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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
SCHEDULE 14D-1
Tender Offer Statement Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
(Amendment No. 1)
_______________
SAVANNAH FOODS & INDUSTRIES, INC.
(Name of Subject Company)
_______________
IHK MERGER SUB CORPORATION
IMPERIAL HOLLY CORPORATION
(Bidders)
_______________
COMMON STOCK, PAR VALUE $0.25 PER SHARE
(Title of Class of Securities)
_______________
804795 10 2
(CUSIP Number of Class of Securities)
_______________
WILLIAM F. SCHWER, ESQ.
IMPERIAL HOLLY CORPORATION
ONE IMPERIAL SQUARE, SUITE 200
8016 HIGHWAY 90-A
SUGAR LAND, TEXAS 77478
(281) - 491-9181
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Bidders)
with a copy to:
ROBERT V. JEWELL, ESQ.
ANDREWS & KURTH L.L.P.
TEXAS COMMERCE TOWER
600 TRAVIS, SUITE 4200
HOUSTON, TEXAS 77002-3090
(713) 220-4200
_______________
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This Amendment No. 1 ("Amendment No. 1") amends and supplements the Tender
Offer Statement on Schedule 14D-1, dated September 18, 1997 (the "Schedule
14D-1"), relating to the offer by IHK Merger Sub Corporation, a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Imperial Holly
Corporation, a Texas corporation ("Parent"), to purchase 14,397,836 outstanding
shares (or such other amount of shares representing 50.1% of the outstanding
common stock, par value $0.25 per share (the "Shares"), on a fully diluted basis
on the date of purchase) of Savannah Foods & Industries, Inc., a Delaware
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated September 18, 1997 (the "Offer to
Purchase"), and in the related Letter of Transmittal (which together constitute
the "Offer"), which were filed with the Schedule 14D-1 as Exhibits (a)(1) and
(a)(2), respectively.
ITEM 10--ADDITIONAL INFORMATION
As the CUSIP number for the Company initially included on the cover page to
the Schedule 14D-1 was incorrect, the cover page of the Schedule 14D-1 is
amended to include the correct CUSIP Number of the Company (804795 10 2).
The Offer to Purchase filed as Exhibit (a)(1) has been amended so that the
first paragraph of Section 14 thereof reads as follows:
"Notwithstanding any other provision of the Offer, the Purchaser will
not be required to accept for payment or pay for any Shares tendered
pursuant to the Offer, and may terminate or amend the Offer and may
postpone the acceptance for payment of and payment for Shares tendered, if
(i) prior to the Expiration Date, the Target Shares Condition, the HSR
Condition or the Financing Condition shall not have been satisfied or (ii)
at any time on or after the date of the Merger Agreement, and prior to the
Expiration Date, any of the following conditions shall have occurred and be
continuing:"
ITEM 11--MATERIAL TO BE FILED AS EXHIBITS
(a)(1) Offer to Purchase, as amended.
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SIGNATURE
After due inquiry and to the best of its knowledge and belief, each of the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: October 14, 1997
IHK MERGER SUB CORPORATION
By: /s/ WILLIAM F. SCHWER
______________________________
William F. Schwer
Vice President and Secretary
IMPERIAL HOLLY CORPORATION
By: /s/ WILLIAM F. SCHWER
______________________________
William F. Schwer
Managing Director,
Senior Vice President,
General Counsel and Secretary
<PAGE>
EXHIBIT INDEX
Exhibit Exhibit Name
- ------- ------------
(a)(1) Offer to Purchase, dated September 18, 1997, as amended.
<PAGE>
EXHIBIT 99(a)(1)
Offer to Purchase for Cash
14,397,836 Shares of Common Stock
of
SAVANNAH FOODS & INDUSTRIES, INC.
at
$20.25 Net Per Share
by
IHK MERGER SUB CORPORATION
a wholly owned subsidiary
of
IMPERIAL HOLLY CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, OCTOBER 16, 1997, UNLESS THE OFFER
IS EXTENDED.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT THE
OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND
ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AT THE OFFER PRICE AND
THE MERGER, AND RECOMMENDS THAT HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER
THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN BY THE EXPIRATION DATE AT LEAST 14,397,836 SHARES
OR SUCH OTHER NUMBER OF SHARES REPRESENTING 50.1% OF THE COMPANY'S OUTSTANDING
COMMON STOCK ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE, (II) THE
EXPIRATION OF ANY APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER
AND (III) IMPERIAL HOLLY HAVING OBTAINED FINANCING SUFFICIENT TO ENABLE IT (OR
TO CAUSE PURCHASER) TO PURCHASE THE SHARES TENDERED PURSUANT TO THE OFFER AND
TO CONSUMMATE THE MERGER. THE OFFER ALSO IS SUBJECT TO CERTAIN OTHER
CONDITIONS WHICH ARE SET FORTH IN SECTION 14 OF THIS OFFER TO PURCHASE.
---------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (a) complete and sign the enclosed Letter of Transmittal
(or a facsimile copy thereof) in accordance with the instructions in the
Letter of Transmittal, have his signature thereon guaranteed if required by
Instruction 1 of the Letter of Transmittal and mail or deliver it, together
with the certificate(s) representing tendered Shares, and any other required
documents, to the Paying Agent or tender such Shares pursuant to the procedure
for book-entry transfer set forth in Section 3 or (b) request such
stockholder's broker, dealer, commercial bank, trust company or other nominee
to effect the transaction for such stockholder. A stockholder whose Shares are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact such broker, dealer, commercial bank, trust company
or other nominee if such stockholder desires to tender such Shares.
Any stockholder who desires to tender such stockholder's Shares and whose
certificates representing such Shares are not immediately available or who
cannot comply with the procedures for book-entry transfer on a timely basis
may tender such Shares by following the procedures for guaranteed delivery set
forth in Section 3.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase. Additional
copies of this Offer to Purchase, the Letter of Transmittal, the Notice of
Guaranteed Delivery and other related materials may be obtained from the
Information Agent or from brokers, dealers, commercial banks and trust
companies.
---------------
The Dealer Manager for the Offer is:
LEHMAN BROTHERS
---------------
September 18, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
Section 1. Terms of the Offer, Proration and Expiration Date............ 3
Section 2. Acceptance for Payment and Payment........................... 5
Section 3. Procedures for Tendering Shares.............................. 6
Section 4. Withdrawal Rights............................................ 8
Section 5. Certain Tax Consequences..................................... 9
Section 6. Price Range of Shares; Dividends............................. 10
Section 7. Certain Information Concerning the Company................... 10
Certain Information Concerning the Purchaser and Imperial
Section 8. Holly....................................................... 12
Section 9. Source and Amount of Funds................................... 13
Background of the Offer, Past Contacts, Transactions or
Section 10. Negotiations with the Company............................... 15
Purpose of the Offer; the Merger; Merger Agreement; Plans for
Section 11. the Company................................................. 16
Section 12. Effect of the Offer on the Market for Shares................. 27
Section 13. Dividends and Distributions.................................. 27
Section 14. Conditions to the Offer...................................... 27
Section 15. Certain Legal Matters; Required Regulatory Approvals......... 29
Section 16. Fees and Expenses............................................ 31
Section 17. Miscellaneous................................................ 31
</TABLE>
<TABLE>
<S> <C>
SCHEDULE I--DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER AND IMPERIAL
HOLLY...................................................................... S-1
</TABLE>
(i)
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To Holders of Common Stock of
Savannah Foods & Industries, Inc.
INTRODUCTION
IHK Merger Sub Corporation, a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Imperial Holly Corporation, a Texas corporation
("Imperial Holly"), hereby offers to purchase 14,397,836 shares of common
stock, par value $0.25 per share (the "Shares"), of Savannah Foods &
Industries, Inc., a Delaware corporation (the "Company"), or such other number
of Shares representing 50.1% of the Company's outstanding common stock on a
Fully Diluted Basis (as defined below) on the date of purchase, at a price of
$20.25 per Share (such price, or any such higher price as may be paid in the
Offer (as defined below), being referred to herein as the "Offer Price"), net
to the seller in cash, without interest thereon, upon the terms and subject to
the conditions set forth in this Offer to Purchase and in the related Letter
of Transmittal (which together constitute the "Offer"). "Fully Diluted Basis"
means the number of Shares (i) issued and outstanding as of the close of
business on the date of purchase and (ii) issuable pursuant to the exercise of
rights to purchase Shares or upon conversion or exchange of other securities,
other than options to purchase shares issued under the Company's 1996 Equity
Incentive Plan.
Tendering stockholders will not be obligated to pay brokerage commissions
or, except as set forth in Instruction 6 of the Letter of Transmittal,
transfer taxes on the purchase of Shares by the Purchaser pursuant to the
Offer. However, any tendering stockholder or other payee who fails to complete
and sign the Substitute Form W-9 that is included in the Letter of Transmittal
may be subject to a required backup federal income tax withholding of 31% of
the gross proceeds payable to such stockholder or other payee pursuant to the
Offer. See Section 3. The Purchaser will pay all charges and expenses of
Lehman Brothers Inc. ("Lehman Brothers"), which is acting as Dealer Manager
for the Offer (in such capacity, the "Dealer Manager"), D. F. King & Co.,
Inc., which is acting as the Information Agent (the "Information Agent"), and
Wachovia Bank, N.A., which is acting as the Paying Agent (the "Paying Agent"),
incurred in connection with the Offer. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT THE
OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND
ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AT THE OFFER PRICE AND
THE MERGER, AND RECOMMENDS THAT HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER
THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN BY THE EXPIRATION DATE AT LEAST 14,397,836 SHARES,
OR SUCH OTHER NUMBER OF SHARES REPRESENTING 50.1% OF THE COMPANY'S OUTSTANDING
COMMON STOCK ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE (THE "TARGET
SHARE CONDITION" AND SUCH NUMBER OF SHARES BEING REFERRED TO HEREIN AS THE
"TARGET NUMBER OF SHARES") , (II) THE EXPIRATION OF ANY APPLICABLE WAITING
PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS
AMENDED (THE "HSR ACT") AND THE REGULATIONS THEREUNDER (THE "HSR CONDITION")
AND (III) IMPERIAL HOLLY HAVING OBTAINED FINANCING SUFFICIENT TO ENABLE IT (OR
TO CAUSE THE PURCHASER) TO PURCHASE THE SHARES TENDERED PURSUANT TO THE OFFER
AND TO CONSUMMATE THE MERGER (THE "FINANCING CONDITION"). THE OFFER ALSO IS
SUBJECT TO CERTAIN OTHER CONDITIONS WHICH ARE SET FORTH IN SECTION 14.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION ("DLJ"), THE COMPANY'S
FINANCIAL ADVISOR, HAS DELIVERED TO THE BOARD OF DIRECTORS OF THE COMPANY ITS
WRITTEN OPINION, DATED SEPTEMBER 11, 1997, THAT THE OFFER PRICE AND THE MERGER
CONSIDERATION (AS DEFINED BELOW) TO BE RECEIVED BY THE STOCKHOLDERS PURSUANT
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TO THE OFFER AND THE MERGER, TAKEN AS A WHOLE, ARE FAIR FROM A FINANCIAL POINT
OF VIEW, TO SUCH STOCKHOLDERS. A COPY OF THE WRITTEN OPINION OF DLJ, WHICH
SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND CERTAIN LIMITATIONS ON
THE SCOPE OF REVIEW UNDERTAKEN BY DLJ, IS CONTAINED IN THE COMPANY'S
SOLICITATION/ RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE 14D-
9") FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") IN
CONNECTION WITH THE OFFER, A COPY OF WHICH IS BEING FURNISHED TO THE
STOCKHOLDERS CONCURRENTLY WITH THIS OFFER TO PURCHASE.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of September 12, 1997 (the "Merger Agreement"), among Imperial Holly, the
Purchaser and the Company, pursuant to which, as promptly as practicable
following the later of the Expiration Date and the satisfaction or waiver of
certain conditions, the Purchaser will be merged with and into the Company
(the "Merger"), with the Company surviving as a wholly owned subsidiary of
Imperial Holly (the "Surviving Corporation"). At the effective time of the
Merger (the "Effective Time"), each Share issued and outstanding immediately
prior thereto (other than Shares held by Imperial Holly, the Purchaser or any
of their subsidiaries, or held in the treasury of the Company, all of which
will be canceled and cease to exist without consideration being payable
therefor (the "Excluded Shares"), and Shares held by stockholders who perfect
their appraisal rights under Delaware law (the "Dissenting Shares")) will be
converted into the right to receive, subject to the proration procedures
described below (i) cash in the amount equal to the Offer Price, without
interest thereon (the "Cash Consideration"), or (ii) Stock Consideration (as
defined below, and together with the Cash Consideration, the "Merger
Consideration").
The number of Shares to be converted into the right to receive the Cash
Consideration in the Merger shall be equal to (x) 70% of the number of Shares
issued and outstanding immediately prior to the Effective Time less (y) the
sum of the Excluded Shares (which include Shares purchased in the Offer) and
the Dissenting Shares (the "Cash Election Number"). Subsequent to the
consummation of the Offer, each stockholder of the Company holding Shares not
tendered in the Offer (other than Excluded Shares) or not accepted for payment
in the Offer because of proration will be entitled to make an election to
receive the Cash Consideration. If the number of Shares electing to receive
the Cash Consideration exceeds the Cash Election Number, such Shares will be
converted into the right to receive the Cash Consideration on a pro rata
basis, with the remainder converted into the right to receive the Stock
Consideration. If the number of Shares electing to receive the Cash
Consideration is less than the Cash Election Number, such Shares will be
converted into the right to receive the Cash Consideration while those Shares
not so electing will be converted into the right to receive the Stock
Consideration on a pro rata basis, with the remainder receiving the Cash
Consideration. "Stock Consideration," with respect to each Share converted
into the right to receive such Stock Consideration, shall mean (x) if the
Closing Price (as defined below) of the shares of common stock, without par
value, of Imperial Holly ("Imperial Shares") is $13.25 or lower, a number of
Imperial Shares equal to the quotient of the Offer Price divided by $13.25,
(y) if the Closing Price of the Imperial Shares is $17.25 or greater, a number
of Imperial Shares equal to the quotient of the Offer Price divided by $17.25,
or (z) if the Closing Price of the Shares is greater than $13.25 but less than
$17.25, a number of Imperial Shares equal to the quotient of the Offering
Price divided by the Closing Price. The Stock Consideration also includes
certain rights to purchase shares of preferred stock of Imperial Holly. See
Section 11 for a description of such rights. "Closing Price" means the volume
weighted average of the trading prices of the Imperial Shares, rounded to
three decimal places, as reported by Bloomberg Financial Markets, for each of
the first 15 consecutive days upon which both the New York Stock Exchange and
the American Stock Exchange are open for trading in the period commencing 20
of such trading days prior to the date of the closing of the Merger. See
Section 11 for a description of the Merger Agreement.
The Purchaser, Imperial Holly and each of the Directors and executive
officers of the Company have entered into a stockholders agreement, dated
September 12, 1997 (the "Stockholders Agreement"), whereby each of
2
<PAGE>
such stockholders has agreed to tender all Shares owned by such stockholder
into the Offer and not withdraw any of such Shares so tendered.
According to the Company, as of September 1, 1997, there were (i) 28,738,196
Shares issued and outstanding, all of which were validly issued, fully paid
and nonassessable, (ii) 2,568,604 Shares were held in the treasury of the
Company, and (iii) 1,250,000 Shares were reserved for future issuance pursuant
to the Company's 1996 Equity Incentive Plan, of which 179,844 Shares were
reserved for issuance upon exercise of existing options. See Section 11 for a
description of the effect of the Merger on such existing options. As of the
date hereof, 1,000,000 shares of Company preferred stock are reserved for
issuance pursuant to a Rights Agreement, dated as of March 31, 1989, between
the Company and and Wachovia Bank, N.A., as successor rights agent to Citizens
and Southern Trust Company (Georgia), N.A. (the "Company Rights Agreement"),
none of which are currently issued and outstanding. The Company has amended
the Company Rights Agreement so as to provide that no purchase rights under
such agreement will become exercisable as a result of the authorization,
execution or delivery of the Merger Agreement or the consummation of the Offer
or the Merger.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH STOCKHOLDERS SHOULD READ CAREFULLY BEFORE ANY
DECISION IS MADE WITH RESPECT TO THE OFFER.
The statements regarding future market prices and operating results and
other statements that are not historical facts contained herein are forward-
looking statements. The words "expect", "project", "estimate", "believe",
"anticipate", "plan", "intend", "could", "may", "predict" and similar
expressions are also intended to identify forward-looking statements. Such
statements involve risks, uncertainties and assumptions, including, without
limitation, market factors, the effect of weather and economic conditions,
farm and trade policy, the available supply of sugar, available quantity and
quality of sugar beets and other factors detailed elsewhere in this Offer to
Purchase and other Company filings with the Commission. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual outcomes may vary materially from those indicated.
Section 1. Terms of the Offer, Proration and Expiration Date.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of such extension or
amendment), if more than the Target Number of Shares is validly tendered and
not withdrawn in accordance with Section 4 of this Offer to Purchase prior to
the Expiration Date, Purchaser will accept for payment and pay for the Target
Number of Shares, on a pro rata basis (with appropriate adjustments to avoid
purchases of fractional Shares) based upon the number of Shares properly
tendered and not withdrawn by each stockholder at or prior to the Expiration
Date. In the event that proration of tendered Shares is required, because of
the difficulty of determining the precise number of Shares properly tendered
and not withdrawn (due in part to the guaranteed delivery procedure described
in Section 3), the Purchaser does not expect to be able to announce the final
results of such proration or pay for any Shares until at least five New York
Stock Exchange, Inc. ("NYSE") trading days after the Expiration Date.
Preliminary results of proration will be announced by press release as
promptly as practicable after the Expiration Date. Stockholders may obtain
such preliminary information from the Information Agent and may be able to
obtain such information from their brokers. The term "Expiration Date" means
12:00 midnight, New York City time, on Thursday, October 16, 1997, unless and
until Purchaser, in its sole discretion (but subject to the terms and
conditions of the Merger Agreement), shall have extended the period during
which the Offer is open, in which event the term "Expiration Date" shall mean
the latest time and date at which the Offer, as so extended by Purchaser,
shall expire.
The Offer is conditioned upon, among other things, the satisfaction of each
of the Target Share Condition, the HSR Condition and the Financing Condition.
The Offer is also subject to certain other conditions set forth in Section 14
below. If any condition to the Purchaser's obligation to purchase Shares under
the Offer is not satisfied prior to the Expiration Date, the Purchaser
reserves the right (subject to the terms of the Merger Agreement and the
applicable rules and regulations of the Commission) to (i) decline to purchase
any of the
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Shares tendered and terminate the Offer, (ii) waive such unsatisfied
condition, and purchase the Target Number of Shares validly tendered and not
withdrawn, (iii) extend the Offer and, subject to the right of stockholders to
withdraw Shares as provided in Section 4 of this Offer to Purchase, retain the
Shares which have been tendered during the period or periods for which the
Offer is extended or (iv) amend the Offer. The Merger Agreement provides that
the Purchaser reserves the right to increase the price per Share payable in
the Offer or to otherwise amend the Offer; provided, however, the Purchaser
will not, without the prior written consent of the Company, (i) decrease or
change the form of consideration payable in the Offer, (ii) decrease the
Target Number of Shares, (iii) impose conditions to the Offer in addition to
those set forth in the Merger Agreement, (iv) change the conditions of the
Offer (except that the Purchaser may waive any of the conditions of the Offer
other than the Target Share Condition) or (v) make any other change in the
terms or conditions of the Offer which is adverse to holders of Shares.
If the conditions described in Section 14 are not satisfied, to the extent
permitted by the Merger Agreement, the Purchaser may extend the period of time
during which the Offer is open and thereby delay acceptance for payment of,
and the payment for, any Shares, by giving oral or written notice of such
extension to the Paying Agent. The rights reserved by the Purchaser in this
paragraph are in addition to the Purchaser's rights to amend or terminate the
Offer described in Section 14. There can be no assurance, however, that the
Purchaser will exercise its rights to extend the Offer. Any extension,
amendment or termination will be followed as promptly as practicable by public
announcement thereof, the announcement in the case of an extension to be
issued no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date in accordance with the
announcement requirements of Rule 14d-4(c) under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Without limiting the obligation of
the Purchaser under such Rule or the manner in which the Purchaser may choose
to make any public announcement, the Purchaser currently intends to make
announcements by issuing a release to the Dow Jones News Service.
If the Purchaser extends the Offer, or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its purchase of or
payment for Shares or is unable to pay for Shares pursuant to the Offer for
any reason, then without prejudice to the Purchaser's rights under the Offer,
the Paying Agent may retain tendered Shares on behalf of the Purchaser, and
such Shares may not be withdrawn except to the extent tendering stockholders
are entitled to withdrawal rights as described in Section 4 of this Offer to
Purchase. However, the ability of the Purchaser to delay the payment for
Shares which the Purchaser has accepted for payment is limited by Rule 14e-
l(c) under the Exchange Act, that requires that a bidder pay the consideration
offered or return the securities deposited by or on behalf of holders of
securities promptly after the termination or withdrawal of the Offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will disseminate additional tender offer materials and extend
the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under
the Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances, including the
relative materiality of the change in terms or information. With respect to a
change in price or a change in percentage of securities sought (other than an
increase in the number of Shares being sought that does not exceed 2% of the
number of Shares outstanding), a minimum period of 10 business days is
required to allow for adequate dissemination to stockholders and investor
response. If, prior to the Expiration Date, the Purchaser should decide to
increase the price per Share being offered in the Offer, such increase will be
applicable to all stockholders whose Shares are accepted for payment pursuant
to the Offer. As used in this Offer to Purchase, "business day" has the
meaning set forth in Rule l4d-1 under the Exchange Act.
The Company has provided to the Purchaser its list of stockholders and
security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of
Transmittal and other relevant materials will be mailed to record holders of
Shares and furnished to brokers, dealers, commercial banks, trust companies
and similar persons whose names, or the names of whose nominees,
4
<PAGE>
appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
Section 2. Acceptance for Payment and Payment.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), the Purchaser will purchase, by accepting for payment, and will
pay for, the Target Number of Shares that have been validly tendered prior to
the Expiration Date (and not properly withdrawn in accordance with Section 4
hereof) promptly after the Expiration Date. Any determination concerning the
satisfaction of such terms and conditions shall be within the sole discretion
of the Purchaser. See Section 14. The Purchaser expressly reserves the right
to delay acceptance for payment of, or, subject to Rule 14e-1(c) under the
Exchange Act, payment for, Shares in order to comply, in whole or in part,
with any applicable law, including the HSR Act. See Sections 14 and 15.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Paying Agent of (i) certificates for
such Shares or timely confirmation of book-entry transfer (a "Book-Entry
Confirmation") of such Shares into the Paying Agent's account at The
Depository Trust Company or the Philadelphia Depository Trust Company (each, a
"Book-Entry Transfer Facility") pursuant to the procedures set forth in
Section 3, (ii) a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof), with any required signature
guarantees or an Agent's Message (as defined below) in connection with a book-
entry transfer, and (iii) any other documents required by the Letter of
Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Paying Agent and forming a part of
a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that are the subject of such Book-Entry
Confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Purchaser may enforce such
agreement against such participant.
Pursuant to the HSR Act, on September 17, 1997, Imperial Holly filed a
Premerger Notification and Report Form in connection with the purchase of
Shares pursuant to the Offer with the Federal Trade Commission (the "FTC") and
the Antitrust Division of the Department of Justice (the "Antitrust
Division"). Under the provisions of the HSR Act applicable to the Offer, the
purchase of Shares pursuant to the Offer may not be consummated until the
expiration of a 15-calendar day waiting period following the filing by
Imperial Holly. Accordingly, the waiting period under the HSR Act applicable
to the purchase of Shares pursuant to the Offer will expire at 11:59 p.m., New
York City time, on October 2, 1997, unless such waiting period is earlier
terminated by the FTC and the Antitrust Division or extended by a request from
the FTC or the Antitrust Division for additional information or documentary
material prior to the expiration of the waiting period or by the withdrawal
and resubmission of the Premerger Notification and Report Form by Imperial
Holly. Pursuant to the HSR Act, Imperial Holly has requested early termination
of the waiting period applicable to the Offer. There can be no assurance,
however, that the 15-day HSR Act waiting period will be terminated early or
not extended. See Section 15. In any event, pursuant to Rule 14e-1(a) under
the Exchange Act, the Expiration Date may not occur prior to October 16, 1997.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment (and thereby purchased) tendered Shares, if, as and when the Purchaser
gives oral or written notice to the Paying Agent of the Purchaser's acceptance
of such Shares for payment pursuant to the Offer. In all cases, payment for
Shares purchased pursuant to the Offer will be made by deposit of the purchase
price with the Paying Agent, which will act as agent for tendering
stockholders for the purpose of receiving payment from the Purchaser and
transmitting payment to tendering stockholders. Under no circumstances will
interest on the purchase price of the Shares be paid by the Purchaser. Upon
the deposit of funds with the Paying Agent for the purpose of making payments
to tendering stockholders, the Purchaser's obligation to make such payments
shall be satisfied and tendering
5
<PAGE>
stockholders must thereafter look solely to the Paying Agent for payment of
amounts owed to them by reason of the acceptance for payment of Shares
pursuant to the Offer.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates submitted represent more Shares than are tendered,
certificates for such Shares not purchased or tendered will be returned,
without expense to the tendering stockholder (or, in the case of Shares
tendered by book-entry transfer into the Paying Agent's account at a Book-
Entry Transfer Facility pursuant to the procedures set forth in Section 3,
such Shares will be credited to an account maintained at such Book-Entry
Transfer Facility), promptly after the expiration, termination or withdrawal
of the Offer.
Section 3. Procedures for Tendering Shares.
For Shares to be validly tendered pursuant to the Offer, a properly
completed and duly executed Letter of Transmittal or facsimile thereof, with
any required signature guarantees, or an Agent's Message in connection with a
book-entry delivery of Shares, and any other requirements, must be received by
the Paying Agent at one of its addresses set forth on the back cover of this
Offer to Purchase prior to the Expiration Date. In addition, either (i) the
certificates for Shares must be received by the Paying Agent along with the
Letter of Transmittal or Shares must be tendered pursuant to the procedures
for book-entry transfer described below and a Book-Entry Confirmation must be
received by the Paying Agent, in each case prior to the Expiration Date, or
(ii) the tendering stockholder must comply with the guaranteed delivery
procedures described below. The Paying Agent will establish an account with
respect to the Shares at each Book-Entry Transfer Facility for purposes of the
Offer within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in any of the Book-Entry Transfer
Facilities' systems may make book-entry delivery of Shares by causing a Book-
Entry Transfer Facility to transfer such Shares into the Paying Agent's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. However, although delivery of
Shares may be effected through book-entry transfer at a Book-Entry Transfer
Facility, the Letter of Transmittal or facsimile thereof properly completed
and duly executed, with any required signature guarantees, or an Agent's
Message in connection with a book-entry transfer, and any other required
documents, must, in any case, be transmitted to and received by the Paying
Agent at one of its addresses set forth on the back cover of this Offer to
Purchase prior to the Expiration Date or the tendering stockholder must comply
with the guaranteed delivery procedures described below. DELIVERY OF DOCUMENTS
TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER
FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE PAYING AGENT.
No signature guarantee on this Letter of Transmittal is required (a) if this
Letter of Transmittal is signed by the registered holder of the Shares
tendered herewith, unless such holder has completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" or (b) if such Shares are tendered for the account of a bank or
trust company in the United States or by a firm that is a member of the
National Association of Securities Dealers, Inc. (the "NASD") or of a
registered national securities exchange which is a member of a recognized
member of a Medallion Signature Guarantee Program (an "Eligible Institution").
In all other cases, all signatures on this Letter of Transmittal must be
guaranteed by an Eligible Institution. See Instruction 1 of the Letter of
Transmittal. If the certificates are registered in the name of a person other
than the signer of the Letter of Transmittal or if payment is to be made or
certificates for Shares not accepted for payment or not tendered are to be
returned to a person other than the registered holder, then the tendered
certificates must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered owner or
owners appear on the certificates, with the signatures on the certificates or
stock powers guaranteed as described above. See Instructions 1 and 5 of the
Letter of Transmittal.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL (OR A MANUALLY
SIGNED FACSIMILE THEREOF) AND ANY OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY
THROUGH A BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE
TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
6
<PAGE>
If a stockholder desires to tender Shares pursuant to the Offer and such
stockholder's certificates for Shares are not immediately available or time
will not permit all required documents to reach the Paying Agent on or prior
to the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all
the following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser herewith, is
received by the Paying Agent as provided below, on or prior to the
Expiration Date as provided below; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation), together with a Letter of
Transmittal or facsimile thereof, properly completed and duly executed,
with any required signature guarantees (or, in the case of a book-entry
transfer, an Agent's Message) and any other documents required by the
Letter of Transmittal are received by the Paying Agent within three NYSE
trading days after the date of execution of such Notice of Guaranteed
Delivery. Stockholders may not extend the foregoing time period for
delivery of Shares to the Paying Agent by providing a second Notice of
Guaranteed Delivery with respect to such Shares. A "trading day" is any day
on which the NYSE is open for business.
The Notice of Guaranteed Delivery may be sent by hand delivery, telegram,
facsimile transmission or mail to the Paying Agent and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares purchased
pursuant to the Offer will in all cases be made only after timely receipt by
the Paying Agent of certificates for the Shares or a timely Book-Entry
Confirmation of the delivery of such Shares, and a Letter of Transmittal (or
manually signed facsimile thereof), properly completed and duly executed, with
any required signature guarantees (or, in the case of a book-entry transfer,
an Agent's Message) and any other documents required by the Letter of
Transmittal. Accordingly, payment might not be made to all tendering
stockholders at the same time, and will depend upon when certificates for the
Shares or Book-Entry Confirmations of the delivery of such Shares are received
into the Paying Agent's account at a Book-Entry Transfer Facility.
UNDER THE FEDERAL INCOME TAX LAWS APPLICABLE TO CERTAIN STOCKHOLDERS (OTHER
THAN CERTAIN EXEMPT STOCKHOLDERS, INCLUDING, AMONG OTHERS, ALL CORPORATIONS
AND CERTAIN FOREIGN INDIVIDUALS), THE PAYING AGENT MAY BE REQUIRED TO WITHHOLD
31% OF THE AMOUNT OF ANY PAYMENTS MADE TO SUCH STOCKHOLDERS PURSUANT TO THE
OFFER. TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO
PAYMENT OF THE PURCHASE PRICE FOR SHARES PURCHASED PURSUANT TO THE OFFER, A
TENDERING STOCKHOLDER MUST PROVIDE THE PAYING AGENT WITH SUCH STOCKHOLDER'S
CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH STOCKHOLDER IS
NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE
SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 9
TO THE LETTER OF TRANSMITTAL.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tendered Shares pursuant to any of
the procedures described above will be determined in the sole discretion of
the Purchaser, whose determination shall be final and binding. The Purchaser
reserves the absolute right to reject any or all tenders of any Shares
determined by it not to be in proper form if the acceptance for payment of, or
payment for, such Shares may, in the opinion of the Purchaser's counsel, be
unlawful. The Purchaser also reserves the absolute right, in its sole
discretion, subject to the Merger Agreement, to waive any of the conditions of
the Offer or any defect or irregularity in any tender with respect to Shares
of any particular stockholder, whether or not similar defects or
irregularities are waived in the case of other stockholders. The Purchaser's
interpretation of the terms and conditions of the Offer (including the Letter
of Transmittal and the Instructions thereto) will be final and binding.
Neither the Purchaser, Imperial Holly, the Company, the Paying Agent, the
Information Agent, the Dealer Manager nor any other person or entity will be
under any duty to give notification of any defects or irregularities in
tenders or will incur any liability for failure to give any such notification.
7
<PAGE>
By executing a Letter of Transmittal or by causing the transmission of an
Agent's Message as set forth above, a tendering stockholder irrevocably
appoints designees of the Purchaser as the stockholder's attorneys-in-fact and
proxies, in the manner set forth in the Letter of Transmittal, each with full
power of substitution, to the full extent of the stockholder's rights with
respect to the Shares tendered by the stockholder and accepted for payment by
the Purchaser (and any and all other Shares or other securities issued or
issuable in respect of such Shares on or after the date of the Merger
Agreement). All such powers of attorney and proxies shall be considered to be
coupled with an interest in the tendered Shares. This appointment will be
effective when, and only to the extent that, the Purchaser accepts Shares for
payment. Upon acceptance for payment, all prior powers of attorney and proxies
given by the stockholder with respect to the Shares or other securities will,
without further action, be revoked, and no subsequent powers of attorney or
proxies may be given nor any subsequent written consent executed by such
stockholder (and, if given or executed, will not be deemed to be effective)
with respect thereto. The designees of the Purchaser will, with respect to the
Shares and other securities, be empowered to exercise all voting and other
rights of such stockholder as they in their sole discretion may deem proper at
any annual, special or adjourned meeting of the Company's stockholders, by
written consent or otherwise. The Purchaser reserves the right to require
that, in order for Shares to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of such Shares, the Purchaser must be able
to exercise full voting and other rights of a record and beneficial holder,
including rights in respect of acting by written consent, with respect to such
Shares.
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer. The Purchaser's acceptance for payment for Shares
tendered pursuant to the Offer will constitute a binding agreement between the
tendering stockholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
Section 4. Withdrawal Rights.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer
may be withdrawn at any time prior to the Expiration Date and, unless
theretofore accepted for payment by the Purchaser pursuant to the Offer, may
also be withdrawn at any time after November 17, 1997.
For a withdrawal to be effective, a written, telegraphic, or facsimile
transmission notice of withdrawal must be timely received by the Paying Agent
at one of its addresses set forth on the back cover of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the name
of the registered holder, if different from that of the person who tendered
such Shares. If certificates for Shares have been delivered or otherwise
identified to the Paying Agent, then, prior to the release of such
certificates, the serial numbers of the particular certificates evidencing the
Shares to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an Eligible Institution, except in the case of Shares tendered
for the account of an Eligible Institution, must also be furnished to the
Paying Agent as described above. If Shares have been tendered pursuant to the
procedures for book-entry transfer as set forth in Section 3, any notice of
withdrawal must also specify the name and number of the account at the
appropriate Book-Entry Transfer Facility to be credited with the withdrawn
Shares.
ALL QUESTIONS AS TO THE FORM AND VALIDITY (INCLUDING TIME OF RECEIPT) OF
NOTICES OF WITHDRAWAL WILL BE DETERMINED BY THE PURCHASER, IN ITS SOLE
DISCRETION, WHOSE DETERMINATION WILL BE FINAL AND BINDING. NEITHER THE
PURCHASER, IMPERIAL HOLLY, THE COMPANY, THE DEALER MANAGER, THE PAYING AGENT,
THE INFORMATION AGENT NOR ANY OTHER PERSON OR ENTITY WILL BE UNDER ANY DUTY TO
GIVE NOTIFICATION OF ANY DEFECTS OR IRREGULARITIES IN ANY NOTICE OF WITHDRAWAL
OR INCUR ANY LIABILITY FOR FAILURE TO GIVE ANY NOTIFICATION.
Any Shares properly withdrawn will be deemed to be not validly tendered for
purposes of the Offer. However, withdrawn Shares may be retendered by
following one of the procedures described in Section 3 at any time prior to
the Expiration Date.
8
<PAGE>
Section 5. Certain Tax Consequences.
The following is a summary of certain United States federal income tax
consequences of the Offer and the Merger to beneficial owners of Shares whose
Shares are purchased pursuant to the Offer or whose Shares are converted to
cash or Imperial Shares in the Merger. The discussion is for general
information only and does not purport to consider all aspects of federal
income taxation that might be relevant to beneficial owners of Shares. The
discussion is based on current provisions of the Internal Revenue Code of
1986, as amended (the "Code"), existing, proposed and temporary regulations
promulgated thereunder and administrative and judicial interpretations
thereof, all of which are subject to change. The discussion applies only to
beneficial owners of Shares in whose hands Shares are capital assets within
the meaning of Section 1221 of the Code, and may not apply to Shares received
pursuant to the exercise of employee stock options or otherwise as
compensation, or to certain types of beneficial owners of Shares (such as
insurance companies, tax-exempt organizations, financial institutions and
broker-dealers) who may be subject to special rules. This discussion does not
discuss the federal income tax consequences to a beneficial owner of Shares
who, for United States federal income tax purposes, is a non-resident alien
individual, a foreign corporation, a foreign partnership or a foreign estate
or trust, nor does it consider the effect of any foreign, state or local tax
laws.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH BENEFICIAL OWNER OF SHARES
SHOULD CONSULT SUCH BENEFICIAL OWNER'S OWN TAX ADVISOR TO DETERMINE THE
APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH BENEFICIAL OWNER AND THE
PARTICULAR TAX EFFECTS TO SUCH BENEFICIAL OWNER OF THE OFFER AND THE MERGER,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or cash or Imperial
Shares pursuant to the Merger will be a taxable transaction for federal income
tax purposes. In general, for federal income tax purposes, a beneficial owner
of Shares will recognize gain or loss equal to the difference between the
beneficial owner's adjusted tax basis in the Shares sold pursuant to the Offer
or converted to cash and Imperial Shares in the Merger and the amount of cash
and the value of the Imperial Shares, determined as of the Effective Time,
received therefor. Gain or loss must be determined separately for each block
of Shares (i.e., Shares acquired at the same cost in a single transaction)
sold pursuant to the Offer or converted to cash and Imperial Shares in the
Merger. Such gain or loss will be capital gain or loss and will be (a) long-
term capital gain or loss if the beneficial owner held the Shares for more
than 18 months or (b) mid-term capital gain or loss if the beneficial owner
held the Shares more than 12 months but not more than 18 months as of the date
of sale (in the case of the Offer) or the Effective Time (in the case of the
Merger). Long-term capital gain of individuals currently is taxed at a maximum
rate of 20%. Mid-term capital gain of individuals is currently taxed at a
maximum rate of 28%.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a rate of 31%, unless a beneficial owner of Shares (a)
is a corporation or comes within certain exempt categories and, when required,
demonstrates this fact or (b) provides a correct taxpayer identification
number to the payor, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable withholding rules. A
beneficial owner who does not provide a correct taxpayer identification number
may be subject to penalties imposed by the Internal Revenue Service. Any
amount paid as backup withholding does not constitute an additional tax and
will be creditable against the beneficial owner's federal income tax
liability. Each beneficial owner of Shares should consult with his or her own
tax advisor as to his or her qualification for exemption from backup
withholding and the procedure for obtaining such exemption. Those tendering
their Shares in the Offer may prevent backup withholding by completing the
Substitute Form W-9 included in the Letter of Transmittal. See Section 3
hereof. Similarly, those who convert their Shares into cash and Imperial
Shares in the Merger may prevent backup withholding by completing a Substitute
Form W-9 and submitting it to the Paying Agent.
Imperial Holly and the Purchaser will be entitled to deduct and withhold
from the consideration otherwise payable pursuant to the Merger Agreement to
any holder of Shares such amounts as Imperial Holly and the Purchaser is
required to deduct and withhold with respect to the making of such payment. To
the extent that amounts are so withheld by Imperial Holly or the Purchaser,
such withheld amounts shall be treated for all purposes as having been paid to
the holder of the Shares in respect of which such deduction and withholding
was made by Imperial Holly and the Purchaser.
9
<PAGE>
Section 6. Price Range of Shares; Dividends.
The Shares are listed and traded on the NYSE under the symbol "SFI". The
following table sets forth, for the calendar quarters indicated, the high and
low closing sales price per Share on the NYSE and the dividends paid. All
prices set forth below are as reported in published financial sources:
<TABLE>
<CAPTION>
CALENDAR QUARTER HIGH LOW DIVIDEND
---------------- ---- ---- --------
<S> <C> <C> <C>
1995
First Quarter................................... $14 3/8 $10 1/2 $0.135
Second Quarter.................................. 11 3/4 9 1/8 0.025
Third Quarter................................... 13 5/8 10 1/2 0.025
Fourth Quarter.................................. 13 7/8 11 3/8 0.025
1996
First Quarter................................... $12 7/8 $10 5/8 $0.025
Second Quarter.................................. 13 1/2 10 3/4 0.025
Third Quarter................................... 14 11 3/8 0.025
Fourth Quarter.................................. 16 5/8 13 1/4 0.025
1997
First Quarter................................... $15 1/4 $12 7/8 $0.025
Second Quarter.................................. 17 3/4 12 1/2 0.0375
Third Quarter (through September 17, 1997)...... 19 13 1/16 0.0375
</TABLE>
On August 25, 1997, the last full trading day prior to the announcement of
Imperial Holly's initial offer to acquire the Company, the reported closing
sales price per Share on the NYSE was 14 15/16. On September 11, 1997, the
last full trading day prior to the announcement of the Merger Agreement, the
reported closing sales price per Share on the NYSE was 18 1/16. On September
17, 1997, the last full trading day prior to the commencement of the Offer,
the reported closing sales price per Share on the NYSE was 18 7/8.
Stockholders are urged to obtain a current market quotation for the Shares.
Section 7. Certain Information Concerning the Company.
General. According to the Company's Annual Report on Form 10-K for the
fiscal year ended September 29, 1996 (the "Company 10-K"), the Company was
incorporated in Delaware on February 19, 1969, as the successor to the
Savannah Sugar Refining Corporation, which was originally incorporated in New
York in 1916. Its principal executive offices are located at 2 East Bryan
Street, Savannah, Georgia 31401. The Company and its wholly owned subsidiaries
are principally engaged in the production, marketing and distribution of food
products, primarily refined sugar.
Selected Consolidated Financial Data. The following selected consolidated
financial data relating to the Company have been taken or derived from the
audited financial statements contained in the Company 10-K and the unaudited
financial statements contained in the Company's Quarterly Reports on Form 10-Q
for the quarterly periods ended December 29, 1996, March 30, 1997 and June 29,
1997 (collectively, the "Company Form 10-Qs"). More comprehensive financial
information (including the notes to the Company's financial statements) is
included in such Company 10-K, the Company Form 10-Qs and other documents
filed by the Company with the Commission, and the financial data set forth
below are qualified in their entirety by reference to such reports and other
documents, including the financial statements (and notes thereto) contained
therein. Such reports and other documents may be examined and copies may be
obtained from the offices of the Commission in the manner set forth below.
10
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA FOR SAVANNAH FOODS & INDUSTRIES, INC.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1) NINE MONTHS ENDED
-------------------------------------- ------------------------
(UNAUDITED)
OCTOBER 2, OCTOBER 1, SEPTEMBER 29, JUNE 30, JUNE 29,
1994 1995 1996 1996 1997
----------- ----------- ------------- ----------- -----------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales............... $ 1,074,367 $ 1,098,544 $ 1,146,332 $ 842,675 $ 883,156
EBITDA.................. 48,404 35,715 49,793 40,692 70,212
Income from operations.. 19,432 7,401 21,799 19,618 52,443
Income (loss) before in-
come taxes and extraor-
dinary item............ 8,606 (6,078) 9,681 9,883 47,391
Extraordinary item, net
of tax................. -- -- (971) (698) (376)
Net income (loss)....... 5,743 (3,493) 5,972 5,528 29,003
Per share:
Income (loss) before
extraordinary item... $ 0.22 $ ( 0.13) $ 0.27 $ 0.24 $ 1.12
Extraordinary item.... -- -- (0.04) (0.03) (0.01)
Net income (loss)..... 0.22 $ (0.13) 0.23 0.21 1.11
Dividends............. 0.54 $ 0.32 $ 0.10 0.0750 0.0875
Weighted average shares
outstanding............ 26,238,196 26,238,196 26,238,196 26,238,196 26,238,196
BALANCE SHEET DATA
Current assets.......... $ 197,802 $ 180,552 $ 229,931
Total assets............ 476,507 398,261 435,092
Current liabilities..... 114,740 85,946 134,144
Long-term debt.......... 106,864 59,754 26,230
Stockholders' equity.... 169,649 173,727 200,933
</TABLE>
- --------
(1) The Company's fiscal year ends on the Sunday closest to September 30th.
The Company is subject to the information and filing requirements of the
Exchange Act and is required to file periodic reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. Information, as of particular dates, concerning
the Company's directors and officers, their remuneration, options granted to
them, the principal holders of the Company's securities and any material
interest of such persons in transactions with the Company is required to be
described in proxy statements distributed to the Company's stockholders and
filed with the Commission. These reports, proxy statements and other
information are available for inspection and copying at the Commission's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of these materials may also be
obtained by mail, upon payment of the Commission's customary fees, from the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission also maintains a World Wide Web Site on the Internet at
http://www.sec.gov that contains reports, proxy statements and other
information filed electronically by the Company with the Commission.
Other than as set forth below, the information concerning the Company
contained in this section has been taken from or based upon publicly available
documents on file with the Commission and other publicly available
information. Although neither the Purchaser nor Imperial Holly has any
knowledge that would indicate that statements contained herein based upon such
documents are untrue, neither the Purchaser nor Imperial Holly takes any
responsibility for the accuracy or completeness of the information contained
in such documents or for any failure by the Company to disclose events that
may have occurred and may affect the significance or accuracy of any such
information but which are unknown to either the Purchaser or Imperial Holly.
11
<PAGE>
Section 8. Certain Information Concerning the Purchaser and Imperial Holly.
The Purchaser is a newly incorporated Delaware corporation and a wholly
owned subsidiary of Imperial Holly which to date has not conducted any
business other than that incident to its formation, the execution and delivery
of the Merger Agreement and the commencement of the Offer. Accordingly, no
meaningful financial information with respect to the Purchaser is available.
The principal executive offices of Imperial Holly and the Purchaser are
located at One Imperial Square, Suite 200, 8016 Highway 90-A, Sugar Land,
Texas 77478. Imperial Holly, which is a Texas corporation, and its
subsidiaries are producers and marketers of refined sugar, producing both cane
and beet sugar.
The name, citizenship, business address, present principal occupation or
employment and five-year employment history of each of the directors and
executive officers of the Purchaser and Imperial Holly are set forth in
Schedule I hereto.
Selected Consolidated Financial Data. The following selected consolidated
financial data relating to Imperial Holly have been taken or derived from the
audited financial statements contained in the Annual Report on Form 10-K for
the fiscal year ended March 31, 1997 of Imperial Holly (the "Imperial Holly
10-K") and the unaudited financial statements contained in the Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1996 (the
"Imperial Holly 10-Q"). More comprehensive financial information (including
the notes to Imperial Holly's financial statements) is included in such
Imperial Holly 10-K, Imperial Holly 10-Q and other documents filed by Imperial
Holly with the SEC, and the financial data set forth below are qualified in
their entirety by reference to such reports and other documents, including the
financial statements (and notes thereto) contained therein. Such reports and
other documents may be examined and copies may be obtained from the offices of
the SEC in the manner set forth in Section 7.
SELECTED CONSOLIDATED FINANCIAL DATA FOR IMPERIAL HOLLY CORPORATION
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31, QUARTER ENDED JUNE 30,
---------------------------------- -----------------------
(UNAUDITED)
1995 1996 1997 1996 1997
---------- ---------- ---------- ----------- -----------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales............... $ 586,925 $ 616,450 $ 752,595 $ 179,905 $ 197,758
EBITDA.................. 11,338 10,250 43,196 12,610 18,954
Operating income (loss). (2,091) (2,431) 28,423 8,971 14,171
Income (loss) before
income taxes and
extraordinary item... (8,649) (5,076) 17,688 6,618 11,574
Extraordinary item.... -- 604 -- -- --
Net income (loss)..... (5,365) (2,614) 11,518 4,149 7,294
Per share:
Income (loss) before
extraordinary item... (0.52) (0.31) 0.92 0.40 0.51
Extraordinary item.... -- 0.06 -- -- --
Net income (loss)..... (0.52) (0.25) 0.92 0.40 0.51
Weighted average shares
outstanding............ 10,266,229 10,300,487 12,576,489 10,315,289 14,220,388
BALANCE SHEET DATA
Current assets.......... $ 183,350 $ 285,147 $ 315,204
Total assets............ 325,319 449,933 481,184
Current liabilities..... 101,804 151,241 177,430
Long-term debt.......... 89,800 90,619 81,495
Shareholders' equity.... 111,043 176,956 189,936
</TABLE>
12
<PAGE>
Ownership of Shares, Transactions with Respect to Shares and Other Matters
Imperial Holly currently owns 448 Shares. James C. Kempner, the President
and Chief Executive Officer of Imperial Holly, owns 3,000 Shares. Roger W.
Hill, a managing director of Imperial Holly, owns 100 Shares. P.C. Carrothers,
the Senior Vice President--Operations of Imperial Holly, owns 2,200 Shares.
Mr. Carrothers sold 800 Shares on July 25, 1997 at a price of $14 per Share.
He initially acquired such Shares in May of 1996 at a price of $10 5/8. Mr.
Carrothers effected such trades through his broker. Certain individuals and
entities affiliated with Harris L. Kempner, Jr., a director of Imperial Holly,
sold an aggregate amount of 5,602 Shares for an aggregate price of $15.375 per
Share on July 21, 1997. Such Shares were acquired on May 20, 1996 and July 16,
1996, in each case for an aggregate price of $11.33 per Share. All of such
trades were effected through a broker.
Imperial Holly and its wholly owned subsidiary, Holly Sugar Corporation
("Holly Sugar") entered into several routine sales contracts to sell refined
sugar to the Company for the one-year period ended September 30, 1997. For
such period, Imperial Holly entered into two sales contracts to deliver
refined sugar to the Company for an aggregate consideration of approximately
$2,219,000. For such period, Holly Sugar entered into three sales contracts to
deliver refined sugar to the Company for aggregate consideration of
approximately $6,401,000. In addition, in July 1996, Holly Sugar entered into
a packaging contract with Dixie Crystals Foodservices, Inc., a wholly owned
subsidiary of the Company ("Dixie"), to deliver refined sugar to Dixie's
facility in Visalia, California to be packaged and returned to Holly Sugar.
The aggregate value of such contract to Imperial Holly for its fiscal year
ended March 31, 1997 was approximately $950,000.
Except as provided in the Merger Agreement, and as otherwise described in
this Offer to Purchase, neither Imperial Holly nor the Purchaser, nor to the
best knowledge of Imperial Holly and the Purchaser, any of the persons listed
on Schedule I hereto, has any contract, arrangement, understanding, or
relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any
securities of the Company, joint ventures, loan or option arrangements, puts
or calls, guarantees of loans, guarantees against loss or the giving or
withholding of proxies. Except as set forth in this Offer to Purchase, neither
Imperial Holly nor the Purchaser nor, to the best knowledge of Imperial Holly
and the Purchaser, any of the persons listed on Schedule I hereto, has had,
since October 4, 1993, any business relationships or transactions with the
Company or any of its executive officers, directors, or affiliates that would
require reporting under the rules of the SEC applicable to this Offer to
Purchase. Except as set forth in this Offer to Purchase, since October 4,
1993, there have been no contacts, negotiations or transactions between the
Purchaser, Imperial Holly or any of its subsidiaries or, to the best knowledge
of Imperial Holly and the Purchaser, any of the persons listed on Schedule I
hereto, and the Company or its affiliates, concerning a merger, consolidation
or acquisition, tender offer or other acquisition of securities, election of
directors or a sale or other transfer of a material amount of assets. Except
as set forth in this Offer to Purchase, neither Imperial Holly nor the
Purchaser, nor, to the best knowledge of Imperial Holly and the Purchaser, any
of the persons listed on Schedule I hereto, beneficially owns any Shares or
has effected any transactions in the Shares in the past 60 days.
Section 9. Source and Amount of Funds.
The total amount of funds required by the Purchaser to purchase 50.1% of the
outstanding Shares is estimated not to exceed $295 million. The total cash
compensation payable to holders of Shares in connection with the consummation
of the Offer and the Merger is estimated not to exceed $408 million. The funds
necessary to purchase Shares pursuant to the Offer and to pay related fees and
expenses will be furnished to the Purchaser (i) by Imperial Holly as a capital
contribution and (ii) through the financings described below.
Imperial Holly has received a commitment letter (the "Commitment Letter"),
dated September 10, 1997, as amended September 18, 1997, from Lehman
Commercial Paper Inc., an affiliate of Lehman Brothers ("LCPI"), to provide
senior credit facilities in the aggregate amount of $505 million (the "Tender
Facilities"). Such funds will be used to finance the Offer, to repay
approximately $136 million of indebtedness of Imperial Holly and certain
related expenses and to provide for Imperial Holly's working capital needs
pending the closing
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of the Merger. The Tender Facilities will be comprised of a term loan facility
in the amount of $295 million and a revolving credit facility in the amount of
$210 million. The Tender Facilities will be guaranteed by each of Imperial
Holly's direct and indirect subsidiaries (other than the Company and its
subsidiaries), and will be secured by substantially all the assets of Imperial
Holly and each of the guarantors. The term loan under the Tender Facilities
will be available for one drawing on the date (in no event later than November
30, 1997) on which Purchaser accepts for payment the Target Number of Shares
(the "Tender Date"). The term loan will be repayable on the earlier of (i) the
date of the closing of the Merger and (ii) the date which is the earlier of
January 31, 1998 and 90 days after the Tender Date (the "Maturity Date"). The
revolving credit facility will be available on a revolving basis during the
period commencing on or before the Tender Date and ending on the Maturity Date
and will mature on the Maturity Date. The Tender Facilities will bear
interest, at Imperial Holly's election, at either (i) the higher of (A) the
prime rate of the administrative agent selected in the syndication process,
(B) the secondary market rate for certificates of deposit plus 1%, or (C) the
federal funds effective rate plus 0.50% (the "Base Rate") plus a margin of
1.50% or (ii) the rate for eurodollar deposits in the interbank eurodollar
market (the "Eurodollar Rate") plus a margin of 2.50%.
The Commitment Letter also provides for LCPI to arrange senior credit
facilities (the "Merger Facilities"), which are comprised of either (i) senior
credit facilities of up to $455 million (the "Alternative A Merger
Facilities"), comprised of term loan facilities aggregating not more than $255
million (the "Alternative A Term Loans") and a $200 million revolving credit
facility (the "Alternative A Revolver"), which will be implemented in
conjunction with the issuance of $250 million in proceeds of unsecured senior
subordinated notes to be issued by Imperial Holly (the "Subordinated Notes")
or (ii) in the event the Subordinated Notes are not issued and sold on the
date of the Merger, senior credit facilities of up to $705 million (the
"Alternative B Merger Facilities"), comprised of term loan facilities
aggregating not more than $505 million (the "Alternative B Term Loans") and a
$200 million revolving credit facility (the "Alternative B Revolver"). The
proceeds of the Merger Facilities will provide the financing necessary to
repay amounts owing under the Tender Facilities, to provide a portion of the
Cash Consideration payable upon consummation of the Merger and certain related
expenses, and to provide financing for future working capital and other
general corporate purposes. The Merger Facilities will be guaranteed by each
of Imperial Holly's direct and indirect subsidiaries, and will be secured by
substantially all tangible and intangible assets of Imperial Holly and each of
the guarantors.
The Alternative A Term Loans will be available for one drawing on the date
of the closing of the Merger, and will consist of two tranches. The two
tranches, in the aggregate principal amounts of $150 million and $105 million,
respectively, will fully amortize over a period of six and eight years,
respectively. The Alternative A Revolver will be available on a revolving
basis during the period commencing on the date of the closing of the Merger
and ending on the date that is five years after the date of the closing of the
Merger. The Alternative A Revolver and the Alternative A Term Loans will bear
interest, at Imperial Holly's election, at either the Base Rate plus a margin
ranging from 0.25% to 1.00% or the Eurodollar Rate plus a margin ranging from
1.25% to 2.00%.
The Alternative B Term Loans will be available for one drawing on the date
of the closing of the Merger, and will consist of four tranches. The four
tranches, in the aggregate principal amounts of $150 million, $127.5 million,
$127.5 million and $100 million, respectively, will fully amortize over
periods of five, six, seven and eight years, respectively. The Alternative B
Revolver will be available on a revolving basis during the period commencing
on the date of the closing of the Merger and ending on the date that is five
years after the date of the closing of the Merger. The Alternative B Revolver
and the Alternative B Term Loans will bear interest, at Imperial Holly's
election, at either the Base Rate plus a margin ranging from 0.75% to 2.50% or
the Eurodollar Rate plus a margin ranging from 1.75% to 3.50%.
Although LCPI anticipates that it may syndicate all or a portion of the
Tender Facilities and the Merger Facilities to other lenders, the commitment
letter provides that LCPI will, subject to customary conditions, underwrite
the entire amount of the Tender Facilities and the Alternative A Merger
Facilities or the Alternative B Merger Facilities.
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Section 10. Background of the Offer, Past Contacts, Transactions or
Negotiations with the Company.
On July 15, 1997, the Company announced that it had entered into an
Agreement and Plan of Merger (the "Flo-Sun Merger Agreement"), dated as of
July 14, 1997, among XSF Holdings, Inc., a Delaware corporation ("Newco"), DXE
Merger Corp., a Delaware corporation and a wholly owned subsidiary of Newco,
the Company and Flo-Sun Incorporated, a Florida corporation ("Flo-Sun"),
pursuant to which the Company would be merged into DXE Merger Corp. and each
outstanding Share would be converted into one share of Class A Common Stock of
Newco, (the "Flo-Sun Merger"). Shortly after the announcement of the Flo-Sun
Merger Agreement, Imperial Holly's management contacted Lehman Brothers to
seek assistance in determining the feasibility of a potential offer to acquire
the Company.
The Imperial Holly Board of Directors (the "Imperial Holly Board") met on
July 25, 1997 and considered a presentation by Lehman Brothers and Imperial
Holly management of structuring and financing alternatives for the acquisition
of the Company by Imperial Holly. The Imperial Holly Board authorized
management and Lehman Brothers to continue to refine their financial and
strategic analyses and to pursue financing alternatives for such a
transaction.
On August 8, 1997, the Imperial Holly Board met to consider and discuss a
presentation by Imperial Holly management and Lehman Brothers of their
analysis of a proposal for the acquisition of the Company by Imperial Holly
for a combination of cash and Imperial Shares. The Imperial Holly Board, after
consulting with its outside counsel, management and Lehman Brothers,
authorized management to continue to work with Lehman Brothers and Imperial
Holly's legal advisors to formulate a proposal for the acquisition of the
Company and the financing required for such a transaction.
The Imperial Holly Board met on August 22, 1997 and discussed with
management, Lehman Brothers and Imperial Holly's outside counsel a proposal to
acquire the Company in a cash and stock merger for $18.75 per Share,
consisting of 70% cash and 30% Imperial Shares. The Imperial Holly Board
authorized management to deliver a letter setting forth the terms of such a
proposal to the Company.
On August 25, 1997, James C. Kempner, the President and Chief Executive
Officer of Imperial Holly, delivered a letter containing the terms of such an
offer to William F. Sprague, III, the President and Chief Executive Officer of
the Company. On August 26, 1997, the Company Board met and evaluated Imperial
Holly's offer. After consulting with its financial and legal advisors, the
Company Board instructed management of the Company to enter into discussions
with Imperial Holly regarding Imperial Holly's proposed offer to acquire the
Company.
On August 26, 1997, Imperial Holly signed a customary confidentiality
agreement with the Company relating to the information to be provided by the
Company (which agreement, among other things, prohibited Imperial Holly from
making an unsolicited acquisition proposal for the Company, or engaging in
certain other activities relating to control of the Company, for a two year
period).
On August 27, 1997, Imperial Holly delivered a draft merger agreement to the
Company and its financial and legal advisors, and Imperial Holly and the
Company both began to conduct due diligence.
On August 28, 1997, Mr. Kempner and other members of Imperial Holly's
management and its financial and legal advisors met in Savannah with Messrs.
Cartledge and Sprague and other members of the Company's management, and the
Company's financial and legal advisors to discuss Imperial Holly's offer. The
Company and Imperial Holly discussed a proposed structure for the acquisition
of the Company, pursuant to which Imperial Holly would make a cash tender
offer for 50.1% of the Shares followed by a merger at a price of $18.75 per
Share, with 70% of the consideration being in cash and 30% in Imperial Shares.
On August 30, 1997, Messrs. Kempner, Cartledge and Sprague, and other members
of Imperial Holly's and the Company's management, DLJ and Lehman Brothers and
the Company's and Imperial Holly's outside counsel met by telephone conference
to discuss the terms of a proposed merger agreement and to resolve certain
issues regarding the terms of Imperial Holly's proposed offer.
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On September 4, 1997, the Imperial Holly Board met and reviewed in detail
with Imperial Holly's management, Lehman Brothers and Imperial Holly's outside
counsel the terms of the proposed transaction. Lehman Brothers delivered its
opinion to the Imperial Holly Board that the consideration to be paid by
Imperial Holly in the proposed transaction was fair from a financial point of
view. The Imperial Holly Board unanimously approved an offer for the Shares at
$18.75 per Share, consisting of 70% cash and 30% Imperial Shares. The Imperial
Holly Board also directed Lehman to communicate the offer, including the copy
of the proposed merger agreement signed by Imperial Holly, to DLJ, conditioned
upon the Company's terminating its agreement with Flo-Sun.
Also on September 4, 1997, the Company's Board met and reviewed Imperial
Holly's offer with DLJ and the Company's outside counsel. DLJ rendered its
opinion to the Company that the consideration to be paid in the proposed
transaction by Imperial Holly to the Company's stockholders was fair to the
Company's stockholders from a financial point of view, and the Company's Board
approved the termination of the Flo-Sun agreement and, subject to such
termination, the acceptance of the Imperial Holly offer and the execution of
the proposed merger agreement tendered by Imperial Holly.
On September 4, 1997, Flo-Sun contacted the Company to propose a revised
offer, which the Company Board agreed to consider. DLJ notified Imperial Holly
that Flo-Sun had revised its offer. From September 5, 1997 through September
9, 1997, Imperial Holly's management, Lehman Brothers and Imperial Holly's
outside counsel discussed certain revisions to the terms of Imperial Holly's
offer to the Company and negotiated with the Company's management, DLJ and the
Company's outside counsel concerning the terms of such a revised offer.
The Imperial Holly Board met on September 10, 1997 and reviewed the terms of
a revised offer at $20.25 per Share, consisting of 70% cash and 30% Imperial
Shares, with Imperial Holly's management, Lehman Brothers and Imperial Holly's
outside counsel. Lehman Brothers rendered its revised opinion to the Imperial
Holly Board that such a transaction was fair from a financial point of view to
Imperial Holly, and the Imperial Holly Board unanimously approved such an
offer and directed Lehman Brothers to communicate the revised offer to DLJ.
On September 11, 1997, the Company Board met and reviewed the terms of the
revised Flo-Sun offer and the revised Imperial Holly offer with DLJ and a
second financial advisor, The Robinson-Humphrey Company ("Robinson-Humphrey"),
and the Company's outside counsel. After full discussion of the final Imperial
Holly offer and the revised Flo-Sun offer, and after considering the advice of
DLJ, Robinson-Humphrey and the Company's outside counsel, and the oral opinion
of DLJ that, based upon and subject to the assumptions, limitations and
qualifications set forth therein, as of the date of such opinion, the
consideration to be received by the Company's stockholders pursuant to the
Offer and the Merger was fair to such stockholders from a financial point of
view, the Company Board unanimously approved the Offer, the Merger, the Merger
Agreement and the transactions contemplated thereby, and the termination of
the Flo-Sun Merger Agreement. On September 12, 1997, the Flo-Sun Merger
Agreement was terminated and the Company executed the Merger Agreement.
Section 11. Purpose of the Offer; the Merger; Merger Agreement; Plans for the
Company.
The purpose of the Offer, the Merger and the Merger Agreement is for
Imperial Holly to acquire control of, and the entire equity interest in, the
Company. The Offer and the Merger Agreement are intended to increase the
likelihood that the Merger will be effected as promptly as practicable.
The Merger Agreement. The following summary of the Merger Agreement, a copy
of which is filed as an exhibit to the Schedule 14D-1, is qualified by
reference to the Merger Agreement.
The Offer. The Merger Agreement provides for the making of the Offer. The
obligation of the Purchaser to accept for payment or pay for Shares tendered
pursuant to the Offer is subject to the satisfaction of the Target Share
Condition, the HSR Condition and the Financing Condition and certain other
conditions that are set forth in Section 14. If any condition to the
Purchaser's obligation to purchase Shares under the Offer is not satisfied
prior to the Expiration Date, the Purchaser reserves the right (subject to the
terms of the Merger Agreement and the applicable rules and regulations of the
Commission) to (i) decline to purchase any of the Shares tendered and
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terminate the Offer, (ii) waive such unsatisfied condition, and purchase the
Target Number of Shares validly tendered and not withdrawn, (iii) extend the
Offer and, subject to the right of stockholders to withdraw Shares as provided
in Section 4 of this Offer to Purchase, retain the Shares which have been
tendered during the period or periods for which the Offer is extended or (iv)
amend the Offer. The Merger Agreement provides that the Purchaser reserves the
right to increase the price per Share payable in the Offer or to otherwise
amend the Offer; provided, however, the Purchaser will not, without the prior
written consent of the Company, (i) decrease or change the form of
consideration payable in the Offer, (ii) decrease the Target Number of Shares,
(iii) impose conditions to the Offer in addition to those set forth in the
Merger Agreement, (iv) change the conditions of the Offer (except that the
Purchaser may waive any of the conditions of the Offer other than the Minimum
Condition) or (v) make any other change in the terms or conditions of the
Offer which is adverse to holders of Shares.
Recommendation. The Board of Directors of the Company, based in part upon
the opinion of DLJ that the proposed consideration to be received by holders
of Shares pursuant to the Merger Agreement is fair from a financial point of
view to the holders of Shares, unanimously determined that the Offer and the
Merger are fair to and in the best interests of the stockholders of the
Company, approved the Offer and the Merger and recommended acceptance of the
Offer and approval and adoption of the Merger Agreement by the stockholders of
the Company and approved the amendment to the Company Rights Plan so as to
provide that no purchase rights under such agreement will become exercisable
as a result of the approval, execution or delivery of the Merger Agreement or
the consummation of the transactions contemplated thereby (including the Offer
or the Merger).
Board Representation. The Merger Agreement provides that, upon the
Purchaser's acquisition of a majority of the outstanding Shares pursuant to
the Offer, the Purchaser shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Board of Directors as
shall give the Purchaser representation on the Board of Directors equal to the
product of the total number of directors on the Board of Directors multiplied
by the percentage that the aggregate number of Shares beneficially owned by
the Purchaser at such time bears to the total number of Shares then
outstanding, and the Company shall, at such time, promptly take all actions
necessary to cause the Purchaser's designees to be elected as directors of the
Company, including increasing the size of the Board of Directors or securing
the resignations of incumbent directors or both. At the request and expense of
the Purchaser, the Company shall take all action necessary to effect any such
election, including mailing to its stockholders the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 thereunder.
Notwithstanding the foregoing, at all times prior to the Effective Time of
the Merger, the Board of Directors of the Company shall include at least two
directors who held office as of the date of the Merger Agreement (any such
director remaining in office being a "Continuing Director"). Following the
election or appointment of Purchaser's designees and prior to the Effective
Time, such designees shall abstain from acting upon, and the approval of a
majority of the Continuing Directors shall be required to authorize and shall
be sufficient to authorize, any resolution with respect to any termination of
the Merger Agreement by the Company, any amendment of the Merger Agreement
requiring action by the Board of Directors of the Company, any extension of
time for the performance of any of the obligations or other acts of Imperial
Holly or the Purchaser under the Merger Agreement, any waiver of compliance
with any of the agreements or conditions under the Merger Agreement for the
benefit of the Company and any action to seek to enforce any obligation of
Imperial Holly or the Purchaser under this Agreement.
The Merger. The Merger Agreement provides that, at the Effective Time, the
Purchaser will be merged with and into the Company, whereupon the separate
corporate existence of the Purchaser will cease and the Company will be the
surviving corporation in the Merger. The Merger Agreement further provides
that (i) subject to certain requirements in the Merger Agreement, the
Certificate of Incorporation and the By-Laws of the Purchaser as in effect at
the Effective Time shall be the Certificate of Incorporation and the By-Laws
of the surviving corporation, (ii) the directors of the Purchaser immediately
prior to the Effective Time shall be the initial directors of the surviving
corporation, and (iii) the officers of the Company immediately prior to the
Effective Time shall be the initial officers of the surviving corporation.
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Consideration to be Paid in the Merger. The Merger Agreement provides that
each Share issued and outstanding immediately prior to the Effective Time
(other than Excluded Shares and Dissenting Shares) will be converted into the
right to receive (i) Cash Consideration or (ii) Stock Consideration. The
number of Shares to be converted into the right to receive the Cash
Consideration in the Merger shall be the Cash Election Number. Subsequent to
the consummation of the Offer, each stockholder of the Company holding Shares
not tendered in the Offer (other than Excluded Shares) will be entitled to
make an election to receive the Cash Consideration. If the number of Shares
electing to receive the Cash Consideration exceeds the Cash Election Number,
then pursuant to the Merger Agreement (i) each Share other than Cash Election
Shares will be converted into the Stock Consideration and (ii) each
stockholder making an election to receive the Cash Consideration (a "Cash
Election") will be entitled to receive the Offer Price for that number of Cash
Election Shares as is equal to the product of (x) the number of Cash Election
Shares of such stockholder and (y) a fraction, the numerator of which is the
Cash Election Number and the denominator of which is the total number of Cash
Election Shares and (iii) each other Cash Election Share held by such
stockholder will be converted into the Stock Consideration. If the number of
Shares electing to receive the Cash Consideration is less than the Cash
Election Number, then (i) each Cash Election Share will be converted into the
right to receive the Offer Price, (ii) in addition to such Cash Election
Shares, each stockholder (including stockholders who made Cash Elections with
respect to some but not all of their Shares) will be required to accept the
Offer Price for that number of Shares as is equal to the product of (x) the
excess of the Cash Election Number over the number of Cash Election Shares and
(y) a fraction, the numerator of which is the number of Shares (other than
Cash Election Shares) held by such stockholder and the denominator of which is
the aggregate number of outstanding Shares other than Cash Election Shares and
(iii) each other Share held by such stockholder will be converted into the
Stock Consideration. The Stock Consideration also includes with each Imperial
Share the right to purchase one one-hundredth of a share of Series A Junior
Participating Preferred Stock, without par value, of Imperial Holly pursuant
to a rights agreement, dated as of September 14, 1989, as amended, between
Imperial Holly and the Bank of New York, as rights agent. See "Introduction."
Company Options. Each unexpired and unexercised option to purchase Shares
issued pursuant to the Company's 1996 Equity Incentive Plan, or otherwise
granted by the Company (in each case, an "Option"), shall, at the Effective
Time and at the election of the holder of such Options either (i) be assumed
by Imperial Holly and constitute an option to acquire, on the same terms and
conditions as were applicable under such assumed Option, a number of Imperial
Shares equal to the product of (A) the Stock Consideration and (B) the number
of Shares subject to such Option, at a price per share equal to the amount
obtained by dividing the exercise price of such Option by the Stock
Consideration or (ii) be canceled by the Company, and each holder of an Option
so canceled shall be entitled to receive an amount in cash equal to the
difference between the Offer Price and the exercise price of such Option. Each
holder of an Option shall make such election by notifying the Company and
Imperial Holly by 5:00 p.m. New York City time on the Election Date (as
defined below). At the Effective Time, Imperial Holly shall deliver to holders
of Options who make the election set forth in clause (i) of the preceding
sentence, appropriate option agreements representing the right to acquire
Imperial Shares on the same terms and conditions as contained in the
outstanding Options. Imperial Holly shall adopt and comply with the terms of
the 1996 Equity Incentive Plan as it applies to Options assumed as set forth
above including, without limitation, provisions regarding the accelerated
vesting of Options which shall occur by virtue of consummation of the Merger,
to the extent required by the terms of such Options or such Plan. The date of
grant of each option to acquire Imperial Shares shall be deemed to be the date
on which the corresponding Option was granted.
Stockholders' Meetings. In the Merger Agreement, each of the Company and
Imperial Holly agreed to take all action necessary in accordance with
applicable law to duly call, give notice of, convene and hold a special
meeting of its stockholders as soon as practicable following the consummation
of the Offer for the purpose of (in the case of the Company) the approving and
adopting of the Merger Agreement and the Merger or (in the case of Imperial
Holly) the issuance of the Stock Consideration to stockholders of the Company
in the Merger (the "Company Stockholders Meeting" and the "Imperial
Stockholders Meeting," respectively). Subject to their fiduciary duties under
applicable law, the respective Board of Directors of the Company and Imperial
Holly will recommend that their respective stockholders approve such actions.
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Exchange of Certificates. The Merger Agreement provides that as of or
promptly after the Effective Time, Imperial Holly shall deposit the aggregate
Merger Consideration with the Bank of New York (the "Exchange Agent") for the
benefit of the holders of Shares. As soon as practicable after the Effective
Time, each holder of an outstanding certificate or certificates which prior
thereto represented Shares shall, upon surrender to the Exchange Agent of such
certificate or certificates and acceptance thereof by the Exchange Agent, be
entitled to a certificate or certificates representing the number of full
Imperial Shares received as Stock Consideration and the Cash Consideration, if
any, into which the number of Shares previously represented by such
certificate or certificates surrendered shall have been converted pursuant to
the Merger Agreement. The Exchange Agent shall accept such certificates upon
compliance with such reasonable terms and conditions as the Exchange Agent may
impose to effect an orderly exchange thereof in accordance with normal
exchange practices. If any certificate for such Imperial Shares is to be
issued in, or if cash is to be remitted to, a name other than that in which
the certificate representing Shares surrendered for exchange is registered,
the certificate so surrendered shall be properly endorsed, with signature
guaranteed or otherwise in proper form for transfer. The person requesting
such exchange shall pay any transfer or other taxes required by reason of the
issuance of certificates for such Imperial Shares in a name other than that of
the registered holder of the certificate surrendered or establish that such
tax has been paid or is not applicable. Until surrendered, each certificate
representing Shares shall be deemed at any time after the Effective Time to
represent only the right to receive the Merger Consideration upon surrender.
Each holder of Shares after the Effective Time who would otherwise have been
entitled to receive as Stock Consideration a fraction of an Imperial Share
(after taking into account all Shares delivered by such holder) shall receive,
in lieu thereof, a cash payment (without interest) equal to such fraction
multiplied by the Cash Consideration.
No dividends or other distributions with respect to Imperial Shares with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered certificate representing Shares and no cash payment in lieu of
fractional Imperial Shares shall be paid to any such holder until the
surrender of such certificate representing Shares. However, following
surrender of any such certificates, but subject to applicable laws, the holder
of a certificate representing whole Imperial Shares shall be paid, without
interest, at the time of such surrender (i) cash in lieu of fractional
Imperial Shares to which such holder is entitled and (ii) the proportionate
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such fractional or whole
Imperial Shares.
Any portion of the Merger Consideration deposited with the Exchange Agent
which remains undistributed to the holders of the certificates representing
Shares for six months after the Effective Time shall be delivered to Imperial
Holly, and any holders of Shares prior to the Effective Time who have not
theretofore complied with the exchange provisions of the Merger Agreement
shall thereafter look only to Imperial Holly and only as general creditors
thereof for payment of their claim for cash or Imperial Shares. None of the
Purchaser, the Company, Imperial Holly or the Exchange Agent shall be liable
to any person in respect of any cash or any Imperial Shares delivered to a
public office pursuant to any applicable abandoned property, escheat or
similar law. If any certificates representing Shares shall not have been
surrendered immediately prior to the date on which any Merger Consideration in
respect of such certificate would otherwise escheat to or become the property
of any government authority, any such Merger Consideration in respect of such
certificate shall, as such time and to the extent permitted by applicable law,
become the property of the Surviving Corporation, free and clear of all claims
or interest of any person previously entitled thereto. The Company shall pay
all charges and expenses of the Exchange Agent.
Elections. The Merger Agreement provides that each person who, on or prior
to the Election Date, is a record holder of Shares (other than Excluded
Shares) will be entitled, with respect to all or any portion of his Shares, to
make a Cash Election on or prior to such Election Date to receive the Cash
Consideration. The Company shall prepare and mail a form of election, which
form shall be subject to the reasonable approval of Imperial Holly and the
Purchaser (the "Form of Election"), with the joint proxy statement/prospectus
prepared in connection with the Merger (the "Proxy Statement") to the record
holders of Shares as of the record date for the Company Stockholders Meeting
to be used by each such record holder who wishes to make a Cash Election
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with respect to any or all Shares held by such holder. The Company will use
commercially reasonable efforts to make the Form of Election and the Proxy
Statement available to all persons who become holders of Shares during the
period between such record date and the Election Date. Any such holder's Cash
Election shall have been properly made only if the Exchange Agent shall have
received at its designated office, by 5:00 p.m., New York City time on the
business day (the "Election Date") next preceding the day on which the vote is
taken at the Company Stockholders' Meeting (or any adjournment thereof) a Form
of Election properly completed and signed and accompanied by certificates for
the Shares to which such Form of Election relates (or by an appropriate
guarantee of delivery of such certificates as set forth in such Form of
Election from a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the
United States, provided such certificates are in fact delivered to the
Exchange Agent within three NYSE trading days after the date of execution of
such guarantee of delivery). Failure to deliver Shares covered by such a
guarantee of delivery within the time set forth therein shall invalidate an
otherwise properly made Cash Election.
Any Form of Election may be revoked by the stockholder submitting it to the
Exchange Agent only by written notice received by the Exchange Agent (i) prior
to 5:00 p.m., New York City time, on the Election Date or (ii) after the date
of the Company Stockholders Meeting, if (and to the extent that) the Paying
Agent is legally required to permit revocations and the Effective Time shall
not yet have occurred. In addition, all Forms of Election shall automatically
be revoked if the Exchange Agent is notified in writing by Imperial Holly,
Purchaser and the Company that the Merger has been abandoned. If a Form of
Election is revoked, the certificate or certificates (or guarantees of
delivery, as appropriate) for Shares to which such Form of Election relates
shall be promptly returned to the stockholder submitting the same to the
Exchange Agent.
The determination of the Exchange Agent shall be binding as to whether or
not Cash Elections have been properly made or revoked with respect to Shares
and when Cash Elections and revocations were received. If the Exchange Agent
determines that any Cash Election was not properly made with respect to
Shares, such Shares shall be exchanged in the Merger for Stock Consideration
subject to the proration procedures described in "Consideration to be Paid in
the Merger". The Exchange Agent shall also make all computations as to the
allocation and the proration contemplated in connection with any exchange, and
any such computation shall be conclusive and binding on the holders of Shares.
Dissenters' Rights. If the Merger is consummated, persons who hold Shares at
that time would have the right to appraisal of their Shares in accordance with
Section 262 of the DGCL. Such appraisal rights, if the statutory procedures
are complied with, would result in a judicial determination of the "fair
value" of such Dissenting Shares (excluding any element of value arising from
the accomplishment or expectation of the Merger) owned by such holders. In
addition, such dissenting stockholders may be entitled to receive payment of a
fair rate of interest from the date of consummation of the Merger on the
amount determined to be the fair value of their Dissenting Shares. Any such
judicial determination of the fair value of the Dissenting Shares could be
based upon considerations other than or in addition to the Offer Price, the
Cash Consideration or the Stock Consideration and the market value of the
Shares, including asset values, the investment value of the Shares and any
other valuation considerations generally accepted in the investment community.
The value so determined for Dissenting Shares could be more or less than the
Offer Price, the Cash Consideration or the Stock Consideration, and payment of
such consideration would take place subsequent to payment pursuant to the
Offer. The Company shall not, without the prior written consent of Purchaser
and Imperial Holly, make any payment with respect to, or settle or offer to
settle with, any such dissenters.
In addition, several decisions by the Delaware courts have held that a
controlling stockholder of a corporation involved in a merger has a fiduciary
duty to the other stockholders which requires that the merger be fair to such
other stockholders. In determining whether a merger is fair to minority
stockholders, the Delaware courts have considered, among other things, the
type and amount of consideration to be received by the stockholders and
whether there was fair dealing among the parties. In Weinberger v. UOP, Inc.,
the Delaware Supreme Court stated, among other things, that although the
remedy ordinarily available in a merger that is found not to be "fair" to
minority stockholders is the right to appraisal described above, such
appraisal remedy may
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not be adequate "in certain cases, particularly where fraud,
misrepresentation, self-dealing, deliberate waste of corporate assets, or
gross and palpable overreaching are involved," and that in such cases the
Delaware Chancery Court would be free to fashion any form of appropriate
relief.
If the Purchaser purchases Shares pursuant to the Offer, and the Merger or
another merger or other business combination is consummated more than one year
after the completion of the Offer, or if such a merger or other business
combination were to provide for the payment of consideration less than that
paid pursuant to the Offer, compliance by the Purchaser with Rule 13e-3 under
the Exchange Act would be required, unless the Shares were to be deregistered
under the Exchange Act prior to such transaction. See Section 12. Rule 13e-3
would require, among other things, that certain financial information
concerning the Company and certain information relating to the fairness of the
proposed transaction and the consideration offered to minority stockholders
therein be filed with the SEC and disclosed to minority stockholders prior to
consummation of the transaction.
Representations and Warranties. The Merger Agreement contains customary
representations and warranties by the Company, on the one hand, and the
Purchaser and Imperial Holly, on the other hand, relating to, among other
things, (i) due organization and qualification, including subsidiaries, (ii)
charter documents, (iii) capitalization, (iv) due authorization, execution and
delivery of the Merger Agreement and consummation of the transactions
contemplated thereby, (v) conflict with charter documents and required
consents, (vi) possession of all necessary permits, (vii) accuracy of
information contained in documents filed with the Commission and financial
statements prepared in accordance with U.S. generally accepted accounting
principles ("U.S. GAAP"), (viii) no material adverse affect since the end of
the Company's and Imperial Holly's respective last fiscal years, (ix) the
absence of material litigation, (x) matters relating to the Employee
Retirement Income Security Act, (xi) intellectual property, (xii) taxes,
(xiii) environmental matters, (xiv) products, (xv) real property and other
assets, (xvi) insurance, (xvii) opinions of the Company's and Imperial Holly's
respective financial advisors, (xviii) vote necessary for stockholder
approval, (xix) no brokers other than financial advisors of the Company and
Imperial Holly and (xx) no material misstatements or omissions in documents
filed with Commission in connection with Offer and Merger. The Company also
represented and warranted that it (a) amended the Company Rights Agreement,
(b) amended certain provisions of the Company's Employee Benefit Trust and (c)
terminated the agreement and plan of merger, dated July 14, 1997, entered into
among the Company, Flo-Sun Incorporated ("Flo-Sun") and certain affiliates of
Flo-Sun. In addition, the Purchaser and Imperial Holly represented that
Imperial Holly received a commitment letter from LCPI to provide financing to
complete the Offer and the Merger.
Employee Benefit Matters. For a one year period immediately following the
Closing Date, Imperial Holly has agreed to provide or cause the Surviving
Corporation to provide all employees of the Company who continue to be
employed by Imperial Holly or the Surviving Corporation or any of their
respective affiliates as of the Effective Time ("Continuing Employees") with
compensation and benefits on terms which are, in the aggregate, not
substantially less favorable than those provided to Continuing Employees
immediately prior to the date of the Merger Agreement.
Prior to the execution of the Merger Agreement, the Company amended each of
(i) the Company's Supplemental Executive Retirement Plan and (ii) the Deferred
Compensation Plan for Key Employees of the Company, as amended and restated as
of August 1, 1990 (collectively, the "Company Executive Deferred Compensation
Plans"), to provide that neither the execution of the Merger Agreement, nor
the consummation of the transactions comtemplated by the Merger Agreement,
shall constitute a "change of control" for purposes of such Company Executive
Deferred Compensation Plans or otherwise will result in the acceleration of
vesting or payment of any benefit, or the triggering of any ancillary or
supplemental benefit or subsidy, under such plan.
Prior to the execution of the Merger Agreement and in accordance with the
terms thereof, the Company amended its Benefit Trust Agreement (the "Benefit
Trust") in order to, among other things, (i) provide for the prepayment of the
existing note of the Benefit Trust (the "Note"), with the cash proceeds
received in the Offer and the Merger; (ii) provide for the remaining corpus of
the Benefit Trust to be reinvested in Imperial Shares to be acquired from
Imperial Holly; (iii) provide that the corpus of the Benefit Trust will not be
immediately
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distributed to participants, but rather will be held in the Benefit Trust to
pay benefits when due; (iv) provide that, from and after consummation of the
Offer, the Company will no longer be entitled to be reimbursed from the
Benefit Trust for payments or contributions made prior to such time under the
covered benefit plans; (v) provide that no actions taken in connection with
the Offer and the Merger will constitute a Potential Change in Control under
the Benefit Trust; (vi) provide that, from and after consummation of the
Offer, the Trustee can sell Imperial Shares only after giving Imperial Holly a
right of first refusal; (vii) provide that, from and after consummation of the
Offer, Imperial Shares held by the Benefit Trust will be voted in proportion
to all other outstanding Imperial Shares; and (viii) provide that, from and
after consummation of the Offer, the Trustee will tender or exchange Imperial
Shares held by the Benefit Trust as directed by the Company's Board of
Directors. The Merger Agreement stipulates that the cash received by the
Benefit Trust in the Offer and the Merger will be used to repay the Note to
the Company and to purchase additional Imperial Shares. Consummation of the
Offer will constitute a Change in Control under the Benefit Trust.
Agreements with Respect to the Conduct of Business Pending the Merger. The
Merger Agreement provides that, between the date of the Merger Agreement and
the Effective Time, the Company and Imperial Holly shall not, unless agreed to
in writing by the other party, fail to carry on their business and the
business of their subsidiaries in the usual, regular and ordinary course in
substantially the same manner as conducted beforehand, or fail to use
commercially reasonable efforts to preserve substantially intact their present
lines of business, maintain their rights and franchises and preserve their
relationships with employees, customers and suppliers.
The Merger Agreement contains covenants of both the Company and Imperial
Holly with respect to the period between the date of the Merger Agreement and
the Effective Time, including covenants that: (i) prevent amendment to
corporate governance documents, (ii) prevent issuance of securities, (iii)
prevent declaration and payment of dividends (other than regular quarterly
dividends), (iv) limit reclassification or alteration of any of its capital
stock, (v) limit acquisition or disposition of any entity or assets not in the
ordinary course of business, (vi) limit incurrence of any indebtedness, (vii)
limit entrance into, amendment or termination of any material contract, (viii)
limit authorization of any material capital expenditure, (ix) limit increases
of the compensation to its officers or employees, (x) limit entrance into or
amendment of any employment or severance agreement, (xi) prevent the
establishment or amendment of any benefit or option plans, (xii) limit changes
in accounting methods, (xiii) prevent the making of any tax election with
respect to any material tax liability and (xiv) limit payment, discharge or
satisfaction of any obligation.
In addition, the Merger Agreement contains covenants of both the Company and
Imperial Holly with respect to the period between the date of the Merger
Agreement and Effective Time, that neither party will (i) take any action that
would prevent or impede the Merger from obtaining any material consent or
approval, (ii) enter into any agreement that would limit such company's
ability to compete or (iii) take any action that would result in breach of any
representations or warranties or prevent the conditions to the Merger from
being satisfied.
Neither the Company, Imperial Holly nor any subsidiary thereof may authorize
or enter into an agreement to do anything listed above.
No Solicitation. The Merger Agreement provides that neither the Company nor
any subsidiary shall, directly or indirectly, initiate, solicit, encourage, or
otherwise facilitate any inquiries or the making of any proposal or offer
relating to a merger, reorganization, share exchange, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
(other than the transactions contemplated by the Merger Agreement) (any of
such transactions being an "Acquisition Proposal") involving, or any purchase
or sale of all or any significant portion of the assets or 20% or more of the
equity securities of, the Company or any subsidiary that could reasonably be
expected to interfere with the completion of the Merger or the other
transactions contemplated by the Merger Agreement. Neither the Company or any
subsidiary of the Company will have any discussion with or provide any
confidential information or data to any person or entity relating to an
Acquisition Proposal or engage in any negotiations concerning an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement
an Acquisition Proposal or accept an Acquisition Proposal; provided, however,
that nothing contained in the Merger Agreement shall prevent the Company or
the Company's Board of Directors from (i) complying with Rule 14e-2 under the
Exchange Act with regard to an Acquisition Proposal; (ii) engaging in any
discussions or negotiations with, or providing any information to, any person
or entity in
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response to an unsolicited bona fide written Acquisition Proposal by any such
person or entity; or (iii) recommending such an unsolicited bona fide written
Acquisition Proposal to the holders of Shares if and only to the extent that,
in any such case as is referred to in clauses (ii) and (iii), (A) the
Company's Board of Directors concludes in good faith (after consultation with
its legal counsel and financial advisors) that such Acquisition Proposal is
reasonably capable of being completed, and would, if consummated, result in a
transaction more favorable to holders of Shares than the transactions
contemplated by the Merger Agreement (any such more favorable Acquisition
Proposal being hereinafter referred to as a "Superior Proposal"), (B) the
Company's Board of Directors determines in good faith after consultation with
legal counsel that such action is necessary for it to act in a manner
consistent with its fiduciary duties, (C) prior to providing any information
or data to any person or entity in connection with a Superior Proposal, the
Company's Board of Directors receives from such person or entity an executed
confidentiality agreement on terms substantially similar to those contained in
the confidentiality agreement, dated August 26, 1997, between the Company and
Imperial Holly and (D) prior to providing any information or data to or
entering into discussions or negotiations with any person or entity, the
Company's Board of Directors notifies Imperial Holly promptly of the
inquiries, proposals or offers received by, the information requested from, or
the discussions or negotiations sought to be initiated or continued with, the
Company or any subsidiary indicating the name of such person or entity and the
terms and conditions of any proposals or offers. The Company also will cease
and cause to be terminated any existing activities, discussions or
negotiations with any parties previously conducted regarding any Acquisition
Proposal.
Indemnification of Directors. As provided in the Merger Agreement, Imperial
Holly will, and will cause the Surviving Corporation to, maintain all rights
of indemnification existing in favor of, and indemnify, each present and
former director, officer, employee and fiduciary of the Company or any
subsidiary and each person who served at the request of the Company or any
subsidiary (collectively, the "Indemnified Parties") to the fullest extent
permitted under applicable law against all losses and claims arising out of or
pertaining to any action or omission in the capacity as an officer, director,
employee or fiduciary of the Company. Imperial Holly and the Purchaser agree
that all rights to indemnification existing in favor of the Indemnified
Parties as provided in the Company's By-Laws, as in effect as of the date
hereof, with respect to matters occurring through the Effective Time, shall
survive the Merger and shall continue in full force and effect for a period of
not less than six years from the Effective Time.
In the event any claim, action, suit, proceeding or investigation (a
"Claim") is brought against any Indemnified Party (whether arising before or
after the Effective Time) after the Effective Time, the Indemnified Parties
have certain rights with respect to retention of counsel, payment of fees and
expenses and assistance in the vigorous defense of any Claim (provided that
neither Imperial Holly nor the Surviving Corporation shall be liable for any
settlement of any Claim effected without its written consent). Any Indemnified
Party wishing to claim indemnification must notify Imperial Holly (but the
failure to so notify Imperial Holly shall not relieve Imperial Holly from any
liability that Imperial Holly may have thereunder except to the extent such
failure materially prejudices Imperial Holly), and must deliver to Imperial
Holly the undertaking contemplated by Section 145(e) of the General Corporate
Law of the State of Delaware. The Indemnified Parties as a group may retain
only one law firm to represent them with respect to each such matter unless
there is, under applicable standards of professional conduct, a conflict on
any significant issue between the positions of any two or more Indemnified
Parties.
For a period of six years after the Effective Time, Imperial Holly shall
cause to be maintained in effect the current directors' and officers'
liability insurance policies maintained by the Company with respect to claims
arising from facts or events that occurred prior to the Effective Time;
provided, however, that in no event shall Imperial Holly be required to expend
more than an amount per year equal to 200% of current annual premiums paid by
the Company for such insurance.
Company Rights Plan. The Company's Board of Directors shall take all further
action necessary in order to render the preferred stock purchase rights under
the Company Rights Agreement inapplicable to the Offer, the Merger and the
other transactions contemplated by the Merger Agreement, to terminate the
Company Rights Agreement as of the Effective Time and to ensure that Imperial
Holly and Purchaser will not have any obligations in connection with the
Company Rights Agreement or such related purchase rights.
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Conditions to Each Party's Obligation to Effect the Merger. In addition to
the approval and adoption of the Merger Agreement and the transactions
contemplated thereby by the affirmative vote of the stockholders of the
Company in accordance with the DGCL and the Company's Certificate of
Incorporation and the approval of the issuance of the Imperial Shares pursuant
to the Merger by the affirmative vote of the shareholders of Imperial Holly in
accordance with the applicable rules and regulations of the American Stock
Exchange, the obligations of the Company, Imperial Holly and the Purchaser to
consummate the Merger are subject to the following conditions: (i) any waiting
period (and any extension thereof) applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated; (ii) the
absence of any law, rule, regulation or other order by any governmental entity
which would have the effect of restraining or making the Merger illegal or
otherwise prohibiting consummation of the Merger; (iii) the Registration
Statement on Form S-4 to be filed by Imperial Holly with the Commission after
the consummation of the Offer (the "Registration Statement") shall have been
declared effective, and the absence of a stop order suspending such
effectiveness; (iv) the Imperial Shares to be issued in the Merger and
pursuant to options assumed by Imperial Holly shall have been authorized for
listing on the American Stock Exchange, subject to official notice of
issuance; and (v) the Purchaser shall have purchased Shares pursuant to the
Offer.
Termination. The Merger Agreement may be terminated and the Merger and the
other transactions contemplated thereby may be abandoned at any time prior to
the Effective Time, notwithstanding any requisite approval and adoption of the
Merger Agreement and the transactions contemplated thereby:
(a) by mutual written consent of Imperial Holly and the Company; or
(b) by Imperial Holly or the Company if the Effective Time shall not have
occurred on or before May 31, 1998; provided, however, that the right to
terminate the Merger Agreement will not be available to any party whose
failure to fulfill any obligation under the Merger Agreement has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date; or
(c) by either Imperial Holly or the Company, if any court of competent
jurisdiction in the United States or other governmental entity, based
otherwise than on any antitrust law, (i) shall have issued an order,
decree, judgment, injunction, ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by the Merger Agreement and such order, decree, judgment,
injunction, ruling or other action shall have become final or nonappealable
or (ii) shall have failed to issue an order, decree, judgment, injunction,
ruling or other action or to take any other action necessary to fulfill the
conditions to the closing of the Merger and such denial of a request to
issue such order, decree, judgment, injunction, ruling or other action or
take such other action shall have become final and nonappealable; or
(d) (x) by either Imperial Holly or the Company, if the Merger Agreement
and the transactions contemplated thereby shall fail to receive the
requisite vote for approval and adoption at the Company Stockholders'
Meeting or (y) by the Company, if the issuance of the Imperial Shares as
part of the Merger shall fail to receive the requisite vote for approval at
the Imperial Shareholders Meeting; or
(e) by Imperial Holly, if prior to the payment for Shares pursuant to the
Offer (i) the Company's Board of Directors withdraws, modifies or changes
its approval or recommendation (including by amendment of the Schedule 14D-
9) of the Merger Agreement, the Offer or the Merger in a manner adverse to
Imperial Holly or the Purchaser, (ii) the Company's Board of Directors
shall, at a time when there is an Acquisition Proposal with respect to the
Company, fail to reaffirm such approval or recommendation of the Merger
Agreement, the Offer or the Merger upon the reasonable request of Imperial
Holly and Purchaser, (iii) the Company's Board of Directors shall approve
or recommend any acquisition of the Company or a material portion of its
assets or any tender offer for shares of its capital stock, in each case,
other than by the other parties to the Merger Agreement or affiliates
thereof; (iv) a tender offer or exchange offer for 20% or more of the
outstanding Shares is commenced, and the Company's Board of Directors fails
to recommend against acceptance of such tender offer or exchange offer by
its stockholders (including by taking no position with
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respect to the acceptance of such tender offer or exchange offer by its
stockholders); or (v) the Company's Board of Directors has resolved to take
any of the actions specified in clauses (i) through (iv) above;
(f) by the Company, prior to the payment for Shares pursuant to the
Offer, upon five business days' prior notice to Imperial Holly and
Purchaser (which notice shall be revocable by the Company), if, as a result
of a Superior Proposal received by the Company from a person or entity
other than a party to this Agreement or any of its affiliates, the
Company's Board of Directors determines in good faith that their fiduciary
obligations require that such Superior Proposal be accepted; provided,
however, that (i) the Company's Board of Directors shall have concluded in
good faith, on the basis of advice of counsel, that such action is
necessary for the Company's Board of Directors to act in a manner
consistent with its fiduciary duties and (ii) prior to the effective date
of any such termination, the Company shall provide Imperial Holly and
Purchaser with an opportunity to make such adjustments in the terms and
conditions of this Agreement, the Offer or the Merger as would enable the
Company to proceed with the transactions contemplated hereby; provided,
however, that it shall be a condition to the effectiveness of termination
by the Company that the Company shall have made the payment of the
Termination Fee (as defined below) to Imperial Holly;
(g) by Imperial Holly, prior to the payment for Shares pursuant to the
Offer, upon a breach of any representation, warranty, covenant or agreement
on the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company shall have become untrue;
provided, however, that, if such breach is curable by the Company and for
so long as the Company continues to exercise all reasonable efforts to cure
such breach, Imperial Holly may not terminate the Merger Agreement;
(h) by the Company, prior to the payment for Shares pursuant to the
Offer, upon breach of any representation, warranty, covenant or agreement
on the part of Imperial Holly or the Purchaser set forth in this Agreement,
or if any representation or warranty of Imperial Holly and the Purchaser
shall have become untrue, in either case except for such breaches or
failures (i) which, individually or in the aggregate, would not have an
material adverse effect upon Imperial Holly and (ii) which, individually or
in the aggregate, would not materially impair or delay the ability of the
Purchaser to consummate the Offer or the ability of Imperial Holly, the
Purchaser and the Company to effect the Merger; provided, however, that, if
such breach is curable by Imperial Holly and the Purchaser and for so long
as Imperial Holly and the Purchaser continue to exercise all reasonable
efforts to cure such breach, the Company may not terminate the Merger
Agreement; or
(i) by Imperial Holly, if the Offer is terminated or expires without the
purchase of any Shares thereunder, unless such termination or expiration
has been caused by or resulted from the failure in any material respect of
Imperial Holly or the Purchaser to perform any of its covenants and
agreements contained in the Merger Agreement or in the Offer; and
(j) by the Company, if all of the conditions to the Offer have been
satisfied except for the Financing Condition and Imperial Holly fails to
accept and pay for the Shares in the Offer solely because of the failure of
LCPI to provide the funding necessary for such purchase.
(k) by the Company, if on May 29, 1998, the Effective Time shall not have
occurred because Imperial Holly and the Purchaser have not been permitted
to consummate the Offer and the Merger by reason of any antitrust law.
Fees and Expenses. The Merger Agreement provides that except as set forth
herein, all expenses incurred in connection with the Merger Agreement shall be
paid by the party incurring such expenses, whether or not the Merger is
consummated, except that the Company and Imperial Holly each shall pay one-
half of all expenses relating to printing, filing and mailing the Registration
Statement and the Proxy Statement and all Commission and other regulatory
filing fees incurred in connection with the Registration Statement and the
Proxy Statement.
Termination Fees. The Merger Agreement provides that (i) if Imperial Holly
terminates the Merger Agreement pursuant to paragraph (e) above or (ii) if the
Company terminates the Merger Agreement pursuant to
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paragraph (f) above or (iii) if (A) Imperial Holly or the Company terminates
the Merger Agreement pursuant to paragraph (d) due to the failure of the
Company's stockholders to approve and adopt the Merger Agreement and (B) at
the time of such failure to so approve and adopt the Merger Agreement there
exists an Acquisition Proposal with respect to the Company and, within 12
months of the termination of the Merger Agreement, the Company enters into a
definitive agreement with any third party with respect to an Acquisition
Proposal with respect to the Company, then the Company will pay to Imperial
Holly an amount equal to $8,000,000 (the "Company Termination Fee").
The Merger Agreement provides that if the Company terminates the Merger
Agreement pursuant to paragraph (j) or (k) above, then Imperial Holly will pay
to the Company an amount equal to $8,000,000 (the "Imperial Termination Fee").
The Company Termination Fee required to be paid pursuant to clause (ii)
above shall be paid prior to, and will be a pre-condition to effectiveness of
termination of the Merger Agreement and the Company Termination Fee required
to be paid pursuant to clause (iii) will be paid to Imperial Holly on the next
business day after a definitive agreement is entered into with a third party
with respect to an Acquisition Proposal with respect to the Company. Any
payment of a Company Termination Fee or an Imperial Termination Fee shall be
made not later than two business days after termination of the Merger
Agreement.
Amendment. The Merger Agreement provides that it may be amended (by an
instrument in writing signed by the parties thereto) by the parties thereto by
action by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time; provided, however, after approval and adoption of
the Merger Agreement and the transactions contemplated thereby by the
stockholders of the Company, no amendment may be made which would reduce the
amount or change the type of consideration payable in the Merger.
Company Stockholders Agreement. As a condition and inducement to entering
the Merger Agreement, Imperial Holly and the Purchaser required that
substantially all of the directors and executive officers of the Company enter
into a stockholders agreement, dated September 12, 1997. Pursuant to the
Stockholder Agreement, each such stockholder severally agreed to tender all
Shares owned by such stockholder into the Offer prior to the expiration of the
Offer and not to withdraw any Shares so tendered so long as the per Share
price is not less than $20.25 in cash net to the seller.
Imperial Holly Proxy Agreements. As a condition and inducement to entering
the Merger Agreement, the Company required that certain stockholders of
Imperial Holly, affiliated with Imperial Holly and representing approximately
66.34% of the issued and outstanding Imperial Shares, enter into the Imperial
Holly Proxy Agreements, pursuant to which they would agree to vote all of
their Imperial Shares in favor of the Merger.
Employment Agreements. In connection with the Merger, Imperial Holly intends
to enter into a new employment agreement with Mr. Sprague providing for a 5-
year term beginning on the Merger Date. Pursuant to the employment agreement,
Mr. Sprague will continue as the President of the Company and will be
nominated to serve on Imperial Holly's Board. In addition to his base salary
which will continue at no less than $430,000, Mr. Sprague will be entitled to
participate in an annual bonus program, which provides him with a maximum
bonus opportunity equal to 75% of his base salary, to continue to receive
benefits under the Company's Supplemental Executive Retirement Plan and
retiree health benefits, to receive a stock option grant with respect to
135,000 shares of Imperial Holly common stock, and various other benefits and
perquisites. In addition, upon termination of his employment for "Good Reason"
or if he is involuntarily terminated by Imperial Holly other than for "Cause"
(as those terms are defined in the employment agreement), Mr. Sprague will be
entitled to receive a lump sum payment equal to three times the sum of his
base salary and his highest bonus amount (as defined in the employment
agreement), his stock options shall vest, and certain employee benefits will
be continued for a period of up to five years. Also, in the event these
payments would exceed the "golden" parachute payment limit of the Internal
Revenue Code, Mr. Sprague will be made "whole" on a net after-tax basis for
any parachute excise tax he incurs. Imperial Holly acknowledged, in connection
with the execution of
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the Merger Agreement, its intention to enter into employment agreements, to
become effective upon consummation of the Merger, with certain other senior
executives of the Company on terms to be determined.
Section 12. Effect of the Offer on the Market for Shares.
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and the number of holders of
Shares, which could adversely affect the liquidity and market value of the
remaining shares held by stockholders other than the Purchaser. The Purchaser
cannot predict whether the reduction in the number of Shares and the existence
of the Merger Agreement would have an adverse or beneficial effect on the
market price for or marketability of the Shares or whether it would cause
future market prices to be equal to or greater or less than the Offer Price.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), which has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. Depending upon factors similar
to those described above regarding listing and market quotations, following
the Offer it is possible that the Shares would no longer constitute "margin
securities" for the purposes of the margin regulations of the Federal Reserve
Board and therefore could no longer be used as collateral for loans made by
brokers.
If the Purchaser acquires a substantial number of Shares, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 under the
Securities Act may be impaired.
Section 13. Dividends and Distributions.
If, on or after September 12, 1997, the Company should, except as permitted
under the Merger Agreement, (i) split or combine the Shares, or otherwise
change the Shares or its capitalization, (ii) issue or sell any additional
securities of the Company (other than Shares issued or sold upon the exercise
(in accordance with the present terms thereof) of Options outstanding on
September 12, 1997, or (iii) acquire currently outstanding Shares or otherwise
cause a reduction in the number of outstanding Shares, then, without prejudice
to the Purchaser's rights under Sections 1 and 14 hereof, the Purchaser, in
its sole discretion (subject to the terms of the Merger Agreement), may make
such adjustments as it deems appropriate in the Offer Price and other terms of
the Offer and the Merger including, without limitation, the amount and type of
securities offered to be purchased.
If, on or after September 12, 1997, the Company should, except as permitted
under the Merger Agreement, declare or pay any dividend on the Shares or make
any distribution (including, without limitation, the issuance of additional
Shares pursuant to a stock dividend or stock split, the issuance of other
securities or the issuance of rights for the purchase of any securities) with
respect to the Shares that is payable or distributable to stockholders of
record on a date prior to the transfer to the name of the Purchaser or its
nominee or transferee on the Company's stock transfer records of the Shares
purchased pursuant to the Offer, then, without prejudice to the Purchaser's
rights under Sections 1 and 14 hereof, (i) the Offer Price payable by the
Purchaser pursuant to the Offer will be reduced by the amount of any such cash
dividend or cash distribution and (ii) any such non-cash dividend,
distribution or right to be received by the tendering stockholders will be
received and held by the tendering stockholders for the account of the
Purchaser and will be required to be promptly remitted and transferred by each
tendering stockholder to the Paying Agent for the account of the Purchaser,
accompanied by appropriate documentation of transfer. Pending such remittance
and subject to applicable law, the Purchaser will be entitled to all rights
and privileges as owner of any such non-cash dividend, distribution or right
and may withhold the entire Offer Price or deduct from the Offer Price the
amount or value thereof, as determined by the Purchaser in its sole
discretion.
Section 14. Conditions to the Offer.
Notwithstanding any other provision of the Offer, the Purchaser will not be
required to accept for payment or pay for any Shares tendered pursuant to the
Offer, and may terminate or amend the Offer and may postpone the acceptance
for payment of and payment for Shares tendered, if (i) prior to the Expiration
Date, the Target Share Condition, the HSR
27
<PAGE>
Condition or the Financing Condition shall not have been satisfied or (ii) at
any time on or after the date of the Merger Agreement, and prior to the
Expiration Date, any of the following conditions shall have occurred and be
continuing:
(a) there shall have been any action taken, or any statute, rule,
regulation, judgment, administrative interpretation, order or injunction
enacted, promulgated, entered, enforced or deemed applicable to the Offer
or the Merger (other than the application of the waiting period provisions
of the HSR Act) by any court of competent jurisdiction in the United States
or other governmental entity, which would (i) restrain, prohibit or make
illegal or otherwise prohibit (A) the acceptance for payment of, or payment
for or purchase of at least the Target Number of Shares of the Shares or
(B) the consummation of the Merger, or (ii) prohibiting Imperial Holly or
any of its affiliates to exercise full rights of ownership of the Shares,
including without limitation the right to vote any Shares purchased by them
on all matters properly presented to the stockholders of the Company,
including without limitation the adoption and approval of the Merger
Agreement and the Merger;
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or in the over-the-counter market in the United States, (ii) the
declaration of any banking moratorium or any suspension of payments in
respect of banks or any material limitation (whether or not mandatory) on
the extension of credit by lending institutions in the United States, (iii)
the commencement of a war, material armed hostilities or any other material
international or national calamity involving the United States having a
significant adverse effect on the functioning of the financial markets in
the United States, or (iv) in the case of any of the foregoing existing at
the time of the execution of the Merger Agreement, a material acceleration
or worsening thereof;
(c) the Company shall have breached or failed to comply with any of its
obligations under the Merger Agreement (other than as a result of a breach
by Imperial Holly or the Purchaser of any of their obligations under the
Merger Agreement) and such breach or failure shall continue unremedied for
ten (10) business days after the Company has received written notice from
Imperial Holly or the Purchaser of the occurrence of such breach or
failure, except such breaches or failures (i) which, individually and in
the aggregate, would not have a material adverse effect on the Company and
(ii) which, individually and in the aggregate, would not materially impair
or delay the ability of the Purchaser to consummate the Offer or the
ability of Imperial Holly, the Purchaser and the Company to effect the
Merger;
(d) any representation or warranty of the Company contained in the Merger
Agreement shall fail to be true and correct as of such expiration or
proposed termination of the Offer except for such failures (i) which,
individually and in the aggregate, would not have a material adverse effect
on the Company and (ii) which, individually and in the aggregate, would not
materially impair or delay the ability of the Purchaser to consummate the
Offer or the ability of Imperial Holly, the Purchaser and the Company to
effect the Merger, provided that Imperial Holly shall have notified the
Company promptly upon learning of such failure;
(e) the Merger Agreement shall have been terminated pursuant to its terms
or amended pursuant to its terms to provide for such termination or
amendment of the Offer; or
(f) the Company's Board of Directors shall have (i) (including by
amendment of the Schedule 14D-9) withdrawn or modified in any manner
adverse to Imperial Holly or the Purchaser its approval or recommendation
of the Offer, the Merger or the Merger Agreement or (ii) resolved to do any
of the foregoing;
which, in the good faith reasonable judgment of Imperial Holly and the
Purchaser, makes it inadvisable to proceed with acceptance for payment or
payment for the Shares.
The Merger Agreement provides that, except as provided for therein, the
foregoing conditions are for the sole benefit of Imperial Holly and the
Purchaser and may be asserted or waived by Imperial Holly or the Purchaser, in
whole or in part, at any time or from time to time, in its discretion. The
failure of Imperial Holly
28
<PAGE>
or the Purchaser at any time to exercise any of the foregoing rights shall not
be deemed a waiver of any such right and each such right shall be deemed an
ongoing right that may be asserted at any time and from time to time.
Section 15. Certain Legal Matters; Required Regulatory Approvals.
Except as set forth in this Offer to Purchase, based on a review of publicly
available filings by the Company with the SEC and other publicly available
information regarding the Company, neither Imperial Holly nor the Purchaser is
aware of any licenses or regulatory permits that appear to be material to the
business of the Company and its subsidiaries, taken as a whole, and that might
be adversely affected by the Purchaser's acquisition of the Shares (and the
indirect acquisition of the stock of the Company's subsidiaries) as
contemplated herein, or any approvals or other actions by or with any
domestic, foreign or supranational governmental authority or administrative or
regulatory agency that would be required for the acquisition or ownership of
the Shares (or the indirect acquisition of the stock of the Company's
subsidiaries) by the Purchaser pursuant to the Offer as contemplated herein.
Should any such approval or other action be required, it is presently
contemplated that such approval or action would be sought except as described
below under "State Takeover Laws." Should any such approval or other action be
required, there can be no assurance that any such approval or action, if
needed, would be obtained without substantial conditions or that adverse
consequences might not result to the Company's or its subsidiaries'
businesses, or that certain parts of the Company's, Imperial Holly's, the
Purchaser's or any of their respective subsidiaries' businesses might not have
to be disposed of or held separate or other substantial conditions complied
with in order to obtain such approval or action or in the event that such
approvals were not obtained or such actions were not taken. The Purchaser's
obligation to purchase and pay for Shares is subject to certain conditions,
including conditions with respect to injunctions and governmental actions. See
the Introduction and Section 14.
State Takeover Laws. A number of states (including Delaware, where the
Company is incorporated) have adopted takeover laws and regulations which
purport, to varying degrees, to be applicable to attempts to acquire
securities of corporations which are incorporated in such states or which have
substantial assets, stockholders, principal executive offices or principal
places of business therein. To the extent that certain provisions of certain
of these state takeover statutes purport to apply to the Offer or the Merger,
the Purchaser believes that such laws conflict with federal law and constitute
an unconstitutional burden on interstate commerce. In 1982, the Supreme Court
of the United States, in Edgar v. Mite Corp., invalidated on constitutional
grounds the Illinois Business Takeover Statute which, as a matter of state
securities law, made takeovers of corporations meeting certain requirements
more difficult, and the reasoning in such decision is likely to apply to
certain other state takeover statutes. In 1987, however, in CTS Corp. v.
Dynamics Corp. of America, the Supreme Court of the United States held that
the State of Indiana could, as a matter of corporate law and, in particular,
those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of
a target corporation without the prior approval of the remaining stockholders,
provided that such laws were applicable only under certain conditions.
Subsequently, in TLX Acquisition Corp. v. Telex Corp., a federal district
court in Oklahoma ruled that the Oklahoma statutes were unconstitutional
insofar as they apply to corporations incorporated outside Oklahoma in that
they would subject such corporations to inconsistent regulations. Similarly,
in Tyson Foods, Inc. v. McReynolds, a federal district court in Tennessee
ruled that four Tennessee takeover statutes were unconstitutional as applied
to corporations incorporated outside Tennessee. This decision was affirmed by
the United States Court of Appeals for the Sixth Circuit. In December 1988, a
federal district court in Florida held in Grand Metropolitan PLC v.
Butterworth that the provisions of the Florida Affiliated Transactions Act and
Florida Control Share Acquisition Act were unconstitutional as applied to
corporations incorporated outside of Florida.
The Purchaser has not attempted to comply with any state takeover statutes
in connection with the Offer or the Merger. The Purchaser reserves the right
to challenge the validity or applicability of any state law allegedly
applicable to the Offer or the Merger and nothing in this Offer to Purchase
nor any action taken in connection herewith is intended as a waiver of that
right. In the event that it is asserted that one or more takeover statutes
apply to the Offer or the Merger, and it is not determined by an appropriate
court that such statute or statutes do
29
<PAGE>
not apply or are invalid as applied to the Offer or the Merger, as applicable,
the Purchaser may be required to file certain documents with, or receive
approvals from, the relevant state authorities, and the Purchaser might be
unable to accept for payment or purchase Shares tendered pursuant to the Offer
or be delayed in continuing or consummating the Offer. In such case, the
Purchaser may not be obligated to accept for purchase, or pay for, any Shares
tendered. See Section 14.
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the FTC, certain acquisition transactions may not be consummated
unless certain information has been furnished to the Antitrust Division and
the FTC and certain waiting period requirements have been satisfied. The
acquisition of Shares by the Purchaser pursuant to the Offer are subject to
such requirements. See Section 2.
Pursuant to the HSR Act, on September 17, 1997, Imperial Holly filed a
Premerger Notification and Report Form in connection with the purchase of
Shares pursuant to the Offer with the FTC and the Antitrust Division. Under
the provisions of the HSR Act applicable to the Offer, the purchase of Shares
pursuant to the Offer may not be consummated until the expiration of a 15-
calendar day waiting period following the filing by Imperial Holly.
Accordingly, the waiting period under the HSR Act applicable to the purchase
of Shares pursuant to the Offer will expire at 11:59 p.m., New York City time,
on October 2, 1997, unless such waiting period is earlier terminated by the
FTC and the Antitrust Division or extended by a request from the FTC or the
Antitrust Division for additional information or documentary material prior to
the expiration of the waiting period or by the withdrawal and resubmission of
the Premerger Notification and Report Form by Imperial Holly. The effect of
withdrawal and submission of such form would be to give the relevant
governmental agency an additional 15-day waiting period.
Pursuant to the HSR Act, Imperial Holly has requested early termination of
the waiting period applicable to the Offer. There can be no assurance,
however, that either the 15-day HSR Act waiting period will be terminated
early or not extended. If either the FTC or the Antitrust Division were to
request additional information or documentary material from Imperial Holly
with respect to the Offer, the waiting period with respect to the Offer would
expire at 11:59 p.m., New York City time, on the tenth calendar day after the
date of substantial compliance by Imperial Holly with such request.
Thereafter, the waiting period could be extended only by court order or with
Imperial Holly's consent. If the acquisition of Shares is delayed pursuant to
a request by the FTC or the Antitrust Division for additional information or
documentary material pursuant to the HSR Act, the Offer may, but need not, be
extended and, in any event, the purchase of and payment for Shares will be
deferred until 10 days after the request is substantially complied with, or
unless the waiting period is sooner terminated by the FTC and the Antitrust
Division. Only one extension of such waiting period pursuant to a request for
additional information is authorized by the HSR Act and the rules promulgated
thereunder, except by court order or with the consent of Imperial Holly. Any
such extension of the waiting period will not give rise to any withdrawal
rights not otherwise provided for by applicable law. See Section 4. It is a
condition to the Offer that the waiting period applicable under the HSR Act to
the Offer expire or be terminated. See Section 14. In any event, pursuant to
Rule 14e-1(a) under the Exchange Act, the Expiration Date may not occur prior
to October 16, 1997.
If the acquisition of Shares is delayed pursuant to a request by the FTC or
the Antitrust Division for information or documentary material pursuant to the
HSR Act, the Offer may, at the discretion of the Purchaser (subject to the
terms and conditions of the Merger Agreement) be extended and, in any event
the purchase of and payment for Shares will be deferred until the applicable
waiting period expires or is terminated. Unless the Offer is extended, any
extension of the waiting period will not give rise to any additional
withdrawal rights. See Section 4.
In practice, complying with a request for information or documentary
material can take a significant amount of time. In addition, if the Antitrust
Division or the FTC raises substantive issues in connection with a proposed
transaction, the parties frequently engage in negotiations with the relevant
governmental agency concerning possible means of addressing those issues and
may agree to delay consummation of the transaction while such negotiations
continue.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's acquisition of
Shares pursuant to the Offer and the Merger. At any time before or after
30
<PAGE>
the Purchaser's acquisition of Shares, the Antitrust Division or the FTC could
take such action under the antitrust laws as it deems necessary or desirable
in the public interest, including seeking to enjoin the acquisition of Shares
pursuant to the Offer or otherwise or seeking divestiture of Shares acquired
by the Purchaser or divestiture of substantial assets of Imperial Holly, the
Company or their subsidiaries. Private parties and state attorneys general may
also bring legal action under the antitrust laws under certain circumstances.
Based upon an examination of publicly available information relating to the
businesses in which Imperial Holly and the Company are engaged, Imperial Holly
and the Purchaser believe that the acquisition of Shares by the Purchaser will
not violate the antitrust laws. Nevertheless, there can be no assurance that a
challenge to the Offer or other acquisition of Shares by the Purchaser on
antitrust grounds will not be made or, if such a challenge is made, of the
result. See Section 14 for certain conditions to the Offer, including
conditions with respect to injunctions and certain governmental actions.
Section 16. Fees and Expenses.
Lehman Brothers is acting as Dealer Manager in connection with the Offer. In
addition, Lehman Brothers has provided certain financial advisory services to
Imperial Holly in connection with the proposed acquisition of the Company. As
compensation for such services, Imperial Holly has to date paid Lehman
Brothers a fee of $100,000, which fee was payable upon execution of the
engagement letter with Lehman Brothers, and a fee of $900,000, which was
payable upon announcement of Imperial Holly's intent to acquire the Company.
Imperial Holly has also agreed to pay Lehman Brothers a fee of 0.75% of the
aggregate consideration to be paid to holders of Shares involved in the
acquisition of the Company contingent upon the consummation of such
acquisition, against which all fees previously paid will be fully creditable.
Imperial Holly has agreed to reimburse Lehman Brothers for its out-of-pocket
expenses, including fees and expenses of its counsel, and to indemnify Lehman
Brothers (and certain affiliated persons) against certain liabilities and
expenses. Lehman Brothers may from time to time in the future render various
investment banking services to Imperial Holly and its affiliates, for which it
is expected it would be paid customary fees. In addition, LCPI, an affiliate
of Lehman Brothers, is serving as the exclusive arranger and adviser to
Imperial Holly in securing the financing necessary to fund the purchase of
Shares pursuant to the Offer and the Merger.
D. F. King & Co., Inc. has been retained by the Purchaser as Information
Agent in connection with the Offer. The Information Agent may contact holders
of Shares by mail, telephone, telex, telegraph and personal interview and may
request brokers, dealers and other nominee stockholders to forward material
relating to the Offer to beneficial owners of Shares. The Purchaser will pay
the Information Agent reasonable and customary compensation for all such
services in addition to reimbursing the Information Agent for reasonable out-
of-pocket expenses in connection therewith.
In addition, Wachovia Bank, N.A. has been retained as the Paying Agent. The
Purchaser will pay the Paying Agent reasonable and customary compensation for
its services in connection with the Offer and reimburse the Paying Agent for
its reasonable out-of-pocket expenses in connection therewith.
Except as set forth above, neither Imperial Holly nor the Purchaser will pay
any fees or commissions to any broker, dealer or other person for soliciting
tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks
and trust companies and other nominees will, upon request, be reimbursed by
Imperial Holly or the Purchaser for customary clerical and mailing expenses
incurred by them in forwarding offering materials to their customers.
Section 17. Miscellaneous.
The Purchaser is not aware of any jurisdiction in which the making of the
Offer is not in compliance with applicable law. If the Purchaser becomes aware
of any jurisdiction in which the making of the Offer would not be in
compliance with applicable law, the Purchaser will make a good faith effort to
comply with any such law. If, after such good faith effort, the Purchaser
cannot comply with any such law, the Offer will not be made to (nor will
tenders be accepted from or on behalf of) the holders of Shares residing in
such jurisdiction. In those
31
<PAGE>
jurisdictions whose securities or blue sky laws require the Offer to be made
by a licensed broker or dealer, the Offer is being made on behalf of the
Purchaser by one or more registered brokers or dealers which are licensed
under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR IMPERIAL HOLLY NOT CONTAINED IN
THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
The Purchaser has filed with the SEC the Schedule 14D-1 pursuant to Rule
l4d-3 under the Exchange Act, furnishing certain additional information with
respect to the Offer, and may file amendments thereto. The Schedule 14D-1 and
any amendments thereto, including exhibits, may be inspected and copies may be
obtained at the same places and in the same manner as set forth in Section 7
(except that they will not be available at the regional offices of the SEC).
IHK MERGER SUB CORPORATION
32
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER AND IMPERIAL HOLLY
1. Directors and Executive Officers of the Purchaser.
The following table sets forth the name, current business address and
present principal occupation or employment and material occupations,
positions, offices or employments for the past five years of each director and
executive officer of the Purchaser. Unless otherwise indicated, the current
business address of each person is c/o One Imperial Square, Suite 200, 8016
Highway 90-A, Sugar Land, Texas 77478, and each occupation set forth opposite
an individual's name refers to employment with the Purchaser. Each such person
is a citizen of the United States, unless otherwise indicated.
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- --------------------------- ----------------------------------------------------
<S> <C>
James C. Kempner........... Director; Chief Executive Officer and Chief
Financial Officer; see "Directors and Executive
Officers of Imperial Holly."
William F. Schwer.......... Director; Vice President and Secretary; see
"Directors and Executive Officers of Imperial
Holly."
Roger W. Hill.............. Director; Vice President; see "Directors and
Executive Officers of Imperial Holly."
</TABLE>
2. Directors and Executive Officers of Imperial Holly.
The following table sets forth the name, business address and present
principal occupation or employment, and material occupations, positions,
offices or employments for the past five years of each director and executive
officer of Imperial Holly. Unless otherwise indicated, the current business
address of each such person is c/o One Imperial Square, Suite 200, 8016
Highway 90-A, Sugar Land, Texas 77478, and each occupation set forth opposite
an individual's name refers to employment with Imperial Holly. Each such
person is a citizen of the United States, unless otherwise indicated.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- --------------------------- ----------------------------------------------------
<S> <C>
John D. Curtin, Jr......... Director since 1993. Chairman and CEO, Aearo Company
from 1994 to present. Executive Vice President and
Director of Cabot Corporation from 1989-1994.
Director of Eastern Enterprises.
David J. Dilger............ Director since 1996. Chief Executive Officer of
Greencore Group plc from 1996 to Present. Chief
Operating Officer of Greencore Group plc from 1991-
1996. Mr. Dilger is a citizen of Ireland.
E. O. Gaylord.............. Director since 1978. President, Gaylord & Company (a
venture capital firm) since 1988. Chairman of the
Board of Directors EOTT Energy Corp. from 1993 to
present. Director of Seneca Funds Corporation,
Essex International, Kinder Morgan Energy Partners,
L.P. and Stant Corporation.
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- --------------------------- ----------------------------------------------------
<S> <C>
Gerald Grinstein........... Director since 1996. Chairman of the Board of Delta
Air Lines, Inc. from August, 1997 to present,
director from 1987 to present. Chairman of the
Board of Burlington Northern, Inc. from 1987 to
1995. Director of Browning Ferris Industries,
Paccar, Inc. and Suntrend Corp.
Ann O. Hamilton............ Director since 1974. Retired Senior Advisor, World
Bank, Washington, D.C. Employed with World Bank
from 1971-1995.
Roger W. Hill.............. Director since 1988. President and CEO Holly Sugar
Corp. from 1988 to present and Managing Director of
Imperial Holly Corporation from 1996 to present.
Harris L. Kempner, Jr...... Director since 1966. President of Kempner Capital
Management, Inc. from 1982 to present. Director TNP
Enterprises and American Indemnity Financial
Corporation. Advisory Director of Cullen/Frost
Bankers, Inc.
I. H. Kempner, III......... Director since 1967. Chairman of the Board of
Imperial Holly Corporation from 1971 to present.
James C. Kempner........... Director since 1988. President, Chief Executive
Officer and Chief Financial Officer of Imperial
Holly Corporation from 1993 to present. Executive
Vice President and Chief Financial Officer from
1988-1993.
H. E. Lentz................ Director since 1993. Managing Director of Lehman
Brothers Inc. from 1993 to present. Managing
Director of Wasserstein, Perella & Co., Inc. from
1987 to 1993. Director of Rowan Companies, Inc.
Robert L. K. Lynch......... Director since 1990. Chairman, President and Chief
Executive Officer of Yaga, Inc. from 1995 to
present. President of Galveston Management Co. from
1987-1994. Director of United States National Bank
and Foster Farms.
Kevin C. O'Sullivan........ Director since 1996. Chief Financial Officer of
Greencore Group plc from 1992 to present. Mr.
O'Sullivan is a citizen of Great Britain.
Fayez Sarofim.............. Director since 1991. President and Chairman of the
Board of Fayez Sarofim & Co. from 1958 to present.
Director of Allegheny-Teledyne, Argonaut Group,
Inc., EXOR Group and Unitrin, Inc.
Daniel K. Thorne........... Director since 1988. President of Star Lake Cattle
Company from 1984 to present and President Star
Lake Properties, Inc. from 1992 to present.
Peter C. Carrothers........ Officer since 1994. Senior Vice President--
Operations from 1994 to present. Pepsico Foods
International, Vice President--Logistics from 1990
to 1994.
Douglas W. Ehrenkranz...... Officer since 1995. Vice President--Sales and
Marketing 1995 to present and Managing Director
from April 1997 to present. Procter & Gamble Corp.,
Category Sales Manager from 1979 to 1993.
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- --------------------------- ----------------------------------------------------
<S> <C>
John A. Richmond........... Officer since 1991. Vice President--Operations from
1995 to present and Managing Director from April
1997 to present. Holly Sugar Corp., Senior Vice
President and General Manager--Beet Sugar
Operations from 1993 to 1995. Holly Sugar Corp.,
Senior Vice President and General Manager--Eastern
Division from 1992 to 1993.
William F. Schwer.......... Officer since 1989. Managing Director from 1995 to
present. Senior Vice President and General Counsel
from 1993 to 1995. Vice President and General
Counsel 1992 to 1993.
</TABLE>
<TABLE>
<S> <C>
Roy E. Henderson............ Officer since 1981. Vice President--Administration
from 1994 to present, Vice President and Treasurer
from 1981 to 1994.
</TABLE>
<TABLE>
<S> <C>
H. P. Mechler.............. Officer since 1988. Vice President--Accounting from
April 1997 to present, Controller from 1988 to
April 1997.
Karen L. Mercer............ Officer since 1993. Vice President and Treasurer
from April 1997 to present. Treasurer from 1994 to
April 1997. Texas Commerce Bank, Vice President--
General Lending in 1993. First City Bank, various
positions 1988 to 1993.
Alan K. Lebsock............ Officer since 1997. Controller from April 1997 to
present. Holly Sugar Corp., Controller from 1990 to
April 1997.
</TABLE>
S-3
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each
stockholder of the Company or his broker, dealer, commercial bank, trust
company or other nominee to the Paying Agent at one of its address set forth
below:
The Paying Agent for the Offer is:
WACHOVIA BANK, N.A.
<TABLE>
<S> <C> <C> <C>
IF DELIVERY IS BY MAIL: BY OVERNIGHT COURIER: BY HAND: FOR NEW YORK DROP:
Wachovia Bank, N.A. Wachovia Bank, N.A. Wachovia Bank, N.A. Wachovia Bank, N.A.
Corporate
Reorganizations Corporate Reorganizations Shareholder Services Department c/o Boston
P. O. Box 9061 70 Campanelli Drive Wachovia East Building EquiServe L.P.
Boston, MA 02205 Braintree, MA 02184 2nd Floor Corporate Reorganizations
301 North Church Street 55 Broadway
Winston-Salem, Third Floor
NC 27101 New York, NY 10006
</TABLE>
BY FACSIMILE:
(Eligible Institutions Only)
(910) 770-4832
Confirmation Number: 1-800-633-4236
Any questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of the Offer to Purchase, this Letter of
Transmittal and other tender offer materials may be obtained from the
Information Agent as set forth below, and will be furnished promptly at the
Purchaser's expense. You may also contact your broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
D. F. KING & CO., INC.
77 Water Street
New York, New York 10005-4495
Call Collect: (212) 269-5550
Call Toll Free: (800) 758-5378
The Dealer Manager for the Offer is:
LEHMAN BROTHERS
3 World Financial Center
200 Vesey Street
New York, New York 10285
Call Collect: (212) 526-2449
