation of law, any liabilities of any
kind, fixed or contingent, known or unknown, under any Environmental Law or
with respect to any Material of Environmental Concern.

Notwithstanding the qualification as to the Borrower's knowledge set forth in
the foregoing subsection 4.16(b), for purposes of Section 8(b) the
representations contained in such subsection 4.16(b) shall be deemed to be
made, or have been made, as the case may be, without giving effect to such
qualification.

<PAGE> 46

4.17 Accuracy of Information, etc. No statement or
information when taken as a whole contained in this Agreement, any other Loan
Document or any other document, certificate or statement furnished to the
Administrative Agent or the Lenders or any of them, by or on behalf of any Loan
Party for use in connection with the transactions contemplated by this
Agreement or the other Loan Documents, contained as of the date such statement,
information, document or certificate was so furnished, any untrue statement of
a material fact or omitted to state a material fact necessary in order to make
the statements contained herein or therein not misleading. The projections and
pro forma financial information contained in the materials referenced above are
based upon good faith estimates and assumptions believed by management of the
Borrower to be reasonable at the time made, it being recognized by the Lenders
that such financial information as it relates to future events is not to be
viewed as fact and that actual results during the period or periods covered by
such financial information may differ from the projected results set forth
therein by a material amount. As of the date hereof, the representations and
warranties contained in the Transaction Documentation are true and correct in
all material respects. There is no fact known to any Loan Party that could
reasonably be expected to have a Material Adverse Effect that has not been
expressly disclosed herein, in the other Loan Documents or in any other
documents, certificates and statements furnished to the Administrative Agent
and the Lenders for use in connection with the transactions contemplated hereby
and by the other Loan Documents.

4.18 Security Documents. (a) The Guarantee and Collateral
Agreement is effective to create in favor of the Administrative Agent, for the
benefit of the Lenders, a legal, valid and enforceable security interest in the
Collateral described therein and proceeds thereof. In the case of the Pledged
Stock that is certificated described in the Guarantee and Collateral Agreement,
when stock certificates representing such Pledged Stock are delivered to the
Administrative Agent, in the case of Book Entry Securities (as defined in the
Target Pledge Agreement), upon the taking of the actions described in Section
5.2(f) and in the case of the other Collateral (including uncertificated
Pledged Stock) described in the Guarantee and Collateral Agreement, when
financing statements in appropriate form are filed in the offices specified on
Schedule 4.18(a), the Guarantee and Collateral Agreement shall constitute a
fully perfected Lien on, and security interest in, all right, title and
interest of the Loan Parties in such Collateral and, subject to compliance with
applicable law, the proceeds thereof, as security for the Obligations (as
defined in the Guarantee and Collateral Agreement), in each case prior and
superior in right to any other Person (other than Liens expressly permitted by
Section 7.3).

(b) Each of the Mortgages is effective to create in favor of
the Administrative Agent, for the benefit of the Lenders, a legal, valid and
enforceable Lien on the Mortgaged Properties described therein and proceeds
thereof, and when the Mortgages are filed in the offices specified on Schedule
4.18(b), each such Mortgage shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the Loan Parties in the
Mortgaged Properties and the proceeds thereof, as security for the Obligations
(as defined in the relevant Mortgage), in each case prior and superior in right
to any other Person except for (i) Liens expressly permitted by Section 7.3
hereof and (ii) all matters set forth in Schedule B to the mortgagees title
insurance policy delivered to the Administrative Agent in accordance with
Section 5.1(r)(iii) herein.

<PAGE> 47

(c) The Target Pledge Agreement is effective to create in
favor of the Administrative Agent, for the benefit of the Lenders, a legal,
valid and enforceable security interest in the Collateral described therein and
proceeds thereof. In the case of the Collateral described in the Target Pledge
Agreement, upon compliance with the provisions of Sections 3(a) and (b)
thereof, the Target Pledge Agreement shall constitute a fully perfected Lien
on, and security interest in, all right, title and interest of the IHK Merger
Sub in such Collateral and the proceeds thereof, subject in the case of
proceeds to compliance with applicable law, as security for the Obligations (as
defined in the Target Pledge Agreement), in each case prior and superior in
right to any other Person.

4.19 Solvency. Each Loan Party is, and after giving effect
to the Tender Offer and the other transactions contemplated hereby and the
incurrence of all Indebtedness and obligations being incurred in connection
herewith and therewith will be and will continue to be, Solvent.

4.20 Regulation H. No Mortgage encumbers improved real
property which is located in an area that has been identified by the Secretary
of Housing and Urban Development as an area having special flood hazards and in
which flood insurance has been made available under the National Flood
Insurance Act of 1968 except as set forth on Schedule 4.20.

SECTION 5. CONDITIONS PRECEDENT

5.1 Conditions to Initial Revolving Extension of Credit. The
agreement of each Lender to make the initial extension of credit requested to
be made by it under the Revolving Credit Commitments is subject to the
satisfaction, prior to or concurrently with the making of such extension of
credit on the Closing Date, of the following conditions precedent:

(a) Loan Documents. The Administrative Agent shall have
received (i) this Agreement, executed and delivered by a duly
authorized officer of the Borrower, (ii) the Guarantee and Collateral
Agreement, executed and delivered by a duly authorized officer of the
Borrower and each Subsidiary Guarantor, (iii) each of the Mortgages,
executed and delivered by a duly authorized officer of each party
thereto, (iv) for the account of each relevant Lender, Notes
conforming to the requirements hereof and executed and delivered by a
duly authorized officer of the Borrower and (v) the Control Agreement,
executed and delivered by a duly authorized officer of each party
thereto .

(b) Related Agreements. The Administrative Agent shall have
received (in a form reasonably satisfactory to the Syndication Agent),
true and correct copies, certified as to authenticity by the Borrower,
of the Merger Agreement, the Offer to Purchase, the Debt Tender Offer,
the Senior Note Indenture (including the supplemental indenture
reflecting the effectiveness of amendments pursuant to the Debt Tender
Offer as described in clause (e) below), the Stockholders Agreement
and such other documents or instruments as may be reasonably requested
by the Syndication Agent.

(c) Acquisition Matters. (i) Each of the Offer to Purchase,
the Merger Agreement shall have remained in full force and effect and
shall not have been amended, supplemented,

<PAGE> 48

waived or otherwise modified in any material respect (other than to
the extent the Offer to Purchase is supplemented to extend the final
date for the Tender Offer Purchase to a date not later than November
30, 1997), and the conditions to the Tender Offer Purchase set forth
in the Offer to Purchase shall not have been waived, in each case
without the prior written consent of the Syndication Agent; (ii) the
Tender Offer shall have been made in accordance with applicable law
and the Offer to Purchase and shall not have been terminated or
expired without extension in accordance therewith; (iii) the Specified
Number of Shares shall have been tendered and not withdrawn pursuant
to the Tender Offer; and (iv) the capital structure, corporate
structure, ownership and management of each Loan Party as contemplated
after giving effect to the Tender Offer and as contemplated by the
Merger Agreement shall be substantially as described to the
Syndication Agent in writing prior to the Commitment Letter Date, and
the sources and uses of funds for the Tender Offer and the Merger
shall be as set forth on Schedule 4.1(b).

(d) Public Filings. The documents and materials filed
publicly by the Borrower, IHK Merger Sub and Target in connection with
the Acquisition shall have been furnished to the Administrative Agent
and the Syndication Agent and shall be reasonably satisfactory in form
and substance to the Syndication Agent.

(e) Existing Debt. On the Closing Date after giving effect
to the repayments made on the Closing Date concurrently with the other
conditions precedent to be satisfied on the Closing Date, (i) the
Existing Credit Facility shall have been paid in full and terminated,
and the Syndication Agent shall have received such evidence thereof,
along with documents and instruments terminating and releasing any
liens thereunder, as shall be reasonably satisfactory to it, (ii) the
Debt Tender Offer shall not have been amended, supplemented, waived or
otherwise modified in any material respect without the prior written
consent of the Syndication Agent, and the "Proposed Amendments to
Indenture" set forth (and as defined) therein shall have become
effective in accordance with applicable law and the terms of the Debt
Tender Offer, and (iii) the "Consent Payments" and "Tender Offer
Consideration" under (and as defined in) the Debt Tender Offer shall
be made with respect to Senior Notes tendered thereunder in accordance
therewith.

(f) Fees. The Lenders, Syndication Agent and the
Administrative Agent shall have received all fees required to be paid,
and all expenses for which invoices have been presented, on or before
the Closing Date.

(g) Approvals. All governmental, shareholder and third party
approvals (including debtholders', landlords' and other consents)
reasonably necessary in connection with the making of the Tender
Offer, the effectiveness of the Merger Agreement and the financing
contemplated hereby shall have been obtained, and all applicable
waiting periods shall have expired or been extended without any action
being taken or threatened by any Governmental Authority which would
restrain, prevent or otherwise impose adverse conditions on Tender
Offer, the Merger or the financing thereof.

<PAGE> 49

(h) Financial Information. The Lenders shall have received
(i) satisfactory Pro Forma Balance Sheets described in subsection
4.1(a), (ii) audited financial statements of Target for its fiscal
years ended October 2, 1994, October 1, 1995 and September 29, 1996,
(iii) audited financial statements of the Borrower for its fiscal
years ended March 31 of 1995, 1996 and 1997 and (iv) unaudited interim
financial statements of each of the Borrower and the Target for each
quarterly period ended subsequent to September 29, 1996, in the case
of Target, and March 31, 1997, in the case of the Borrower, as to
which such financial statements are available, and such financial
statements shall not, in the reasonable judgment of the Lenders,
reflect any material adverse change in the consolidated financial
condition of the Borrower and its Subsidiaries (including for this
purpose Target as a Subsidiary), as reflected in the financial
statements or projections provided to the Syndication Agent prior to
the Commitment Letter Date.

(i) Solvency Opinion. The Lenders shall have received a
satisfactory solvency opinion from an independent valuation firm
satisfactory to the Syndication Agent which shall document the
solvency of the Borrower and its subsidiaries taken as a whole after
giving effect to the Closing Date and after giving effect to the
Tender Offer Purchase and the financings and related transactions
contemplated hereby.

(j) Environmental Information. The Lenders shall have
received environmental information with respect to the Borrower and
its subsidiaries and Target and its subsidiaries satisfactory to the
Syndication Agent.

(k) Proceedings. There shall exist no judgment, order,
injunction or other restraint which would prevent or delay the
consummation of, or impose materially adverse conditions upon, the
Tender Offer or the Merger, and there shall exist no claim, action,
suit, investigation, litigation or proceeding (including, without
limitation, shareholder or derivative litigation) pending or
threatened in any court or before any arbitrator or governmental
instrumentality which relates to the Tender Offer or the Merger which
has any reasonable likelihood of having a material adverse effect on
(i) the financial condition, operations, business or properties of
either the Borrower or the Target and their respective subsidiaries
taken as a whole, (ii) the Tender Offer, the Merger, or the financing
thereof or (iii) the rights and remedies of the Administrative Agent,
the Syndication Agent or the Lenders under the Credit Documentation or
on the ability of the Borrower and its subsidiaries to perform their
respective obligations thereunder.

(l) Marketable Securities. The Syndication Agent shall be
reasonably satisfied that the Borrower's portfolio of marketable
securities shall have remained substantially equivalent (other than
changes resulting from changes in market value thereof) to that
previously described in writing to the Syndication Agent prior to the
Commitment Letter Date.

(m) Regulations of Board. The Lenders shall be satisfied
that the Tender Offer and the financing thereof comply with Regulation
G, T, U and X of the Board.

<PAGE> 50

(n) Closing Certificate. The Administrative Agent shall have
received, with a counterpart for each Lender, a certificate of each
Loan Party, dated the Closing Date, substantially in the form of
Exhibit C, with appropriate insertions and attachments.

(o) Legal Opinions. The Administrative Agent shall have
received the following executed legal opinions:

(i) the legal opinion of Andrews & Kurth
L.L.P., counsel to the Borrower and its Subsidiaries,
substantially in the form of Exhibit F-1;

(ii) the legal opinion of William Schwer,
general counsel of the Borrower and its Subsidiaries,
substantially in the form of Exhibit F-2;

(iii) to the extent consented to by the relevant
counsel, each legal opinion, if any, delivered in connection
with the Merger Agreement, accompanied by a reliance letter in
favor of the Lenders; and

(iv) the legal opinion of local counsel in each
of California, Montana and Wyoming and of such other special
and local counsel as may be required by the Administrative
Agent.

Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative
Agent may reasonably require.

(p) Pledged Stock; Stock Powers. The Administrative Agent
shall have received the certificates representing the shares of
Capital Stock pledged pursuant to the Guarantee and Collateral
Agreement, together with an undated stock power for each such
certificate executed in blank by a duly authorized officer of the
pledgor thereof.

(q) Filings, Registrations and Recordings. Each document
(including, without limitation, any Uniform Commercial Code financing
statement) required by the Security Documents or under law or
reasonably requested by the Administrative Agent to be filed,
registered or recorded in order to create in favor of the
Administrative Agent, for the benefit of the Lenders, a perfected Lien
on the Collateral described therein, prior and superior in right to
any other Person (other than with respect to Liens expressly permitted
by Section 7.3), shall be in proper form for filing, registration or
recordation. The Syndication Agent shall have received the results of
a recent lien, tax and judgment search in each of the jurisdictions
and offices where assets of each of the Borrower, IHK Merger Sub,
Target and their subsidiaries are located or recorded, and such search
shall reveal no material liens on any of their assets except for liens
permitted by this Agreement or liens to be discharged substantially
concurrently with the Closing Date.

(r) Mortgages, etc. (i) The Syndication Agent shall have
received a Mortgage with respect to each Mortgaged Property, executed
and delivered by a duly authorized officer of each party thereto.

<PAGE> 51

(ii) If requested by the Syndication Agent, the
Administrative Agent shall have received, and the title insurance
company issuing the policy referred to in Section 5.1(r)(iii) (the
"Title Insurance Company") shall have received, maps or plats of an
as-built survey of the sites of the Mortgaged Properties certified to
the Administrative Agent and the Title Insurance Company in a manner
satisfactory to them, dated a date satisfactory to the Syndication
Agent and the Title Insurance Company by an independent professional
licensed land surveyor satisfactory to the Syndication Agent and the
Title Insurance Company, which maps or plats and the surveys on which
they are based shall be made in accordance with the Minimum Standard
Detail Requirements for Land Title Surveys jointly established and
adopted by the American Land Title Association and the American
Congress on Surveying and Mapping in 1992, and, without limiting the
generality of the foregoing, there shall be surveyed and shown on such
maps, plats or surveys the following: (A) the locations on such sites
of all the buildings, structures and other improvements and the
established building setback lines; (B) the lines of streets abutting
the sites and width thereof; (C) all access and other easements
appurtenant to the sites; (D) all roadways, paths, driveways,
easements, encroachments and overlapping improvements and similar
encumbrances affecting the site, whether recorded, apparent from a
physical inspection of the sites or otherwise known to the surveyor;
(E) any encroachments on any adjoining property by the building
structures and improvements on the sites; (F) if the site is described
as being on a filed map, a legend relating the survey to said map; and
(G) the flood zone designations, if any, in which the Mortgaged
Properties are located.

(iii) The Administrative Agent shall have received in
respect of each Mortgaged Property a mortgagee's title insurance
policy (or policies) or marked up unconditional binder for such
insurance or, in the case of Mortgaged Property located in the State
of Texas, an effective commitment in respect thereof. Each such
policy shall (A) be in an amount satisfactory to the Syndication
Agent; (B) be issued at ordinary rates; (C) insure that the Mortgage
insured thereby creates a valid first Lien on such Mortgaged Property
free and clear of all defects and encumbrances, except (i) as
disclosed therein and (ii) those Liens expressly permitted by Section
7.3 hereof; (D) name the Administrative Agent for the benefit of the
Lenders as the insured thereunder; (E) be in the form of ALTA Loan
Policy (or equivalent policies); (F) contain such endorsements and
affirmative coverage as the Syndication Agent may reasonably request
and (G) be issued by title companies satisfactory to the Syndication
Agent (including any such title companies acting as co-insurers or
reinsurers, at the option of the Syndication Agent). The Syndication
Agent shall have received evidence satisfactory to it that all
premiums in respect of each such policy, all charges for mortgage
recording tax, and all related expenses, if any, have been paid.

(iv) If requested by the Syndication Agent, the
Administrative Agent shall have received (A) a policy of flood
insurance which (1) covers any parcel of improved real property which
is encumbered by any Mortgage (2) is written in an amount not less
than the outstanding principal amount of the indebtedness secured by
such Mortgage which is reasonably allocable to such real property or
the maximum limit of coverage made available with respect to the
particular type of property under the National Flood Insurance Act of
1968, whichever is less, and (3) has a term ending not later than the
maturity of the

<PAGE> 52

Indebtedness secured by such Mortgage and (B) confirmation that the
Borrower has received the notice required pursuant to Section
208(e)(3) of Regulation H of the Board.

(v) The Administrative Agent shall have received a copy
of all recorded documents referred to, or listed as exceptions to
title in, the title policy or policies referred to in Section
5.1(r)(iii) and a copy of all other material documents affecting the
Mortgaged Properties.

(s) Insurance. The Administrative Agent shall have received
insurance certificates satisfying the requirements of Section 5.3 of
the Guarantee and Collateral Agreement.

5.2 Conditions to Term Loans. The agreement of each Lender
to make the Term Loan requested to be made by it under the Term Loan
Commitments is subject to the satisfaction, prior to or concurrently with the
making of such Term Loan on the Tender Funding Date, of the following
conditions precedent:

(a) Initial Conditions. The conditions precedent set forth
in Section 5.1 hereto shall have been satisfied (or waived in a manner
satisfactory to the Syndication Agent) and shall remain satisfied as
of the Tender Funding Date.

(b) Tender Offer. (i) The Tender Offer Purchase shall have
been, or concurrently with the making of the Term Loans on the Tender
Funding Date shall be, consummated pursuant to the Offer to Purchase
and in accordance with the Merger Agreement, (ii) IHK Merger Sub shall
have acquired, concurrently with the making of the Loans on the Tender
Funding Date, the Specified Number of Shares, and there shall not have
been any material change from 14,397,836 as the number of Shares
representing the Specified Number of Shares on the date the Tender
Offer is consummated, and (iii) the Administrative Agent shall have
received certified copies of such documents as shall be requested by
the Syndication Agent to evidence that the actions described above in
this paragraph have been taken.

(c) Approvals. All governmental (including compliance with
the H-S-R Act in respect of the Tender Offer and the Merger) and third
party approvals (including debtholders', landlords' and other
consents) necessary or advisable in connection with the Tender Offer,
the Tender Offer Purchase, the Merger, the continuing operations of
the Borrower, Target and each of their Subsidiaries after the Tender
Offer Purchase and the Merger and the financing provided pursuant to
this Agreement shall have been obtained and be in full force and
effect, and all applicable waiting periods shall have expired without
any action being taken or threatened by any competent authority which
would restrain, prevent or otherwise impose adverse conditions on the
Tender Offer, the Tender Offer Purchase, the Merger or the other
transactions and financings contemplated hereby.

(d) Regulations of Board; Forms G-3 and U-1. The Lenders
shall be satisfied that the Tender Offer and the financing thereof
comply with Regulation G, T, U and X of the Board. Each Lender shall
have received a duly completed and executed Form G-3 or Form FR U-1,
as applicable, of the Board, demonstrating such compliance.

<PAGE> 53

(e) Loan Documents. The Administrative Agent shall have
received (i) the Target Pledge Agreement, executed and delivered by a
duly authorized officer of the IHK Merger Sub, and (ii) the Depositary
Agency Agreement, executed and delivered by a duly authorized officer
of each party thereto.

(f) Pledged Stock; Stock Powers. The Administrative Agent or
the Depositary shall have received the certificates representing the
Shares pledged pursuant to the Target Pledge Agreement (other than
such Shares constituting Book-Entry Shares (as defined in the Target
Pledge Agreement)), together with an undated stock power for each such
certificate executed in blank by a duly authorized officer of the
Borrower, and with respect to Shares consisting of Book-Entry Shares,
evidence that all actions described in Section 3(b) of the Target
Pledge Agreement which are necessary to create and perfect the
security interests pursuant to the Target Pledge Agreement in
accordance with Article 8 of the Uniform Commercial Code have been
taken. The Shares pledged on the Closing Date pursuant to the Target
Pledge Agreement shall constitute all Shares owned by the Borrower or
any of its affiliates, whether acquired in the Tender Offer or
otherwise.

(g) Fees. The Lenders, the Syndication Agent and the
Administrative Agent shall have received all fees required to be paid
on or before the Tender Funding Date.

5.3 Conditions to Each Extension of Credit. The agreement of
each Lender to make any extension of credit requested to be made by it on any
date (including, without limitation, its initial extension of credit) is
subject to the satisfaction of the following conditions precedent:

(a) Representations and Warranties. Each of the
representations and warranties made by any Loan Party in or pursuant
to the Loan Documents shall be true and correct on and as of such date
as if made on and as of such date.

(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the
extensions of credit requested to be made on such date.

Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date of such extension of credit that the conditions contained in this
Section 5.3 have been satisfied.

SECTION 6. AFFIRMATIVE COVENANTS

The Borrower hereby agrees that, so long as the Commitments
remain in effect, any Letter of Credit remains outstanding or any Loan or other
amount is owing to any Lender or any Agent hereunder, the Borrower shall and
shall cause each of its Subsidiaries to:

<PAGE> 54

6.1 Financial Statements. Furnish to each Agent and each
Lender:

(a) as soon as available, but in any event within 90 days
after the end of each fiscal year of the Borrower, a copy of the
audited consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of such year and the related
audited consolidated statements of income and of cash flows for such
year, setting forth in each case in comparative form the figures for
the previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope
of the audit, by Deloitte & Touche LLP or other independent certified
public accountants of nationally recognized standing; and

(b) as soon as available, but in any event not later than 45
days after the end of each of the first three quarterly periods of
each fiscal year of the Borrower, the unaudited consolidated balance
sheet of the Borrower and its consolidated Subsidiaries as at the end
of such quarter and the related unaudited consolidated statements of
income for such quarter and the portion of the fiscal year through the
end of such quarter and an unaudited consolidated statement of cash
flow for the portion of the fiscal year through the end of such
quarter, setting forth in each case in comparative form the figures
for the previous year, certified by a Responsible Officer as being
fairly stated in all material respects (including all adjustments
consisting only of normal recurring accruals necessary for fair
presentation of such interim periods);

all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).

6.2 Certificates; Other Information. Furnish to each Agent
and each Lender, or, in the case of clause (f), to the relevant Lender:

(a) concurrently with the delivery of the financial
statements referred to in Section 6.1(a), a certificate of the
independent certified public accountants reporting on such financial
statements stating that in making the examination necessary therefor
no knowledge was obtained of any Default or Event of Default, except
as specified in such certificate;

(b) concurrently with the delivery of any financial
statements pursuant to Sections 6.1(a) and (b), (i) a certificate of a
Responsible Officer stating that, to the best of each such Responsible
Officer's knowledge, each Loan Party during such period has observed
or performed all of its covenants and other agreements, and satisfied
every condition, contained in this Agreement and the other Loan
Documents to which it is a party to be observed, performed or
satisfied by it, and that such Responsible Officer has obtained no
knowledge of any Default or Event of Default except as specified in
such certificate and (ii) (x) a Compliance Certificate containing all
information necessary for determining compliance by the Borrower and
its Subsidiaries with the provisions of this Agreement referred to
therein as of the last day of the fiscal quarter or fiscal year of the
Borrower, as the case may be, and

<PAGE> 55

(y) to the extent not previously disclosed to the Administrative
Agent, a listing of any county or state within the United States where
any Loan Party keeps inventory or equipment and of any Intellectual
Property acquired by any Loan Party since the date of the most recent
list delivered pursuant to this clause (y) (or, in the case of the
first such list so delivered, since the Closing Date);

(c) as soon as available, and in any event no later than 60
days after the end of each fiscal year of the Borrower, a detailed
consolidated budget for the following fiscal year (including a
projected consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of the following fiscal year, and the
related consolidated statements of projected cash flow, projected
changes in financial position and projected income), and, as soon as
available, significant revisions, if any, of such budget and
projections with respect to such fiscal year (collectively, the
"Projections"), which Projections shall in each case be accompanied by
a certificate of a Responsible Officer stating that such Projections
are based on reasonable estimates, information and assumptions and
that such Responsible Officer has no reason to believe that such
Projections are incorrect or misleading in any material respect;

(d) within 45 days after the end of each fiscal quarter of
the Borrower, a narrative discussion and analysis of the financial
condition and results of operations of the Borrower and its
Subsidiaries for such fiscal quarter and for the period from the
beginning of the then current fiscal year to the end of such fiscal
quarter, as compared to the portion of the Projections covering such
periods and to the comparable periods of the previous year;

(e) promptly after the same are sent, copies of all financial
statements and reports which the Borrower sends to the holders of any
class of its debt securities or public equity securities and within
five days after the same are filed, copies of all financial statements
and reports which the Borrower may make to, or file with, the
Securities and Exchange Commission or any successor or analogous
Governmental Authority; and

(f) promptly, such additional financial and other information
as any Agent or any Lender may from time to time reasonably request
through the Administrative Agent.

6.3 Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all its material obligations of whatever nature, except where the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been
provided on the books of the Borrower or its Subsidiaries, as the case may be.

6.4 Conduct of Business and Maintenance of Existence, etc.
(a) (i) Continue to engage in business of the same general type as now
conducted by it and business related thereto, all as set forth in subsection
7.14, (ii) preserve, renew and keep in full force and effect its corporate
existence except that the Borrower shall not be required to preserve, renew or
keep in full force and effect the corporate or other existence of any
Subsidiary, if the Board of Directors of the Borrower shall determine in the
exercise of its business judgment that the preservation thereof is no longer
desirable in the conduct of the business of the Borrower or any Subsidiary and
that abandonment of

<PAGE> 56

any such right shall not have a Material Adverse Effect and (iii) take all
reasonable action to maintain all rights, privileges and franchises necessary
or desirable in the normal conduct of its business, except, in each case, as
otherwise permitted by Section 7.4 and except, in the case of clause (iii)
above, to the extent that failure to do so could not reasonably be expected to
have a Material Adverse Effect; (b) comply with its obligations under the
Merger Agreement in all material respects; and (c) comply with all Contractual
Obligations and Requirements of Law except to the extent that failure to comply
therewith could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.

6.5 Maintenance of Property; Insurance. (a) Keep all
Property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted and (b) maintain with financially
sound and reputable insurance companies insurance or by means of self insurance
with adequate provisions made for the funding therefor on all its Property in
at least such amounts and against at least such risks (but including in any
event public liability, product liability and business interruption) as are
usually insured against in the same general area by companies engaged in the
same or a similar business.

6.6 Inspection of Property; Books and Records; Discussions.
(a) Keep proper books of records and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of
all dealings and transactions in relation to its business and activities and
(b) permit representatives of the Administrative Agent and any Lender
(coordinated, to the extent reasonable, through the Administrative Agent) to
visit and inspect any of its properties and examine and make abstracts from any
of its books and records at any reasonable time during normal business hours
and as often as may reasonably be desired and to discuss the business,
operations, properties and financial and other condition of the Borrower and
its Subsidiaries with officers and employees of the Borrower and its
Subsidiaries and with its independent certified public accountants. If an
Event of Default has occurred and is continuing, Borrower will pay for all such
examinations; prior thereto the examining Lender will pay for same.

6.7 Notices. Promptly upon a Responsible Officer becoming
aware thereof, give notice to the Administrative Agent and each Lender of:

(a) the occurrence of any Default or Event of Default;

(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries or (ii)
litigation, investigation or proceeding which may exist at any time
between the Borrower or any of its Subsidiaries and any Governmental
Authority, which in either case, if not cured or if adversely
determined, as the case may be, could reasonably be expected to have a
Material Adverse Effect;

(c) any litigation or proceeding affecting the Borrower or
any of its Subsidiaries in which the amount involved is $10,000,000 or
more and not covered by insurance or in which injunctive or similar
relief is sought which if adversely determined could be reasonably
expected to cause a Material Adverse Effect;

<PAGE> 57

(d) the following events, as soon as possible and in any
event within 30 days after the Borrower knows or has reason to know
thereof: (i) the occurrence of any Reportable Event with respect to any
Plan, a failure to make any required contribution to a Plan, the
creation of any Lien in favor of the PBGC or a Plan or any withdrawal
from, or the termination, Reorganization or Insolvency of, any
Multiemployer Plan or (ii) the institution of proceedings or the taking
of any other action by the PBGC or the Borrower or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from, or the termination, Reorganization or Insolvency of,
any Plan; and

(e) any development or event which has had or could
reasonably be expected to have a Material Adverse Effect.

Each notice pursuant to this Section 6.7 shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Borrower or the relevant Subsidiary
proposes to take with respect thereto.

6.8 Environmental Laws. (a)(i) Comply with all Environmental
Laws applicable to it, and obtain, comply with and maintain any and all
Environmental Permits necessary for its operations as conducted and as planned;
and (ii) take reasonable efforts to ensure that all of its tenants, subtenants,
contractors, subcontractors, and invitees comply with all Environmental Laws,
and obtain, comply with and maintain any and all Environmental Permits,
applicable to any of them insofar as any failure to so comply, obtain or
maintain reasonably could be expected to adversely affect the Borrower or any
of its Subsidiaries. For purposes of this 6.8(a), noncompliance by the
Borrower or any of its Subsidiaries with any applicable Environmental Law or
Environmental Permit shall be deemed not to constitute a breach of this
covenant so long as (x) upon learning of any actual or suspected noncompliance,
the Borrower and any affected Subsidiary shall promptly undertake reasonable
efforts to achieve compliance, and (y) in any case, such non-compliance, and
any other noncompliance with Environmental Law, individually or in the
aggregate, could not reasonably be expected to give rise to a Material Adverse
Effect or materially and adversely affect the value of the Mortgaged Property,
taken as a whole.

(b) Promptly comply with all enforceable requirements of all
Governmental Authorities regarding Environmental Laws, other than such
enforceable requirements as to which appropriate proceedings have been timely
and properly taken in good faith so long as the pendency of any and all such
proceedings could not reasonably be expected to give rise to a Material Adverse
Effect.

(c) Prior to acquiring any ownership or leasehold interest in
real property, or other interest in any real property (x) involving aggregate
value for such property (including improvements thereof) of $2,000,000 or more
and (y) that could give rise to Borrower being found an owner, operator, or
otherwise subject to potential liability under any Environmental Law (or any
entity with such interests in any real property): (i) obtain a written report
by an environmental consulting firm reasonably acceptable to the Administrative
Agent (an "Environmental Consultant") of the Environmental Consultant's
assessment of the presence or potential presence of significant levels of any
Materials of Environmental Concern on, in, under, or about such property, or of
other

<PAGE> 58

conditions that could give rise to potentially significant liability under or
violations of Environmental Law relating to such acquisition, and notify the
Administrative Agent of such potential acquisition; and (ii) if requested by
the Administrative Agent after learning of such potential acquisition, provide
such Report to the Administrative Agent, provided that in the event that the
Borrower is contractually prohibited from providing any such requested Report
prior to the consummation of the applicable acquisition, such Report shall be
delivered promptly upon such consummation. The Administrative Agent shall have
the right, but shall not have any duty, to obtain any such report.

(d) Promptly upon the Administrative Agent's request if there
has occurred or the Administrative Agent reasonably anticipates an Event of
Default, permit an environmental consultant whom the Administrative Agent in
its discretion designates to perform an environmental assessment (including,
without limitation: reviewing documents; interviewing knowledgeable persons; and
sampling and analyzing soil, air, surface water, groundwater, and/or other media
in or about property owned or leased by the Borrower or any of its Subsidiaries,
or on which operations of the Borrower or any of its Subsidiaries otherwise take
place.) Such environmental assessment shall be in form, scope, and substance
satisfactory to the Administrative Agent. The Borrower and its Subsidiaries
shall cooperate fully in the conduct of such environmental assessment, and
Borrower shall pay the costs of such environmental assessment immediately upon
written demand by the Administrative Agent. The Administrative Agent shall have
the right, but shall not have any duty, to request and/or obtain such
environmental assessment.

6.9 Additional Collateral, etc. (a) With respect to any
Property acquired after the Closing Date by the Borrower or any of its
Subsidiaries (other than (x) any Property described in paragraph (b), (c) or
(d) below and (y) any Property subject to a Lien expressly permitted by Section
7.3(g)) as to which the Administrative Agent, for the benefit of the Lenders,
does not have a perfected Lien, promptly (i) execute and deliver to the
Administrative Agent such amendments to the Guarantee and Collateral Agreement
or such other documents as the Administrative Agent deems necessary or
advisable in order to grant to the Administrative Agent, for the benefit of the
Lenders, a security interest in such Property and (ii) take all actions
necessary or advisable to grant to the Administrative Agent, for the benefit of
the Lenders, a perfected first priority security interest in such Property,
including without limitation, the filing of Uniform Commercial Code financing
statements in such jurisdictions as may be required by the Guarantee and
Collateral Agreement or by law or as may be requested by the Administrative
Agent.

(b) With respect to any fee interest in any real estate
having a value (together with improvements thereof) of at least $2,000,000
acquired after the Closing Date by the Borrower or any of its Subsidiaries
(other than any such real estate subject to a Lien expressly permitted by
Section 7.3(g)), promptly (i) execute and deliver a first priority mortgage or
deed of trust, as the case may be, in favor of the Administrative Agent, for
the benefit of the Lenders, covering such real estate, in form and substance
reasonably satisfactory to the Administrative Agent, (ii) if requested by the
Administrative Agent, provide the Lenders with (x) title and extended coverage
insurance covering such real estate in an amount at least equal to the purchase
price of such real estate (or such other amount as shall be reasonably
specified by the Administrative Agent) as well as a current ALTA survey
thereof, together with a surveyor's certificate and (y) any consents or
estoppels reasonably deemed necessary or advisable by the Administrative Agent
in connection with such mortgage or

<PAGE> 59

deed of trust, each of the foregoing in form and substance reasonably
satisfactory to the Administrative Agent and (iii) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance substantially similar to the relevant opinions delivered on the
Closing Date and otherwise reasonably satisfactory to the Syndication Agent,
and from counsel reasonably satisfactory to the Syndication Agent.

(c) With respect to any new Subsidiary (other than an
Excluded Foreign Subsidiary) created or acquired after the Closing Date (which,
for the purposes of this paragraph (c), shall include any existing Subsidiary
that ceases to be an Excluded Foreign Subsidiary), by the Borrower or any of
its Subsidiaries, promptly (i) execute and deliver to the Administrative Agent
such amendments to the Guarantee and Collateral Agreement as the Administrative
Agent deems necessary or advisable in order to grant to the Administrative
Agent, for the benefit of the Lenders, a perfected first priority security
interest in the Capital Stock of such new Subsidiary which is owned by the
Borrower or any of its Subsidiaries, (ii) deliver to the Administrative Agent
the certificates representing such Capital Stock, together with undated stock
powers, in blank, executed and delivered by a duly authorized officer of the
Borrower or such Subsidiary, as the case may be, (iii) cause such new
Subsidiary (A) to become a party to the Guarantee and Collateral Agreement and
(B) to take such actions necessary or advisable to grant to the Administrative
Agent for the benefit of the Lenders a perfected first priority security
interest in the Collateral described in the Guarantee and Collateral Agreement
with respect to such new Subsidiary, including, without limitation, the filing
of Uniform Commercial Code financing statements in such jurisdictions as may be
required by the Guarantee and Collateral Agreement or by law or as may be
requested by the Administrative Agent, and (iv) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance substantially similar to the relevant opinions delivered on the
Closing Date and otherwise reasonably satisfactory to the Syndication Agent,
and from counsel reasonably satisfactory to the Syndication Agent.

(d) With respect to any new Excluded Foreign Subsidiary
created or acquired after the Closing Date by the Borrower or any of its
Subsidiaries, promptly (i) execute and deliver to the Administrative Agent such
amendments to the Guarantee and Collateral Agreement as the Administrative
Agent deems necessary or advisable in order to grant to the Administrative
Agent, for the benefit of the Lenders, a perfected first priority security
interest in the Capital Stock of such new Subsidiary which is owned by the
Borrower or any of its Subsidiaries (provided that in no event shall more than
65% of the total outstanding Capital Stock of any such new Subsidiary be
required to be so pledged), (ii) deliver to the Administrative Agent the
certificates representing such Capital Stock, together with undated stock
powers, in blank, executed and delivered by a duly authorized officer of the
Borrower or such Subsidiary, as the case may be and (iii) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Syndication Agent.

6.10 Merger Consummation; Merger Agreement. Use its best
efforts to cause Target to comply in all material respects with all of its
material obligations under the Merger Agreement;

<PAGE> 60

cause the consummation of the Merger in accordance with the Merger Agreement
and all applicable Requirements of Law as promptly as practicable, and, in any
event, on or prior to the earlier of January 31, 1998 and the date that is 90
days after the consummation of the Tender Offer; and comply in all materials
respects with its obligations under the Transaction Documentation.

SECTION 7. NEGATIVE COVENANTS

7.1 Limitation on Activities of IHK Merger Sub. In the case
of IHK Merger Sub, notwithstanding anything to the contrary in this Agreement
or any other Loan Document, except to the extent necessary for the consummation
of the Tender Offer and the Merger in accordance with the Transaction
Documentation: (a) conduct, transact or otherwise engage in, or commit to
conduct, transact or otherwise engage in, any business or operations, (b)
incur, create, assume or suffer to exist any Indebtedness or other liabilities
or financial obligations, except (i) nonconsensual obligations imposed by
operation of law, (ii) pursuant to the Loan Documents to which it is a party
and (iii) obligations with respect to its Capital Stock, or (c) own, lease,
manage or otherwise operate any properties or assets (including cash and cash
equivalents).

7.2 Limitation on Indebtedness. Create, incur, assume or
suffer to exist (in each case, to "Incur") any Indebtedness, except:

(a) Indebtedness of any Loan Party pursuant to any Loan
Document;

(b) Indebtedness of the Borrower to any Subsidiary and of any
Wholly Owned Subsidiary Guarantor to the Borrower or any other
Subsidiary;

(c) Indebtedness secured by Liens permitted by Section 7.3(g)
in an aggregate principal amount not to exceed, when added to the
Capital Lease Obligations permitted under paragraph (d) of this
Section 7.2, $30,000,000 at any one time outstanding;

(d) Capital Lease Obligations in an aggregate principal
amount not to exceed, when added to the Indebtedness permitted under
paragraph (c) of this Section 7.2, $30,000,000 at any one time
outstanding;

(e) Indebtedness outstanding on the date hereof and listed on
Schedule 7.2(e) and any refinancings, refundings, renewals or
extensions thereof (without any increase in the principal amount
thereof);

(f) guarantees made in the ordinary course of business by the
Borrower or any of its Subsidiaries of obligations of any Wholly Owned
Subsidiary Guarantor;

<PAGE> 61

(g) Indebtedness under any Interest Rate Protection
Agreements entered into to protect the Borrower or any of its
Subsidiaries against fluctuations in interest rates and not for
speculative purposes;

(h) other Indebtedness (contingent or direct) not to exceed
$6,000,000 outstanding at any one time in respect of letters of credit
issued for the account of the Borrower or any of its Subsidiaries in
the conduct of their business in the ordinary course and any Guarantee
Obligations thereof;

(i) Indebtedness of the Borrower under the remaining Senior
Notes outstanding upon the consummation of the Debt Tender Offer in an
aggregate principal amount not to exceed $_________ at any time
outstanding;

(j) renewals and extensions (in the same or lesser principal
amount on similar terms and conditions and in any case no less
favorable to the interests of the Lenders) of any Indebtedness listed
in the foregoing clauses;

(k) Indebtedness of Holly Finance Company not to exceed
$13,500,000 in aggregate principal amount outstanding at any time,
provided that the aggregate principal amount of such Indebtedness
outstanding at any time, when added to the aggregate principal amount
of Indebtedness incurred pursuant to subsection 7.2(l) below and
outstanding at such time, does not exceed $20,000,000; and

(l) other unsecured Indebtedness not to exceed $10,000,000 in
aggregate principal amount outstanding at any time, provided that the
aggregate principal amount of such Indebtedness outstanding at any
time, when added to the aggregate principal amount of Indebtedness
incurred pursuant to subsection 7.2(k) above and outstanding at such
time, does not exceed $20,000,000.

7.3 Limitation on Liens. Create, incur, assume or suffer to
exist any Lien upon any of its Property or revenues, whether now owned or
hereafter acquired, except for:

(a) Liens for taxes not yet due or which are being contested
in good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the books of the
Borrower or its Subsidiaries, as the case may be, in conformity with
GAAP;

(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like nonconsensual Liens imposed by operation of
law, arising in the ordinary course of business which are not overdue
for a period of more than 30 days or which are being contested in good
faith by appropriate proceedings;

(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation;

<PAGE> 62

(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;

(e) easements, rights-of-way, restrictions, minor
irregularities in title, and other similar encumbrances incurred in
the ordinary course of business which, in the aggregate, are not
material in amount and which do not in any case materially detract
from the value of the Property subject thereto or materially interfere
with the ordinary conduct of the business of the Borrower or any of
its Subsidiaries and all such title matters described in the
Mortgages;

(f) Liens in existence on the date hereof listed on Schedule
7.3(f), securing Indebtedness permitted by Section 7.2(e), provided
that no such Lien is spread to cover any additional Property after the
Closing Date and that the amount of Indebtedness secured thereby is
not increased;

(g) Liens securing Indebtedness of the Borrower and any of
its Subsidiaries incurred pursuant to Section 7.2(c) or (d) to finance
the acquisition or lease of fixed or capital assets, provided that (i)
such Liens shall be created substantially simultaneously with the
acquisition of such fixed or capital assets, (ii) such Liens do not at
any time encumber any Property other than the Property financed by
such Indebtedness and (iii) the amount of Indebtedness secured thereby
is not increased;

(h) Liens created pursuant to the Security Documents;

(i) any interest or title of a lessor under any lease entered
into by the Borrower or any Subsidiary of the Borrower in the ordinary
course of its business and covering only the assets so leased;

(j) Liens securing judgments which do not constitute an Event
of Default;

(k) Liens on Cash Equivalents to secure letter of credit
reimbursement obligations permitted under Section 7.2(h) in an
aggregate amount not to exceed $6,000,000;

(l) Liens securing Indebtedness of Holly Finance Company
permitted under subsection 7.2(k) on notes payable to Holly Finance
Company in respect of loans made by it in the ordinary course of its
business to growers;

(m) additional Liens securing obligations in an aggregate
amount not to exceed $3,000,000; and

(n) rights of lessees of equipment owned by the Borrower or
any of its Subsidiaries not interfering with the normal conduct of the
Borrower's business.

<PAGE> 63

7.4 Limitation on Fundamental Changes. Enter into any
merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution), or Dispose of, all or substantially
all of its Property or business, or make any material change in its present
method of conducting business, except:

(a) any Subsidiary of the Borrower may be merged or
consolidated with or into the Borrower (provided that the Borrower
shall be the continuing or surviving corporation) or with or into any
Wholly Owned Subsidiary Guarantor (provided that the Wholly Owned
Subsidiary Guarantor shall be the continuing or surviving
corporation);

(b) any Subsidiary of the Borrower may Dispose of any or all
of its assets (upon voluntary liquidation or otherwise) to the
Borrower or any Wholly Owned Subsidiary Guarantor; and

(c) the Tender Offer, Tender Offer Purchase, and the Merger
may be consummated so long as concurrently with the Merger all amounts
outstanding hereunder and under the Loan Documents shall be repaid in
full.

7.5 Limitation on Sale of Assets. Dispose of any of its
Property or business (including, without limitation, receivables and leasehold
interests), whether now owned or hereafter acquired, or, in the case of any
Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any
Person, except:

(a) the Disposition of surplus, obsolete or worn out property
in the ordinary course of business (including the expiration or
termination of leasehold interests related to receiving station
leases);

(b) the sale of inventory in the ordinary course of business;

(d) Dispositions in the normal course of the Borrower's
business of non-operating assets unnecessary for the continued
operation of the Borrower's business;

(e) Disposition of the real property, improvements and
equipment associated with the non operating facilities at Hamilton
City, California and Santa Barbara, California; and

(f) the sale or issuance of any Subsidiary's Capital Stock to
the Borrower or any Wholly Owned Subsidiary Guarantor.

7.6 Limitation on Dividends. Declare or pay any dividend
(other than dividends payable solely in common stock of the Person making such
dividend) on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of Capital Stock of
the Borrower or any Subsidiary or any warrants or options to purchase any such
Capital Stock, whether

<PAGE> 64

now or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of the Borrower or any Subsidiary (collectively, "Restricted
Payments"), except that (a) any Subsidiary may make Restricted Payments to the
Borrower or any Wholly Owned Subsidiary Guarantor and (b) the Borrower may
continue to pay dividends on its common stock in accordance with past practice
and in amounts per share not in excess of recent such amounts.

7.7 Limitation on Capital Expenditures. Make or commit to
make (by way of the acquisition of securities of a Person or otherwise) any
Capital Expenditure, except (i) Capital Expenditures of the Borrower and its
Subsidiaries in the ordinary course of business constituting manufacturing
costs incurred between processing periods which are necessary to prepare any
factory for the next processing campaign which are deferred and allocated to
the cost of sugar produced in the subsequent campaign not to exceed $40,000,000
in any fiscal year and (ii) other Capital Expenditures of the Borrower and its
Subsidiaries in the ordinary course of business not to exceed $45,000,000 in
any fiscal year; provided that any portion of the amount specified in clause
(ii) for any fiscal year that is not expended in such fiscal year may be
carried over to increase the amount of Capital Expenditures permitted under
clause (ii) for the immediately succeeding fiscal year.

7.8 Limitation on Investments, Loans and Advances. Make any
advance, loan, extension of credit (by way of guaranty or otherwise) or capital
contribution to, or purchase any stock, bonds, notes, debentures or other
securities of or any assets constituting all or a material part of a business
unit of, or make any other investment in, any Person, except:

(a) extensions of trade credit in the ordinary course of
business;

(b) investments in Cash Equivalents;

(d) loans and advances to employees of the Borrower or its
Subsidiaries in the ordinary course of business (including, without
limitation, for travel, entertainment and relocation expenses) in an
aggregate amount for the Borrower and its Subsidiaries not to exceed
$250,000 at any one time outstanding;

(e) the Tender Offer Purchase;

(f) investments by the Borrower or any of its Subsidiaries in
the Borrower or any Person that, prior to such investment, is a Wholly
Owned Subsidiary Guarantor;

(g) investments and reinvestments in the Borrower's portfolio
of marketable securities in the ordinary course of business;

(h) Loans by Holly Finance Company or Holly Sugar Corporation
in the ordinary course of business not to exceed $15,000,000 in the
aggregate outstanding at any time;

<PAGE> 65

(i) advances, loans, extensions of credit existing on the
date hereof and listed on Schedule 7.8(i); and

(j) any other loans or investments not otherwise permitted
under this Section 7.8 having an aggregate amount at any time not in
excess of $10,000,000 (determined at any time as the aggregate initial
amount of such investment or loan less returns or repayments of such
investments at or prior to such time).

7.9 Limitation on Transactions with Affiliates. Enter into
any transaction, including, without limitation, any purchase, sale, lease or
exchange of Property, the rendering of any service or the payment of any
management, advisory or similar fees, with any Affiliate (other than the
Borrower or any Wholly Owned Subsidiary Guarantor) unless such transaction is
(a) not prohibited under this Agreement and (b) upon fair and reasonable terms
no less favorable to the Borrower or such Subsidiary, as the case may be, than
it would obtain in a comparable arm's length transaction with a Person which is
not an Affiliate. Notwithstanding the foregoing, the Tender Offer, the Tender
Offer Purchase, and the Merger may be consummated.

7.10 Limitation on Sales and Leasebacks. Enter into any
arrangement with any Person providing for the leasing by the Borrower or any
Subsidiary of real or personal property which has been or is to be sold or
transferred by the Borrower or such Subsidiary to such Person or to any other
Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of the Borrower or such
Subsidiary, other than any arrangements otherwise expressly permitted
hereunder.

7.11 Limitation on Changes in Fiscal Periods. Permit the
fiscal year of the Borrower to end on a day other than March 31 or change the
Borrower's method of determining fiscal quarters, provided that the Borrower
may make one election after the Closing Date to change its fiscal year end, if
the Borrower enters into such amendments to this Agreement as the Syndication
Agent shall request to reflect such change, including modifications to Section
7, such that the covenants affected by such change shall have the same effect
(or, in any case, be substantively no less favorable to the Lenders, in the
determination of the Syndication Agent) after giving effect thereto as if such
change were not made. The Lenders hereby authorize the Syndication Agent and
the Administrative Agent to enter into such amendments to effect such
modifications, if any, in accordance with the provisions of this subsection.

7.12 Limitation on Negative Pledge Clauses. Enter into or
suffer to exist or become effective any agreement which prohibits or limits the
ability of the Borrower or any of its Subsidiaries to create, incur, assume or
suffer to exist any Lien upon any of its Property or revenues, whether now
owned or hereafter acquired, other than (a) this Agreement and the other Loan
Documents and (b) any agreements governing any purchase money Liens or Capital
Lease Obligations otherwise permitted hereby (in which case, any prohibition or
limitation shall only be effective against the assets financed thereby).

7.13 Limitation on Restrictions on Subsidiary Distributions.
Enter into or suffer to exist or become effective any consensual encumbrance or
restriction on the ability of any Subsidiary

<PAGE> 66

of the Borrower to (a) pay dividends or make any other distributions in respect
of any Capital Stock of such Subsidiary held by, or pay any Indebtedness owed
to, the Borrower or any other Subsidiary of the Borrower, (b) make loans or
advances to the Borrower or any other Subsidiary of the Borrower or (c)
transfer any of its assets to the Borrower or any other Subsidiary of the
Borrower, except for such encumbrances or restrictions existing under or by
reason of (i) any restrictions existing under the Loan Documents and (ii) any
restrictions with respect to a Subsidiary imposed pursuant to an agreement
which has been entered into in connection with the Disposition of all or
substantially all of the Capital Stock or assets of such Subsidiary.

7.14 Limitation on Lines of Business. Enter into any
business, either directly or through any Subsidiary, except for (a) those
businesses in which the Borrower or any of its Subsidiaries, or the Target or
any of its Subsidiaries, are engaged on the date of this Agreement and (b)
businesses reasonably related thereto, the revenues of which do not exceed 10%
of the Borrower's consolidated gross revenues.

7.15 Limitation on Amendments to Transaction Documentation.
Amend, supplement or otherwise modify (pursuant to a waiver or otherwise) the
terms and conditions of the Transaction Documentation in any material respect;
or fail to use commercially reasonable efforts to enforce any material right of
such Loan Party under the Merger Agreement.

7.16 Limitation on Optional Payments and Modifications of
Debt Instruments and Organizational Documentation, etc. (a) Make any optional
payment or prepayment on or redemption or purchase of any material Indebtedness
(other than the Loans), (b) amend, modify or change, or consent or agree to any
amendment, modification or change to any of the terms of any such Indebtedness
on terms less favorable to the Borrower and its Subsidiaries or to the
interests of the Lenders than those currently in effect on such Indebtedness,
or (c) amend, modify or change in any material respect, or consent or agree to
any amendment, modification, or change in any material respect to the terms of
any capitalization or organizational documents (including in respect of any
Capital Stock); provided, however, that this Section 7.16 shall not prohibit
(i) the Borrower or any of its Affiliates from acquiring, from time to time,
any of the Senior Notes which remain outstanding following consummation or
expiration of the Debt Tender Offer in accordance with the terms thereof and
with the terms of the Senior Note Indenture as described in Section 5.1(e) or
(ii) the Borrower or any Subsidiary to amend its charter or other
organizational documents to increase the amount of authorized Capital Stock or
other equity thereunder.

SECTION 8. EVENTS OF DEFAULT

If any of the following events shall occur and be continuing:

(a) The Borrower shall fail to pay any principal of any Loan
or Reimbursement Obligation when due in accordance with the terms
hereof; or the Borrower shall fail to pay any interest on any Loan or
Reimbursement Obligation, or any other amount payable hereunder or
under any other Loan Document, within five Business Days after any
such interest or other amount becomes due in accordance with the terms
hereof; or

<PAGE> 67

(b) Any representation or warranty made or deemed made by any
Loan Party herein or in any other Loan Document or which is contained
in any certificate, document or financial or other statement furnished
by it at any time under or in connection with this Agreement or any
such other Loan Document shall prove to have been inaccurate in any
material respect on or as of the date made or deemed made; or

(c) (i) Any Loan Party shall default in the observance or
performance of any agreement contained in clause (i) or (ii) of
Section 6.4(a) (with respect to the Borrower only), Section 6.7(a),
Section 7, Section 5 of the Guarantee and Collateral Agreement or
Section 5(b) of the Target Pledge Agreement or (ii) an "Event of
Default" under and as defined in any Mortgage shall have occurred and
be continuing; or

(d) Any Loan Party shall default in the observance or
performance of any other agreement contained in this Agreement or any
other Loan Document (other than as provided in paragraphs (a) through
(c) of this Section), and such default shall continue unremedied for a
period of 30 days after notice to the Borrower from the Administrative
Agent or the Required Lenders; or

(e) The Borrower or any of its Subsidiaries shall (i) default
in making any payment of any principal of any Indebtedness (including,
without limitation, any Guarantee Obligation, but excluding the Loans)
on the scheduled or original due date with respect thereto; or (ii)
default in making any payment of any interest on any such Indebtedness
beyond the period of grace, if any, provided in the instrument or
agreement under which such Indebtedness was created; or (iii) default
in the observance or performance of any other agreement or condition
relating to any such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or beneficiary
of such Indebtedness (or a trustee or agent on behalf of such holder
or beneficiary) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or (in the
case of any such Indebtedness constituting a Guarantee Obligation) to
become payable; provided, that a default, event or condition described
in clause (i), (ii) or (iii) of this paragraph (e) shall not at any
time constitute an Event of Default under this Agreement unless, at
such time, one or more defaults, events or conditions of the type
described in clauses (i), (ii) and (iii) of this paragraph (e) shall
have occurred and be continuing with respect to Indebtedness the
outstanding principal amount of which exceeds in the aggregate
$10,000,000; or

(f) (i) The Borrower or any of its Subsidiaries (other than
Holly Finance Company) shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (B) seeking appointment of
a receiver, trustee, custodian, conservator or other similar official
for it or for all or any substantial part of its assets, or the
Borrower or any of its

<PAGE> 68

Subsidiaries (other than Holly Finance Company) shall make a general
assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Borrower or any of its Subsidiaries (other than
Holly Finance Company) any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry
of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of 60 days;
or (iii) there shall be commenced against the Borrower or any of its
Subsidiaries (other than Holly Finance Company) any case, proceeding
or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial
part of its assets which results in the entry of an order for any such
relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; or (iv)
the Borrower or any of its Subsidiaries (other than Holly Finance
Company) shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth
in clause (i), (ii), or (iii) above; or (v) the Borrower or any of its
Subsidiaries (other than Holly Finance Company) shall generally not,
or shall be unable to, or shall admit in writing its inability to, pay
its debts as they become due; or

(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) involving any Plan, (ii) any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not
waived, shall exist with respect to any Plan or any Lien in favor of
the PBGC or a Plan shall arise on the assets of the Borrower or any
Commonly Controlled Entity, (iii) a Reportable Event shall occur with
respect to, or proceedings shall commence to have a trustee appointed,
or a trustee shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion
of the Required Lenders, likely to result in the termination of such
Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan
shall terminate for purposes of Title IV of ERISA, (v) the Borrower or
any Commonly Controlled Entity shall, or in the reasonable opinion of
the Required Lenders is likely to, incur any liability in connection
with a withdrawal from, or the Insolvency or Reorganization of, a
Multiemployer Plan or (vi) any other event or condition shall occur or
exist with respect to a Plan; and in each case in clauses (i) through
(vi) above, such event or condition, together with all other such
events or conditions, if any, could reasonably be expected to have a
Material Adverse Effect; or

(h) One or more judgments or decrees shall be entered against
the Borrower or any of its Subsidiaries (other than Holly Finance
Company) involving in the aggregate a liability (to the extent not
paid or fully covered by insurance as to which the relevant insurance
company has acknowledged coverage) of $10,000,000 or more, and all
such judgments or decrees shall not have been vacated, discharged,
stayed or bonded pending appeal within 30 days from the entry thereof;
or

(i) Any of the Security Documents shall cease, for any
reason, to be in full force and effect, or any Loan Party or any
Affiliate of any Loan Party shall so assert, or any Lien created by
any of the Security Documents shall cease to be enforceable and
substantially of the same effect and priority purported to be created
thereby; or

<PAGE> 69

(j) The guarantee contained in Section 2 of the Guarantee and
Collateral Agreement shall cease, for any reason, to be in full force
and effect or any Loan Party or any Affiliate of any Loan Party shall
so assert; or

(k) (i) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), (A) shall become, or obtain rights
(whether by means or warrants, options or otherwise) to become, the
"beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the
Exchange Act), directly or indirectly, of more than 40% of the
outstanding common stock of the Borrower or (B) shall obtain the right
or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of the
Borrower; (ii) the board of directors of the Borrower shall cease to
consist of a majority of Continuing Directors; or (iii) a Specified
Change of Control shall occur;

then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under
this Agreement and the other Loan Documents (including, without limitation, all
amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) shall immediately become due and payable, and (B) if such event is
any other Event of Default, either or both of the following actions may be
taken: (i) with the consent of the Majority Revolving Credit Facility Lenders,
the Administrative Agent may, or upon the request of the Majority Revolving
Credit Facility Lenders, the Administrative Agent shall, by notice to the
Borrower declare the Revolving Credit Commitments to be terminated forthwith,
whereupon the Revolving Credit Commitments shall immediately terminate; and
(ii) with the consent of the Required Lenders, the Administrative Agent may, or
upon the request of the Required Lenders, the Administrative Agent shall, by
notice to the Borrower, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement and the other Loan
Documents (including, without limitation, all amounts of L/C Obligations,
whether or not the beneficiaries of the then outstanding Letters of Credit
shall have presented the documents required thereunder) to be due and payable
forthwith, whereupon the same shall immediately become due and payable. With
respect to all Letters of Credit with respect to which presentment for honor
shall not have occurred at the time of an acceleration pursuant to this
paragraph, the Borrower shall at such time deposit in a cash collateral account
opened by the Administrative Agent an amount equal to the aggregate then
undrawn and unexpired amount of such Letters of Credit. Amounts held in such
cash collateral account shall be applied by the Administrative Agent to the
payment of drafts drawn under such Letters of Credit, and the unused portion
thereof after all such Letters of Credit shall have expired or been fully drawn
upon, if any, shall be applied to repay other obligations of the Borrower
hereunder and under the other Loan Documents. After all such Letters of Credit
shall have expired or been fully drawn upon, all Reimbursement Obligations
shall have been satisfied and all other obligations of the Borrower hereunder
and under the other Loan Documents shall have been paid in full, the balance,
if any, in such cash collateral account shall be returned to the Borrower (or
such other Person as may be lawfully entitled thereto).

<PAGE> 70

SECTION 9. THE AGENTS

9.1 Appointment. Each Lender hereby irrevocably designates
and appoints the Agents as the agents of such Lender under this Agreement and
the other Loan Documents, and each such Lender irrevocably authorizes each
Agent, in such capacity, to take such action on its behalf under the provisions
of this Agreement and the other Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to such Agent by the terms of
this Agreement and the other Loan Documents, together with such other powers as
are reasonably incidental thereto. Notwithstanding any provision to the
contrary elsewhere in this Agreement, no Agent shall have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against any Agent.

9.2 Delegation of Duties. Each Agent may execute any of its
duties under this Agreement and the other Loan Documents by or through agents
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. No Agent shall be responsible for the
negligence or misconduct of any agents or attorneys in-fact selected by it with
reasonable care.

9.3 Exculpatory Provisions. Neither any Agent nor any of
their respective officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except to the extent that any of the foregoing are found
by a final and nonappealable decision of a court of competent jurisdiction to
have resulted from its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by any Loan Party or
any officer thereof contained in this Agreement or any other Loan Document or
in any certificate, report, statement or other document referred to or provided
for in, or received by the Agents under or in connection with, this Agreement
or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of any Loan Party a party thereto to perform its
obligations hereunder or thereunder. The Agents shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of any Loan Party. Without limiting the generality of the foregoing,
the Collateral Agent shall not be responsible to any of the Agents or any of
the Lenders for the existence, creation, attachment, perfection or priority of
any lien or security interest in the Collateral or any part thereof or for the
existence of any liens, security interests or other encumbrances or charges
thereon.

9.4 Reliance by Administrative Agent. Each Agent shall be
entitled to rely, and shall be fully protected in relying, upon any instrument,
writing, resolution, notice, consent, certificate, affidavit, letter, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Loan Parties), independent
accountants and other experts selected by the

<PAGE> 71

Administrative Agent. The Agents may deem and treat the payee of any Note as
the owner thereof for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Administrative
Agent. Each Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders (or, if so specified
by this Agreement, all Lenders) as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. Each Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of the Required Lenders (or, if so
specified by this Agreement, all Lenders), and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Lenders
and all future holders of the Loans.

9.5 Notice of Default. No Agent shall be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless such Agent has received notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the
Administrative Agent receives such a notice, the Administrative Agent shall
give notice thereof to the Lenders. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders (or, if so specified by this Agreement, all
Lenders); provided that unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.

9.6 Non-Reliance on Agents and Other Lenders. Each Lender
expressly acknowledges that neither the Agents nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or affiliates have
made any representations or warranties to it and that no act by any Agent
hereinafter taken, including any review of the affairs of a Loan Party or any
affiliate of a Loan Party, shall be deemed to constitute any representation or
warranty by any Agent to any Lender. Each Lender represents to the Agents that
it has, independently and without reliance upon any Agent or any other Lender,
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and
their affiliates and made its own decision to make its Loans hereunder and
enter into this Agreement. Each Lender also represents that it will,
independently and without reliance upon any Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Loan Parties and their affiliates. Except for notices,
reports and other documents expressly required to be furnished to the Lenders
by the Administrative Agent hereunder, no Agent shall have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of any Loan

<PAGE> 72

Party or any affiliate of a Loan Party which may come into the possession of
such Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.

9.7 Indemnification. The Lenders agree to indemnify each
Agent in its capacity as such (to the extent not reimbursed by the Borrower and
without limiting the obligation of the Borrower to do so), ratably according to
their respective Revolving Credit Percentages and Term Loan Percentages in
effect on the date on which indemnification is sought under this Section 9.7
(or, if indemnification is sought after the date upon which the Commitments
shall have terminated and the Loans shall have been paid in full, ratably in
accordance with such Percentages immediately prior to such date), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation, at any time
following the payment of the Loans) be imposed on, incurred by or asserted
against such Agent in any way relating to or arising out of, the Commitments,
this Agreement, any of the other Loan Documents or any documents contemplated
by or referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by such Agent under or in connection
with any of the foregoing; provided that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements which
are found by a final and nonappealable decision of a court of competent
jurisdiction to have resulted from such Agent's gross negligence or willful
misconduct. The agreements in this Section 9.7 shall survive the payment of
the Loans and all other amounts payable hereunder.

9.8 Agent in Its Individual Capacity. Each Agent and its
affiliates may make loans to, accept deposits from and generally engage in any
kind of business with any Loan Party as though such Agent was not an Agent.
With respect to its Loans made or renewed by it and with respect to any Letter
of Credit issued or participated in by it, each Agent shall have the same
rights and powers under this Agreement and the other Loan Documents as any
Lender and may exercise the same as though it were not an Agent, and the terms
"Lender" and "Lenders" shall include each Agent in its individual capacity.

9.9 Successor Administrative Agent. The Administrative Agent
may resign as Administrative Agent upon 10 days' notice to the Lenders and the
Borrower. If the Administrative Agent shall resign as Administrative Agent
under this Agreement and the other Loan Documents, then the Required Lenders
shall appoint from among the Lenders a successor agent for the Lenders, which
successor agent shall (unless an Event of Default under Section 8(a) or Section
8(f) with respect to the Borrower shall have occurred and be continuing) be
approved by the Borrower (which approval shall not be unreasonably withheld or
delayed), whereupon such successor agent shall succeed to the rights, powers
and duties of the Administrative Agent, and the term "Administrative Agent"
shall mean such successor agent effective upon such appointment and approval,
and the former Administrative Agent's rights, powers and duties as
Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement or any holders of the Loans. If no successor agent has accepted
appointment as Administrative Agent by the date that is 30 days following a
retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless thereupon become
effective and the Lenders shall assume and perform all of the duties

<PAGE> 73

of the Administrative Agent hereunder until such time, if any, as the Required
Lenders appoint a successor agent as provided for above. The Syndication Agent
may, at any time, by notice to the Lenders and the Administrative Agent, resign
as Syndication Agent hereunder, whereupon the duties, rights, obligations and
responsibilities hereunder shall automatically be assumed by, and inure to the
benefit of, the Administrative Agent, without any further act by the
Syndication Agent, the Administrative Agent or any Lender. After any retiring
Agent's resignation as Agent, the provisions of this Section 9 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement and the other Loan Documents.

9.10 Authorization to Release Liens. The Administrative
Agent is hereby irrevocably authorized by each of the Lenders to release any
Lien covering any Property of the Borrower or any of its Subsidiaries that is
the subject of a Disposition which is permitted by this Agreement or which has
been consented to in accordance with Section 10.1.

9.11 The Arranger. The Arranger, in its capacity as such,
shall have no duties or responsibilities, and shall incur no liability, under
this Agreement and the other Loan Documents.

SECTION 10. MISCELLANEOUS

10.1 Amendments and Waivers. Neither this Agreement, any
other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
Section 10.1. The Required Lenders and each Loan Party party to the relevant
Loan Document may, or (with the written consent of the Required Lenders) the
Syndication Agent, the Administrative Agent and each Loan Party party to the
relevant Loan Document may, from time to time, (a) enter into written
amendments, supplements or modifications hereto and to the other Loan Documents
for the purpose of adding any provisions to this Agreement or the other Loan
Documents or changing in any manner the rights of the Lenders or of the Loan
Parties hereunder or thereunder or (b) waive, on such terms and conditions as
the Required Lenders, or the Agents, as the case may be, may specify in such
instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences; provided,
however, that no such waiver and no such amendment, supplement or modification
shall (i) forgive the principal amount or extend the final scheduled date of
maturity of any Loan, extend the scheduled date of any amortization payment in
respect of any Term Loan, reduce the stated rate of any interest, fee or letter
of credit commission payable hereunder or extend the scheduled date of any
payment thereof, or increase the amount or extend the expiration date of any
Lender's Revolving Credit Commitment, in each case without the consent of each
Lender directly affected thereby; (ii) amend, modify or waive any provision of
this Section 10.1 or reduce any percentage specified in the definition of
Required Lenders, consent to the assignment or transfer by the Borrower of any
of its rights and obligations under this Agreement and the other Loan
Documents, release all or substantially all of the Collateral or release all or
substantially all of the Subsidiary Guarantors from their obligations under the
Guarantee and Collateral Agreement, in each case without the written consent of
all Lenders; (iii) amend, modify or waive any condition precedent to any
extension of credit under the Revolving Credit Facility set forth in Section
5.3 (including, without limitation, in connection with any waiver of an
existing Default or Event of Default) without the written consent of the
Majority Revolving Credit Facility Lenders; (iv) reduce the percentage
specified in the

<PAGE> 74

definition of Majority Facility Lenders without the written consent of all
Lenders under each affected Facility; (v) amend, modify or waive any provision
of Section 9 without the written consent of the Agents; or (vi) amend, modify
or waive any provision of Section 3 without the written consent of the Issuing
Lender; provided, further, notwithstanding the provisions set forth above, no
Lender consent shall be required in connection with the release of any Liens on
Property sold by the Borrower or its Subsidiaries if such sale is permitted
pursuant to Section 7.5. Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Lenders and shall be binding
upon the Loan Parties, the Lenders, the Administrative Agent and all future
holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders
and the Administrative Agent shall be restored to their former position and
rights hereunder and under the other Loan Documents, and any Default or Event
of Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon.

10.2 Notices. All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice,
when received, addressed as follows in the case of the Borrower, the
Syndication Agent, the Collateral Agent and the Administrative Agent, and as
set forth in an administrative questionnaire delivered to the Administrative
Agent in the case of the Lenders, or to such other address as may be hereafter
notified by the respective parties hereto:

The Borrower: Imperial Holly Corporation
One Imperial Square, Suite 200
8016 Highway 90-A
Sugar Land, Texas 77478
Attention:
Telecopy:
Telephone:

The Syndication Agent and
the Administrative Agent:
Lehman Commercial Paper Inc.
3 World Financial Center
New York, New York 10285
Attention: Michele Swanson
Telecopy: (212) 528-0819
Telephone: (212) 526-0330

The Collateral Agent: Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690
Attention: Agribusiness Division
Telecopy: (312) 765-8095
Telephone: (312) 461-2744

with a copy to:

<PAGE> 75

provided that any notice, request or demand to or upon either Agent or the
Lenders shall not be effective until received.

10.3 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of either Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.

10.4 Survival of Representations and Warranties. All
representations and warranties made hereunder, in the other Loan Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the Loans hereunder.

10.5 Payment of Expenses. The Borrower agrees (a) to pay or
reimburse the Agents for all their reasonable out-of-pocket costs and expenses
incurred in connection with the development, preparation and execution of, and
any amendment, supplement or modification to, this Agreement and the other Loan
Documents (except for any costs or expenses specifically excluded in the
commitment letter executed by the Borrower and the Syndication Agent in respect
of the credit facilities provided for herein) and any other documents prepared
in connection herewith or therewith, and the consummation and administration of
the transactions contemplated hereby and thereby, including, without
limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent, (b) to pay or reimburse each Lender and the Agents for
all its costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the other Loan Documents and
any such other documents, including, without limitation, the reasonable fees
and disbursements of counsel (including the allocated fees and expenses of
in-house counsel) to each Lender and of counsel to the Agents, (c) to pay,
indemnify, and hold each Lender and the Agents harmless from, any and all
recording and filing fees or any amendment, supplement or modification of, or
any waiver or consent under or in respect of, this Agreement, the other Loan
Documents and any such other documents, and (d) to pay, indemnify, and hold
each Lender and the Agents and their respective officers, directors, employees,
affiliates, agents and controlling persons (each, an "indemnitee") harmless
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration

<PAGE> 76

of this Agreement, the other Loan Documents and any such other documents,
including, without limitation, any of the foregoing relating to the use of
proceeds of the Loans or the violation of, noncompliance with or liability
under, any Environmental Law applicable to the operations of the Borrower any
of its Subsidiaries or any of the Properties (all the foregoing in this clause
(d), collectively, the "indemnified liabilities"), provided, that the Borrower
shall have no obligation hereunder to any indemnitee with respect to
indemnified liabilities to the extent such indemnified liabilities resulted
from the gross negligence or willful misconduct of such indemnitee. Without
limiting the foregoing, and to the extent permitted by applicable law, the
Borrower agrees not to assert and hereby waives, and shall cause each of its
Subsidiaries not to assert and to waive, all rights of contribution or any
other rights of recovery with respect to all claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or
nature, under or related to Environmental Laws, that any of them might have by
statute or otherwise against any Indemnitee. The agreements in this Section
10.5 shall survive repayment of the Loans and all other amounts payable
hereunder.

10.6 Successors and Assigns; Participations and Assignments.
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Agents, all future holders of the Loans and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of the Agents and each Lender.

(b) Any Lender may, without the consent of the Borrower, in
accordance with applicable law, at any time sell to one or more banks,
financial institutions or other entities (each, a "Participant") participating
interests in any Loan owing to such Lender, any Commitment of such Lender or
any other interest of such Lender hereunder and under the other Loan Documents.
In the event of any such sale by a Lender of a participating interest to a
Participant, such Lender's obligations under this Agreement to the other
parties to this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall remain the
holder of any such Loan for all purposes under this Agreement and the other
Loan Documents, and the Borrower and the Agents shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. In no event
shall any Participant under any such participation have any right to approve
any amendment or waiver of any provision of any Loan Document, or any consent
to any departure by any Loan Party therefrom, except to the extent that such
amendment, waiver or consent would reduce the principal of, or interest on, the
Loans or any fees payable hereunder, or postpone the date of the final maturity
of the Loans, in each case to the extent subject to such participation. The
Borrower agrees that if amounts outstanding under this Agreement and the Loans
are due or unpaid, or shall have been declared or shall have become due and
payable upon the occurrence of an Event of Default, each Participant shall, to
the maximum extent permitted by applicable law, be deemed to have the right of
setoff in respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under this Agreement, provided that, in
purchasing such participating interest, such Participant shall be deemed to
have agreed to share with the Lenders the proceeds thereof as provided in
Section 10.7(a) as fully as if it were a Lender hereunder. The Borrower also
agrees that each Participant shall be entitled to the benefits of Sections
2.15, 2.16 and 2.17 with respect to its

<PAGE> 77

participation in the Commitments and the Loans outstanding from time to time as
if it was a Lender; provided that, in the case of Section 2.16, such
Participant shall have complied with the requirements of said Section and
provided, further, that no Participant shall be entitled to receive any greater
amount pursuant to any such Section than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred
by such transferor Lender to such Participant had no such transfer occurred.

(c) Any Lender (an "Assignor") may, in accordance with
applicable law, at any time and from time to time, subject to the consent of
the Syndication Agent, assign to any Lender or any affiliate thereof or, with
the consent of the Borrower and the Agents (which, in each case, shall not be
unreasonably withheld or delayed) (provided that no such consent need be
obtained for assignments involving Lehman Commercial Paper Inc.), to an
additional bank, financial institution or other entity (an "Assignee") all or
any part of its rights and obligations under this Agreement pursuant to an
Assignment and Acceptance, substantially in the form of Exhibit E, executed by
such Assignee, such Assignor, the Syndication Agent and the Administrative
Agent (and, where the consent of the Borrower is required pursuant to the
foregoing provisions, by the Borrower) and delivered to the Administrative
Agent for its acceptance and recording in the Register; provided that no such
assignment to an Assignee (other than any Lender or any affiliate thereof)
shall be in an aggregate principal amount of less than $5,000,000 (other than
in the case of an assignment of all of a Lender's interests under this
Agreement), unless otherwise agreed by the Borrower, the Syndication Agent and
the Administrative Agent. Any such assignment need not be ratable as among the
Facilities. Upon such execution, delivery, acceptance and recording, from and
after the effective date determined pursuant to such Assignment and Acceptance,
(x) the Assignee thereunder shall be a party hereto and, to the extent provided
in such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder with a Commitment and/or Loans as set forth therein, and (y) the
Assignor thereunder shall, to the extent provided in such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all of an Assignor's rights and
obligations under this Agreement, such assigning Lender shall cease to be a
party hereto). Notwithstanding any provision of this Section 10.6, the consent
of the Borrower shall not be required for any assignment which occurs at any
time when any of the events described in Section 8(f) shall have occurred and
be continuing.

(d) The Administrative Agent shall maintain at its address
referred to in Section 10.2 a copy of each Assignment and Acceptance delivered
to it and a register (the "Register") for the recordation of the names and
addresses of the Lenders and the Commitment of, and principal amount of the
Loans owing to, each Lender from time to time and any Notes evidencing such
Loans. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Administrative Agent and the Lenders
shall treat each Person whose name is recorded in the Register as the owner of
the Loan and any Note evidencing such Loan recorded therein for all purposes of
this Agreement. Any assignment of any Loan whether or not evidenced by a Note
shall be effective only upon appropriate entries with respect thereto being
made in the Register (and each Note shall expressly so provide). Any
assignment or transfer of all or part of a Loan evidenced by a Note shall be
registered on the Register only upon surrender for registration of assignment
or transfer of the Note evidencing such Loan, accompanied by a duly executed
Assignment and Acceptance, and thereupon one or more new Notes in the same
aggregate principal amount shall be issued to the

<PAGE> 78

designated Assignee and the old Notes shall be returned by the Administrative
Agent to the Borrower marked "cancelled". The Register shall be available for
inspection by the Borrower or any Lender at any reasonable time and from time
to time upon reasonable prior notice.

(e) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender, an Assignee and the Syndication Agent (and, in the case
of an Assignee that is not then a Lender or an affiliate thereof or a Person
under common management with such Lender, by the Borrower, the Administrative
Agent and the Issuing Lender) together with payment to the Administrative Agent
of a registration and processing fee of $3,500 (except that no such
registration and processing fee shall be payable in connection with an
assignment by Lehman Commercial Paper Inc.), the Administrative Agent shall (i)
promptly accept such Assignment and Acceptance and (ii) on the effective date
determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to the Lenders and
the Borrower. On or prior to such effective date, the Borrower, at its own
expense, upon request, shall execute and deliver to the Administrative Agent
(in exchange for the Revolving Credit Note and/or Term Notes, as the case may
be, of the assigning Lender) a new Revolving Credit Note and/or Term Notes, as
the case may be, to the order of such Assignee in an amount equal to the
Revolving Credit Commitment and/or applicable Term Loans, as the case may be,
assumed or acquired by it pursuant to such Assignment and Acceptance and, if
the assigning Lender has retained a Revolving Credit Commitment and/or Term
Loans, as the case may be, upon request, a new Revolving Credit Note and/or
Term Notes, as the case may be, to the order of the assigning Lender in an
amount equal to the Revolving Credit Commitment and/or applicable Term Loans,
as the case may be, retained by it hereunder. Such new Notes shall be dated
the Closing Date and shall otherwise be in the form of the Note replaced
thereby.

(f) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this Section 10.6 concerning assignments of
Loans and Notes relate only to absolute assignments and that such provisions do
not prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law.

10.7 Adjustments; Setoff. (a) Except to the extent that
this Agreement provides for payments to be allocated to the Lenders under a
particular Facility, if any Lender (a "Benefitted Lender") shall at any time
receive any payment of all or part of its Loans or the Reimbursement
Obligations owing to it, or interest thereon, or receive any collateral in
respect thereof (whether voluntarily or involuntarily, by setoff, pursuant to
events or proceedings of the nature referred to in Section 8(f), or otherwise),
in a greater proportion than any such payment to or collateral received by any
other Lender, if any, in respect of such other Lender's Loans or the
Reimbursement Obligations owing to such other Lender, or interest thereon, such
Benefitted Lender shall purchase for cash from the other Lenders a
participating interest in such portion of each such other Lender's Loan and/or
of the Reimbursement Obligations owing to each such other Lender, or shall
provide such other Lenders with the benefits of any such collateral, or the
proceeds thereof, as shall be necessary to cause such Benefitted Lender to
share the excess payment or benefits of such collateral or proceeds ratably
with each of the Lenders; provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such Benefitted Lender,
such purchase shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest.

<PAGE> 79

(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to the
Borrower, any such notice being expressly waived by the Borrower to the extent
permitted by applicable law, upon any amount becoming due and payable by the
Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise) to setoff and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of the Borrower. Each Lender
agrees promptly to notify the Borrower and the Administrative Agent after any
such setoff and application made by such Lender, provided that the failure to
give such notice shall not affect the validity of such setoff and application.

10.8 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Borrower and the
Administrative Agent.

10.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

10.10 Integration. This Agreement and the other Loan
Documents represent the entire agreement of the Borrower, the Administrative
Agent and the Lenders with respect to the subject matter hereof, and there are
no promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof not expressly set forth
or referred to herein or in the other Loan Documents.

10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

10.12 Submission To Jurisdiction; Waivers. The Borrower
hereby irrevocably and unconditionally:

(a) submits for itself and its Property in any legal action
or proceeding relating to this Agreement and the other Loan Documents
to which it is a party, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general jurisdiction
of

<PAGE> 80

the courts of the State of New York, the courts of the United States
of America for the Southern District of New York, and appellate courts
from any thereof;

(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;

(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Borrower at its address set forth in Section 10.2 or
at such other address of which the Administrative Agent shall have
been notified pursuant thereto;

(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction; and

(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or
proceeding referred to in this Section 10.12 any special, exemplary,
punitive or consequential damages.

10.13 Acknowledgements. The Borrower hereby acknowledges
that:

(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;

(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower arising out of or
in connection with this Agreement or any of the other Loan Documents,
and the relationship between Administrative Agent and Lenders, on one
hand, and the Borrower, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and

(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrower and the
Lenders.

10.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENTS AND
THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

10.15 Confidentiality. Each of the Agents and each Lender
agrees to keep confidential all non-public information provided to it by any
Loan Party pursuant to this Agreement that is designated by such Loan Party as
confidential; provided that nothing herein shall prevent any Agent or any
Lender from disclosing any such information (a) to the Administrative Agent,
any

<PAGE> 81

other Lender or any affiliate of any Lender, (b) to any Participant or Assignee
(each, a "Transferee") or prospective Transferee which agrees to comply with
the provisions of this Section 10.15, (c) to the employees, directors, agents,
attorneys, accountants and other professional advisors of such Lender or its
affiliates, (d) upon the request or demand of any Governmental Authority having
jurisdiction over the such Agent or such Lender, (e) in response to any order
of any court or other Governmental Authority or as may otherwise be required
pursuant to any Requirement of Law, (f) if requested or required to do so in
connection with any litigation or similar proceeding, provided that such Agent
will use commercially reasonable efforts to give notice to the Borrower
thereof, (g) which has been publicly disclosed other than in breach of this
Section 10.15, (h) to the National Association of Insurance Commissioners or
any similar organization or any nationally recognized rating agency that
requires access to information about a Lender's investment portfolio in
connection with ratings issued with respect to such Lender, or (i) in
connection with the exercise of any remedy hereunder or under any other Loan
Document.

<PAGE> 82

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

IMPERIAL HOLLY CORPORATION

By: /s/KAREN MERCER
-------------------------------------
Name: Karen Mercer
Title: Vice President and Treasurer

LEHMAN COMMERCIAL PAPER INC., as
Syndication Agent, Issuing Bank and as
Lender

By:
---------------------------------------
Name:
Title:

LEHMAN COMMERCIAL PAPER INC., as
Administrative Agent

By:
---------------------------------------
Name:
Title:

HARRIS TRUST AND SAVINGS BANK, as
Collateral Agent

By:
---------------------------------------
Name:
Title:

<PAGE> 83

SCHEDULES 1.1A

COMMITMENTS: LENDING OFFICES AND ADDRESSES

<TABLE>
<CAPTION>
Commitments
-----------
<S> <C> <C>
Name of Lender and Revolving Term
Information for Notices Credit Loan
------ ----
Lehman Commercial Paper Inc.
</TABLE>

<PAGE> 84

SCHEDULE 1.1B

MORTGAGED PROPERTY

<PAGE> 85

SCHEDULE 4.4

CONSENTS, AUTHORIZATIONS, FILINGS AND NOTICES

<PAGE> 86

SCHEDULE 4.14

SUBSIDIARIES

<PAGE> 87

SCHEDULE 4.18(a)

UCC FILING JURISDICTIONS

<PAGE> 88

SCHEDULE 4.18(b)

MORTGAGE FILING JURISDICTIONS

<PAGE> 89

SCHEDULE 7.2(e)

EXISTING INDEBTEDNESS

<PAGE> 90

SCHEDULE 7.3(f)

EXISTING LIENS

<PAGE> 1
EXHIBIT 10.2

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

GUARANTEE AND COLLATERAL AGREEMENT

made by

IMPERIAL HOLLY CORPORATION

and certain of its Subsidiaries

in favor of

HARRIS TRUST AND SAVINGS BANK,
as Collateral Agent

Dated as of October 17, 1997

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

<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

SECTION 2. GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Right of Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 No Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Amendments, etc. with respect to the Borrower Obligations . . . . . . . . . . . . . . . . . . . . . . . 6
2.5 Guarantee Absolute and Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.6 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.7 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

SECTION 3. GRANT OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

SECTION 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 Representations in Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Title; No Other Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 Perfected First Priority Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.5 Inventory and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 Pledged Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.7 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.9 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

SECTION 5. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 Covenants in Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Delivery of Instruments and Chattel Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.3 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.4 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.5 Maintenance of Perfected Security Interest; Further Documentation . . . . . . . . . . . . . . . . . . . 12
5.6 Changes in Locations, Name, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.8 Pledged Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.9 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.10 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

SECTION 6. REMEDIAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1 Certain Matters Relating to Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.2 Communications with Obligors; Grantors Remain Liable . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.3 Pledged Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.4 Proceeds to be Turned Over To Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.5 Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.6 Code and Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

</TABLE>

i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
6.7 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.8 Waiver; Deficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

SECTION 7. THE COLLATERAL AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.1 Collateral Agent's Appointment as Attorney-in-Fact, etc . . . . . . . . . . . . . . . . . . . . . . . . 20
7.2 Duty of Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.3 Execution of Financing Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.4 Authority of Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

SECTION 8. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.1 Amendments in Writing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.3 No Waiver by Course of Conduct; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.4 Enforcement Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.5 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.6 Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.9 Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.10 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.12 Submission To Jurisdiction; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.13 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.14 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.15 Additional Grantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.16 Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>

ii
<PAGE> 4
EXHIBIT 10.2

GUARANTEE AND COLLATERAL AGREEMENT

GUARANTEE AND COLLATERAL AGREEMENT, dated as of October 17,
1997, made by each of the signatories hereto (together with any other entity
that may become a party hereto as provided herein, the "Grantors"), in favor of
Harris Trust and Savings Bank, an Illinois banking corporation, as Collateral
Agent (in such capacity, the "Collateral Agent") for the banks and other
financial institutions (the "Lenders") from time to time parties to the Credit
Agreement, dated as of October 17, 1997 (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among Imperial Holly Corporation (the "Borrower"), the Lenders, Lehman Brothers
Inc., as Arranger, Lehman Commercial Paper Inc., as Syndication Agent and
Administrative Agent and the Collateral Agent.

W I T N E S S E T H:

WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrower upon the terms
and subject to the conditions set forth therein;

WHEREAS, the Borrower is a member of an affiliated group of
companies that includes each other Grantor;

WHEREAS, the proceeds of the extensions of credit under the
Credit Agreement will be used in part to enable the Borrower to make valuable
transfers to one or more of the other Grantors in connection with the operation
of their respective businesses;

WHEREAS, the Borrower and the other Grantors are engaged in
related businesses, and each Grantor will derive substantial direct and
indirect benefit from the making of the extensions of credit under the Credit
Agreement; and

WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective extensions of credit to the Borrower under the
Credit Agreement that the Grantors shall have executed and delivered this
Agreement to the Collateral Agent for the ratable benefit of the Lenders;

NOW, THEREFORE, in consideration of the premises and to induce
the Agents and the Lenders to enter into the Credit Agreement and to induce the
Lenders to make their respective extensions of credit to the Borrower
thereunder, each Grantor hereby agrees with the Administrative Agent, for the
ratable benefit of the Lenders, as follows:

SECTION 1. DEFINED TERMS

1.1 Definitions. (a) Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given
to them in the Credit Agreement, and the following terms which are defined in
the Uniform Commercial Code in effect in the State of New York on the date
hereof are used herein as so defined: Accounts, Chattel Paper, Documents,
Equipment, Farm Products, Instruments and Inventory.
<PAGE> 5
2

(b) The following terms shall have the following meanings:

"Agreement": this Guarantee and Collateral Agreement, as the
same may be amended, amended and restated, supplemented or otherwise
modified from time to time.

"Borrower Obligations": the collective reference to the
unpaid principal of and interest on the Loans and Reimbursement
Obligations and all other obligations and liabilities of the Borrower
(including, without limitation, interest accruing at the then
applicable rate provided in the Credit Agreement after the maturity of
the Loans and Reimbursement Obligations and interest accruing at the
then applicable rate provided in the Credit Agreement after the filing
of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether
or not a claim for post-filing or post- petition interest is allowed
in such proceeding) to any Agent or any Lender (or, in the case of any
Hedge Agreement referred to below, any Affiliate of any Lender),
whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Credit Agreement, this Agreement, the
other Loan Documents, any Letter of Credit or any Hedge Agreement
entered into by the Borrower with any Lender (or any Affiliate of any
Lender) or any other document made, delivered or given in connection
therewith, in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements
of counsel to the Agents or to the Lenders that are required to be
paid by the Borrower pursuant to the terms of any of the foregoing
agreements).

"Collateral": as defined in Section 3.

"Collateral Account": any collateral account established by
the Collateral Agent as provided in Section 6.1 or 6.4.

"Contracts": to the extent assignment thereof is not
expressly prohibited by applicable law or prohibited by such contract
or agreement, all contracts and agreements to which any Grantor is a
party or under which any Grantor is a beneficiary or has rights, in
each case, as the same may be amended, supplemented or otherwise
modified from time to time, including, without limitation, (i) all
rights of any Grantor to receive moneys due and to become due to it
thereunder or in connection therewith, (ii) all rights of any Grantor
to damages arising thereunder and (iii) all rights of any Grantor to
perform and to exercise all remedies thereunder.

"Copyrights": (i) all copyrights arising under the laws of
the United States, any other country or any political subdivision
thereof, whether registered or unregistered and whether published or
unpublished (including, without limitation, those listed in Schedule
6), all registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, all
registrations, recordings and applications in the United States
Copyright Office, and (ii) the right to obtain all renewals thereof.

"Copyright Licenses": any written agreement naming any
Grantor as licensor or licensee (including, without limitation, those
listed in Schedule 6), granting any right under any Copyright,
including, without limitation, the grant of rights to manufacture,
distribute, exploit and sell materials derived from any Copyright.

<PAGE> 6
3

"General Intangibles": all "general intangibles" as such term
is defined in Section 9-106 of the Uniform Commercial Code in effect
in the State of New York on the date hereof and, in any event,
including, without limitation, with respect to any Grantor, all
contracts, agreements, instruments and indentures in any form, and
portions thereof, to which such Grantor is a party or under which such
Grantor has any right, title or interest or to which such Grantor or
any property of such Grantor is subject, as the same may from time to
time be amended, supplemented or otherwise modified, including,
without limitation, (i) all rights of such Grantor to receive moneys
due and to become due to it thereunder or in connection therewith,
(ii) all rights of such Grantor to damages arising thereunder and
(iii) all rights of such Grantor to perform and to exercise all
remedies thereunder, in each case to the extent the grant by such
Grantor of a security interest pursuant to this Agreement in its
right, title and interest in such contract, agreement, instrument or
indenture is not prohibited by applicable law or prohibited by such
contract, agreement, instrument or indenture without the consent of
any other party thereto, would not give any other party to such
contract, agreement, instrument or indenture the right to terminate
its obligations thereunder, or is permitted with consent if all
necessary consents to such grant of a security interest have been
obtained from the other parties thereto (it being understood that the
foregoing shall not be deemed to obligate such Grantor to obtain such
consents); provided, that the foregoing limitation shall not affect,
limit, restrict or impair the grant by such Grantor of a security
interest pursuant to this Agreement in any Receivable or any money or
other amounts due or to become due under any such contract, agreement,
instrument or indenture.

"Guarantor Obligations": with respect to any Guarantor, the
collective reference to (i) the Borrower Obligations and (ii) all
obligations and liabilities of such Guarantor which may arise under or
in connection with this Agreement or any other Loan Document to which
such Guarantor is a party, in each case whether on account of
guarantee obligations, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise (including, without limitation, all fees
and disbursements of counsel to the Agents or to the Lenders that are
required to be paid by such Guarantor pursuant to the terms of this
Agreement or any other Loan Document).

"Guarantors": the collective reference to each Grantor other
than the Borrower.

"Hedge Agreements": as to any Person, all interest rate
swaps, caps or collar agreements or similar arrangements entered into
by such Person providing for protection against fluctuations in
interest rates or currency exchange rates or the exchange of nominal
interest obligations, either generally or under specific
contingencies.

"Intellectual Property": the collective reference to all
rights, priorities and privileges relating to intellectual property,
whether arising under United States, multinational or foreign laws or
otherwise, including, without limitation, the Copyrights, the
Copyright Licenses, the Patents, the Patent Licenses, the Trademarks
and the Trademark Licenses, and all rights to sue at law or in equity
for any infringement or other impairment thereof, including the right
to receive all proceeds and damages therefrom.

"Intercompany Note": any promissory note evidencing loans
made by any Grantor to the Borrower or any of its Subsidiaries.

<PAGE> 7
4

"Investment Property": as defined in Section 9-115 of the
Uniform Commercial Code in effect in the State of New York on the date
hereof, excluding the items set forth on Schedule 8 hereto.

"Issuers": the collective reference to each issuer of a
Pledged Security.

"New York UCC": the Uniform Commercial Code as from time to
time in effect in the State of New York.

"Obligations": (i) in the case of the Borrower, the Borrower
Obligations, and (ii) in the case of each Guarantor, its Guarantor
Obligations.

"Patents": (i) all letters patent of the United States, any
other country or any political subdivision thereof, all reissues and
extensions thereof and all goodwill associated therewith, including,
without limitation, any of the foregoing referred to in Schedule 6,
(ii) all applications for letters patent of the United States or any
other country and all divisions, continuations and
continuations-in-part thereof, including, without limitation, any of
the foregoing referred to in Schedule 6, and (iii) all rights to
obtain any reissues or extensions of the foregoing.

"Patent License": all agreements, whether written or oral,
providing for the grant by or to any Grantor of any right to
manufacture, use or sell any invention covered in whole or in part by
a Patent, including, without limitation, any of the foregoing referred
to in Schedule 6.

"Pledged Notes": all promissory notes listed on Schedule 2,
all Intercompany Notes at any time issued to any Grantor and all other
promissory notes issued to or held by any Grantor (other than
promissory notes issued in connection with extensions of trade credit
by any Grantor in the ordinary course of business).

"Pledged Securities": the collective reference to the Pledged
Notes and the Pledged Stock.

"Pledged Stock": the shares of Capital Stock listed on
Schedule 2, together with any other shares, stock certificates,
options or rights of any nature whatsoever in respect of the Capital
Stock of any Person that may be issued or granted to, or held by, any
Grantor while this Agreement is in effect.

"Proceeds": all "proceeds" as such term is defined in Section
9-306(1) of the Uniform Commercial Code in effect in the State of New
York on the date hereof and, in any event, shall include, without
limitation, all dividends or other income from the Pledged Securities,
collections thereon or distributions or payments with respect thereto.

"Receivable": any right to payment for goods sold or leased
or for services rendered, whether or not such right is evidenced by an
Instrument or Chattel Paper and whether or not it has been earned by
performance (including, without limitation, any Account).

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

"Trademarks": (i) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade
styles, service marks, logos and other source

<PAGE> 8
5

or business identifiers, and all goodwill associated therewith, now
existing or hereafter adopted or acquired, all registrations and
recordings thereof, and all applications in connection therewith,
whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or
any other country or any political subdivision thereof, or otherwise,
and all common-law rights related thereto, including, without
limitation, any of the foregoing referred to in Schedule 6, and (ii)
the right to obtain all renewals thereof.

"Trademark License": any agreement, whether written or oral,
providing for the grant by or to any Grantor of any right to use any
Trademark, including, without limitation, any of the foregoing
referred to in Schedule 6.

1.2 Other Definitional Provisions. (a) The words "hereof,"
"herein", "hereto" and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section and Schedule references are
to this Agreement unless otherwise specified.

(b) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.

(c) Where the context requires, terms relating to the
Collateral or any part thereof, when used in relation to a Grantor, shall refer
to such Grantor's Collateral or the relevant part thereof.

SECTION 2. GUARANTEE

2.1 Guarantee. (a) Each of the Guarantors hereby, jointly
and severally, unconditionally and irrevocably, guarantees to the Collateral
Agent, for the ratable benefit of the Lenders and their respective successors,
indorsees, transferees and assigns, the prompt and complete payment and
performance by the Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower Obligations.

(b) Anything herein or in any other Loan Document to the
contrary notwithstanding, the maximum liability of each Guarantor hereunder and
under the other Loan Documents shall in no event exceed the amount which can be
guaranteed by such Guarantor under applicable federal and state laws relating
to the insolvency of debtors (after giving effect to the right of contribution
established in Section 2.2).

(c) Each Guarantor agrees that the Borrower Obligations may
at any time and from time to time exceed the amount of the liability of such
Guarantor hereunder without impairing the guarantee contained in this Section 2
or affecting the rights and remedies of any Agent or any Lender hereunder.

(d) The guarantee contained in this Section 2 shall remain in
full force and effect until all the Borrower Obligations and the obligations of
each Guarantor under the guarantee contained in this Section 2 shall have been
satisfied by payment in full, no Letter of Credit shall be outstanding and the
Commitments shall be terminated, notwithstanding that from time to time during
the term of the Credit Agreement the Borrower may be free from any Borrower
Obligations.

<PAGE> 9
6

(e) No payment made by the Borrower, any of the Guarantors,
any other guarantor or any other Person or received or collected by
the any Agent or any Lender from the Borrower, any of the Guarantors,
any other guarantor or any other Person by virtue of any action or
proceeding or any set-off or appropriation or application at any time
or from time to time in reduction of or in payment of the Borrower
Obligations shall be deemed to modify, reduce, release or otherwise
affect the liability of any Guarantor hereunder which shall,
notwithstanding any such payment (other than any payment made by such
Guarantor in respect of the Borrower Obligations or any payment
received or collected from such Guarantor in respect of the Borrower
Obligations), remain liable for the Borrower Obligations up to the
maximum liability of such Guarantor hereunder until the Borrower
Obligations are paid in full, no Letter of Credit shall be outstanding
and the Commitments are terminated.

2.2 Right of Contribution. Each Guarantor hereby agrees that
to the extent that a Guarantor shall have paid more than its proportionate
share of any payment made hereunder, such Guarantor shall be entitled to seek
and receive contribution from and against any other Guarantor hereunder which
has not paid its proportionate share of such payment. Each Guarantor's right
of contribution shall be subject to the terms and conditions of Section 2.3.
The provisions of this Section 2.2 shall in no respect limit the obligations
and liabilities of any Guarantor to the Agents and the Lenders, and each
Guarantor shall remain liable to the Agents and the Lenders for the full amount
guaranteed by such Guarantor hereunder.

2.3 No Subrogation. Notwithstanding any payment made by any
Guarantor hereunder or any set-off or application of funds of any Guarantor by
any Agent or any Lender, no Guarantor shall be entitled to be subrogated to any
of the rights of any Agent or any Lender against the Borrower or any other
Guarantor or any collateral security or guarantee or right of offset held by
any Agent or any Lender for the payment of the Borrower Obligations, nor shall
any Guarantor seek or be entitled to seek any contribution or reimbursement
from the Borrower or any other Guarantor in respect of payments made by such
Guarantor hereunder, until all amounts owing to the Agents and the Lenders by
the Borrower on account of the Borrower Obligations are paid in full, no Letter
of Credit shall be outstanding and the Commitments are terminated. If any
amount shall be paid to any Guarantor on account of such subrogation rights at
any time when all of the Borrower Obligations shall not have been paid in full,
such amount shall be held by such Guarantor in trust for the Agents and the
Lenders, segregated from other funds of such Guarantor, and shall, forthwith
upon receipt by such Guarantor, be turned over to the Collateral Agent in the
exact form received by such Guarantor (duly indorsed by such Guarantor to the
Administrative Agent, if required), to be applied against the Borrower
Obligations, whether matured or unmatured, in such order as the Collateral
Agent may determine.

2.4 Amendments, etc. with respect to the Borrower
Obligations. Each Guarantor shall remain obligated hereunder notwithstanding
that, without any reservation of rights against any Guarantor and without
notice to or further assent by any Guarantor, any demand for payment of any of
the Borrower Obligations made by any Agent or any Lender may be rescinded by
such Agent or such Lender and any of the Borrower Obligations continued, and
the Borrower Obligations, or the liability of any other Person upon or for any
part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by any Agent or any Lender, and the Credit Agreement
and the other Loan Documents and any other documents executed and delivered in
connection therewith may be amended, modified, supplemented or terminated, in
whole or in part, as the Agents (or the Required Lenders or all Lenders, as the
case may be) may deem advisable from time to time, and any collateral security,
guarantee or right of offset at any time held by any Agent or any Lender for
the payment of the Borrower Obligations may be sold, exchanged,

<PAGE> 10

7
waived, surrendered or released. Neither any Agent nor any Lender shall as a
condition to any Guarantor's liability hereunder have any obligation to
protect, secure, perfect or insure any Lien at any time held by it as security
for the Borrower Obligations or for the guarantee contained in this Section 2
or any property subject thereto.

2.5 Guarantee Absolute and Unconditional. Each Guarantor
waives any and all notice of the creation, renewal, extension or accrual of any
of the Borrower Obligations and notice of or proof of reliance by any Agent or
any Lender upon the guarantee contained in this Section 2 or acceptance of the
guarantee contained in this Section 2; the Borrower Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in this Section 2; and all dealings between the Borrower
and any of the Guarantors, on the one hand, and the Agents and the Lenders, on
the other hand, likewise shall be conclusively presumed to have been had or
consummated in reliance upon the guarantee contained in this Section 2. Each
Guarantor waives diligence, presentment, protest, demand for payment and notice
of default or nonpayment to or upon the Borrower or any of the Guarantors with
respect to the Borrower Obligations. Each Guarantor understands and agrees
that the guarantee contained in this Section 2 shall be construed as a
continuing, absolute and unconditional guarantee of payment without regard to
(a) the validity or enforceability of the Credit Agreement or any other Loan
Document, any of the Borrower Obligations or any other collateral security
therefor or guarantee or right of offset with respect thereto at any time or
from time to time held by any Agent or any Lender, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any
time be available to or be asserted by the Borrower or any other Person against
any Agent or any Lender, or (c) any other circumstance whatsoever (with or
without notice to or knowledge of the Borrower or such Guarantor) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of the Borrower for the Borrower Obligations, or of such Guarantor
under the guarantee contained in this Section 2, in bankruptcy or in any other
instance. When making any demand hereunder or otherwise pursuing its rights
and remedies hereunder against any Guarantor, any Agent or any Lender may, but
shall be under no obligation to, make a similar demand on or otherwise pursue
such rights and remedies as it may have against the Borrower, any other
Guarantor or any other Person or against any collateral security or guarantee
for the Borrower Obligations or any right of offset with respect thereto, and
any failure by any Agent or any Lender to make any such demand, to pursue such
other rights or remedies or to collect any payments from the Borrower, any
other Guarantor or any other Person or to realize upon any such collateral
security or guarantee or to exercise any such right of offset, or any release
of the Borrower, any other Guarantor or any other Person or any such collateral
security, guarantee or right of offset, shall not relieve any Guarantor of any
obligation or liability hereunder, and shall not impair or affect the rights
and remedies, whether express, implied or available as a matter of law, of any
Agent or any Lender against any Guarantor. For the purposes hereof "demand"
shall include the commencement and continuance of any legal proceedings.

2.6 Reinstatement. The guarantee contained in this Section 2
shall continue to be effective, or be reinstated, as the case may be, if at any
time payment, or any part thereof, of any of the Borrower Obligations is
rescinded or must otherwise be restored or returned by any Agent or any Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
the Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or any Guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.

<PAGE> 11
8

2.7 Payments. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars at the office of the Administrative Agent specified in
the Credit Agreement.

SECTION 3. GRANT OF SECURITY INTEREST

Each Grantor hereby assigns and transfers to the Collateral
Agent, and hereby grants to the Collateral Agent, for the ratable benefit of
the Lenders, a security interest in, all of the following property now owned or
at any time hereafter acquired by such Grantor or in which such Grantor now has
or at any time in the future may acquire any right, title or interest
(collectively, the "Collateral"), as collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of such Grantor's Obligations,:

(a) all Accounts;

(b) all Chattel Paper;

(d) all Documents;

(e) all Equipment;

(f) all General Intangibles;

(g) all Instruments;

(h) all Intellectual Property;

(i) all Inventory;

(j) all Investment Property;

(k) all Pledged Securities;

(l) all Farm Products;

(m) all books and records pertaining to the Collateral; and

(n) to the extent not otherwise included, all Proceeds,
investment securities and products of any and all of the foregoing and
all collateral security and guarantees given by any Person with
respect to any of the foregoing.

<PAGE> 12
9

SECTION 4. REPRESENTATIONS AND WARRANTIES

To induce the Agents and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower thereunder, each Grantor hereby represents and warrants
to each Agent and each Lender that:

4.1 Representations in Credit Agreement. In the case of each
Guarantor, the representations and warranties set forth in Section 4 of the
Credit Agreement as they relate to such Guarantor or to the Loan Documents to
which such Guarantor is a party, each of which is hereby incorporated herein by
reference, are true and correct, and each Agent and each Lender shall be
entitled to rely on each of them as if they were fully set forth herein,
provided that each reference in each such representation and warranty to the
Borrower's knowledge shall, for the purposes of this Section 4.1, be deemed to
be a reference to such Guarantor's knowledge.

4.2 Title; No Other Liens. Except for the security interest
granted to the Collateral Agent for the ratable benefit of the Lenders pursuant
to this Agreement and the other Liens permitted to exist on the Collateral by
the Credit Agreement, such Grantor owns each item of the Collateral free and
clear of any and all Liens or claims of others or, with respect to Collateral
acquired after the date hereof, such Grantor will own each item of the
Collateral free and clear of any and all Liens and claims of others. No
financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any public office, except such as
have been filed in favor of the Collateral Agent, for the ratable benefit of
the Lenders, pursuant to this Agreement or as are permitted by the Credit
Agreement.

4.3 Perfected First Priority Liens. The security interests
granted pursuant to this Agreement (a) upon completion of the filings and other
actions specified on Schedule 3 (which, in the case of all filings and other
documents referred to on said Schedule, have been delivered to the Collateral
Agent in completed and duly executed form) will constitute valid perfected
security interests in all of the Collateral in favor of the Collateral Agent,
for the ratable benefit of the Lenders, as collateral security for such
Grantor's Obligations, enforceable in accordance with the terms hereof against
all creditors of such Grantor and any Persons purporting to purchase any
Collateral from such Grantor to the extent such liens can be perfected under
domestic law and (b) are prior to all other Liens on the Collateral in
existence on the date hereof except for (i) unrecorded Liens permitted by the
Credit Agreement which have priority over the Liens on the Collateral by
operation of law and (ii) Liens described on Schedule 7.

4.4 Chief Executive Office. On the date hereof, such
Grantor's jurisdiction of organization and the location of such Grantor's chief
executive office or sole place of business are specified on Schedule 4.

4.5 Inventory and Equipment. On the date hereof, the
Inventory, the Farm Products and the Equipment (other than mobile goods) are
kept at the locations listed on Schedule 5.

4.6 Pledged Securities. (a) The shares of Pledged Stock
pledged by such Grantor hereunder constitute all the issued and outstanding
shares of all classes of the Capital Stock of each Issuer owned by such
Grantor.

(b) All the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable.

<PAGE> 13
10

(c) Each of the Pledged Notes constitutes the legal, valid
and binding obligation of the obligor with respect thereto, enforceable in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.

(d) Such Grantor is the record and beneficial owner of, and
has good and marketable title to, the Pledged Securities pledged by it
hereunder, free of any and all Liens or options in favor of, or claims of, any
other Person, except the security interest created by this Agreement.

4.7 Receivables. (a) No amount payable to such Grantor
under or in connection with any Receivable is evidenced by any Instrument or
Chattel Paper which has not been delivered to the Collateral Agent and for
which delivery thereof has been requested by the Collateral Agent.

(b) None of the obligors on any Receivables having an
aggregate value of $1,000,000 is a Governmental Authority.

(c) The amounts represented by such Grantor to the Lenders
from time to time as owing to such Grantor in respect of the Receivables will
at such times be substantially accurate.

4.8 Contracts. (a) No consent of any party (other than such
Grantor) to any Contract is required, or purports to be required, in connection
with the execution, delivery and performance of this Agreement.

(b) Each Contract is in full force and effect and constitutes
a valid and legally enforceable obligation of the parties thereto, subject to
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.

(c) No consent or authorization of, filing with or other act
by or in respect of any Governmental Authority is required in connection with
the execution, delivery, performance, validity or enforceability of any of the
Contracts by any party thereto other than those which have been duly obtained,
made or performed, are in full force and effect and do not subject the scope of
any such Contract to any material adverse limitation, either specific or
general in nature.

(d) Neither such Grantor nor (to the best of such Grantor's
knowledge) any of the other parties to the Contracts is in default in the
performance or observance of any of the terms thereof in any manner that, in
the aggregate, could reasonably be expected to have a Material Adverse Effect.

(e) The right, title and interest of such Grantor in, to and
under the Contracts are not subject to any defenses, offsets, counterclaims or
claims that, in the aggregate, could reasonably be expected to have a Material
Adverse Effect.

(f) Such Grantor has delivered, made available or will upon
request make available to the Collateral Agent a complete and correct copy of
each Contract, including all amendments, supplements and other modifications
thereto.

<PAGE> 14
11

(g) No amount payable to such Grantor under or in connection
with any Contract is evidenced by any Instrument or Chattel Paper which has not
been delivered to the Collateral Agent and for which delivery thereof has been
requested by the Collateral Agent.

(h) None of the parties to any Contract which has generated
Receivables in excess of that referenced in Section 4.7 is a Governmental
Authority.

4.9 Intellectual Property. (a) Schedule 6 lists all
Intellectual Property owned by such Grantor in its own name on the date hereof.

(b) On the date hereof, all material Intellectual Property is
valid, subsisting, unexpired and enforceable, has not been abandoned and, to
Grantor's knowledge, does not infringe the intellectual property rights of any
other Person.

(c) Except as set forth in Schedule 6, on the date hereof,
none of the Intellectual Property is the subject of any licensing or franchise
agreement pursuant to which such Grantor is the licensor or franchisor.

(d) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of,
or such Grantor's rights in, any Intellectual Property in any respect that
could reasonably be expected to have a Material Adverse Effect.

(e) No action or proceeding is pending, or, to the knowledge
of such Grantor, threatened, on the date hereof (i) seeking to limit, cancel or
question the validity of any Intellectual Property or such Grantor's ownership
interest therein, or (ii) which, if adversely determined, would have a material
adverse effect on the value of any Intellectual Property.

SECTION 5. COVENANTS

Each Grantor covenants and agrees with the Agents and the
Lenders that, from and after the date of this Agreement until the Obligations
shall have been paid in full, and no Letter of Credit shall be outstanding and
the Commitments shall have terminated:

5.1 Covenants in Credit Agreement. In the case of each
Guarantor, such Guarantor shall take, or shall refrain from taking, as the case
may be, each action that is necessary to be taken or not taken, as the case may
be, so that no Default or Event of Default is caused by the failure to take
such action or to refrain from taking such action by such Guarantor or any of
its Subsidiaries.

5.2 Delivery of Instruments and Chattel Paper. If any amount
payable under or in connection with any of the Collateral shall be or become
evidenced by any Instrument or Chattel Paper, such Instrument or Chattel Paper,
upon the request of the Collateral Agent, shall be immediately delivered to the
Collateral Agent, duly indorsed in a manner satisfactory to the Collateral
Agent, to be held as Collateral pursuant to this Agreement.

5.3 Maintenance of Insurance. (a) Such Grantor will
maintain, with financially sound and reputable companies, insurance policies as
is customary in its business (i) insuring the Inventory and Equipment against
loss by fire, explosion, theft and such other casualties as may be reasonably

<PAGE> 15

satisfactory to the Collateral Agent and (ii) to the extent requested by the
Collateral Agent, insuring such Grantor, the Agents and the Lenders against
liability for personal injury and property damage relating to such Inventory
and Equipment, such policies to be in such form and amounts and having such
coverage as is customary in Grantor's business.

(b) All such insurance shall (i) provide that no
cancellation, material reduction in amount or material change in coverage
thereof shall be effective until at least 30 days after receipt by the
Collateral Agent of written notice thereof, (ii) name the Collateral Agent as
insured party or loss payee and (iii) if reasonably requested by the Collateral
Agent, include a breach of warranty clause.

(c) The Borrower shall deliver to the Collateral Agent and
the Lenders a report of a reputable insurance broker with respect to such
insurance from time to time as reasonably requested by the Collateral Agent.

5.4 Payment of Obligations. Such Grantor will pay and
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all taxes, assessments and governmental charges
or levies imposed upon the Collateral or in respect of income or profits
therefrom, as well as all claims of any kind (including, without limitation,
claims for labor, materials and supplies) against or with respect to the
Collateral, except that no such charge need be paid if the amount or validity
thereof is currently being contested in good faith by appropriate proceedings,
reserves in conformity with GAAP with respect thereto have been provided on the
books of such Grantor and such proceedings could not reasonably be expected to
result in the sale, forfeiture or loss of any material portion of the
Collateral or any interest therein.

5.5 Maintenance of Perfected Security Interest; Further
Documentation. (a) Such Grantor shall maintain the security interest created
by this Agreement as a perfected security interest having at least the priority
described in Section 4.3 and shall defend such security interest against the
claims and demands of all Persons whomsoever.

(b) Such Grantor will furnish to the Collateral Agent and the
Lenders from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Collateral Agent may reasonably request, all in reasonable
detail.

(c) At any time and from time to time, upon the written
request of the Collateral Agent, and at the sole expense of such Grantor, such
Grantor will promptly and duly execute and deliver, and have recorded, such
further instruments and documents and take such further actions as the
Collateral Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code (or other similar
laws) in effect in any jurisdiction with respect to the security interests
created hereby.

5.6 Changes in Locations, Name, etc. Such Grantor will not,
except upon 15 days' prior written notice to the Collateral Agent and delivery
to the Collateral Agent of (a) all additional executed financing statements and
other documents reasonably requested by the Collateral Agent to maintain the
validity, perfection and priority of the security interests provided for herein
and (b) if applicable, a written supplement to Schedule 5 showing any
additional location at which Inventory, Equipment or Farm Products shall be
kept:

<PAGE> 16
13

(i) permit any portion with an aggregate value in excess of
$1,000,000 of the Inventory, Equipment or Farm Products to be kept at
a location other than those listed on Schedule 5;

(ii) change the location of its chief executive office or sole
place of business from that referred to in Section 4.4; or

(iii) change its name, identity or corporate structure to such
an extent that any financing statement filed by the Collateral Agent
in connection with this Agreement would become misleading.

5.7 Notices. Such Grantor will, promptly after acquiring
knowledge thereof, advise the Agents and the Lenders promptly, in reasonable
detail, of:

(a) any Lien (other than security interests created hereby or
Liens permitted under the Credit Agreement) on any of the Collateral which
would adversely affect the ability of the Collateral Agent to exercise any of
its remedies hereunder; and

(b) of the occurrence of any other event which could
reasonably be expected to have a material adverse effect on the aggregate value
of the Collateral or on the security interests created hereby.

5.8 Pledged Securities. (a) If such Grantor shall become
entitled to receive or shall receive any stock certificate (including, without
limitation, any certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of capital or any
certificate issued in connection with any reorganization), option or rights in
respect of the Capital Stock of any Issuer, whether in addition to, in
substitution of, as a conversion of, or in exchange for, any shares of the
Pledged Stock, or otherwise in respect thereof, such Grantor shall accept the
same as the agent of the Agents and the Lenders, hold the same in trust for the
Agents and the Lenders and deliver the same forthwith to the Collateral Agent
in the exact form received, duly indorsed by such Grantor to the Collateral
Agent, if required, together with an undated stock power covering such
certificate duly executed in blank by such Grantor and with, if the Collateral
Agent so requests, signature guaranteed, to be held by the Collateral Agent,
subject to the terms hereof, as additional collateral security for the
Obligations. Any sums paid upon or in respect of the Pledged Securities upon
the liquidation or dissolution of any Issuer shall, promptly but in no event
later than ten days unless the prior consent of the Collateral Agent is
obtained, be paid over to the Collateral Agent to be held by it hereunder as
additional collateral security for the Obligations, and in case any
distribution of capital shall be made on or in respect of the Pledged
Securities or any property shall be distributed upon or with respect to the
Pledged Securities pursuant to the recapitalization or reclassification of the
capital of any Issuer or pursuant to the reorganization thereof, the property
so distributed shall, unless otherwise subject to a perfected security interest
in favor of the Collateral Agent, be delivered, promptly but in not event later
than ten days unless the prior consent of the Collateral Agent is obtained, to
the Collateral Agent to be held by it hereunder as additional collateral
security for the Obligations. If any sums of money or property so paid or
distributed in respect of the Pledged Securities shall be received by such
Grantor, such Grantor shall, until such money or property is paid or delivered
to the Collateral Agent, hold such money or property in trust for the Lenders,
segregated from other funds of such Grantor, as additional collateral security
for the Obligations.

<PAGE> 17
14

(b) Without the prior written consent of the Collateral
Agent, such Grantor will not (i) vote to enable, or take any other action to
permit, any Issuer to issue any stock or other equity securities of any nature
or to issue any other securities convertible into or granting the right to
purchase or exchange for any stock or other equity securities of any nature of
any Issuer, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or
grant any option with respect to, the Pledged Securities or Proceeds thereof
(except pursuant to a transaction expressly permitted by the Credit Agreement),
(iii) create, incur or permit to exist any Lien or option in favor of, or any
claim of any Person with respect to, any of the Pledged Securities or Proceeds
thereof, or any interest therein, except for the security interests created by
this Agreement or (iv) enter into any agreement or undertaking restricting the
right or ability of such Grantor or the Collateral Agent to sell, assign or
transfer any of the Pledged Securities or Proceeds thereof.

(c) In the case of each Grantor which is an Issuer, such
Issuer agrees that (i) it will be bound by the terms of this Agreement relating
to the Pledged Securities issued by it and will comply with such terms insofar
as such terms are applicable to it, (ii) it will notify the Collateral Agent
promptly in writing of the occurrence of any of the events described in Section
5.8(a) with respect to the Pledged Securities issued by it and (iii) the terms
of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to
all actions that may be required of it pursuant to Section 6.3(c) or 6.7 with
respect to the Pledged Securities issued by it.

5.9 Receivables. (a) Other than in the ordinary course of
business consistent with its past practice, such Grantor will not (i) grant any
extension of the time of payment of any material portion of the Receivables,
(ii) compromise or settle any material portion of the Receivables for less than
the full amount thereof, (iii) release, wholly or partially, any Person liable
for the payment of any material portion of the Receivables, (iv) allow any
credit or discount whatsoever on any material portion of the Receivables or (v)
amend, supplement or modify any Receivable in any manner that could adversely
affect the value thereof.

(b) Such Grantor will deliver to the Collateral Agent a copy
of each material demand, notice or document received by it that questions or
calls into doubt the validity or enforceability of more than 5% of the
aggregate amount of the then outstanding Receivables.

5.10 Contracts. (a) Except to the extent that could not
reasonably be expected to have a Material Adverse Effect, such Grantor will
perform and comply in all material respects with all its obligations under the
Contracts.

(b) Such Grantor will not amend, modify, terminate or waive
any provision of any Contract in any manner which could reasonably be expected
to materially adversely affect the value of such Contract as Collateral.

(c) Such Grantor will exercise promptly and diligently each
and every material right which it may have under each Contract (other than any
right of termination).

(d) Such Grantor will deliver to the Collateral Agent a copy
of each material demand, notice or document received by it relating in any way
to any Contract that questions the validity or enforceability of such Contract.

5.11 Intellectual Property. (a) Except to the extent that
could not reasonably be expected to have a Material Adverse Effect, such
Grantor (either itself or through licensees) will (i)

<PAGE> 18
15

continue to use each material Trademark on each and every trademark class of
goods applicable to its current line as reflected in its current catalogs,
brochures and price lists in order to maintain such Trademark in full force
free from any claim of abandonment for non-use, (ii) maintain as in the past
the quality of products and services offered under such Trademark, (iii) use
such Trademark with the appropriate notice of registration and all other
notices and legends required by applicable Requirements of Law, (iv) not adopt
or use any mark which is confusingly similar or a colorable imitation of such
Trademark unless the Collateral Agent, for the ratable benefit of the Lenders,
shall obtain a perfected security interest in such mark pursuant to this
Agreement, and (v) not (and not permit any licensee or sublicensee thereof to)
do any act or knowingly omit to do any act whereby such Trademark may become
invalidated or impaired in any way.

(b) Except to the extent that could not reasonably be
expected to have a Material Adverse Effect, such Grantor (either itself or
through licensees) will not do any act, or omit to do any act, whereby any
material Patent may become forfeited, abandoned or dedicated to the public.

(c) Except to the extent that could not reasonably be
expected to have a Material Adverse Effect, such Grantor (either itself or
through licensees) (i) will employ each material Copyright and (ii) will not
(and will not permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby any material portion of the Copyrights may
become invalidated or otherwise impaired. Such Grantor will not (either itself
or through licensees) do any act whereby any material portion of the Copyrights
may fall into the public domain.

(d) Except to the extent that could not reasonably be
expected to have a Material Adverse Effect, such Grantor (either itself or
through licensees) will not do any act that knowingly uses any material
Intellectual Property to infringe the intellectual property rights of any other
Person.

(e) Such Grantor will notify the Agents and the Lenders
immediately if it knows, or has reason to know, that any application or
registration relating to any material Intellectual Property may become
forfeited, abandoned or dedicated to the public, or of any adverse
determination or development (including, without limitation, the institution
of, or any such determination or development in, any proceeding in the United
States Patent and Trademark Office, the United States Copyright Office or any
court or tribunal in any country) regarding such Grantor's ownership of, or the
validity of, any material Intellectual Property or such Grantor's right to
register the same or to own and maintain the same.

(f) Whenever such Grantor, either by itself or through any
agent, employee, licensee or designee, shall file an application for the
registration of any Intellectual Property with the United States Patent and
Trademark Office, the United States Copyright Office or any similar office or
agency in any other country or any political subdivision thereof, such Grantor
shall report such filing to the Collateral Agent within five Business Days
after the last day of the fiscal quarter in which such filing occurs. Upon
request of the Collateral Agent, such Grantor shall execute and deliver, and
have recorded, any and all agreements, instruments, documents, and papers as
the Collateral Agent may request to evidence the Agents' and the Lenders'
security interest in any Copyright, Patent or Trademark and the goodwill and
general intangibles of such Grantor relating thereto or represented thereby.

(g) Such Grantor will take all reasonable and necessary
steps, including, without limitation, in any proceeding before the United
States Patent and Trademark Office, the United States Copyright Office or any
similar office or agency in any other country or any political subdivision

<PAGE> 19
16

thereof, to maintain and pursue each application (and to obtain the relevant
registration) and to maintain each registration of the material Intellectual
Property, including, without limitation, filing of applications for renewal,
affidavits of use and affidavits of incontestability.

(h) In the event that any material Intellectual Property is
infringed, misappropriated or diluted by a third party, such Grantor shall (i)
take such actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the
Collateral Agent after it learns thereof and sue for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and
to recover any and all damages for such infringement, misappropriation or
dilution.

SECTION 6. REMEDIAL PROVISIONS

6.1 Certain Matters Relating to Receivables. (a) The
Collateral Agent shall have the right to make test verifications of the
Receivables in any manner and through any medium that it reasonably considers
advisable, and each Grantor shall furnish all such assistance and information
as the Collateral Agent may require in connection with such test verifications.
At any time and from time to time, upon the Collateral Agent's request and at
the expense of the relevant Grantor, such Grantor shall cause independent
public accountants or others satisfactory to the Collateral Agent to furnish to
the Collateral Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Receivables.

(b) The Collateral Agent hereby authorizes each Grantor to
collect such Grantor's Receivables, subject to the Collateral Agent's direction
and control, and the Collateral Agent may curtail or terminate said authority
by written notice at any time after the occurrence and during the continuance
of an Event of Default. If required by written notice by the Collateral Agent
at any time after the occurrence and during the continuance of an Event of
Default, any payments of Receivables, when collected by any Grantor, (i) shall
be forthwith (and, in any event, within two Business Days) deposited by such
Grantor in the exact form received, duly indorsed by such Grantor to the
Collateral Agent if required, in a Collateral Account maintained under the sole
dominion and control of the Collateral Agent, subject to withdrawal by the
Collateral Agent for the account of the Lenders only as provided in Section
6.5, and (ii) until so turned over, shall be held by such Grantor in trust for
the Agents and the Lenders, segregated from other funds of such Grantor. Each
such deposit of Proceeds of Receivables shall be accompanied by a report
identifying in reasonable detail the nature and source of the payments included
in the deposit.

(c) At the Collateral Agent's request, each Grantor shall
deliver or make available to the Collateral Agent all original and other
documents evidencing, and relating to, the agreements and transactions which
gave rise to the Receivables, including, without limitation, all original
orders, invoices and shipping receipts.

6.2 Communications with Obligors; Grantors Remain Liable.
(a) The Collateral Agent in its own name or in the name of others may at any
time after the occurrence and during the continuance of an Event of Default
communicate with obligors under the Receivables and parties to the Contracts to
verify with them to the Collateral Agent's satisfaction the existence, amount
and terms of any Receivables or Contracts.

<PAGE> 20
17

(b) Upon the request of the Collateral Agent at any time
after the occurrence and during the continuance of an Event of Default, each
Grantor shall notify obligors on the Receivables and parties to the Contracts
that the Receivables and the Contracts have been assigned to the Collateral
Agent for the ratable benefit of the Lenders and that payments in respect
thereof shall be made directly to the Collateral Agent.

(c) Anything herein to the contrary notwithstanding, each
Grantor shall remain liable under each of the Receivables and Contracts to
observe and perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with the terms of any agreement
giving rise thereto. Neither any Agent nor any Lender shall have any
obligation or liability under any Receivable (or any agreement giving rise
thereto) or Contract by reason of or arising out of this Agreement or the
receipt by any Agent or any Lender of any payment relating thereto, nor shall
any Agent or any Lender be obligated in any manner to perform any of the
obligations of any Grantor under or pursuant to any Receivable (or any
agreement giving rise thereto) or Contract, to make any payment, to make any
inquiry as to the nature or the sufficiency of any payment received by it or as
to the sufficiency of any performance by any party thereunder, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.

6.3 Pledged Stock. (a) Unless an Event of Default shall
have occurred and be continuing and the Collateral Agent shall have given
notice to the relevant Grantor of the Collateral Agent's intent to exercise its
corresponding rights pursuant to Section 6.3(b), each Grantor shall be
permitted to receive all cash dividends paid in respect of the Pledged Stock
and all payments made in respect of the Pledged Notes, in each case paid in the
normal course of business of the relevant Issuer and consistent with past
practice, to the extent permitted in the Credit Agreement, and to exercise all
voting and corporate rights with respect to the Pledged Securities; provided,
however, that no vote shall be cast which would result in any violation of any
provision of the Credit Agreement, this Agreement or any other Loan Document.

(b) If an Event of Default shall occur and be continuing and
the Collateral Agent shall give notice of its intent to exercise such rights to
the relevant Grantor or Grantors, (i) the Collateral Agent shall have the right
to receive any and all cash dividends, payments or other Proceeds paid in
respect of the Pledged Securities and make application thereof to the
Obligations in such order as the Collateral Agent may determine, and (ii) any
or all of the Pledged Securities shall be registered in the name of the
Collateral Agent or its nominee, and the Collateral Agent or its nominee may
thereafter exercise (x) all voting, corporate and other rights pertaining to
such Pledged Securities at any meeting of shareholders of the relevant Issuer
or Issuers or otherwise and (y) any and all rights of conversion, exchange and
subscription and any other rights, privileges or options pertaining to such
Pledged Securities as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Securities upon the merger, consolidation, reorganization, recapitalization or
other fundamental change in the corporate structure of any Issuer, or upon the
exercise by any Grantor or the Collateral Agent of any right, privilege or
option pertaining to such Pledged Securities, and in connection therewith, the
right to deposit and deliver any and all of the Pledged Securities with any
committee, depositary, transfer agent, registrar or other designated agency
upon such terms and conditions as the Collateral Agent may determine), all
without liability except to account for property actually received by it, but
the Collateral Agent shall have no duty to any Grantor to exercise any such
right, privilege or option and shall not be responsible for any failure to do
so or delay in so doing.

<PAGE> 21
18

(c) Each Grantor hereby authorizes and instructs each Issuer
of any Pledged Securities pledged by such Grantor hereunder to (i) comply with
any instruction received by it from the Collateral Agent in writing that (x)
states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each
Issuer shall be fully protected in so complying, and (ii) unless otherwise
expressly permitted hereby, pay any dividends or other payments with respect to
the Pledged Securities directly to the Collateral Agent.

6.4 Proceeds to be Turned Over To Collateral Agent. In
addition to the rights of the Agents and the Lenders specified in Section 6.1
with respect to payments of Receivables, if an Event of Default shall occur and
be continuing, and the written notice required by Section 6.1 shall have been
delivered by the Collateral Agent, all Proceeds received by any Grantor after
such notice consisting of cash, checks and other near-cash items shall be held
by such Grantor in trust for the Agents and the Lenders, segregated from other
funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be
turned over to the Collateral Agent in the exact form received by such Grantor
(duly indorsed by such Grantor to the Collateral Agent, if required). All
Proceeds received by the Collateral Agent hereunder shall be held by the
Collateral Agent in a Collateral Account maintained under its sole dominion and
control. All Proceeds while held by the Collateral Agent in a Collateral
Account (or by such Grantor in trust for the Agents and the Lenders) shall
continue to be held as collateral security for all the Obligations and shall
not constitute payment thereof until applied as provided in Section 6.5.

6.5 Application of Proceeds. At such intervals as may be
agreed upon by the Borrower and the Collateral Agent, or, if an Event of
Default shall have occurred and be continuing, at any time at the Collateral
Agent's election, the Collateral Agent may apply all or any part of Proceeds
constituting Collateral, whether or not held in any Collateral Account, and any
proceeds of the guarantee set forth in Section 2, in payment of the Obligations
in the following order:

First, to pay incurred and unpaid fees and expenses of the
Agents under the Loan Documents;

Second, to the Administrative Agent, for application by it
towards payment of amounts then due and owing and remaining unpaid in
respect of the Obligations, pro rata among the Lenders according to
the amounts of the Obligations then due and owing and remaining unpaid
to the Lenders;

Third, to the Administrative Agent, for application by it
towards prepayment of the Obligations, pro rataamong the Lenders
according to the amounts of the Obligations then held by the Lenders;
and

Fourth, any balance of such Proceeds remaining after the
Obligations shall have been paid in full, no Letters of Credit shall
be outstanding and the Commitments shall have terminated shall be paid
over to the Borrower or to whomsoever may be lawfully entitled to
receive the same.

6.6 Code and Other Remedies. If an Event of Default shall
occur and be continuing, the Collateral Agent, on behalf of the Lenders, may
exercise, in addition to all other rights and remedies granted to them in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the New

<PAGE> 22
19

York UCC or any other applicable law. Without limiting the generality of the
foregoing, the Collateral Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required in the Credit Agreement, herein or any other Loan Document or required
by law referred to below) to or upon any Grantor or any other Person (all and
each of which demands, defenses, advertisements and notices are hereby waived),
may in such circumstances forthwith collect, receive, appropriate and realize
upon the Collateral, or any part thereof, and/or may forthwith sell, lease,
assign, give option or options to purchase, or otherwise dispose of and deliver
the Collateral or any part thereof (or contract to do any of the foregoing), in
one or more parcels at public or private sale or sales, at any exchange,
broker's board or office of any Agent or any Lender or elsewhere upon such
terms and conditions as it may deem advisable and at such prices as it may deem
best, for cash or on credit or for future delivery without assumption of any
credit risk. Any Agent or any Lender shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in any Grantor, which right or equity is
hereby waived and released. Each Grantor further agrees, at the Collateral
Agent's request, to assemble the Collateral and make it available to the
Collateral Agent at places which the Collateral Agent shall reasonably select,
whether at such Grantor's premises or elsewhere. The Collateral Agent shall
apply the net proceeds of any action taken by it pursuant to this Section 6.6,
after deducting all reasonable costs and expenses of every kind incurred in
connection therewith or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the Agents
and the Lenders hereunder, including, without limitation, reasonable attorneys'
fees and disbursements, to the payment in whole or in part of the Obligations,
in such order as the Collateral Agent may elect, and only after such
application and after the payment by the Collateral Agent of any other amount
required by any provision of law, including, without limitation, Section
9-504(1)(c) of the New York UCC, need the Collateral Agent account for the
surplus, if any, to any Grantor. To the extent permitted by applicable law,
each Grantor waives all claims, damages and demands it may acquire against any
Agent or any Lender arising out of the exercise by them of any rights
hereunder. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition.

6.7 Registration Rights. (a) If the Collateral Agent shall
determine to exercise its right to sell any or all of the Pledged Stock
pursuant to Section 6.6, and if in the opinion of the Collateral Agent it is
necessary or advisable to have the Pledged Stock, or that portion thereof to be
sold, registered under the provisions of the Securities Act, the relevant
Grantor will cause the Issuer thereof to (i) execute and deliver, and cause the
directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as
may be, in the opinion of the Collateral Agent, necessary or advisable to
register the Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering
of the Pledged Stock, or that portion thereof to be sold, and (iii) make all
amendments thereto and/or to the related prospectus which, in the opinion of
the Collateral Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Each Grantor agrees to
cause such Issuer to comply with the provisions of the securities or "Blue Sky"
laws of any and all jurisdictions which the Collateral Agent shall designate
and to make available to its security holders, as soon as practicable, an
earnings statement (which need not be audited) which will satisfy the
provisions of Section 11(a) of the Securities Act.

<PAGE> 23
20

(b) Each Grantor recognizes that the Collateral Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Collateral
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.

(c) Each Grantor agrees to use its reasonable commercial
efforts to do or cause to be done all such other acts as may be necessary to
make such sale or sales of all or any portion of the Pledged Stock pursuant to
this Section 6.7 valid and binding and in compliance with any and all other
applicable Requirements of Law. Each Grantor further agrees that a breach of
any of the covenants contained in this Section 6.7 will cause irreparable
injury to the Agents and the Lenders, that the Agents and the Lenders have no
adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this Section 6.7 shall be specifically
enforceable against such Grantor, and such Grantor hereby waives and agrees not
to assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred under the
Credit Agreement.

6.8 Waiver; Deficiency. Each Grantor waives and agrees not
to assert any rights or privileges which it may acquire under Section 9-112 of
the New York UCC. Each Grantor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay its Obligations and the fees and disbursements of any attorneys employed by
the any Agent or any Lender to collect such deficiency.

SECTION 7. THE COLLATERAL AGENT

7.1 Collateral Agent's Appointment as Attorney-in-Fact, etc.
(a) Each Grantor hereby irrevocably constitutes and appoints the Collateral
Agent and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of such Grantor and in the name of such Grantor or in its
own name, for the purpose of carrying out the terms of this Agreement, upon the
occurrence and during the continuance of an Event of Default to take any and
all appropriate action and to execute any and all documents and instruments
which may be necessary or desirable to accomplish the purposes of this
Agreement, and, without limiting the generality of the foregoing, each Grantor
hereby gives the Collateral Agent the power and right, on behalf of such
Grantor, without notice to or assent by such Grantor, to do any or all of the
following upon the occurrence and during the continuance of an Event of
Default:

(i) in the name of such Grantor or its own name, or
otherwise, take possession of and indorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of
moneys due under any Receivable or Contract or with respect to any
other Collateral and file any claim or take any other action or
proceeding in any court of law or equity or otherwise

<PAGE> 24
21

deemed appropriate by the Collateral Agent for the purpose of
collecting any and all such moneys due under any Receivable or
Contract or with respect to any other Collateral whenever payable;

(ii) in the case of any Intellectual Property, execute and
deliver, and have recorded, any and all agreements, instruments,
documents and papers as the Collateral Agent may request to evidence
the Agents' and the Lenders' security interest in such Intellectual
Property and the goodwill and general intangibles of such Grantor
relating thereto or represented thereby;

(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of
the premiums therefor and the costs thereof;

(iv) execute, in connection with any sale provided for in
Section 6.6 or 6.7, any indorsements, assignments or other instruments
of conveyance or transfer with respect to the Collateral; and

(v) (1) direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due or to become
due thereunder directly to the Collateral Agent or as the Collateral
Agent shall direct; (2) ask or demand for, collect, and receive
payment of and receipt for, any and all moneys, claims and other
amounts due or to become due at any time in respect of or arising out
of any Collateral; (3) sign and indorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications, notices and other
documents in connection with any of the Collateral; (4) commence and
prosecute any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any
portion thereof and to enforce any other right in respect of any
Collateral; (5) defend any suit, action or proceeding brought against
such Grantor with respect to any Collateral; (6) settle, compromise or
adjust any such suit, action or proceeding and, in connection
therewith, give such discharges or releases as the Collateral Agent
may deem appropriate; (7) assign any Copyright, Patent or Trademark
(along with the goodwill of the business to which any such Copyright,
Patent or Trademark pertains), throughout the world for such term or
terms, on such conditions, and in such manner, as the Collateral Agent
shall in its sole discretion determine; and (8) generally, sell,
transfer, pledge and make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though the
Collateral Agent were the absolute owner thereof for all purposes, and
do, at the Collateral Agent's option and such Grantor's expense, at
any time, or from time to time, all acts and things which the
Collateral Agent deems necessary to protect, preserve or realize upon
the Collateral and the Collateral Agent's and the Lenders' security
interests therein and to effect the intent of this Agreement, all as
fully and effectively as such Grantor might do.

Anything in this Section 7.1(a) to the contrary notwithstanding, the
Collateral Agent agrees that it will not exercise any rights under the power of
attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.

(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Collateral Agent, at its option, but without
any obligation so to do, may perform or comply, or otherwise cause performance
or compliance, with such agreement.

<PAGE> 25
22

(c) The expenses of the Collateral Agent incurred in
connection with actions undertaken as provided in this Section 7.1, together
with interest thereon at a rate per annum equal to the rate per annum at which
interest would then be payable on past due Revolving Credit Loans that are Base
Rate Loans under the Credit Agreement, from the date of written demand by the
Collateral Agent to the relevant Grantor after payment by the Collateral Agent
to the date reimbursed by the relevant Grantor, shall be payable by such
Grantor to the Collateral Agent on demand.

(d) Each Grantor hereby ratifies all that said attorneys
shall lawfully do or cause to be done by virtue hereof. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until this Agreement is terminated and the
security interests created hereby are released.

7.2 Duty of Collateral Agent. The Collateral Agent's sole
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the New York UCC or
otherwise, shall be to deal with it in the same manner as the Collateral Agent
deals with similar property for its own account. Neither the Collateral Agent,
any Agent, any Lender nor any of their respective officers, directors,
employees or agents shall be liable for failure to demand, collect or realize
upon any of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
any Grantor or any other Person or to take any other action whatsoever with
regard to the Collateral or any part thereof. The powers conferred on the
Collateral Agent, the Agents and the Lenders hereunder are solely to protect
the Collateral Agent's, the Agents' and the Lenders' interests in the
Collateral and shall not impose any duty upon the Collateral Agent, any Agent
or any Lender to exercise any such powers. The Agents and the Lenders shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to any Grantor for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.

7.3 Execution of Financing Statements. Pursuant to Section
9-402 of the New York UCC and any other applicable law, each Grantor authorizes
the Collateral Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Grantor in such form and in such offices as the Collateral
Agent reasonably determines appropriate to perfect the security interests of
the Collateral Agent under this Agreement. A photographic or other
reproduction of this Agreement shall be sufficient as a financing statement or
other filing or recording document or instrument for filing or recording in any
jurisdiction.

7.4 Authority of Collateral Agent. Each Grantor acknowledges
that the rights and responsibilities of the Collateral Agent under this
Agreement with respect to any action taken by the Collateral Agent or the
exercise or non-exercise by the Collateral Agent of any option, voting right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Agreement shall, as between the Collateral Agent and the
Lenders, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Collateral Agent and the Grantors, the Collateral Agent shall be conclusively
presumed to be acting as agent for the Lenders with full and valid authority so
to act or refrain from acting, and no Grantor shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.

<PAGE> 26
23

SECTION 8. MISCELLANEOUS

8.1 Amendments in Writing. None of the terms or provisions
of this Agreement may be waived, amended, supplemented or otherwise modified
except in accordance with subsection 10.1 of the Credit Agreement.

8.2 Notices. All notices, requests and demands to or upon
the Collateral Agent or any Grantor hereunder shall be effected in the manner
provided for in subsection 10.2 of the Credit Agreement; provided that any such
notice, request or demand to or upon any Guarantor shall be addressed to such
Guarantor at its notice address set forth on Schedule 1.

8.3 No Waiver by Course of Conduct; Cumulative Remedies.
Neither any Agent nor any Lender shall by any act (except by a written
instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise
be deemed to have waived any right or remedy hereunder or to have acquiesced in
any Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of any Agent or any Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. A waiver by any Agent or any Lender of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which such Agent or such Lender would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.

8.4 Enforcement Expenses; Indemnification. (a) Each
Guarantor agrees to pay or reimburse each Lender and each Agent for all its
costs and expenses incurred in collecting against such Guarantor under the
guarantee contained in Section 2 or otherwise enforcing or preserving any
rights under this Agreement and the other Loan Documents to which such
Guarantor is a party, including, without limitation, the fees and disbursements
of counsel (including the allocated fees and expenses of in-house counsel) to
each Lender and of counsel to each Agent.

(b) Each Guarantor agrees to pay, and to save the Agents and
the Lenders harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.

(c) Each Guarantor agrees to pay, and to save the Agents and
the Lenders harmless from, any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement to the extent the
Borrower would be required to do so pursuant to subsection 10.5 of the Credit
Agreement.

(d) The agreements in this Section 8.4 shall survive
repayment of the Obligations and all other amounts payable under the Credit
Agreement and the other Loan Documents.

8.5 Successors and Assigns. This Agreement shall be binding
upon the successors and assigns of each Grantor and shall inure to the benefit
of the Agents and the Lenders and their successors and assigns; provided that
no Grantor may assign, transfer or delegate any of its rights or obligations
under this Agreement without the prior written consent of the Collateral Agent.

<PAGE> 27
24

8.6 Set-Off. Each Grantor hereby irrevocably authorizes the
each Agent and each Lender at any time and from time to time while an Event of
Default pursuant to subsection 8(a) of the Credit Agreement shall have occurred
and be continuing, without notice to such Grantor or any other Grantor, any
such notice being expressly waived by each Grantor, to set-off and appropriate
and apply any and all deposits (general or special, time or demand, provisional
or final), in any currency, and any other credits, indebtedness or claims, in
any currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Agent or such Lender to
or for the credit or the account of such Grantor, or any part thereof in such
amounts as such Agent or such Lender may elect, against and on account of the
obligations and liabilities of such Grantor to such Agent or such Lender
hereunder and claims of every nature and description of such Agent or such
Lender against such Grantor, in any currency, whether arising hereunder, under
the Credit Agreement, any other Loan Document or otherwise, as such Agent or
such Lender may elect, whether or not any Agent or any Lender has made any
demand for payment and although such obligations, liabilities and claims may be
contingent or unmatured. Each Agent and each Lender shall notify such Grantor
promptly of any such set-off and the application made by such Agent or such
Lender of the proceeds thereof, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of
each Agent and each Lender under this Section 8.6 are in addition to other
rights and remedies (including, without limitation, other rights of set- off)
which such Agent or such Lender may have.

8.7 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.

8.8 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

8.9 Section Headings. The Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof.

8.10 Integration. This Agreement and the other Loan
Documents represent the agreement of the Grantors, the Collateral Agent, the
Agents and the Lenders with respect to the subject matter hereof and thereof,
and there are no promises, undertakings, representations or warranties by any
Agent or any Lender relative to subject matter hereof and thereof not expressly
set forth or referred to herein or in the other Loan Documents.

8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

8.12 Submission To Jurisdiction; Waivers. Each Grantor
hereby irrevocably and unconditionally:

(a) submits for itself and its property in any legal action
or proceeding relating to this Agreement and the other Loan Documents
to which it is a party, or for recognition and

<PAGE> 28
25

enforcement of any judgment in respect thereof, to the non-exclusive
general jurisdiction of the Courts of the State of New York, the
courts of the United States of America for the Southern District of
New York, and appellate courts from any thereof;

(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such Grantor at its address referred to in Section 8.2 or
at such other address of which the Collateral Agent shall have been
notified pursuant thereto;

(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction; and

(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or
proceeding referred to in this Section any special, exemplary,
punitive or consequential damages.

8.13 Acknowledgements. Each Grantor hereby acknowledges
that:

(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents
to which it is a party;

(b) neither any Agent nor any Lender has any fiduciary
relationship with or duty to any Grantor arising out of or in
connection with this Agreement or any of the other Loan Documents, and
the relationship between the Grantors, on the one hand, and the Agents
and Lenders, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor; and

(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Grantors and the
Lenders.

8.14 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN.

8.15 Additional Grantors. Each Subsidiary of the Borrower
that is required to become a party to this Agreement pursuant to Section 6.9 of
the Credit Agreement shall become a Grantor for all purposes of this Agreement
upon execution and delivery by such Subsidiary of an Assumption Agreement in
the form of Annex 1 hereto.

8.16 Releases. (a) At such time as the Loans, the
Reimbursement Obligations and the other Obligations shall have been paid in
full, the Commitments have been terminated and no Letters of Credit shall be
outstanding, the Collateral shall be released from the Liens created hereby,
and this

<PAGE> 29
26

Agreement and all obligations (other than those expressly stated to survive
such termination) of the Collateral Agent and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Collateral shall revert to the Grantors. At
the request and sole expense of any Grantor following any such termination, the
Collateral Agent shall deliver to such Grantor any Collateral held by the
Collateral Agent hereunder, and execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence such
termination.

(b) If any of the Collateral shall be sold, transferred or
otherwise disposed of by any Grantor in a transaction permitted by the Credit
Agreement, then the Collateral Agent, at the request and sole expense of such
Grantor, shall execute and deliver to such Grantor all releases or other
documents reasonably necessary or desirable for the release of the Liens
created hereby on such Collateral. At the request and sole expense of the
Borrower, a Subsidiary Guarantor shall be released from its obligations
hereunder in the event that all the Capital Stock of such Subsidiary Guarantor
shall be sold, transferred or otherwise disposed of in a transaction permitted
by the Credit Agreement; provided that the Borrower shall have delivered to the
Collateral Agent, at least ten Business Days prior to the date of the proposed
release, a written request for release identifying the relevant Subsidiary
Guarantor and the terms of the sale or other disposition in reasonable detail,
including the price thereof and any expenses in connection therewith, together
with a certification by the Borrower stating that such transaction is in
compliance with the Credit Agreement and the other Loan Documents.

<PAGE> 30

IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee and Collateral Agreement to be duly executed and delivered as of the
date first above written.

IMPERIAL HOLLY CORPORATION

By: /s/KAREN MERCER
-------------------------------------
Title: Vice President and Treasurer

IHK MERGER SUB CORPORATION

By: /s/WILLIAM F. SCHWER
-------------------------------------
Title: Senior Vice President

HOLLY SUGAR CORPORATION

By: /s/WILLIAM F. SCHWER
-------------------------------------
Title: Senior Vice President,
Secretary and General Counsel

HOLLY NORTHWEST COMPANY

By: /s/WILLIAM F. SCHWER
-------------------------------------
Title: Vice President

<PAGE> 31

FORT BEND UTILITIES COMPANY

By: /s/WILLIAM F. SCHWER
-------------------------------------
Title: Vice President

IMPERIAL SWEETENER DISTRIBUTORS, INC.

By: /s/WILLIAM F. SCHWER
-------------------------------------
Title: Vice President

CROWN EXPRESS INC.

By: /s/WILLIAM F. SCHWER
-------------------------------------
Title: Vice President

LIMESTONE PRODUCTS COMPANY, INC.

By: /s/WILLIAM F. SCHWER
-------------------------------------
Title: President

<PAGE> 32
Schedule 1

NOTICE ADDRESSES OF GUARANTORS

<PAGE> 33
Schedule 2

DESCRIPTION OF PLEDGED SECURITIES

PLEDGED STOCK:

Issuer Class of Stock Stock Certificate No. No. of Shares
------ -------------- --------------------- -------------

PLEDGED NOTES:

Issuer Payee Principal Amount
------ ----- -----------------

<PAGE> 34
Schedule 3

FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS

Uniform Commercial Code Filings

[List each office where a financing statement is to be filed]

Patent and Trademark Filings

[List all filings]

Actions with respect to Pledged Stock

Other Actions

[Describe other actions to be taken]

<PAGE> 35
Schedule 4

LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE

<TABLE>
<S> <C>
Grantor Location
------- --------
</TABLE>

<PAGE> 36
Schedule 5

LOCATION OF INVENTORY, EQUIPMENT AND FARM PRODUCTS

<TABLE>
<S> <C>
Grantor Locations
------- ---------
</TABLE>

<PAGE> 37
Schedule 6

COPYRIGHTS AND COPYRIGHT LICENSES

PATENTS AND PATENT LICENSES

TRADEMARKS AND TRADEMARK LICENSES

<PAGE> 38
Schedule 7

EXISTING PRIOR LIENS

<PAGE> 39
Schedule 8

EXCLUSIONS TO COLLATERAL

The terms defined in this Agreement in Section 1 shall have excluded
from such definition those matters as set forth below with respect to such
terms:

"Equipment": the Equipment shall not include any airplanes,
rolling stock, certificate or title vehicles. In addition, the
Equipment shall not include any Equipment or other tangible personal
property in the nature of telephonic equipment, photocopiers, computer
equipment, or other equipment or property the use of which is
ancillary to the primary business of the Grantor that, solely by
reason of it hypothecation under this Agreement, would constitute a
default under any Agreement with the maker, supplier or financier of
such equipment or property.

"General Intangibles": the General Intangibles shall not
include any General Intangible that, solely by reason of hypothecation
under this Agreement, would create a default under any applicable
Agreement or applicable law.

"Investment Property": shall not include any Investment
Property that is currently held in an insurance trust for the purpose
of securing self insurance obligations or in that certain trust
[describe executive benefit trust].

<PAGE> 40

ACKNOWLEDGEMENT AND CONSENT

The undersigned hereby acknowledges receipt of a copy of the Guarantee
and Collateral Agreement dated as of October 17, 1997 (the "Agreement"), made
by the Grantors parties thereto for the benefit of Harris Trust and Savings
Bank, as Collateral Agent. The undersigned agrees for the benefit of the
Agents and the Lenders as follows:

1. The undersigned will be bound by the terms of the Agreement and
will comply with such terms insofar as such terms are applicable to the
undersigned.

2. The undersigned will notify the Collateral Agent promptly in
writing of the occurrence of any of the events described in Section 5.8(a) of
the Agreement.

3. The terms of Sections 6.3(a) and 6.7 of the Agreement shall apply
to it, mutatis mutandis, with respect to all actions that may be required of it
pursuant to Section 6.3(a) or 6.7 of the Agreement.

[NAME OF ISSUER]

By
---------------------------------
Title
------------------------------

Address for Notices:

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

Fax:
-------------------------------

<PAGE> 41
Annex 1 to
Guarantee and Collateral Agreement
- --------------------------------------------------------------------------------

ASSUMPTION AGREEMENT, dated as of ________________, 199_, made
by ______________________________, a ______________ corporation (the
"Additional Grantor"), in favor of Harris Trust and Savings Bank, as collateral
agent (in such capacity, the "Collateral Agent") for the banks and other
financial institutions (the "Lenders") parties to the Credit Agreement referred
to below. All capitalized terms not defined herein shall have the meaning
ascribed to them in such Credit Agreement.

W I T N E S S E T H :

WHEREAS, Imperial Holly Corporation (the "Borrower"), the
Lenders and the Agents have entered into a Credit Agreement, dated as of
October 17, 1997 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement");

WHEREAS, in connection with the Credit Agreement, the Borrower
and certain of its Affiliates (other than the Additional Grantor) have entered
into the Guarantee and Collateral Agreement, dated as of October 17, 1997 (as
amended, amended and restated, supplemented or otherwise modified from time to
time, the "Guarantee and Collateral Agreement") in favor of the Collateral
Agent for the benefit of the Lenders;

WHEREAS, the Credit Agreement requires the Additional Grantor
to become a party to the Guarantee and Collateral Agreement; and

WHEREAS, the Additional Grantor has agreed to execute and
deliver this Assumption Agreement in order to become a party to the Guarantee
and Collateral Agreement;

NOW, THEREFORE, IT IS AGREED:

1. Guarantee and Collateral Agreement. By executing and
delivering this Assumption Agreement, the Additional Grantor, as provided in
Section 8.15 of the Guarantee and Collateral Agreement, hereby becomes a party
to the Guarantee and Collateral Agreement as a Grantor thereunder with the same
force and effect as if originally named therein as a Grantor and, without
limiting the generality of the foregoing, hereby expressly assumes all
obligations and liabilities of a Grantor thereunder. The information set forth
in Annex 1-A hereto is hereby added to the information set forth in Schedules
____________* to the Guarantee and Collateral Agreement. The Additional
Grantor hereby represents and warrants that each of the representations and
warranties contained in Section 4 of the Guarantee and Collateral Agreement is
true and correct on and as the date hereof (after giving effect to this
Assumption Agreement) as if made on and as of such date.

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

* Refer to each Schedule which needs to be supplemented.

<PAGE> 42
2

2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.

IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.

[ADDITIONAL GRANTOR]

By:
--------------------------------
Name:
Title:

<PAGE> 1

EXHIBIT 23.1

INDEPENDENT AUDITOR'S CONSENT

We consent to the incorporation by reference in this Registration Statement
of Imperial Holly Corporation and subsidiaries ("Imperial Holly") on Form S-4,
of our report dated May 30, 1997, appearing in the Annual Report on Form 10-K of
Imperial Holly for the year ended March 31, 1997 and to the reference to use
under the heading "Experts" in the Joint Proxy Statement/Prospectus, which is
part of this Registration Statement.

DELOITTE & TOUCHE LLP
Houston, Texas
November 18, 1997

<PAGE> 1
EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Joint Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of Imperial Holly Corporation of our report dated November 18, 1996
appearing on page 16 of Savannah Foods & Industries, Inc. Annual Report on Form
10-K for the year ended September 29, 1996. We also consent to the reference to
us under the heading "Experts" in such Joint Proxy Statement/Prospectus.

PRICE WATERHOUSE LLP

Atlanta, Georgia
November 17, 1997

<PAGE> 1
EXHIBIT 99.1

CONSENT OF LEHMAN BROTHERS

We hereby consent to the use of our opinion letter dated September 11,
1997 to the Board of Directors of Imperial Holly Corporation (the "Company")
attached as Annex C to the Company's Joint Proxy Statement/Prospectus on Form
S-4 (the "Prospectus") and to the references to our firm in the Prospectus
under the headings "Description of Merger -- Imperial Holly's Financial
Advisor". In giving such consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations of the Securities and
Exchange Commission thereunder and we do not thereby admit that we are experts
with respect to any part of the Registration Statement under the meaning of the
term "expert" as used in the Securities Act.

LEHMAN BROTHERS INC.

New York, New York
November 17, 1997

<PAGE> 1
EXHIBIT 99.2

CONSENT OF
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION

We hereby consent to {i) the inclusion of our opinion letter,
dated September 11, 1997, to the Board of Directors of Savannah Foods &
Industries (the ACompany@) as Annex B to the Joint Proxy Statement/Prospectus
of the Company and Imperial Holly Corporation relating to the merger of IHK
Merger Sub Corporation with and into the Company, and (ii) all references to
DLJ in the sections captioned ASummary C Savannah Foods' Financial Advisors@
and ADescription of Merger@ in the Joint Proxy Statement/Prospectus of the
Company and Imperial Holly Corporation which forms a part of this Registration
Statement on Form S-4. In giving such consent, we do not admit that we come
within the category of persons whose consent is required under, and we do not
admit that we are Aexperts@ for purposes of, the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

By:_______________________________

New York, New York
November 12, 1997

<PAGE> 1
EXHIBIT 99.5

IMPERIAL HOLLY CORPORATION
SPECIAL MEETING OF STOCKHOLDERS

Solicited by the Board of Directors of Imperial Holly Corporation

The undersigned hereby appoints James C. Kempner and William F. Schwer
and each of them individually, as proxies with full power of substitution, to
vote all shares of Common Stock of Imperial Holly Corporation ("Imperial Holly")
that the undersigned is entitled to vote at the Special Meeting of Stockholders
thereof to be held on December 19, 1997, or at any adjournment or postponement
thereof, as follows:

Any executed proxy which does not designate a vote shall be deemed to
grant authority for any item not designated.

PROPOSAL 1: APPROVAL OF ISSUANCE OF SHARES OF COMMON STOCK, NO PAR
VALUE, OF IMPERIAL HOLLY TO STOCKHOLDERS OF SAVANNAH
FOODS & INDUSTRIES, INC. ("SAVANNAH FOODS") IN THE
MERGER OF IHK MERGER SUB CORPORATION ("IHK SUB") WITH
AND INTO SAVANNAH FOODS PURSUANT TO THE AGREEMENT AND
PLAN OF MERGER, DATED SEPTEMBER 12, 1997, AMONG IMPERIAL
HOLLY, IHK SUB AND SAVANNAH FOODS.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

Please check the following box if you plan to attend the
Annual Meeting of Stockholders in person. [ ]

ALL SHARES WILL BE VOTED AS DIRECTED HEREIN AND, UNLESS OTHERWISE DIRECTED, WILL
BE VOTED "FOR" PROPOSAL 1 AND IN ACCORDANCE WITH THE DISCRETION OF THE PERSON
VOTING THE PROXY WITH RESPECT TO ANY OTHER BUSINESS PROPERLY BROUGHT BEFORE THE
MEETING.

YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO A VOTE THEREON.

Dated: ____________________________, 1997

-------------------------------------
Signature
Please sign exactly as name appears on
this card. Joint owners should each sign.
Executors, administrators, trustees,
etc., should give their full titles.

PLEASE COMPLETE, SIGN AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED ENVELOPE.

<PAGE> 1
EXHIBIT 99.6

SAVANNAH FOODS & INDUSTRIES, INC.
SPECIAL MEETING OF STOCKHOLDERS

Solicited by the Board of Directors of Savannah Foods & Industries, Inc.

The undersigned hereby appoints William W. Sprague III, and John M.
Tatum and each of them individually, as proxies with full power of
substitution, to vote all shares of Common Stock of Savannah Foods &
Industries, Inc. ("Savannah Foods") that the undersigned is entitled to vote at
the Special Meeting of Stockholders thereof to be held on December 19, 1997, or
at any adjournment or postponement thereof, as follows:

Any executed proxy which does not designate a vote shall be deemed to
grant authority for any item not designated.

PROPOSAL 1: APPROVAL AND ADOPTION OF THE AGREEMENT AND PLAN OF
MERGER (THE "MERGER AGREEMENT"), DATED AS OF SEPTEMBER
12, 1997, AMONG IMPERIAL HOLLY CORPORATION ("IMPERIAL
HOLLY"), IHK MERGER SUB CORPORATION ("IHK SUB"), AND
SAVANNAH FOODS AND THE MERGER OF IHK SUB WITH AND INTO
SAVANNAH FOODS CONTEMPLATED THEREBY.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

Please check the following box if you plan to attend the
Annual Meeting of Stockholders in person. [ ]

ALL SHARES WILL BE VOTED AS DIRECTED HEREIN AND, UNLESS OTHERWISE DIRECTED,
WILL BE VOTED "FOR" PROPOSAL 1 AND IN ACCORDANCE WITH THE DISCRETION OF THE
PERSON VOTING THE PROXY WITH RESPECT TO ANY OTHER BUSINESS PROPERLY BROUGHT
BEFORE THE MEETING.

YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO A VOTE THEREON.

Dated: ____________________________, 1997

---------------------------------------
Signature
Please sign exactly as name appears on this
card. Joint owners should each sign.
Executors, administrators, trustees, etc.,
should give their full titles.

PLEASE COMPLETE, SIGN AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED ENVELOPE.

<PAGE> 1
EXHIBIT 99.7

FORM OF CASH ELECTION

FOR HOLDERS OF SHARES OF
COMMON STOCK, PAR VALUE $0.25 PER SHARE, OF

SAVANNAH FOODS & INDUSTRIES, INC.

DESIRING TO MAKE A CASH ELECTION

PURSUANT TO THE
AGREEMENT AND PLAN OF MERGER,
DATED AS OF SEPTEMBER 12, 1997,
AMONG IMPERIAL HOLLY CORPORATION,
IHK MERGER SUB CORPORATION AND
SAVANNAH FOODS & INDUSTRIES, INC.

THE EXCHANGE AGENT:

THE BANK OF NEW YORK
BY MAIL, OVERNIGHT COURIER OR HAND DELIVERY:

[INSERT DELIVERY ADDRESSES AND PHONE NUMBER]

This Form is to be completed by holders ("Holders") of the common
stock, par value $0.25 per share ("Savannah Common Stock"), of Savannah Foods &
Industries, Inc., a Delaware corporation ("Savannah Foods"), and is to
accompany the certificates for shares of Savannah Common Stock, if such
certificates are submitted (or if delivery of Shares (defined below) is to be
made by book-entry transfer to the account of Bank of New York (the "Exchange
Agent") at the Depositary Trust Company ("DTC") or the Philadelphia Depository
Trust Company ("PDTC") pursuant to book entry procedures) in connection with an
election to receive $20.25 in cash per share (the "Cash Consideration") for all
or a portion of their shares ("Shares") of Common Stock (a "Cash Election") in
connection with the merger (the "Merger") of Savannah Foods with and into IHK
Merger Sub Corporation ("IHK Sub"), a wholly owned subsidiary of Imperial Holly
Corporation ("Imperial Holly"), as more fully described in the accompanying
Joint Proxy Statement/Prospectus (the "Proxy Statement"). Holders who do not
wish to receive the Cash Consideration for all or a portion of their Shares
will receive shares of common stock, no par value, ("Imperial Common Stock") of
Imperial Holly in the Merger as described below and in the Proxy Statement,
subject to the proration procedures described below and in the Proxy Statement.
Holders who desire to make a Cash Election should fill out this form and submit
it to the Exchange Agent together with the certificate(s) representing the
shares for which the Cash Election is made (the "Electing Shares").

HOLDERS OF SAVANNAH COMMON STOCK SHOULD ONLY SUBMIT THIS FORM IF THEY
WISH TO MAKE A CASH ELECTION AS DESCRIBED BELOW AND IN THE PROXY STATEMENT.
BECAUSE OF THE PRORATION PROCEDURES DESCRIBED BELOW AND IN THE PROXY STATEMENT,
STOCKHOLDERS WHO MAKE A CASH ELECTION MAY NOT RECEIVE THE AMOUNT OF CASH THAT
THEY ELECT. STOCKHOLDERS WHO DO NOT WISH TO RECEIVE THE CASH CONSIDERATION AND
INSTEAD WISH TO RECEIVE SHARES OF IMPERIAL COMMON STOCK SHOULD NOT SUBMIT THIS
FORM. AT THE EFFECTIVE TIME OF THE MERGER, EACH SHARE OF SAVANNAH COMMON STOCK
NOT MAKING A CASH ELECTION WILL, SUBJECT TO THE PRORATION PROCEDURES DESCRIBED
BELOW AND IN THE PROXY STATEMENT, BE CONVERTED INTO THE RIGHT TO RECEIVE $20.25
OF IMPERIAL COMMON STOCK, SUBJECT TO A COLLAR AS DESCRIBED BELOW AND IN THE
PROXY STATEMENT.

The Merger will constitute the second and final step in the
acquisition of Savannah Foods by Imperial Holly pursuant to the Agreement and
Plan of Merger, dated September 12, 1997, among Imperial Holly, IHK Sub and
Savannah Foods (the "Merger Agreement"). The first step was a tender offer
(the "Tender Offer") by IHK Sub for 14,397,836 shares of Savannah Common Stock,
representing 50.1% of the outstanding shares of Savannah Common Stock, for
$20.25 per share in cash which IHK Sub successfully completed on October 16,
1997. In the Merger, 30% of the outstanding shares of Savannah Common Stock
will be converted into the right to receive $20.25 of Imperial Common Stock
(subject to a collar) and 19.9% of the outstanding shares of Savannah Common
Stock will be converted into the right to receive the Cash Consideration. The
remaining 50.1% of the outstanding shares of Savannah Common Stock, which were
purchased by IHK Sub in the Tender Offer, will be canceled.
<PAGE> 2
The Merger Agreement permits you and other Savannah Foods stockholders
to elect, subject to the proration procedures described below and in the Proxy
Statement, the number of Shares for which you wish to receive the Cash
Consideration in lieu of shares of Imperial Common Stock (and as a result, the
number of your Shares that will be converted into shares of Imperial Common
Stock in the Merger). The amount of Cash Consideration and the number of
shares of Imperial Common Stock you will receive in exchange for your Shares in
the Merger will depend on (i) whether you make a Cash Election, (ii) how many
Cash Elections are made by other Holders and (iii) the application of a
proration procedure, as explained in detail herein and in the Proxy Statement
accompanying this Form.

This Form is to be completed, signed and mailed or delivered (or
transmitted by telecopy facsimile) by Holders who desire to make a Cash
Election to the Exchange Agent, together with such Holders' share certificates
(or the attached Notice of Guaranteed Delivery of share certificates must be
completed and signed and must be received by the Exchange Agent) representing
Electing Shares by 5:00 p.m. New York City time on the business day next
preceding the day on which the vote at the Savannah Foods special meeting (or
any adjournment thereof) is to be taken (the "Election Deadline") on the
approval of the Merger Agreement and the Merger.

DELIVERY OF THIS FORM OF CASH ELECTION AFTER SUCH DEADLINE OR TO ANY
ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
SEE INSTRUCTION A.

THE BOARD OF DIRECTORS OF SAVANNAH FOODS MAKES NO RECOMMENDATIONS AS
TO WHETHER OR NOT YOU SHOULD MAKE A CASH ELECTION. YOU SHOULD MAKE YOUR OWN
DECISION, IN CONSULTATION WITH YOUR OWN FINANCIAL AND TAX ADVISORS, AS TO
WHETHER TO MAKE A CASH ELECTION.

THE INSTRUCTIONS ACCOMPANYING THIS FORM OF CASH ELECTION SHOULD BE
READ CAREFULLY BEFORE THIS FORM OF CASH ELECTION IS COMPLETED.

List below the certificates for Shares to which this Form of Cash
Election relates. If the space below is inadequate, the certificate number and
number of Shares should be listed on a separate signed schedule affixed hereto.

DESCRIPTION OF CERTIFICATES SURRENDERED
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S),
EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S)(1)
CERTIFICATE(S) BEING SURRENDERED (ATTACH
(PLEASE FILL IN, IF BLANK) ADDITIONAL SIGNED LIST IF NECESSARY)
- ---------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES
-------------------------------
For which
Represented Cash
CERTIFICATE by Election
NUMBER(S) Certificate(s) is Made (2)
----------------------------------------------------

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

----------------------------------------------------
TOTAL SHARES
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Only certificates registered in a single form may be deposited with
this Form of Cash Election. If certificates are registered in
different forms (e.g., John R. Doe and J. R. Doe), it will be
necessary to fill in, sign and submit as many separate copies of this
Form of Cash Election as there are different registrations of
certificates. Additional copies of the Form of Cash Election may be
obtained by calling the Bank of New York.

(2) Unless otherwise indicated in the box set forth above, it will be
assumed that all Shares related to a submitted certificate are to be
treated as having made a Cash Election.

NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY

- 2 -
<PAGE> 3
SEE INSTRUCTION A IF COMPLETING THE BOXES BELOW.

<TABLE>
<CAPTION>
- ----------------------------------------------------- --------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
<S> <C>
To be completed ONLY if the check for Shares To be completed ONLY if the check for Shares
and/or certificate(s) representing shares of and/or certificate(s) representing shares of
Imperial Common Stock received in the Merger are Imperial Common Stock received in the Merger are
to be issued in the name of someone other than the to be sent to someone other than the undersigned,
undersigned. or to the undersigned at an address other than
that shown under "Description of Certificates
Surrendered."

Issue check and/or certificate to: Mail check to:
Name: Name:
------------------------------------------- -------------------------------------------
(Please Print or Type) (Please Print or Type)

Address: Address:
--------------------------------------- ---------------------------------------

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

------------------------------------------------- -------------------------------------------------
(Print Address, including Zip Code) (Print Address, including Zip Code)

-------------------------------------------------
(Taxpayer Identification or Social Security No.)
(See also Substitute Form W-9 attached)
- ----------------------------------------------------- --------------------------------------------------
</TABLE>

[ ] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY INCLUDED WITH THIS FORM OF CASH ELECTION AND
COMPLETE THE FOLLOWING (SEE INSTRUCTION A):

Name(s) of Holder(s):
---------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
---------------------------
Name of Eligible Institution that Guaranteed Delivery:
------------------------

PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.

[ ] CHECK HERE IF YOU CANNOT LOCATE CERTIFICATES. UPON RECEIPT OF THIS
FORM. THE EXCHANGE AGENT WILL CONTACT YOU DIRECTLY WITH REPLACEMENT
INSTRUCTIONS.

[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
EXCHANGE AGENT'S ACCOUNT AT DTC OR PDTC AND COMPLETE THE FOLLOWING:

<TABLE>
<S> <C> <C>
Name of Electing Institution [ ] The Depository Trust Company or [ ] Philadelphia Depository Trust Company

Account No. Transaction Code No.
---------------------- ---------------------
</TABLE>

(DO NOT WRITE IN SPACES BELOW)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Shares
Converted
Into Shares Check
Shares Shares Retained Certificate Block Converted Check Amount
Submitted Accepted Shares No. No. Into Cash No. of
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>

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

- ----------------------------------------------------------------------------------------------------------
</TABLE>

Delivery Prepared By: Checked By: Dated:
------ --------- -----------

- 3 -
<PAGE> 4
HOLDER'S AGREEMENT

The Bank of New York,
Exchange Agent

Gentlemen:

In connection with the merger (the "Merger") of Savannah Foods &
Industries, Inc., a Delaware corporation ("Savannah Foods"), with and into IHK
Merger Sub Corporation ("IHK Sub"), a wholly owned subsidiary of Imperial Holly
Corporation ("Imperial Holly"), the undersigned hereby submits this Form of
Cash Election and surrenders the certificate(s) representing shares of common
stock, par value $0.25 per share, of Savannah Foods listed above in
"Description of Certificates Submitted" (the "Shares") or hereby transfers
ownership of such Share certificates on the account books maintained by DTC or
PDTC and elects (a "Cash Election"), to receive $20.25 per Share in cash (the
"Cash Consideration") for all or a specified portion of the Shares represented
by such certificates ("Electing Shares") following consummation of the Merger.

The undersigned acknowledges that his or her Cash Election and
submission of Electing Shares is subject to the terms, conditions and
limitations set forth in (i) the Joint Proxy Statement/Prospectus, dated as of
November 20, 1997 (the "Proxy Statement"), relating to the Agreement and Plan
of Merger, dated as of September 12, 1997, among Imperial Holly, IHK Sub and
Savannah Foods (the "Merger Agreement"), receipt of which is acknowledged by
the undersigned, (ii) the terms of the Merger Agreement a conformed copy of
which appears as Annex A to the Proxy Statement and (iii) the accompanying
Instructions.

The undersigned understands that the purpose of the election procedure
is to permit holders of Shares to express their preference for the type of
consideration they wish to receive or retain in the Merger, and understands
that any Cash Election is subject to the proration procedures and other
limitations described in the Merger Agreement, the Proxy Statement and
Instruction C.

THE UNDERSIGNED ACKNOWLEDGES THAT THE BOARD OF DIRECTORS OF SAVANNAH
FOODS MAKES NO RECOMMENDATION AS TO WHETHER OR NOT THE UNDERSIGNED SHOULD MAKE
A CASH ELECTION. EACH STOCKHOLDER SHOULD MAKE HIS OR HER OWN DECISION, IN
CONSULTATION WITH HIS OR HER OWN FINANCIAL AND TAX ADVISORS, AS TO WHETHER OR
NOT TO TAKE A CASH ELECTION.

The undersigned represents and warrants that the undersigned has full
power and authority to submit the Share certificate(s) submitted herewith or
covered by a Notice of Guaranteed Delivery, free and clear of any liens,
claims, charges or encumbrances whatsoever. The undersigned understands and
acknowledges that the method of delivery of the Share certificate(s) and all
other required documents is at the option and risk of the undersigned and that
the risk of loss and title to such Share certificate(s) shall pass only after
the Exchange Agent has actually received the Share certificate(s). All
questions as to the election, revocation, change and form of any election and
surrender of Share certificate(s) hereunder shall be determined by the Exchange
Agent in its reasonable discretion, and such determination shall be binding and
conclusive. The undersigned, upon receipt, shall execute and deliver all
additional documents deemed by the Exchange Agent or Savannah Foods to be
necessary or desirable to complete the sale, assignment, transfer,
cancellation, and retirement of the Shares delivered herewith.

The undersigned understands that in lieu of any fractional share of
Imperial Common Stock, Imperial Holly will pay to each stockholder who
otherwise would be entitled to receive a fraction of a share of Imperial Common
Stock (after taking into account all of the Shares delivered by such
stockholder) an amount in cash determined by multiplying (i) $20.25 by (ii) the
fractional interest in a share of Imperial Common Stock to which such holder
would otherwise be entitled.

The undersigned authorizes and instructs you, as Exchange Agent, to
deliver certificates of Electing Shares to Savannah Foods and/or Imperial Holly
and to receive on behalf of the undersigned, in exchange for Electing Shares
represented thereby, any check for cash (or, in the event of a partial Cash
Election or as a result of the proration procedures described herein or in the
Proxy Statement, certificates for shares of Imperial Common Stock) issuable in
exchange for the Shares represented by such certificates pursuant to the Merger
Agreement. If certificates of Electing Shares are not delivered herewith,
there is furnished herewith a Notice of Guaranteed Delivery of such
certificates representing Electing Shares from a member of a national
securities exchange, a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office in the
United States duly endorsed in blank or otherwise in form acceptable for
transfer on the books of Savannah Foods.

The undersigned understands and agrees that the Exchange Agent will
issue (unless otherwise indicated in the box entitled "Special Payment
Instructions") any check for cash and/or certificate representing shares of
Imperial Common Stock issuable in exchange for Electing Shares represented by
the certificates submitted hereby in the name of the registered holder(s) of
such Electing Shares appearing in the box "Description of Certificates
Submitted." Similarly, unless otherwise indicated in the box entitled "Special
Delivery Instructions," the undersigned understands and agrees that the
Exchange Agent will mail any check for cash and/or certificate representing
shares of Imperial Common Stock issuable in exchange for Electing Shares
represented by the certificates submitted hereby to the

- 4 -
<PAGE> 5
registered holder(s) of the Electing Shares at the address or addresses
appearing in the box entitled "Description of Certificates Submitted."

In the event that the boxes entitled "Special Payment Instructions"
and "Special Delivery Instructions" are both completed, the undersigned
understands and agrees that the Exchange Agent will issue any check in the
name(s) of, and mail such check to, the person(s) so indicated.

PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS SET FORTH BELOW BEFORE
COMPLETING AND TRANSMITTING THIS FORM OF CASH ELECTION.

- 5 -
<PAGE> 6
- --------------------------------------------------------------------------------
SIGNATURE OF HOLDER(S)

The undersigned represents that he or she is a Holder as described in the
Holder's Agreement set forth above on Pages [4 and 5] hereof and has read and
agrees to all of the terms and conditions of such Holder's Agreement.

SIGN HERE

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

- --------------------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S))

Date:
---------------------------------------------

(Must be signed by registered holder(s) exactly as name(s) appear(s) on
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 provided by an officer on behalf of a corporation or by an
executor, administrator, trustee, guardian, attorney, agent or other person
acting in a fiduciary or representative capacity, please provide the following
information. See Instruction A.)

Name(s)
------------------------------------------------------------------------

------------------------------------------------------------------------
(PLEASE PRINT)

Capacity (full title)
----------------------------------------------------------

Address
------------------------------------------------------------------------

------------------------------------------------------------------------
(INCLUDE ZIP CODE)

Area Code and Telephone No.
----------------------------------------------------
Tax Identification or Social Security Number(s)
--------------------------------

Dated: , 1997
-----------------------------------

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

- 6 -
<PAGE> 7
- --------------------------------------------------------------------------------
SIGNATURE GUARANTEE

(IF REQUIRED -- SEE INSTRUCTION A)

The undersigned guarantees the signature(s) which appear(s) on this Form of Cash
Election and the certificate(s) submitted pursuant to this Form of Cash
Election.

Authorized Signature
-----------------------------------------------------------

Name
-------------------------------------------------------------------------

-------------------------------------------------------------------------
(PLEASE PRINT OR TYPE)

Title
-------------------------------------------------------------------------

Name of Firm
-------------------------------------------------------------------

Address
-----------------------------------------------------------------------

-----------------------------------------------------------------------
(ADDRESS OF GUARANTEEING FIRM, INCLUDING ZIP CODE)

Area Code and Telephone No.
----------------------------------------------------

Tax Identification or Social Security Number(s)
--------------------------------

Dated: , 1997
-----------------------------------
- --------------------------------------------------------------------------------
TO PREVENT BACK-UP WITHHOLDING OF CASH PAYMENTS THAT ARE MADE PURSUANT TO THE
MERGER AGREEMENT, A HOLDER MUST COMPLETE A FORM W-9, WHICH IS ENCLOSED.

REMEMBER TO ENCLOSE YOUR STOCK CERTIFICATES

- 7 -
<PAGE> 8
INSTRUCTIONS

THE METHOD OF DELIVERY OF THIS FORM OF CASH ELECTION, CERTIFICATES FOR
SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE
HOLDER. IF SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS STRONGLY RECOMMENDED. DELIVERY SHALL BE EFFECTED, AND
RISK OF LOSS OF CERTIFICATES SHALL PASS, ONLY AFTER PROPER DELIVERY TO THE
EXCHANGE AGENT OF THIS FORM OF CASH ELECTION, CERTIFICATES FOR SHARES, A FORM
W-9 AND ALL OTHER REQUIRED DOCUMENTS.

A. GENERAL.

1. EXECUTION AND DELIVERY. This Form of Cash Election or a
facsimile hereof is to be used either if Share certificates are to be forwarded
herewith if Share certificates are to be delivered by book-entry transfer
pursuant to book entry transfer procedures or if delivery of Shares is to be
guaranteed. This Form of Cash Election must be properly completed, dated and
signed in the box entitled "Signature of Holder(s)," and must be received
(together with stock certificates representing the Shares as to which the Cash
Election is made or with a duly signed Notice of Guaranteed Delivery of such
certificates or confirmation of a book-entry transfer of such Shares, if such
procedure is available, into the Exchange Agents' account at DTC or PDTC
(collectively, "Book Entry Transfer Facilities") pursuant to book entry
transfer procedures) by the Exchange Agent at the address of the Exchange Agent
set forth on the first page hereof prior to the Election Deadline. If Share
certificates are delivered to the Exchange Agent in multiple deliveries, a
properly completed and duly executed copy of this Form of Cash Election must
accompany each such delivery. Holders whose Share certificates are not
immediately available and who cannot deliver their Share certificates and all
other required documents to the Exchange Agent prior to the Election Deadline
may deliver their Shares pursuant to the guaranteed delivery procedure.
Pursuant to such procedure: (i) any such delivery must be made by an Eligible
Institution (as defined in paragraph 2 below); (ii) a properly completed and
duly executed Notice of Guaranteed Delivery, in the form provided herewith,
must be received by the Exchange Agent prior to the Election Deadline; and
(iii) in the case of a guarantee of Shares, the Share certificates in proper
form for transfer or a confirmation of a book entry transfer of Shares, if such
procedure is available, into the Exchange Agent's account at a Book Entry
Transfer Facility, together with a properly completed and duly executed copy of
this Form of Cash Election with any required signature guarantees (or, in the
case of a book entry transfer, an Agent's Message (defined below)), and any
other documents required by this Form of Cash Election, must be received by the
Exchange Agent within three New York Stock Exchange trading days after the date
of execution of such Notice of Guaranteed Delivery. The term "Agents Message"
means a message, transmitted by a Book Entry Transfer Facility, and received by
the Exchange Agent and forming part of a book-entry confirmation, which states
that the Book Entry Transfer Facility has received an express acknowledgment
from a participant in such facility delivering the Shares, that such
participant has received and agrees to be bound by the terms of this Form of
Cash Election and that Imperial Holly may enforce such agreement against the
participant.

Holders of Shares who are nominees only may submit a separate copy of
this Form of Cash Election for each beneficial owner for whom such registered
Holder is a nominee; provided, however, that at the request of the Exchange
Agent, such Holder shall certify to the satisfaction of the Exchange Agent that
such Holder holds such Electing Shares as nominee for the beneficial owner
thereof. Each beneficial owner for whom a copy of this Form of Cash Election
is submitted will be treated as a separate Holder.

HOLDERS WHO DO NOT SUBMIT AN EFFECTIVE COPY OF THIS FORM OF CASH
ELECTION OR WHOSE COPY OF THIS FORM OF CASH ELECTION AND SHARE CERTIFICATES (OR
APPROPRIATE NOTICES OF GUARANTEED DELIVERY), ARE NOT RECEIVED PRIOR TO THE
ELECTION DEADLINE WILL BE DEEMED NOT TO HAVE MADE A CASH ELECTION.

THE METHOD OF DELIVERY OF ALL DOCUMENTS IS AT THE OPTION AND RISK OF
THE HOLDER. IF SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS SUGGESTED.

2. CERTIFICATES FOR IMPERIAL COMMON STOCK AND CHECKS ISSUED IN
SAME NAME. If this Form of Cash Election is signed by the registered Holder(s)
of the certificates delivered herewith, the signature(s) must correspond
exactly with the name(s) as written on the face(s) of the certificates without
alteration, enlargement or any change whatsoever. If any certificates
surrendered hereby are owned of record by two or more joint owners, all such
owners must sign this Form of Cash Election. If any of the Shares delivered
herewith are registered in the names of different Holders, it will be necessary
to complete, sign and submit as many separate Forms of Cash Election as there
are different registrations of such Shares.

No signature on this Form of Cash Election is required to be
guaranteed if (i) this Form of Cash Election is signed by the registered
holder(s) of the certificates surrendered herewith, unless such Holder(s) have
completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" or (ii) the certificates are tendered
for the account of a firm that is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or by a
commercial bank or trust company having an office or correspondent in the
United States (each of the foregoing firms, banks and trust companies being
referred to as an "Eligible Institution").

- 8 -
<PAGE> 9
In all cases requiring a signature guarantee, all signatures on this Form of
Cash Election must be guaranteed by an Eligible Institution. To be an Eligible
Institution for purposes of a signature guarantee, the financial institution
must be a participant in the Securities Transfer Agents Medallion Program or
the Stock Exchange Medallion Program.

3. CERTIFICATES FOR IMPERIAL COMMON STOCK OR CHECKS ISSUED IN
DIFFERENT NAME. When a check in respect of Electing Shares, or as a result of
proration, shares of Imperial Common Stock, are to be issued to anyone other
than exactly the name that appears on the certificate(s) representing Shares
delivered herewith, such payment shall not be made by the Exchange Agent unless
the box entitled "Special Payment Instructions" is completed, and the signature
is guaranteed by an Eligible Institution. In addition, if this Form is signed
by a person other than the registered holder(s) of the certificates listed and
submitted herewith, the certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such certificates. Signatures on any such
certificates or stock powers must also be guaranteed by an Eligible Institution
as described above, unless signed by an Eligible Institution. See Instruction
2 above.

4. SPECIAL DELIVERY INSTRUCTIONS. If the checks or the
certificates for Imperial Common Stock are to be sent to someone other than the
registered holder(s) or to an address other than the address of the registered
holder, it will be necessary to indicate such person or address in the box
entitled "Special Delivery Instructions."

5. PARTIAL ELECTIONS. If the Holder is making a Cash Election
with respect to fewer than all the Shares represented by any certificate
delivered to the Exchange Agent with a copy of this Form of Cash Election, the
Holder must fill in the number of shares for which a Cash Election is made in
the box marked "Number of Shares for which Cash Election is Made" in the table
entitled "Description of Certificates Submitted." ALL SHARES REPRESENTED BY
CERTIFICATES SUBMITTED HEREUNDER SHALL BE TREATED AS HAVING MADE A CASH
ELECTION UNLESS OTHERWISE INDICATED.

6. EXECUTION BY REPRESENTATIVES. If this Form of Cash Election
or any stock certificate(s) are signed by a trustee, executor, administrator,
guardian, officer of a corporation, attorney-in-fact or any other person acting
in a representative or fiduciary capacity, the person signing must give such
person's full title in such capacity and appropriate evidence of authority to
act in such capacity must be forwarded with this Form of Cash Election.

7. FORM W-9. The Holder is required to provide the Exchange
Agent with a correct Taxpayer Identification Number ("TIN'') on Form W-9 to
prevent backup withholding on the cash payment made for Shares. Failure to
provide the Form W-9 may subject the Holder to 31% backup withholding on the
cash payment made for Shares. A blank Form W-9 has been included with the Form
of Cash Election and should be completed, signed and returned in order to
prevent backup withholding. If a Form W-9 is not completed, signed and
returned and the Exchange Agent is not provided with a TIN, the Exchange Agent
will withhold 31% of the cash payment made for Shares until a completed Form
W-9 is provided to the Exchange Agent.

8. LOST CERTIFICATES. In the event that the Holder is unable to
deliver to the Exchange Agent certificate(s) formerly representing his or her
Shares due to the mutilation, loss, theft or destruction of such
certificate(s), this Form of Cash Election may nevertheless be submitted,
together with any documents which may be required, subject to acceptance at the
discretion of Imperial Holly; provided, however, among other requirements, that
the Holder agrees to indemnify Imperial Holly by signing the form of indemnity
agreement which may be obtained from the Exchange Agent and furnishing an
affidavit of loss in form satisfactory to the Exchange Agent and Imperial
Holly.

9. DEFECTS OR IRREGULARITIES. No Shares will be validly
surrendered unless all defects or irregularities in the Form of Cash Election
or the deposit of any Share certificates have been cured or are waived.
Imperial Holly will not incur any liability for failure to give notification of
any defects or irregularities in sufficient time for the Holder to obtain any
particular tax result. Imperial Holly reserves the absolute right to reject
any or all Forms of Cash Election or deposits of certificates the acceptance of
which would, in its judgment, be unlawful. Imperial Holly's interpretation of
the terms and conditions of the Merger Agreement and this Form of Cash Election
(including these Instructions) will be final and binding. The Exchange Agent
will return to the Holder as soon as practicable any certificates it receives
that are not deposited properly and as to which any defects or irregularities
have not been cured or waived.

10. MISCELLANEOUS. A single check and/or a single stock
certificate representing the Merger consideration will be issued in respect of
each certificate submitted.

11. STOCK TRANSFER TAXES. It will not be necessary for transfer
tax stamps to be affixed to the certificates listed in this Form. Imperial
Holly will bear the liability for any state stock transfer taxes applicable to
the issuance and delivery of checks and certificates in connection with the
Merger; provided, however, that if any such check or certificate is to be
issued in the name other than that in which the Share certificates submitted in
exchange therefor are registered, it shall be a condition of such exchange, and
the issuance of any check or certificate, that the person requesting such
exchange shall either: (i) pay to the Exchange Agent the amount of any stock
transfer taxes (whether

- 9 -
<PAGE> 10
imposed on the Holder or the transferee), payable on account of the transfer to
such person, or (ii) provide the Exchange Agent with satisfactory evidence of
the payment of such taxes or exemption therefrom.

12. INADEQUATE SPACE. If the space provided herein under
"Description of Certificates Submitted" is inadequate, the certificate numbers,
the number of shares represented by certificate(s) and the number of shares
submitted should be listed on a separate signed schedule and attached hereto.

13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for
assistance or additional copies of this Form of Cash Election may be made to
the Exchange Agent at the addresses set forth herein.

B. SPECIAL CONDITIONS.

1. TIME IN WHICH TO ELECT. To be effective, an election pursuant
to the terms and conditions set forth herein on this Form of Cash Election
accompanied by the above-described certificates representing Electing Shares or
a proper Notice of Guaranteed Delivery thereof, must be received by the
Exchange Agent, at the address set forth above, no later than the Election
Deadline. Holders whose stock certificates are not immediately available may
also make an effective Cash Election by completing this Form of Cash Election
and by having the box entitled "Notice of Guaranteed Delivery" properly
completed and duly executed (subject to the condition that the certificates for
which delivery is thereby guaranteed are in fact delivered to the Exchange
Agent, duly endorsed in blank or otherwise in form acceptable for transfer on
the books of [Savannah Foods], no later than 5:00 P.M., New York City time, on
the third New York Stock Exchange trading day after the date of execution of
such Notice of Guaranteed Delivery). Each share of Savannah Common Stock with
respect to which the Exchange Agent shall have not received an effective Cash
Election prior to the Election Deadline, outstanding at the effective time of
the Merger will be converted into the right to receive $20.25 of Imperial
Common Stock, subject to the collar and proration procedure described herein
and in the Proxy Statement. See Instruction C.

2. REVOCATION OF ELECTION. Any Cash Election may be revoked or
changed by the person who submitted this Form of Cash Election to the Exchange
Agent and the certificate(s) for Electing Shares withdrawn by written notice
duly executed and received by the Exchange Agent up to and immediately prior to
the Election Deadline. Such notice must specify the person in whose name the
Electing Shares to be withdrawn had been submitted, the number of shares to be
withdrawn, the name of the registered holder thereof, and the serial numbers
shown on the certificate(s) representing the shares to be withdrawn. If a Cash
Election is revoked, and the certificate(s) for Electing Shares withdrawn, the
Electing Shares certificate(s) submitted therewith will be returned promptly by
the Exchange Agent to the person who submitted such certificate(s).

3. TERMINATION OF RIGHT TO ELECT. If for any reason the Merger
is not consummated or is abandoned, this Form of Cash Election will be void and
of no effect. Certificate(s) for Shares previously received by the Exchange
Agent will be returned promptly by the Exchange Agent to the person who
submitted such certificate(s).

C. ELECTION AND PRORATION PROCEDURES.

1. ELECTIONS. By completing this Form of Cash Election in
accordance with the instructions herein, a Savannah Foods stockholder will be
entitled to make a Cash Election; provided that any Cash Election is subject to
the proration procedures described below and in the Proxy Statement in the
event the election made by such stockholder is oversubscribed.

IN CONNECTION WITH MAKING ANY CASH ELECTION, A HOLDER SHOULD READ
CAREFULLY, AMONG OTHER MATTERS, THE AFORESAID DESCRIPTION AND STATEMENTS AND
THE INFORMATION CONTAINED IN THE PROXY STATEMENT UNDER "CERTAIN FEDERAL INCOME
TAX CONSEQUENCES" FOR A DISCUSSION OF THE TAX TREATMENT OF THE RECEIPT OF CASH
BY A HOLDER WHO HAS MADE A CASH ELECTION.

2. PRORATION. The Merger Agreement provides that, at the
effective time of the Merger, each share of Savannah Common Stock issued and
outstanding immediately prior thereto (other than shares of Savannah Common
Stock held by Imperial Holly, IHK Sub or any of their subsidiaries (which
include the shares purchased in the Tender Offer) or held in the treasury of
Savannah Foods, all of which will be canceled and cease to exist without
consideration being payable therefor (the "Excluded Shares")), and shares of
Savannah Common Stock held by stockholders who perfect their appraisal rights
under Delaware law (the "Dissenting Shares") will be converted into the right
to receive, subject to stockholder election and proration, (i) the Cash
Consideration, or (ii) the Stock Consideration (as defined below). The number
of shares of Savannah Common Stock to be converted into the right to receive
the Cash Consideration in the Merger (the "Cash Election Number") will be (x)
70% of the number of shares of Savannah Common Stock outstanding immediately
prior to the effective time of the Merger (which include shares of Savannah
Common Stock purchased in the Tender Offer) less (y) the sum of the Excluded
Shares (which include shares of Savannah Common Stock purchased in the Tender
Offer) and the Dissenting Shares.

- 10 -
<PAGE> 11

In the event that the number of shares of Savannah Common Stock making
a Cash Election exceeds the Cash Election Number, such shares of Savannah
Common Stock 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. In the event that the number of shares of Savannah Common
Stock electing to receive the Cash Consideration is less than the Cash Election
Number, such shares of Savannah Common Stock will be converted into the right
to receive the Cash Consideration while those shares of Savannah Common Stock
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. Any Savannah Foods stockholder who would otherwise receive a
fraction of a share of Imperial Common Stock will receive a cash payment in
lieu thereof.

A description of the election and proration procedures is set forth in
the Proxy Statement under "The Savannah Foods Merger Agreement--Consideration
to be Paid in the Merger" and "--Elections". A full statement of the election
and proration procedures is contained in Article II of the Merger Agreement and
all Cash Elections are subject to compliance with such procedures.

AS A RESULT OF THE PRORATION PROCEDURES DESCRIBED ABOVE AND IN THE
PROXY STATEMENT, HOLDERS MAY NOT RECEIVE THE AMOUNT OF CASH CONSIDERATION THAT
THEY ELECT. SUCH HOLDERS WILL NOT BE ABLE TO CHANGE THE NUMBER OF SHARES OF
IMPERIAL COMMON STOCK OR THE AMOUNT OF CASH CONSIDERATION ALLOCATED TO THEM
PURSUANT TO SUCH PROCEDURES.

3. COLLAR. Shares of Savannah Common Stock with respect to which
a Cash Election has not been made or Shares which will be converted into the
right to receive shares of Imperial Common Stock because of proration will
receive $20.25 of Imperial Common Stock (the "Stock Consideration"), subject to
the following adjustments: (x) if the Closing Price (as defined below) of
Imperial Common Stock is $13.25 or lower, the Stock Consideration will be a
number of shares of Imperial Common Stock equal to the quotient of $20.25
divided by $13.25, (y) if the Closing Price of shares of Imperial Common Stock
is $17.25 or greater, the Stock Consideration will be a number of shares of
Imperial Common Stock equal to the quotient of $20.25 divided by $17.25, or (z)
if the Closing Price of the shares of Imperial Common Stock is greater than
$13.25 but less than $17.25, the Stock Consideration will be a number of shares
of Imperial Common Stock equal to the quotient of $20.25 divided by the Closing
Price. "Closing Price" means the volume weighted average of the trading prices
of Imperial Common Stock, 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 trading days prior to the date of the
closing of the Merger. Any Savannah Foods stockholder who would otherwise
receive a fraction of a share of Imperial Common Stock will receive a cash
payment in lieu thereof.

4. NON-ELECTING SHARES. If no election is made by a Holder, such
Holder shall be deemed not to have made a Cash Election. If Imperial Holly
shall determine that any election was not properly made with respect to any
Shares, such election shall be deemed to be not in effect, and the Holder
covered by such election shall, for the purposes of the Merger Agreement, be
deemed not to have made a Cash Election.

D. RECEIPT OF IMPERIAL COMMON STOCK AND/OR CHECKS REPRESENTING CASH
CONSIDERATION.

As soon as practicable after the effective time of the Merger and
after the Election Deadline, the Exchange Agent will mail cash payments by
check and/or certificate(s) for Imperial Common Stock to Holders with respect
to each Share represented by certificates included with any effective Cash
Election. Holders who fail to make an effective Cash Election with respect to
any or all of their Shares will receive, for each such Share, the right to
receive the Stock Consideration, as soon as practicable after the
certificate(s) representing such Shares have been submitted.

No fractional shares will be issued in connection with the Merger.
Any Savannah Foods stockholder who would otherwise receive a fraction of a
share of Imperial Common Stock will receive a cash payment in lieu thereof.

- 11 -
<PAGE> 12

IMPORTANT TAX INFORMATION

Under U.S. federal income tax law, a holder surrendering certificates
is required to provide the Paying Agent with such holder's correct TIN on
Substitute Form W-9 below. If such holder is an individual, the TIN is the
holder's social security number. The Certificate of Awaiting Taxpayer
Identification Number should be completed if the surrendering holder has not
been issued a TIN and has applied for a number or intends to apply for a number
in the near future. If the Paying Agent is not provided with the correct TIN,
the holder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, payments that are made to such holder with respect to
surrendered certificates may be subject to backup withholding.

Certain holders (including, among others, all corporations and certain
non-U.S. individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as such an exempt
recipient, that holder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements can be
obtained from the Paying Agent. See the enclosed Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9 for additional
information.

If backup withholding applies, the Paying Agent is required to
withhold 31% of any amounts otherwise payable to the holder. 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.

PURPOSE OF SUBSTITUTE FORM W-9

To prevent backup withholding on payments that are made to a holder
with respect to certificates surrendered for payment, the holder is required to
notify the Paying Agent of his or her correct TIN by completing the form herein
certifying that the TIN provided on Substitute Form W-9 is correct (or that
such holder is awaiting a TIN) and that (i) such holder has not been notified
by the Internal Revenue Service that he or she is subject to backup withholding
as a result of failure to report all interest or dividends or (ii) the Internal
Revenue Service has notified such holder that he or she is no longer subject to
backup withholding.

WHAT NUMBER TO GIVE THE PAYING AGENT

Each holder is required to give the Paying Agent the social security
number or employer identification number of the record holder(s) of the
Certificate(s) evidencing Shares. If the Certificate(s) is (are) in more than
one name or is (are) not in the name of the actual holder, consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional guidance on which number to report.

CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER

If the tendering holder has not been issued a TIN and has applied for
a number or intends to apply for a number in the near future, write "Applied
For" in the space for the TIN on Substitute Form W-9, sign and date the form
and the Certificate of Awaiting Taxpayer Identification Number and return them
to the Paying Agent. If such certificate is completed and the Paying Agent is
not provided with the TIN within 60 days, the Paying Agent will withhold 31% of
all payments made thereafter until a TIN is provided to the Paying Agent.

SUBSTITUTE FORM W-9 REQUEST FOR
TAXPAYER IDENTIFICATION NUMBER AND CERTIFICATION

PAYOR'S NAME:
- --------------------------------------------------------------------------------
Name as shown on account (if joint, list first and circle name of the person or
entity whose number you enter below)

Name
----------------------------------------------------------------------

Address
----------------------------------------------------------------------

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

City, State and Zip Code
------------------------------------------------------

- 12 -
<PAGE> 13
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
SUBSTITUTE TAXPAYER IDENTIFICATION NO. --
FOR ALL ACCOUNTS
Social Security No.
Form W-9 Enter your taxpayer identification
number in the appropriate box. -------------------------

Department of the Treasury For most individuals this is your social
Internal Revenue Service security number. If you do not have a
number, see the enclosed Guidelines.

Employer Identification No.
Payor's Request for Note: If the account is in more than
Taxpayer Identification No. one name, see the chart in the enclosed -------------------------
Guidelines on which number to give the
payor.

- ----------------------------------------------------------------------------------------------------------------
Certification -- Under the penalties of perjury, I certify that:

(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a
number to be issued to me); and

(2) I am not subject to backup withholding either because I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report
all interests or dividends, or the IRS has notified me that I am no longer subject to backup
withholding.
</TABLE>

Certification Instruction -- You must cross out Item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting 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 Item (2). (The certification requirement
does not apply to real estate transactions, mortgage interest paid, the
acquisition or abandonment of secured property, contributions to an individual
retirement account, and payments other than interest and dividends. Also see
Signing the Certification under Specific Instructions in the enclosed
Guidelines.)

SIGNATURE DATE
----------------------------- --------------------------------
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING. 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 WROTE "APPLIED FOR" IN THE SPACE
FOR THE "TIN" ON 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 (a) 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 (b)
I intend to mail or deliver an application in the near future. I understand
that if I do not provide a taxpayer identification number within 60 days, 31% of
all reportable payments made to me thereafter will be withheld until I provide a
number.

- ----------------------------------- -------------------------
Signature Date

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

- 13 -