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EXHIBIT 10.34
EXECUTION COPY
SOUTHERN FOODS GROUP, L.P.
SFG CAPITAL CORPORATION
$150,000,000
9 7/8% SENIOR SUBORDINATED NOTES DUE 2007
PURCHASE AGREEMENT
August 27, 1997
CHASE SECURITIES INC.
000 Xxxx Xxxxxx
0xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Southern Foods Group, L.P., a Delaware limited partnership
("SFG"), and SFG Capital Corporation, a Delaware corporation ("SFG Capital"
and, together with SFG, the "Issuers"), propose jointly to issue and sell
$150,000,000 aggregate principal amount of their 9 7/8% Senior Subordinated
Notes due 2007 (the "Securities"). The Securities will be issued pursuant to
an indenture to be dated as of September 4, 1997 (the "Indenture"), among the
Issuers and Texas Commerce Bank National Association, as trustee (the
"Trustee").
Substantially simultaneously with the consummation of the
sale of the Securities hereunder and pursuant to a Stock Purchase and Merger
Agreement dated as of May 22, 1997, among Mid-America Dairymen, Inc., a Kansas
cooperative marketing association ("Mid-Am"), Xxxxxx/Meadow Gold Dairies
Holdings, Inc., a Delaware corporation ("Holdings"), BDH Two, Inc., a Delaware
corporation ("BDH"), and Xxxxxx, Inc., a New Jersey corporation (together with
BDH, "Xxxxxx"), Mid-Am will acquire (the "Acquisition") all of the outstanding
capital stock of Holdings and SFG will obtain the license (the "Xxxxxx
License") to use the Xxxxxx and Xxxxx trademarks for certain products produced
by Holdings (the "Xxxxxx Trademarks"). Immediately following the Acquisition,
Mid-Am will contribute (the "Meadow Gold Dairies Contribution") substantially
all of the assets (other than the Meadow Gold Trademarks (as defined below))
and liabilities of the dairy operations of Xxxxxx owned by Holdings that are
located in the Western United States (the "Meadow Gold Dairies"), which dairy
operations manufacture and sell dairy products primarily under the Meadow Gold
and Viva trademarks (the "Meadow Gold Trademarks"), to SFG in exchange for (a)
the assumption by SFG of the obligations of Mid-Am with respect to the senior
secured credit facilities in an aggregate principal amount of up to
$250,000,000 to be provided by a syndicate of lenders for which The Chase
Manhattan Bank will serve as the administrative agent (the "New Senior Bank
Facilities") and (b) the issuance by SFG to Mid-Am of $90,000,000 in stated
amount of new Series B 10% payment-in-kind preferred limited partnership
interests (the "Series B Mid-Am New Preferred Interests"). In addition, SFG
will acquire the Meadow Gold
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Trademarks from Xxxxxx/Meadow Gold Dairies Investments, Inc., a Delaware
corporation ("Investments"). The acquisitions of the Xxxxxx License from
Xxxxxx and the Meadow Gold Trademarks from Investments are collectively
referred to herein as the "Trademark Acquisitions".
In connection with the Meadow Gold Dairies Contribution,
Mid-Am Capital, L.L.C., a Delaware limited liability company ("Mid-Am
Capital"), will make a $45,000,000 cash investment in SFG through the purchase
of $15,000,000 in stated amount of Series C 10% payment-in-kind preferred
limited partnership interests (the "10% Mid-Am Capital New Preferred
Interests") and $30,000,000 in stated amount of Series D 9.5% preferred limited
partnership interests (the "9.5% Mid-Am Capital New Preferred Interests").
In connection with the Transactions, SFG will authorize a
series of additional payment-in-kind preferred limited partnership interests
consisting of its Series E 10% payment-in-kind preferred limited partnership
interests (the "Series E New Preferred Interests"). Initially, the Series E
New Preferred Interests will be issued in a stated amount of $2.6 million to
Mid-Am and F.T. Xxxx Xxxxxxxx, the President and Chief Executive Officer of
SFG, each of whom will immediately recontribute $400,000 of such interests to
SFG. The Series B Mid-Am New Preferred Interests, the 10% Mid-Am Capital New
Preferred Interests, the 9.5% Mid-Am Capital New Preferred Interests and the
Series E New Preferred Interests are collectively referred to herein as the
"New Preferred Interests".
The foregoing transactions, together with each of the other
Transactions described in the preliminary offering memorandum dated July 31,
1997 (the "Preliminary Offering Memorandum") and the offering memorandum dated
the date hereof (the "Offering Memorandum"), are collectively referred to
herein as the "Transactions".
The Issuers hereby confirm their agreement with Chase
Securities Inc. (the "Initial Purchaser") concerning the purchase of the
Securities from the Issuers by the Initial Purchaser.
The Securities will be offered and sold to the Initial
Purchaser without being registered under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance upon an exemption therefrom. The Issuers
have prepared the Preliminary Offering Memorandum and the Issuers will prepare
the Offering Memorandum setting forth information concerning the Issuers and
the Securities. Copies of the Preliminary Offering Memorandum have been, and
copies of the Offering Memorandum will be, delivered by the Issuers to the
Initial Purchaser pursuant to the terms of this Agreement. Any references
herein to the Preliminary Offering Memorandum and the Offering Memorandum shall
be deemed to include all amendments and supplements thereto, unless otherwise
noted. The Issuers hereby confirm that they have authorized the use of the
Preliminary Offering Memorandum and the Offering Memorandum in connection with
the offering and resale of the Securities by the Initial Purchaser in
accordance with Section 2.
Holders of the Securities (including the Initial Purchaser and
its direct and indirect transferees) will be entitled to the benefits of an
Exchange and Registration Rights Agreement, substantially in the form attached
hereto as Annex A (the "Registration Rights
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Agreement"), pursuant to which the Issuers will agree jointly to file with the
Securities and Exchange Commission (the "Commission") (i) a registration
statement under the Securities Act (the "Exchange Offer Registration
Statement") registering a joint issue of senior subordinated notes of the
Issuers (the "Exchange Securities") which are identical in all material
respects to the Securities (except that the Exchange Securities will not
contain terms with respect to transfer restrictions) and (ii) under certain
circumstances, a shelf registration statement pursuant to Rule 415 under the
Securities Act (the "Shelf Registration Statement").
Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Offering Memorandum.
1. Representations, Warranties and Agreements of the Issuers.
Each of the Issuers, jointly and severally, represents and warrants to, and
agrees with, the Initial Purchaser on and as of the date hereof and the Closing
Date (as defined in Section 3) that:
(a) each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its respective date, did not, and the
Offering Memorandum on the Closing Date will not, contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided that neither of the Issuers makes any
representation or warranty as to information contained in, or omitted
from, the Preliminary Offering Memorandum or the Offering Memorandum
in reliance upon, and in conformity with, written information
furnished to such Issuer by or on behalf of the Initial Purchaser
specifically for use therein (the "Initial Purchaser's Information");
(b) each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its respective date, contains all of the
information that, if requested by a prospective purchaser of the
Securities, would be required to be provided to such prospective
purchaser pursuant to Rule 144A(d)(4) under the Securities Act;
(c) assuming the accuracy of the representations and
warranties of the Initial Purchaser contained in Section 2 and its
compliance with the agreements set forth therein, it is not necessary,
in connection with the issuance and sale of the Securities to the
Initial Purchaser and the offer, resale and delivery of the Securities
by the Initial Purchaser in the manner contemplated by this Agreement
and the Offering Memorandum, to register the Securities under the
Securities Act or to qualify the Indenture under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act");
(d) each of the Issuers and SFG Management Limited Liability
Company, a Delaware limited liability company and the general partner
of SFG ("SFG LLC"), has been duly formed or incorporated, as the case
may be, and is validly existing as a limited partnership, a
corporation or a limited liability company, as the case may be, in
good standing under the laws of its jurisdiction of formation or
incorporation, as the case may be, is duly qualified to do business
and is in good standing as a foreign limited partnership, a foreign
corporation or a foreign limited liability company, as the
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case may be, in each jurisdiction in which its ownership or lease of
property or the conduct of its business requires such qualification,
and has all power and authority necessary to own or hold its
properties and to conduct the business in which it is engaged, except
where the failure to so qualify or have such power or authority would
not, singularly or in the aggregate, have a material adverse effect on
the condition (financial or otherwise), results of operations,
business or prospects of the Issuers taken as a whole after giving
effect to the Transactions (a "Material Adverse Effect");
(e) on June 30, 1997, on a historical basis and after giving
pro forma effect to the Transactions, SFG had a capitalization as set
forth in the Offering Memorandum under the heading "Capitalization",
all of the outstanding partnership interests of SFG have been, and,
upon consummation of the Transactions, all of the outstanding
partnership interests of SFG (including the New Preferred Interests)
will be, duly and validly authorized and issued, and, upon
consummation of the Transactions, the capital structure of SFG will
conform in all material respects to the description thereof contained
in the Offering Memorandum; SFG Capital has the authorized capital
stock as set forth in its Certificate of Incorporation, all of the
outstanding shares of capital stock of SFG Capital have been duly and
validly authorized and issued, are fully paid and non- assessable and
are owned directly by SFG, free and clear of any lien, charge,
encumbrance, security interest, restriction upon voting or transfer or
any other claim of any third party, other than liens arising under the
New Senior Bank Facilities, and SFG Capital was incorporated on July
24, 1997, has no prior operating history and, since the date of its
incorporation, has had no operations; SFG LLC has the authorized
limited liability company interests as set forth in its Limited
Liability Company Agreement, as amended and restated (the "Limited
Liability Company Agreement"), and all of the outstanding limited
liability company interests of SFG LLC have been duly and validly
authorized and issued;
(f) each of the Issuers has full right, power and authority
to execute and deliver this Agreement, the Registration Rights
Agreement, the Indenture, the Securities and each of the other
material agreements relating to the Transactions listed on Schedule 1
hereto (collectively, the "Transaction Documents") to which it is a
party, and the consent decrees to be entered into with the State of
Texas and the Department of Justice, and to perform its obligations
hereunder and thereunder; and all action required to be taken for the
due and proper authorization, execution and delivery of each of the
Transaction Documents to which it is a party, and the consent decrees
to be entered into with the State of Texas and the Department of
Justice, and the consummation of the transactions contemplated thereby
have been, or on or prior to the Closing Date will be, duly and
validly taken;
(g) this Agreement has been duly authorized, executed and
delivered by each of the Issuers and constitutes a valid and legally
binding agreement of each of the Issuers, except to the extent that
such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws affecting creditors' rights generally and by
general equitable principles (whether considered in a proceeding in
equity or at law) and except to the extent that the indemnification
and contribution provisions thereof may be unenforceable;
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(h) the Registration Rights Agreement has been duly
authorized by each of the Issuers and, when duly executed and
delivered in accordance with its terms by each of the parties thereto,
will constitute a valid and legally binding agreement of each of the
Issuers enforceable against each of the Issuers in accordance with its
terms, except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and by general equitable principles (whether
considered in a proceeding in equity or at law) and except to the
extent that the indemnification and contribution provisions thereof
may be unenforceable;
(i) the Indenture has been duly authorized by each of the
Issuers and, when duly executed and delivered in accordance with its
terms by each of the parties thereto, will constitute a valid and
legally binding agreement of each of the Issuers enforceable against
each of the Issuers in accordance with its terms, except to the extent
that such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws affecting creditors' rights generally and by
general equitable principles (whether considered in a proceeding in
equity or at law); on the Closing Date, the Indenture will conform in
all material respects to the requirements of the Trust Indenture Act
and the rules and regulations of the Commission applicable to an
indenture which is qualified thereunder;
(j) the Securities have been duly authorized by each of the
Issuers and, when duly executed, authenticated, issued and delivered
as provided in the Indenture, and paid for as provided herein, will be
duly and validly issued and outstanding and will constitute valid and
legally binding obligations of each of the Issuers entitled to the
benefits of the Indenture and enforceable against each of the Issuers
in accordance with their terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws affecting creditors' rights generally and by general equitable
principles (whether considered in a proceeding in equity or at law);
(k) each of the other Transaction Documents has been duly
authorized by SFG and, when duly executed and delivered in accordance
with its terms by each of the parties thereto, will constitute a valid
and legally binding agreement of SFG, enforceable against SFG in
accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws affecting creditors' rights generally and by general equitable
principles (whether considered in a proceeding in equity or at law);
(l) each Transaction Document, to the extent described in the
Offering Memorandum, conforms in all material respects to such
description;
(m) except as disclosed in the Offering Memorandum, the
execution, delivery and performance by each of the Issuers of each of
the Transaction Documents to which it is a party, the issuance,
authentication, sale and delivery of the Securities and compliance by
each of the Issuers with the terms thereof and the consummation of the
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transactions contemplated by the Transaction Documents will not
conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, or, except as
contemplated by the New Senior Bank Facilities, result in the creation
or imposition of any lien, charge or encumbrance upon any property or
assets of such Issuer pursuant to, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which such
Issuer is a party or by which such Issuer is bound or to which any of
the property or assets of such Issuer is subject which breach or
violation would have a Material Adverse Effect, nor will such actions
result in any violation of the provisions of any of the governing
documents of such Issuer or any statute or any judgment, order,
decree, rule or regulation of any court or arbitrator or governmental
agency or body having jurisdiction over such Issuer or any of its
properties or assets which would have a Material Adverse Effect; and
no consent, approval, authorization or order of, or filing or
registration with, any such court or arbitrator or governmental agency
or body under any such statute, judgment, order, decree, rule or
regulation is required for the execution, delivery and performance by
such Issuer of each of the Transaction Documents, the issuance,
authentication, sale and delivery of the Securities and compliance by
such Issuer with the terms thereof and the consummation of the
transactions contemplated by the Transaction Documents, except for
such consents, approvals, authorizations, filings, registrations or
qualifications (i) which shall have been obtained or made prior to the
Closing Date, (ii) the failure to obtain which would not have a
Material Adverse Effect or any material adverse effect on the ability
of the Issuers to perform their obligations under the Transaction
Documents and (iii) as may be required to be obtained or made under
the Securities Act and applicable state securities laws as provided in
the Registration Rights Agreement;
(n) Price Waterhouse LLP are independent accountants with
respect to SFG (and its predecessors) within the meaning of Rule 101
of the Code of Professional Conduct of the American Institute of
Certified Public Accountants ("AICPA") and its interpretations and
rulings thereunder, and Deloitte & Touche LLP are independent
certified public accountants with respect to the Meadow Gold Dairies
(and its predecessors) within the meaning of Rule 101 of the Code of
Professional Conduct of the AICPA; the historical financial statements
(including the related notes) contained in the Offering Memorandum
have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods covered thereby
and fairly present in all material respects the financial position of
the entities purported to be covered thereby at the respective dates
indicated and the results of their operations and their cash flows for
the respective periods indicated; and the financial information
contained in the Offering Memorandum under the headings "Summary--
Summary Historical Financial Information: Southern Foods Group,
L.P.", "Summary--Summary Historical Financial Information: Meadow
Gold Dairies", "Capitalization", "Selected Historical Financial Data:
Southern Foods Group, L.P.", "Selected Historical Financial Data:
Meadow Gold Dairies", "Management's Discussion and Analysis of
Financial Conditions and Results of Operations" and
"Management--Executive Compensation" are derived from the accounting
records of SFG (and its predecessors) and the accounting records of
the Meadow Gold Dairies (and its predecessors) and fairly present the
information purported to be shown thereby; the pro forma financial
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information contained in the Offering Memorandum has been prepared on
a basis consistent with the historical financial statements contained
in the Offering Memorandum (except for the pro forma adjustments
specified therein), includes all material adjustments to the
historical financial information required to reflect the transactions
described in the Offering Memorandum, gives effect to assumptions made
on a reasonable basis and fairly presents in all material respects the
historical and proposed transactions contemplated by the Offering
Memorandum and the Transaction Documents; and the other historical
financial and statistical information and data included in the
Offering Memorandum are, in all material respects, fairly presented;
(o) except as disclosed in the Offering Memorandum, there are
no pending actions or suits or judicial, arbitral, rule-making,
administrative or other proceedings to which either of the Issuers is
a party or of which any property or assets of either the Issuers is
the subject, which, singularly or in the aggregate, if determined
adversely to such Issuer, could reasonably be expected to have a
Material Adverse Effect; and to the best knowledge of each of the
Issuers, except as disclosed in the Offering Memorandum, no such
proceedings are threatened or contemplated by governmental authorities
or threatened by others;
(p) no action has been taken and no statute, rule, regulation
or order has been enacted, adopted or issued by any governmental
agency or body which prevents the issuance of the Securities or
suspends the sale of the Securities in any jurisdiction; no
injunction, restraining order or order of any nature by any federal or
state court of competent jurisdiction has been issued with respect to
either of the Issuers which would prevent or suspend the issuance or
sale of the Securities or the use of the Preliminary Offering
Memorandum or the Offering Memorandum in any jurisdiction; except as
disclosed in the Offering Memorandum, no action, suit or proceeding is
pending against or, to the best knowledge of each of the Issuers,
threatened against such Issuer before any court or arbitrator or any
governmental agency, body or official, domestic or foreign, which
could reasonably be expected to interfere with or adversely affect the
issuance of the Securities or in any manner draw into question the
validity or enforceability of any of the Transaction Documents or any
action taken or to be taken pursuant thereto; and each of the Issuers
has complied in all material respects with any and all requests by any
securities authority in any jurisdiction for additional information to
be included in the Preliminary Offering Memorandum and the Offering
Memorandum;
(q) none of the Issuers or SFG LLC is, and, upon consummation
of the Transactions, none of the Issuers or SFG LLC will be, (i) in
violation of its governing documents, (ii) in default in any material
respect, and no event has occurred which, with notice or lapse of time
or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any
material indenture, mortgage, deed of trust, loan agreement or other
material agreement or instrument to which it is a party or by which it
is bound or to which any of its property or assets is subject or (iii)
in violation in any material respect of any law, ordinance,
governmental rule, regulation or court decree to which it or its
property or assets may be subject, except for any such violation
specified in
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clause (ii) or (iii) which would not have a Material Adverse Effect or
any material adverse effect on the ability of the Issuers to perform
their obligations under the Transaction Documents;
(r) except as disclosed in the Offering Memorandum, each of
the Issuers possesses, and, upon consummation of the Transactions,
each of the Issuers will possess, all material licenses, certificates,
authorizations and permits issued by, and have made, and, upon the
consummation of the Transactions, will have made, all declarations and
filings with, the appropriate federal, state or foreign regulatory
agencies or bodies which are necessary for the ownership of its
properties or the conduct of its business as described in the Offering
Memorandum, except where the failure to possess or make the same would
not, singularly or in the aggregate, have a Material Adverse Effect,
and neither of the Issuers has received notification of any revocation
or modification of any such material license, certificate,
authorization or permit or has any reason to believe that any such
material license, certificate, authorization or permit will not be
renewed in the ordinary course;
(s) except as disclosed in the Offering Memorandum, each of
the Issuers and SFG LLC has filed all federal, state, local and
foreign income and franchise tax returns required to be filed through
the date hereof, except to the extent the failure to make any such
filing would not have a Material Adverse Effect, and each of the
Issuers has paid all taxes due thereon (other than those being
contested in good faith), and no tax deficiency has been determined
adversely to either of the Issuers or SFG LLC or which has had (nor
does either of the Issuers of SFG LLC have any knowledge of any tax
deficiency which, if determined adversely to such Issuer or SFG LLC,
could reasonably be expected to have) a Material Adverse Effect;
(t) neither of the Issuers is, and, upon consummation of the
Transactions, neither of the Issuers will be, (i) an "investment
company" or a company "controlled by" an investment company within the
meaning of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and the rules and regulations of the
Commission thereunder or (ii) a "holding company" or a "subsidiary
company" of a holding company or an "affiliate" thereof within the
meaning of the Public Utility Holding Company Act of 1935, as amended
(the "Public Utility Holding Company Act");
(u) each of the Issuers and SFG LLC maintains a system of
internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted
only in accordance with management's general or specific authorization
and (iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is
taken with respect to any differences;
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(v) each of the Issuers has, and, upon consummation of the
Transactions, each of the Issuers will have, insurance covering its
properties, operations, personnel and business, which insurance is,
and, upon consummation of the Transactions, will be, in amounts and
insures against such losses and risks as are deemed by management of
SFG to be reasonable and prudent in light of customary industry
practices;
(w) except as disclosed in the Offering Memorandum, each of
the Issuers owns or possesses, and, upon consummation of the
Transactions, each of the Issuers will own or possess, adequate rights
to use all material patents, patent applications, trademarks, service
marks, trade names, trademark registrations, service xxxx
registrations, copyrights, licenses and know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) necessary for the
conduct of its business; and the conduct of its business does not and
will not conflict in any material respect with, and neither of the
Issuers has received any notice of any material claim of conflict
with, any such rights of others;
(x) except as disclosed in the Offering Memorandum, each of
the Issuers has, and, upon consummation of the Transactions, each of
the Issuers will have, good and marketable title in fee simple to, or
has, and, upon consummation of the Transactions, will have, valid
rights to lease or otherwise use, all items of real and personal
property which are material to the business of such Issuer, in each
case free and clear of all liens, encumbrances, claims and defects and
imperfections of title except such as (i) contemplated by the New
Senior Bank Facilities, (ii) do not materially interfere with the use
made and proposed to be made of such property by such Issuer or (iii)
could not reasonably be expected to have a Material Adverse Effect;
(y) except as disclosed in the Offering Memorandum, no labor
disturbance by or dispute with the employees of either of the Issuers
exists or, to the best knowledge of each of the Issuers, is
contemplated or threatened which could reasonably be expected to have
a Material Adverse Effect;
(z) except as disclosed in the Offering Memorandum, no
"prohibited transaction" (as defined in Section 406 of the Employee
Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"), or
Section 4975 of the Internal Revenue Code of 1986, as amended from
time to time (the "Code")), or "accumulated funding deficiency" (as
defined in Section 302 of ERISA) or any of the events set forth in
Section 4043(b) of ERISA (other than events with respect to which the
30-day notice requirement under Section 4043 of ERISA has been waived)
has, or, upon consummation of the Transactions, will have, occurred
with respect to any employee benefit plan of either of the Issuers
which could reasonably be expected to have a Material Adverse Effect;
each such employee benefit plan is, and, upon consummation of the
Transactions, will be, in compliance in all material respects with
applicable law, including ERISA and the Code; neither of the Issuers
has incurred, and neither of the Issuers expects to incur, liability
under Title IV of ERISA with respect to the termination of, or
withdrawal from, any pension plan for which such Issuer would have any
liability; and each such pension plan that is intended to be qualified
under Section 401(a) of the Code is so qualified in
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all material respects and nothing has occurred, whether by action or
by failure to act, which could reasonably be expected to cause the
loss of such qualification;
(aa) except as disclosed in the Offering Memorandum, there
has been no storage, generation, transportation, handling, treatment,
disposal, discharge, emission or other release of any kind of toxic or
other wastes or other hazardous substances by, due to or caused by
either of the Issuers (or, to the best knowledge of each of the
Issuers, any other entity (including any predecessor) for whose acts
or omissions either of the Issuers could reasonably be expected to be
liable) upon any of the property now or previously owned or leased by
either of the Issuers, or upon any other property, in violation of any
statute or any ordinance, rule, regulation, order, judgment, decree or
permit or which would, under any statute or any ordinance, rule
(including rule of common law), regulation, order, judgment, decree or
permit, give rise to any liability, except for any violation or
liability which could not reasonably be expected to have, singularly
or in the aggregate with all such violations and liabilities, a
Material Adverse Effect; and, to the best knowledge of each of the
Issuers, there has been no disposal, discharge, emission or other
release of any kind onto such property or into the environment
surrounding such property of any toxic or other wastes or other
hazardous substances, except for any such disposal, discharge,
emission or other release of any kind which could not reasonably be
expected to have, singularly or in the aggregate with all such
discharges and other releases, a Material Adverse Effect;
(bb) none of the Issuers nor, to the best knowledge of each
of the Issuers, any partner, director, officer, agent, employee or
other person associated with or acting on behalf of such Issuer has
(i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political
activity, (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate
funds, (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977 or (iv) made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment;
(cc) on and immediately after the Closing Date, each of the
Issuers (after giving effect to the issuance of the Securities, the
Transactions and any other transactions related thereto as described
in the Offering Memorandum) will be Solvent; as used in this
paragraph, the term "Solvent" means, with respect to an entity on a
particular date, that on such date (i) the present fair market value
(or present fair saleable value) of the assets of such entity is not
less than the total amount required to pay the probable liabilities of
such entity on its total existing debts and liabilities (including
contingent liabilities) as they become absolute and matured, (ii) such
entity is able to realize upon its assets and pay its debts and other
liabilities, contingent obligations and commitments as they mature and
become due in the normal course of business, (iii) assuming the sale
of the Securities as contemplated by this Agreement and the Offering
Memorandum, such entity is not incurring debts or liabilities beyond
its ability to pay as such debts and liabilities mature and (iv) such
entity is not engaged in any business or transaction, and is not about
to engage in any business or transaction, for which its property would
constitute unreasonably small capital after giving due consideration
to the prevailing practice in the industry in which such entity is
engaged; in computing the amount of
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such contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in the light of all
the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured
liability;
(dd) except as disclosed in the Offering Memorandum, there
are, and, upon consummation of the Transactions, there will be, no
outstanding subscriptions, rights, warrants, calls or options to
acquire, or instruments convertible into or exchangeable for, or
agreements or understandings with respect to the sale or issuance of,
any partnership interests in, or shares of capital stock of, or other
ownership or equity interest in, either of the Issuers;
(ee) neither of the Issuers owns, and, upon consummation of
the Transactions, neither of the Issuers will own, any "margin
securities" as that term is defined in Regulations G and U of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), and none of the proceeds of the sale of the Securities will
be used, directly or indirectly, for the purpose of purchasing or
carrying any margin security, for the purpose of reducing or retiring
any indebtedness which was originally incurred to purchase or carry
any margin security or for any other purpose which might cause any of
the Securities to be considered a "purpose credit" within the meanings
of Regulation G, T, U or X of the Federal Reserve Board;
(ff) neither of the Issuers is a party to any contract,
agreement or understanding with any person (other than you or your
affiliates) that would give rise to a valid claim against such Issuer
or the Initial Purchaser for a brokerage commission, finder's fee or
like payment in connection with the offering and sale of the
Securities;
(gg) the Securities satisfy the eligibility requirements of
Rule 144A(d)(3) under the Securities Act;
(hh) none of the Issuers or any affiliate thereof has,
directly or through any agent, sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of, any security (as
such term is defined in the Securities Act), which is or will be
integrated with the sale of the Securities in a manner that would
require registration of the Securities under the Securities Act;
(ii) none of the Issuers or any affiliate thereof or any
other person acting on its or their behalf has engaged, in connection
with the offering of the Securities, in any form of general
solicitation or general advertising within the meaning of Rule 502(c)
under the Securities Act; provided that no representation is made as
to the Initial Purchaser or any person acting on its behalf;
(jj) there are no securities of either of the Issuers
registered under the Exchange Act of 1934, as amended (the "Exchange
Act"), or listed on a national securities exchange or quoted in a U.S.
automated inter- dealer quotation system;
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(kk) neither of the Issuers has taken, and neither of the
Issuers will take, directly or indirectly, any action prohibited by
Regulation M under the Exchange Act ("Regulation M") in connection
with the offering of the Securities;
(ll) no forward-looking statement (within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act)
contained in the Preliminary Offering Memorandum or the Offering
Memorandum has been made or reaffirmed without a reasonable basis or
has been disclosed other than in good faith;
(mm) neither of Issuers does business with the government of
Cuba or with any person or affiliate located in Cuba within the
meaning of Florida Statutes Section 517.075; and
(nn) since the date as of which information is given in the
Offering Memorandum, except as otherwise stated therein, (i) there has
been no material adverse change or any development involving a
prospective material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs, management or
business prospects of either of the Issuers, whether or not arising in
the ordinary course of business, (ii) neither of the Issuers has
incurred any material liability or obligation, direct or contingent,
other than in the ordinary course of business, (iii) neither of the
Issuers has entered into any material transaction other than in the
ordinary course of business and (iv) there has not been any change in
the capitalization or long-term debt of either of the Issuers, or any
distribution or dividend of any kind declared, paid or made by either
of the Issuers on any class of partnership interests or capital stock,
as applicable.
2. Purchase and Resale of the Securities. (a) On the basis
of the representations, warranties and agreements contained herein, and subject
to the terms and conditions set forth herein, the Issuers agree jointly to
issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Issuers, the principal amount of Securities set forth
opposite its name on Schedule 2 hereto at a purchase price equal to 97% of the
principal amount thereof. The Issuers shall not be obligated to deliver any of
the Securities except upon payment for all of the Securities to be purchased as
provided herein.
(b) The Initial Purchaser has advised the Issuers that it
proposes to offer the Securities for resale upon the terms and subject to the
conditions set forth herein and in the Offering Memorandum. The Initial
Purchaser represents and warrants to, and agrees with, the Issuers that (i) it
is purchasing the Securities pursuant to a private sale exempt from
registration under the Securities Act, (ii) it has not solicited offers for, or
offered or sold, and will not solicit offers for, or offer or sell, the
Securities by means of any form of general solicitation or general advertising
within the meaning of Rule 502(c) of Regulation D under the Securities Act
("Regulation D") or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act and (iii) it has solicited and
will solicit offers for the Securities only from, and has offered or sold and
will offer, sell or deliver the Securities, as part of its initial offering,
only to persons whom it reasonably believes to be qualified institutional
buyers ("Qualified Institutional Buyers") as defined in Rule 144A under the
Securities Act, or if any such person is buying for one or more institutional
accounts for which
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such person is acting as fiduciary or agent, only when such person has
represented to it that each such account is a Qualified Institutional Buyer to
whom notice has been given that such sale or delivery is being made in reliance
on Rule 144A and in each case in transactions in accordance with Rule 144A.
The Initial Purchaser agrees that, prior to or simultaneously with the
confirmation of sale by the Initial Purchaser to any purchaser of any of the
Securities purchased by the Initial Purchaser from the Issuers pursuant hereto,
the Initial Purchaser shall furnish to that purchaser a copy of the Offering
Memorandum (and any amendment or supplement thereto that the Issuers shall have
furnished to the Initial Purchaser prior to the date of such confirmation of
sale). In addition to the foregoing, the Initial Purchaser acknowledges and
agrees that the Issuers and, for purposes of the opinions to be delivered to
the Initial Purchaser pursuant to Sections 5(d) and (e), counsel for the
Issuers and for the Initial Purchaser, respectively, may rely upon the accuracy
of the representations and warranties of the Initial Purchaser and its
compliance with its agreements contained in this Section 2, and the Initial
Purchaser hereby consents to such reliance.
(c) Each of the Issuers acknowledges and agrees that the
Initial Purchaser may sell Securities to any affiliate of the Initial Purchaser
and that any such affiliate may sell Securities purchased by it to the Initial
Purchaser.
3. Delivery of and Payment for the Securities. (a) Delivery
of and payment for the Securities shall be made at the offices of Cravath,
Swaine & Xxxxx, Worldwide Plaza, 825 Eighth Avenue, New York, New York, or at
such other place as shall be agreed upon by the Initial Purchaser and the
Issuers, at 10:00 a.m., New York City time, on September 4, 1997, or at such
other time or date, not later than seven full business days thereafter, as
shall be agreed upon by the Initial Purchaser and the Issuers (such date and
time of payment and delivery being referred to herein as the "Closing Date").
(b) On the Closing Date, payment of the purchase price for
the Securities shall be made to the Issuers by wire or book-entry transfer of
same-day funds to such account or accounts as SFG shall specify prior to the
Closing Date or by such other means as the parties hereto shall agree prior to
the Closing Date against delivery to the Initial Purchaser of the certificates
evidencing the Securities. Time shall be of the essence, and delivery at the
time and place specified pursuant to this Agreement is a further condition of
the obligations of the Initial Purchaser hereunder. Upon delivery, the
Securities shall be in global form, registered in such names and in such
denominations as the Initial Purchaser shall have requested in writing not less
than two full business days prior to the Closing Date. Each of the Issuers
agrees to make one or more global certificates evidencing the Securities
available for inspection by the Initial Purchaser in New York, New York at
least 24 hours prior to the Closing Date.
4. Further Agreements of the Issuers. Each of the Issuers
agrees with the Initial Purchaser:
(a) to advise the Initial Purchaser promptly and, if
requested, confirm such advice in writing, of the happening of any
event which makes any statement of a material fact made in the
Offering Memorandum untrue or which requires the making of any
additions to or changes in the Offering Memorandum (as amended or
supplemented from time to time) in order to make the statements
therein, in the light of
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the circumstances under which they were made, not misleading; to
advise the Initial Purchaser promptly of any order preventing or
suspending the use of the Preliminary Offering Memorandum or the
Offering Memorandum, of any suspension of the qualification of the
Securities for offering or sale in any jurisdiction and of the
initiation or threatening of any proceeding for any such purpose; and
to use its best efforts to prevent the issuance of any such order
preventing or suspending the use of the Preliminary Offering
Memorandum or the Offering Memorandum or suspending any such
qualification and, if any such suspension is issued, to obtain the
lifting thereof at the earliest possible time;
(b) to furnish promptly to the Initial Purchaser and counsel
for the Initial Purchaser, without charge, as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum (and any
amendments or supplements thereto) as may be reasonably requested;
(c) prior to making any amendment or supplement to the
Offering Memorandum, to furnish a copy thereof to the Initial
Purchaser and counsel for the Initial Purchaser and not to effect any
such amendment or supplement to which the Initial Purchaser shall
reasonably object by notice to SFG after a reasonable period to
review;
(d) if, at any time prior to completion of the resale of the
Securities by the Initial Purchaser, any event shall occur or
condition shall exist as a result of which it is necessary, in the
opinion of counsel for the Initial Purchaser or counsel for the
Issuers, to amend or supplement the Offering Memorandum in order that
the Offering Memorandum will not include an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances
existing at the time it is delivered to a purchaser, not misleading,
or if it is necessary to amend or supplement the Offering Memorandum
to comply with applicable law, to promptly prepare such amendment or
supplement as may be necessary to correct such untrue statement or
omission or so that the Offering Memorandum, as so amended or
supplemented, will comply with applicable law;
(e) for so long as the Securities are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, to furnish to holders of the Securities and
prospective purchasers of the Securities designated by such holders,
upon request of such holders or such prospective purchasers, the
information required to be delivered pursuant to Rule 144A(d)(4) under
the Securities Act, unless each of the Issuers is then subject to, and
in compliance with, Section 13 or 15(d) of the Exchange Act (the
foregoing agreement being for the benefit of the holders from time to
time of the Securities and prospective purchasers of the Securities
designated by such holders);
(f) for so long as the Securities or the Exchange Securities
are outstanding, to furnish to the Initial Purchaser copies of any
annual reports, quarterly reports and current reports filed by either
of the Issuers with the Commission on Forms 10-K, 10-Q and 8-K, or
such other similar forms as may be designated by the Commission, and
such other documents, reports and information as shall be furnished by
either of the
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Issuers to the Trustee or to the holders of the Securities pursuant to
the Indenture or the Exchange Act or any rule or regulation of the
Commission thereunder;
(g) to promptly take from time to time such actions as the
Initial Purchaser may reasonably request to qualify the Securities for
offering and sale under the securities or blue sky laws of such
jurisdictions as the Initial Purchaser may designate and to continue
such qualifications in effect for so long as required for the resale
of the Securities; and to arrange for the determination of the
eligibility for investment of the Securities under the laws of such
jurisdictions as the Initial Purchaser may reasonably request;
provided that neither of the Issuers shall be obligated to qualify as
a foreign limited partnership or a foreign corporation, as applicable,
in any jurisdiction in which it is not so qualified or to file a
general consent to service of process in any jurisdiction;
(h) to assist the Initial Purchaser in arranging for the
Securities to be designated Private Offerings, Resales and Trading
through Automated Linkages ("PORTAL") Market securities in accordance
with the rules and regulations adopted by the National Association of
Securities Dealers, Inc. ("NASD") relating to trading in the PORTAL
Market and for the Securities to be eligible for clearance and
settlement through The Depository Trust Company ("DTC");
(i) not to, and to cause its affiliates not to, sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of
any security (as such term is defined in the Securities Act) which
could be integrated with the sale of the Securities in a manner which
would require registration of the Securities under the Securities Act;
(j) except following the effectiveness of the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the
case may be, not to, and to cause its affiliates not to, and not to
authorize or knowingly permit any person acting on its or their behalf
to, solicit any offer to buy or offer to sell the Securities by means
of any form of general solicitation or general advertising within the
meaning of Regulation D or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act; and not to
offer, sell, contract to sell or otherwise dispose of, directly or
indirectly, any securities under circumstances where such offer, sale,
contract or disposition would cause the exemption afforded by Section
4(2) of the Securities Act to cease to be applicable to the offering
and sale of the Securities as contemplated by this Agreement and the
Offering Memorandum;
(k) for a period of 90 days from the date of the Offering
Memorandum, not to offer for sale, sell, contract to sell or otherwise
dispose of, directly or indirectly, or file a registration statement
for, or announce any offer, sale, contract for sale of or other
disposition of any debt securities issued or guaranteed by such Issuer
(other than the Securities) without the prior written consent of the
Initial Purchaser;
(l) during the period from the Closing Date until two years
after the Closing Date, without the prior written consent of the
Initial Purchaser, not to, and not permit any of its affiliates (as
defined in Rule 144 under the Securities Act) to, resell any of the
Securities that have been reacquired by them, except for Securities
purchased by
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such Issuer or any of its affiliates and resold in a transaction
registered under the Securities Act;
(m) not to, for so long as the Securities are outstanding, be
or become, or be or become owned by, an open-end investment company,
unit investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the Investment Company
Act, and to not be or become, or be or become owned by, a closed-end
investment company required to be registered, but not registered
thereunder;
(n) in connection with the offering of the Securities, until
the Initial Purchaser shall have notified SFG of the completion of the
resale of the Securities, not to, and to cause its affiliated
purchasers (as defined in Regulation M) not to, either alone or with
one or more other persons, bid for or purchase, for any account in
which it or any of its affiliated purchasers has a beneficial
interest, any Securities, or attempt to induce any person to purchase
any Securities; and not to, and to cause its affiliated purchasers not
to, make bids or purchases for the purpose of creating actual, or
apparent, active trading in, or of raising the price of, the
Securities;
(o) in connection with the offering of the Securities, to
make its partners, directors, officers, employees, independent
accountants and legal counsel, and to use its best efforts to cause
each of Mid-Am, SFG LLC, Xxxxxx and the Meadow Gold Dairies to make
its directors, officers, employees, independent accountants and legal
counsel, reasonably available upon request by the Initial Purchaser;
(p) to furnish to the Initial Purchaser on the date hereof a
copy of each of the independent accountants' reports included in the
Offering Memorandum signed by the accountants rendering such report;
(q) to do and perform all things required to be done and
performed by it that are within its control, and to use its best
efforts to cause Mid-Am to do and perform all things required to be
done and performed by it that are within its control, under the
agreement governing the New Senior Bank Facilities to cause the New
Senior Bank Facilities to become effective on the Closing Date, all
conditions precedent to the initial borrowing under the New Senior
Bank Facilities to be satisfied on or prior to the Closing Date and
the initial borrowing under the New Senior Bank Facilities and the
assumption of the New Senior Bank Facilities by SFG as contemplated in
the Offering Memorandum to occur on the Closing Date;
(r) to do and perform all things required to be done and
performed by it that are within its control to cause the Trademark
Acquisitions to be consummated on the Closing Date;
(s) to do and perform all things required to be done and
performed by it that are within its control to cause the New Preferred
Interests to be issued on the Closing Date;
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(t) to do and perform all things required to be done and
performed by it under this Agreement that are within its control prior
to, on or after the Closing Date, and to use its best efforts to
satisfy all conditions precedent on its part to the delivery of the
Securities;
(u) prior to the Closing Date, not to issue any press release
or other communication, directly or indirectly, or hold any press
conference with respect to SFG, its condition, financial or otherwise,
or earnings, business affairs or business prospects (except for
routine oral marketing communications in the ordinary course of
business and consistent with its past practices), without the prior
written consent of the Initial Purchaser, unless in the judgment of
SFG and its counsel, and after notification to the Initial Purchaser,
such press release or communication is required by law, and to use its
reasonable best efforts to cause Xxxxxx not to make any news release
or public announcement pertaining to the Transactions, without the
prior written consent of the Initial Purchaser, unless such news
release or public announcement is required by law; and
(x) to apply the net proceeds from the sale of the Securities
as set forth in the Offering Memorandum under the heading "Use of
Proceeds".
5. Conditions of Initial Purchaser's Obligations. The
obligations of the Initial Purchaser hereunder are subject to the accuracy, on
and as of the date hereof and the Closing Date (including after giving effect
to the Transactions), of the representations and warranties of each of the
Issuers contained herein, to the accuracy of the statements of the each of the
Issuers and its officers made in any certificates delivered pursuant hereto, to
the performance by each of the Issuers of its obligations hereunder, and to
each of the following additional terms and conditions:
(a) the Offering Memorandum (and any amendments or
supplements thereto) shall have been printed and copies distributed to
the Initial Purchaser as promptly as practicable on or following the
date of this Agreement or at such other date and time as to which the
Initial Purchaser may agree; and no stop order suspending the sale of
the Securities in any jurisdiction shall have been issued and no
proceeding for that purpose shall have been commenced or shall be
pending or threatened;
(b) the Initial Purchaser shall not have discovered and
notified SFG in writing on or prior to the Closing Date that the
Offering Memorandum or any amendment or supplement thereto contains an
untrue statement of a fact which, in the opinion of counsel for the
Initial Purchaser, is material or omits to state any fact which, in
the opinion of such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading;
(c) all proceedings and other legal matters incident to the
authorization, form and validity of each of the Transaction Documents
and the Offering Memorandum, and all other legal matters relating to
the Transaction Documents and the transactions contemplated thereby,
shall be satisfactory in all material respects to the Initial
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Purchaser, and each of the Issuers shall have furnished to the Initial
Purchaser all documents and information that it or its counsel may
reasonably request to enable it to pass upon such matters;
(d) Xxxxxxxxxxx & Price, L.L.P. shall have furnished to the
Initial Purchaser their written opinion, as counsel to the Issuers,
addressed to the Initial Purchaser and dated the Closing Date, in form
and substance reasonably satisfactory to the Initial Purchaser,
substantially to the effect set forth in Annex B-1 hereto, Xxxxxxxx,
Xxxxxx & Finger shall have furnished to the Initial Purchaser their
written opinion, as special Delaware counsel to the Issuers, addressed
to the Initial Purchaser and dated the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchaser,
substantially to the effect set forth in Annex B-2 hereto, and Coudert
Brothers shall have furnished to the Initial Purchaser their written
opinion, as special counsel to the Issuers, addressed to the Initial
Purchaser and dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchaser, substantially to the effect set
forth in Annex B-3 hereto;
(e) the Initial Purchaser shall have received from Cravath,
Swaine & Xxxxx, counsel for the Initial Purchaser, such opinion or
opinions, dated the Closing Date, with respect to such matters as the
Initial Purchaser may reasonably require, and each of the Issuers
shall have furnished to such counsel such documents and information
as they reasonably request for the purpose of enabling them to pass
upon such matters;
(f) SFG shall have furnished to the Initial Purchaser a
letter (the "SFG Initial Letter") of Price Waterhouse LLP, addressed
to the Initial Purchaser and dated the date hereof, in form and
substance satisfactory to the Initial Purchaser, substantially to the
effect set forth in Annex C-1 hereto, and SFG shall have furnished to
the Initial Purchaser a letter (the "Meadow Gold Dairies Initial
Letter") of Deloitte & Touche LLP, addressed to the Initial Purchaser
and dated the date hereof, in form and substance satisfactory to the
Initial Purchaser, substantially to the effect set forth in Annex C-2
hereto;
(g) SFG shall have furnished to the Initial Purchaser a
letter (the "SFG Bring-Down Letter") of Price Waterhouse LLP,
addressed to the Initial Purchaser and dated the Closing Date, (i)
confirming that they are independent accountants with respect to SFG
(and its predecessors) within the meaning of Rule 101 of the Code of
Professional Conduct of the AICPA and its interpretations and rulings
thereunder, (ii) stating, as of the date of the SFG Bring-Down Letter
(or, with respect to matters involving changes or developments since
the respective dates as of which specified financial information is
given in the Offering Memorandum, as of a date not more than three
business days prior to the date of the SFG Bring-Down Letter), that
the conclusions and findings of such accountants with respect to the
financial information and other matters covered by the SFG Initial
Letter are accurate and (iii) confirming in all material respects the
conclusions and findings set forth in the SFG Initial Letter; and SFG
shall have furnished to the Initial Purchaser a letter (the "Meadow
Gold Dairies Bring-Down Letter") of Deloitte & Touche LLP, addressed
to the Initial Purchaser and dated the Closing Date, (i) confirming
that they are independent certified public accountants with
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respect to the Meadow Gold Dairies (and its predecessors) within the
meaning of Rule 101 of the Code of Professional Conduct of the AICPA
and its interpretations and rulings thereunder, (ii) stating, as of
the date of the Meadow Gold Dairies Bring-Down Letter (or, with
respect to matters involving changes or developments since the
respective dates as of which specified financial information is given
in the Offering Memorandum, as of a date not more than three business
days prior to the date of the Meadow Gold Dairies Bring-Down Letter),
that the conclusions and findings of such accountants with respect to
the financial information and other matters covered by the Meadow Gold
Dairies Initial Letter are accurate and (iii) confirming in all
material respects the conclusions and findings set forth in the Meadow
Gold Dairies Initial Letter;
(h) SFG shall have furnished to the Initial Purchaser a
certificate, dated the Closing Date, of its chief executive officer
and its chief financial officer stating that (i) such officers have
carefully examined the Offering Memorandum, (ii) in their opinion, the
Offering Memorandum, as of its date, did not include any untrue
statement of a material fact and did not omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, and since the date of the Offering
Memorandum, no event has occurred which should have been set forth in
a supplement or amendment to the Offering Memorandum so that the
Offering Memorandum (as so amended or supplemented) would not include
any untrue statement of a material fact and would not omit to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading and (iii) as of the Closing Date,
the representations and warranties of the Issuers in this Agreement
are true and correct in all material respects, the Issuers have
complied with all agreements and satisfied all conditions on their
part to be performed or satisfied hereunder in all material respects
on or prior to the Closing Date, and subsequent to the date of the
most recent financial statements contained in the Offering Memorandum,
if any, there has been no material adverse change in the financial
position or results of operations of the Issuers, or any change, or
any development including a prospective change, in or affecting the
condition (financial or otherwise), results of operations, business or
prospects of the Issuers, except as set forth in the Offering
Memorandum;
(i) the Initial Purchaser shall have received a counterpart
of the Registration Rights Agreement which shall have been executed
and delivered by a duly authorized officer of each of the Issuers;
(j) the Indenture shall have been duly executed and delivered
by each of the Issuers and the Trustee, and the Securities shall have
been duly executed and delivered by each of the Issuers and duly
authenticated by the Trustee;
(k) each of the other Transaction Documents to which SFG is a
party shall have been executed and delivered by a duly authorized
officer of SFG;
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(l) the Securities shall have been approved by the NASD for
trading in the PORTAL Market;
(m) if any event shall have occurred that requires the
Issuers under Section 4(d) to prepare an amendment or supplement to
the Offering Memorandum, such amendment or supplement shall have been
prepared, the Initial Purchaser shall have been given a reasonable
opportunity to comment thereon, and copies thereof shall have been
delivered to the Initial Purchaser reasonably in advance of the
Closing Date;
(n) there shall not have occurred any invalidation of Rule
144A under the Securities Act by any court or any withdrawal or
proposed withdrawal of any rule or regulation under the Securities Act
or the Exchange Act by the Commission or any amendment or proposed
amendment thereof by the Commission which in the judgment of the
Initial Purchaser would materially impair the ability of the Initial
Purchaser to purchase, hold or effect resales of the Securities as
contemplated hereby;
(o) subsequent to the execution and delivery of this
Agreement or, if earlier, the dates as of which information is given
in the Offering Memorandum (exclusive of any amendment or supplement
thereto), there shall not have been any change in the capital
structure or long-term debt or any change, or any development
involving a prospective change, in or affecting the condition
(financial or otherwise), results of operations, business or prospects
of the Issuers, the effect of which, in any such case described above,
is, in the judgment of the Initial Purchaser, so material and adverse
as to make it impracticable or inadvisable to proceed with the sale or
delivery of the Securities on the terms and in the manner contemplated
by this Agreement and the Offering Memorandum (exclusive of any
amendment or supplement thereto);
(p) no action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency or body which would, as of the Closing Date,
prevent the issuance or sale of the Securities; and no injunction,
restraining order or order of any other nature by any federal or state
court of competent jurisdiction shall have been issued as of the
Closing Date which would prevent the issuance or sale of the
Securities;
(q) subsequent to the execution and delivery of this
Agreement (i) no downgrading shall have occurred in the rating
accorded the Securities or any of the other debt securities or
preferred partnership interests or preferred stock, as applicable, of
either of the Issuers by any "nationally recognized statistical rating
organization", as such term is defined by the Commission for purposes
of Rule 436(g)(2) of the rules and regulations of the Commission under
the Securities Act, and (ii) no such organization shall have publicly
announced that it has under surveillance or review (other than an
announcement with positive implications of a possible upgrading) its
rating of the Securities or any of the other debt securities or
preferred partnership interests or preferred stock, as applicable, of
either of the Issuers;
(r) subsequent to the execution and delivery of this
Agreement there shall not have occurred any of the following: (i)
trading in securities generally on the New York
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Stock Exchange, the American Stock Exchange or the over-the-counter
market shall have been suspended or limited, or minimum prices shall
have been established on any such exchange or market by the
Commission, by any such exchange or by any other regulatory body or
governmental authority having jurisdiction, or trading in any
securities of either of the Issuers on any exchange or in the
over-the-counter market shall have been suspended or (ii) any
moratorium on commercial banking activities shall have been declared
by federal or New York state authorities or (iii) an outbreak or
escalation of hostilities or a declaration by the United States of a
national emergency or war or (iv) a material adverse change in general
economic, political or financial conditions the effect of which is (or
the effect of international conditions on the financial markets in the
United States shall be), in the case of this clause (iv), in the
judgment of the Initial Purchaser, so material and adverse as to make
it impracticable or inadvisable to proceed with the sale or the
delivery of the Securities on the terms and in the manner contemplated
by this Agreement and in the Offering Memorandum (exclusive of any
amendment or supplement thereto);
(s) all conditions to the agreements with the Department of
Justice and the State of Texas entered into in connection with the
Transactions shall have been satisfied and the waiting period under
the Xxxx-Xxxxx- Xxxxxx Antitrust Improvements Act of 1976, as amended,
shall have expired or been terminated, in each case in all material
respects in accordance with the terms described in the Offering
Memorandum; and
(t) substantially simultaneously with the consummation of
the sale of the Securities hereunder (but in the order and at the
times contemplated by the Offering Memorandum), each of the
Transactions shall have been consummated.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Initial Purchaser.
6. Termination. The obligations of the Initial Purchaser
hereunder may be terminated by the Initial Purchaser, in its absolute
discretion, by notice given to and received by SFG prior to delivery of and
payment for the Securities if, prior to that time, any of the events described
in Section 5(n), (o), (p), (q) or (r) shall have occurred and be continuing.
7. Reimbursement of Initial Purchaser's Expenses. If (a)
this Agreement shall have been terminated pursuant to Section 6, (b) the
Issuers shall fail to tender the Securities for delivery to the Initial
Purchaser, other than as a result of a default by the Initial Purchaser, or (c)
the Initial Purchaser shall decline to purchase the Securities for any reason
permitted under this Agreement, the Issuers shall reimburse the Initial
Purchaser for such out-of-pocket expenses (including reasonable fees and
disbursements of counsel) as shall have been reasonably incurred by the Initial
Purchaser in connection with this Agreement and the proposed purchase and
resale of the Securities.
8. Indemnification. (a) Each of the Issuers, jointly and
severally, shall indemnify and hold harmless the Initial Purchaser, its
affiliates, their respective directors, officers, employees, representatives
and agents, and each person, if any, who controls the
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Initial Purchaser within the meaning of the Securities Act or the Exchange Act
(collectively referred to for purposes of this Section 8(a) and Section 9 as
the Initial Purchaser) from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof (including, without
limitation, any loss, claim, damage, liability or action relating to purchases
and sales of the Securities), to which the Initial Purchaser may become
subject, whether commenced or threatened, under the Securities Act, the
Exchange Act, any other federal or state statutory law or regulation, at common
law or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Offering Memorandum
or the Offering Memorandum or in any amendment or supplement thereto or in any
information provided by either of the Issuers pursuant to Section 4(d) or (ii)
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and
shall reimburse the Initial Purchaser promptly upon demand for any legal or
other expenses reasonably incurred by the Initial Purchaser in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that neither of the
Issuers shall be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of, or is based upon, an untrue
statement or alleged untrue statement in, or omission or alleged omission from,
any of such documents in reliance upon and in conformity with any Initial
Purchaser's Information; and provided, further, that with respect to any such
untrue statement in, or omission from, the Preliminary Offering Memorandum, the
indemnity agreement contained in this Section 8(a) shall not inure to the
benefit of the Initial Purchaser to the extent that the sale to the person
asserting any such loss, claim, damage, liability or action was an initial
resale by the Initial Purchaser and any such loss, claim, damage, liability or
action of, or with respect to, the Initial Purchaser results from the fact that
both (A) to the extent required by applicable law, a copy of the Offering
Memorandum was not sent or given to such person at or prior to the written
confirmation of the sale of such Securities to such person and (B) the untrue
statement in, or omission from, the Preliminary Offering Memorandum was
corrected in the Offering Memorandum unless, in either case, such failure to
deliver the Offering Memorandum was a result of non-compliance by the Issuers
with Section 4(b).
(b) The Initial Purchaser shall indemnify and hold harmless
each of the Issuers, its affiliates, their respective partners, directors,
officers, employees, representatives and agents, and each person, if any, who
controls such Issuer within the meaning of the Securities Act or the Exchange
Act (collectively referred to for purposes of this Section 8(b) and Section 9
as an Issuer), from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which such Issuer may become
subject, whether commenced or threatened, under the Securities Act, the
Exchange Act, any other federal or state statutory law or regulation, at common
law or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Offering Memorandum
or the Offering Memorandum or in any amendment or supplement thereto or (ii)
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, but in
each case only to the extent that the untrue statement or alleged
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untrue statement or omission or alleged omission was made in reliance upon, and
in conformity with, the Initial Purchaser's Information, and shall reimburse
such Issuer for any legal or other expenses reasonably incurred by such Issuer
in connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party pursuant to Section 8(a) or 8(b), notify the
indemnifying party in writing of the claim or the commencement of that action;
provided, however, that the failure to notify the indemnifying party shall not
relieve it from any liability which it may have under this Section 8 except to
the extent that it has been materially prejudiced (through the forfeiture of
substantive rights or defenses) by such failure; and, provided, further, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 8. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of
its election to assume the defense of such claim or action, the indemnifying
party shall not be liable to the indemnified party under this Section 8 for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that an indemnified party shall have the
right to employ its own counsel in any such action, but the fees, expenses and
other charges of such counsel for the indemnified party will be at the expense
of such indemnified party unless (i) the employment of counsel by the
indemnified party has been authorized in writing by the indemnifying party,
(ii) the indemnified party has reasonably concluded (based upon advice of
counsel to the indemnified party) that there may be legal defenses available to
it or other indemnified parties that are different from, or in addition to,
those available to the indemnifying party, (iii) a conflict or potential
conflict exists (based upon advice of counsel to the indemnified party) between
the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (iv) the indemnifying party has not in
fact employed counsel reasonably satisfactory to the indemnified party to
assume the defense of such action within a reasonable time after receiving
notice of the commencement of the action, in each of which cases the reasonable
fees, disbursements and other charges of counsel will be at the expense of the
indemnifying party or parties. It is understood that the indemnifying party or
parties shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm of attorneys (in addition to any
local counsel) at any one time for all such indemnified party or parties. Each
indemnified party, as a condition of the indemnity agreements contained in
Sections 8(a) and 8(b), shall use all reasonable efforts to cooperate with the
indemnifying party in the defense of any such action or claim. No indemnifying
party shall be liable for any settlement of any such action effected without
its written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment for the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless
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any indemnified party from and against any loss or liability by reason of such
settlement or judgment. No indemnifying party shall, without the prior written
consent of the indemnified party (which consent shall not be unreasonably
withheld), effect any settlement of any pending or threatened proceeding in
respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party unless
such settlement includes an unconditional release of such indemnified party
from all liability on claims that are the subject matter of such proceeding.
The obligations of the Issuers and the Initial Purchaser in
this Section 8 and in Section 9 are in addition to any other liability that the
Issuers or the Initial Purchaser, as the case may be, may otherwise have,
including in respect of any breaches of representations, warranties and
agreements made herein by any such party.
9. Contribution. If the indemnification provided for in
Section 8 is unavailable or insufficient to hold harmless an indemnified party
under Section 8(a) or 8(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of such loss, claim, damage or liability,
or action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Issuers (it being understood that
the benefit to either Issuer shall be considered a benefit to both Issuers), on
the one hand, and the Initial Purchaser, on the other, from the offering of the
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Issuers (it being understood that the fault of either
Issuer shall be considered the fault of both Issuers), on the one hand, and the
Initial Purchaser, on the other, with respect to the statements or omissions
that resulted in such loss, claim, damage or liability, or action in respect
thereof, as well as any other relevant equitable considerations. The relative
benefits received by the Issuers, on the one hand, and the Initial Purchaser,
on the other, with respect to such offering shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Securities
purchased under this Agreement (before deducting expenses) received by or on
behalf of the Issuers, on the one hand, and the total discounts and commissions
received by the Initial Purchaser with respect to the Securities purchased
under this Agreement, on the other, bear to the total gross proceeds from the
sale of the Securities under this Agreement, in each case as set forth in the
table on the cover page of the Offering Memorandum. The relative fault shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to the Issuers or information supplied by the
Issuers, on the one hand, or to the Initial Purchaser's Information, on the
other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The Issuers and the Initial Purchaser agree that it would not be
just and equitable if contributions pursuant to this Section 9 were to be
determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to herein.
The amount paid or payable by an indemnified party as a result of the loss,
claim, damage or liability, or action in respect thereof, referred to above in
this Section 9 shall be deemed to include, for purposes of this Section 9, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending or preparing to defend any such
action or claim. Notwithstanding the provisions of this Section 9, the Initial
Purchaser
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shall not be required to contribute any amount in excess of the amount by which
the total discounts and commissions received by the Initial Purchaser with
respect to the Securities purchased by it under this Agreement exceeds the
amount of any damages which the Initial Purchaser has otherwise paid or become
liable to pay by reason of any untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
10. Persons Entitled to Benefit of Agreement. This Agreement
shall inure to the benefit of, and be binding upon, the Initial Purchaser, the
Issuers and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except as
provided in Sections 8 and 9 with respect to affiliates, partners, directors,
officers, employees, representatives, agents and controlling persons of the
Issuers and the Initial Purchaser and in Section 4(e) with respect to holders
and prospective purchasers of the Securities. Nothing in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 10, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
11. Expenses. The Issuers jointly agree with the Initial
Purchaser to pay (a) the costs incident to the authorization, issuance, sale,
preparation and delivery of the Securities and any taxes payable in that
connection, (b) the costs incident to the preparation, printing and
distribution of the Preliminary Offering Memorandum, the Offering Memorandum
and any amendments or supplements thereto, (c) the costs of reproducing and
distributing each of the Transaction Documents, (d) the costs incident to the
preparation, printing and delivery of the certificates evidencing the
Securities, including stamp duties and transfer taxes, if any, payable upon
issuance of the Securities, (e) the fees and expenses of the Issuers' counsel
and independent accountants, (f) the fees and expenses of qualifying the
Securities under the securities laws of the several jurisdictions as provided
in Section 4(g) and of preparing, printing and distributing blue sky memoranda
(including related fees and expenses of counsel for the Initial Purchaser), (g)
any fees charged by rating agencies for rating the Securities, (h) the fees and
expenses of the Trustee and any paying agent (including related fees and
expenses of any counsel to such parties), (i) all expenses and application fees
incurred in connection with the application for the inclusion of the Securities
on the PORTAL Market and the approval of the Securities for book-entry transfer
by DTC and (j) all other costs and expenses incident to the performance of the
obligations of the Issuers under this Agreement which are not otherwise
specifically provided for in this Section 11; provided, however, that except as
provided in this Section 11, the Initial Purchaser shall pay its own costs and
expenses.
12. Survival. The respective indemnities, rights of
contribution, representations, warranties and agreements of the Issuers and the
Initial Purchaser contained in this Agreement or made by or on behalf of the
Issuers or the Initial Purchaser pursuant to this Agreement or any certificate
delivered pursuant hereto shall survive the delivery of and payment for the
Securities and shall remain in full force and effect, regardless of any
termination or cancelation of this Agreement or any investigation made by or on
behalf of any of them or any of their respective affiliates, partners,
directors, officers, employees, representatives, agents or controlling persons.
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26
13. Notices, etc. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to the Initial Purchaser, shall be delivered or sent by
mail or telecopy transmission to Chase Securities Inc., 000 Xxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xxxxx X. Xxxxx (telecopier no.: (212)
270-0994); or
(b) if to the Issuers, shall be delivered or sent by mail or
telecopy transmission to the address of SFG set forth in the Offering
Memorandum, Attention: Xxxx Xxxxxxxx (telecopier no.: (000) 000-0000);
provided that any notice to the Initial Purchaser pursuant to Section 8(c)
shall also be delivered or sent by mail to the Initial Purchaser at its address
set forth on the signature page hereof. Any such statements, requests, notices
or agreements shall take effect at the time of receipt thereof.
14. Definition of Terms. For purposes of this Agreement, (a)
the term "business day" means any day on which the New York Stock Exchange,
Inc. is open for trading, (b) the term "subsidiary" has the meaning set forth
in Rule 405 under the Securities Act and (c) except where otherwise expressly
provided, the term "affiliate" has the meaning set forth in Rule 405 under the
Securities Act.
15. Initial Purchaser's Information. The parties hereto
acknowledge and agree that, for all purposes of this Agreement, the Initial
Purchaser's Information consists solely of the following information in the
Preliminary Offering Memorandum and the Offering Memorandum: (i) the last
paragraph on the front cover page concerning the terms of the offering by the
Initial Purchaser, (ii) the legend on the inside front cover page concerning
over-allotment and trading activities by the Initial Purchaser and (iii) the
statements concerning the Initial Purchaser contained in the third, fourth,
seventh and eighth paragraphs under the heading "Plan of Distribution".
16. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
17. Counterparts. This Agreement may be executed in one or more
counterparts (which may include counterparts delivered by telecopier) and, if
executed in more than one counterpart, the executed counterparts shall each be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
18. Amendments. No amendment or waiver of any provision of this
Agreement, nor any consent or approval to any departure therefrom, shall in any
event be effective unless the same shall be in writing and signed by the
parties hereto.
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19. Headings. The headings herein are inserted for convenience
of reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Agreement.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement among the Issuers and the Initial
Purchaser in accordance with its terms. Very truly yours,
SOUTHERN FOODS GROUP, L.P.,
by SFG Management Limited Liability Company,
its General Partner,
by /s/ XXXX XXXXXXXX
-----------------------------------
Name: Xxxx Xxxxxxxx
Title:President & CEO
SFG CAPITAL CORPORATION,
by /s/ XXXX XXXXXXXX
-----------------------------------
Name: Xxxx Xxxxxxxx
Title:President & CEO
Accepted:
CHASE SECURITIES INC.,
by /s/
-----------------------------
Authorized Signatory
0 Xxxxx Xxxxx
00xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Legal Department
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SCHEDULE 1
1. Credit Agreement, dated as of the Closing Date, to be entered into by
Southern Foods Group, L.P., Mid-America Dairymen, Inc., the lenders
party thereto and The Chase Manhattan Bank, as Administrative Agent, and
each of the Loan Documents (as defined therein).
2. Capital Contribution, Assignment and Assumption Agreement, dated as of
the Closing Date, to be entered into by Mid-America Dairymen, Inc. and
Southern Foods Group, L.P.
3. Capital Contribution Agreement, dated as of the Closing Date, to be
entered into by Mid-Am Capital, L.L.C. and Southern Foods Group, L.P.
4. Assignment and Assumption Agreement Relating to Stock Purchase and
Merger Agreement, dated as of the Closing Date, to be entered into by
Mid-America Dairymen, Inc. and Southern Foods Group, L.P.
5. Trademark License Agreement, dated as of the Closing Date, to be entered
into by BDH Two, Inc., Xxxxxx, Inc. and Southern Foods Group, L.P.
6. Asset Purchase Agreement, dated as of the Closing Date, to be entered
into by Xxxxxx/Meadow Gold Dairies Investments, Inc., Mid-America
Dairymen, Inc. and Southern Foods Group, L.P.
7. Equipment Sub-Lease Agreement, dated as of the Closing Date, to be
entered into by Mid-America Dairymen, Inc. and Southern Foods Group,
L.P.
8. Second Amended and Restated Agreement of Limited Partnership of Southern
Foods Group, L.P. dated as of the Closing Date.
9. Second Amended and Restated Limited Liability Company Agreement of SFG
Management Limited Liability Company dated as of the Closing Date.
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SCHEDULE 2
Principal
Amount
Initial Purchaser of Securities
----------------- -------------
Chase Securities Inc. $150,000,000
30
ANNEX A
Form of Exchange and Registration Rights Agreement
31
ANNEX B-1
Form of Opinion of Counsel to SFG
Xxxxxxxxxxx & Price, L.L.P. shall have furnished to the Initial
Purchaser their written opinion, as counsel to SFG, addressed to the Initial
Purchaser and dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchaser, substantially to the effect set forth
below:
(i) each of SFG and SFG LLC has been duly formed and is validly
existing as a limited partnership or a limited liability company, as the
case may be, in good standing under the laws of its jurisdiction of
formation, is duly qualified to do business and is in good standing as a
foreign limited partnership or a foreign limited liability company, as
the case may be, in each jurisdiction in which its ownership or lease of
property or the conduct of its business requires such qualification, and
has requisite partnership or limited liability company, as the case may
be, power and authority necessary to own, lease and operate its
properties and to conduct its business, except where the failure to so
qualify or have such power or authority would not have a Material
Adverse Effect;
(ii) SFG has an authorized capitalization as set forth in the
Second Amended and Restated Agreement of Limited Partnership of SFG, all
of the outstanding partnership interests of SFG (including the New
Preferred Interests) have been duly authorized and validly issued, and
the capital structure of SFG conforms in all material respects to the
description thereof contained in the Offering Memorandum; SFG LLC has
the authorized limited liability company interests as set forth in the
Second Amended and Restated Limited Liability Company Agreement of SFG
LLC, and all of the outstanding limited liability company interests of
SFG LLC have been duly authorized and validly issued; and SFG owns of
record all of the outstanding shares of capital stock of SFG Capital, to
the knowledge of such counsel, free and clear of any lien, charge,
encumbrance, security interest, restriction upon voting or transfer or
any other claim of any third party, other than restrictions imposed by
the Transactions Documents and liens arising under the New Senior Bank
Facilities;
(iii) the descriptions in the Offering Memorandum of statutes,
contracts and other documents, and the matters described with respect to
the Department of Justice and the State of Texas, and, to the knowledge
of such counsel, other legal and governmental proceedings (other than
the description of certain federal income tax consequences as to which
it need not express an opinion) are accurate in all material respects;
and such counsel does not have actual knowledge of any current or
pending legal or governmental actions, suits or proceedings which would
be required to be described in the Offering Memorandum if the Offering
Memorandum were a prospectus included in a registration statement on
Form S-1 which are not described as so required;
(iv) SFG LLC has requisite limited liability company power and
authority to act as General Partner of SFG and in such capacity has
requisite partnership power and authority to execute and deliver each of
the Transaction Documents on behalf of SFG
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and to perform its obligations thereunder; the execution and delivery by
SFG LLC of each of the Transaction Documents and the performance by SFG
LLC of its obligations thereunder, on behalf of SFG, have been duly
authorized by requisite limited liability company action on the part of
SFG LLC; and all partnership action required to be taken for the
consummation of the transactions contemplated by the Transaction
Documents has been duly and validly taken;
(v) each of the Purchase Agreement and the Registration Rights
Agreement has been duly authorized by requisite partnership action on
the part of SFG and constitutes a valid and legally binding agreement of
SFG enforceable against SFG in accordance with its terms, except to the
extent that such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws affecting creditors' rights generally and by general equity
principles and except to the extent that rights to indemnity and
contribution may be limited by applicable law;
(vi) the Indenture has been duly authorized, executed and
delivered by requisite partnership action on the part of SFG and,
assuming due authorization, execution and delivery thereof by the
Trustee, constitutes a valid and legally binding obligation of SFG
enforceable against SFG in accordance with its terms, except to the
extent that such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws affecting creditors' rights generally and by general equity
principles;
(vii) the Securities have been duly authorized and issued by
requisite partnership action on the part of SFG and, assuming due
authentication thereof by the Trustee and upon payment and delivery in
accordance with the Purchase Agreement, will constitute valid and
legally binding obligations of SFG entitled to the benefits of the
Indenture and enforceable against SFG in accordance with their terms,
except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and by general equity principles;
(viii) each of the Transaction Documents to which SFG is a party
has been duly authorized, executed and delivered by requisite
partnership action on the part of SFG and constitutes a valid and
legally binding agreement of SFG enforceable against SFG in accordance
with its terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and by general equity principles;
(ix) the execution, delivery and performance by each of the
Issuers of each of the Transaction Documents to which such Issuer is a
party, the issuance, authentication, sale and delivery of the Securities
and compliance by the Issuers with the terms thereof and the
consummation of the transactions contemplated by the Transaction
Documents will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, or,
except as contemplated by the New Senior Bank
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Facilities, result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of either of the Issuers
pursuant to, any material indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument to which either of
the Issuers is a party or by which either of the Issuers is bound or to
which any of the property or assets of either of the Issuers is subject
that are identified on a schedule certified by the Issuers and attached
as an exhibit to such opinion as a material agreement (the "Material
Agreements"), which conflict, breach, default, lien, charge or
encumbrance would have a Material Adverse Effect, nor will such actions
result in any violation of the provisions of any of the governing
documents of either of the Issuers, nor will such actions result in any
violation of any statute, rule or regulation of the State of Texas or
the United States of America (it being understood that no opinion is
expressed with respect to any violation of any state securities law) or,
to the knowledge of such counsel, any judgment, order or decree of any
court or arbitrator or governmental agency or body having jurisdiction
over either of the Issuers or any of their respective properties or
assets which violation would have a Material Adverse Effect; and no
consent, approval, authorization or order of, or filing or registration
with, any such court or arbitrator or governmental agency or body under
any such statute, judgment, order, decree, rule or regulation is
required for the execution, delivery and performance by either of the
Issuers of each of the Transaction Documents, the issuance,
authentication, sale and delivery of the Securities and compliance by
either of the Issuers with the terms thereof and the consummation of the
transactions contemplated by the Transaction Documents, except for such
consents, approvals, authorizations, filings, registrations or
qualifications (i) which shall have been obtained or made prior to the
Closing Date, (ii) the failure to obtain which would not have a Material
Adverse Effect or a material adverse effect on the ability of either of
the Issuers to perform their respective obligations under the
Transaction Documents and (iii) as may be required to be obtained or
made under the Securities Act and applicable state securities laws as
provided in the Registration Rights Agreement;
(x) to the knowledge of such counsel, except as disclosed in the
Offering Memorandum, there are no pending actions or suits or judicial,
arbitral, rule-making, administrative or other proceedings to which
either of the Issuers is a party or of which any property or assets of
either of the Issuers is the subject, which, singularly or in the
aggregate, if determined adversely to either of the Issuers, could
reasonably be expected to have a Material Adverse Effect; and to the
knowledge of such counsel, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(xi) none of the Issuers or SFG LLC is (A) to the knowledge of
such counsel, in violation of its governing documents, (B) to the
knowledge of such counsel, in default in any material respect, and no
event has occurred which, with notice or lapse of time or both, would
constitute such a default, in the due performance or observance of any
term, covenant or condition contained in any Material Agreement, except
as would not have a Material Adverse Effect or any material adverse
effect on the ability of the Issuers or SFG LLC to perform their
obligations under the Transaction Documents or (C) to the knowledge of
such counsel, except as described in the Offering Memorandum, in
violation in any material respect of any law, ordinance,
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governmental rule, regulation or court decree to which it or its
property or assets may be subject, except as would not have a Material
Adverse Effect or any material adverse effect on the ability of the
Issuers or SFG LLC to perform their obligations under the Transaction
Documents;
(xii) SFG is not (A) an "investment company" or a company
"controlled by" an investment company within the meaning of the
Investment Company Act and the rules and regulations of the Commission
thereunder or (B) a "holding company" or a "subsidiary company" of a
holding company or an "affiliate" thereof within the meaning of the
Public Utility Holding Company Act; and
(xiii) neither the consummation of the Transactions nor the
sale, issuance, execution or delivery of the Securities will violate
Regulation G, T, U or X of the Federal Reserve Board.
Such counsel shall also state that (a) they have participated in
conferences with representatives of the Issuers, representatives of their
affiliates, their independent accountants, representatives of their special
counsel and representatives of the Initial Purchaser and its counsel at which
the contents of the Offering Memorandum and any amendment and supplement
thereto were discussed, (b) because the primary purpose of such counsel's
professional engagement was not to establish or confirm factual matters or
financial, accounting or statistical matters and because of the wholly or
partially non-legal character of many of the statements contained in the
Offering Memorandum, such counsel has not passed upon, and does not assume any
responsibility for, the accuracy, completeness or fairness of the statements
contained in the Offering Memorandum or any amendment or supplement thereto
(except as set forth in clause (iii) above), and such counsel makes no
representation that it has independently verified the accuracy, completeness or
fairness of such statements, (c) based on the information such counsel gained
the services referred to above, nothing has come to the attention of such
counsel that has caused it to believe that the Offering Memorandum, as of the
date thereof and as of the Closing Date, contained or contains an untrue
statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and (d) notwithstanding the
foregoing, such counsel need not express any opinion or belief as to the
financial statements or other financial, accounting or statistical data
contained in the Offering Memorandum or any amendment or supplement thereto.
The opinions referred to above regarding the Loan Documents may be set
forth in a separate opinion letter delivered pursuant to Section 4.01(b) of the
Credit Agreement (which specifically provides that the Initial Purchaser may
rely on such opinion letter) which may contain qualifications customarily
included in opinions of such kind.
In rendering such opinion, such counsel may rely as to matters of fact,
to the extent such counsel deems proper, on certificates of responsible
officers of the Issuers and SFG LLC and public officials which are furnished to
the Initial Purchaser. In addition, such counsel may rely as to all matters of
Delaware law on the opinion of Xxxxxxxx, Xxxxxx & Finger, substantially to the
effect set forth in Annex B-2, and such counsel may rely as to all matters of
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New York law and as to any matters of Delaware law relating to SFG Capital on
the opinion of Coudert Brothers, substantially to effect set forth in Annex
B-3.
36
ANNEX B-2
Form of Opinion of Special Delaware Counsel to the SFG
Xxxxxxxx, Xxxxxx & Finger shall have furnished to the Initial Purchaser
their written opinion, as special counsel to SFG, addressed to the Initial
Purchaser and dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchaser, substantially to the effect set forth
below:
(i) SFG been duly formed and is validly existing in good
standing as a limited partnership under the Delaware Revised Uniform
Limited Partnership Act (the "LP Act");
(ii) under the LP Act and the Partnership Agreement, SFG has
requisite partnership power and authority to own, lease and operate its
properties and to conduct its business, all as described in the
Partnership Agreement;
(iii) the Partnership Interests issued and sold by SFG to the
partners have been duly authorized by the Partnership Agreement and are
validly issued;
(iv) under the LP Act and the Partnership Agreement, SFG has
requisite partnership power and authority to execute and deliver, and to
perform its obligations under, the Purchase Agreement, the Indenture,
the Securities, the Credit Agreement and the Registration Rights
Agreement (the "Operative Documents");
(v) under the LP Act and the Partnership Agreement, the
execution and delivery by SFG of the Operative Documents, and the
performance by SFG of its obligations thereunder, have been duly
authorized by requisite partnership action on the part of SFG;
(vi) no authorization, consent, approval or order of any
Delaware court or any Delaware government or Delaware administrative
body is required to be obtained by SFG solely as a result of the
execution, delivery and performance by SFG of the Operative Documents or
the issuance and sale by SFG of the Securities;
(vii) the execution, delivery and performance by SFG of the
Operative Documents and the issuance and sale by SFG of the Securities
do not violate (i) any Delaware law, rule or regulation, or (ii) the
Partnership Agreement;
(viii) SFG LLC has been duly formed and is validly existing in
good standing as a limited liability company under the Delaware Limited
Liability Company Act (the "LLC Act");
(ix) under the LLC Act and the LLC Agreement, SFG LLC has
requisite limited liability company power and authority to own, lease
and operate its properties and to conduct its business, all as described
in the LLC Agreement;
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(x) the LLC Interests issued and sold by SFG LLC to the members
have been duly authorized by the LLC Agreement and are validly issued;
(xi) under the LLC Act and the LLC Agreement and the consents,
SFG LLC has requisite limited liability company power and authority to
execute and deliver, and to perform its obligations under, the Operative
Documents on behalf of SFG;
(xii) under the LLC Act and the LLC Agreement and the consents,
the execution and delivery by SFG LLC of the Operative Documents, and
the performance by SFG LLC of its obligations thereunder, on behalf of
SFG, have been duly authorized by requisite limited liability company
action on the part of SFG LLC;
(xiii) no authorization, consent, approval or order of any
Delaware court or any Delaware governmental or Delaware administrative
body is required to be obtained by SFG LLC solely as a result of the
execution, delivery and performance by SFG LLC of the Operative
Documents on behalf of SFG; and
(xiv) the execution, delivery and performance by SFG LLC of the
Operative Documents on behalf of SFG do not violate (i) any Delaware
law, rule or regulation or (ii) the LLC Agreement.
38
ANNEX B-3
Form of Opinion of Special Counsel for the Issuers
Coudert Brothers shall have furnished to the Initial Purchaser
their written opinion, as special counsel to the Issuers, addressed to the
Initial Purchaser and dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchaser, substantially to the effect set forth
below:
(i) SFG Capital has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware and
has all corporate power and authority necessary to conduct its business
as described in the Offering Memorandum, except where the failure to
have such power or authority would not have a Material Adverse Effect;
(ii) SFG has the authorized capital stock as set forth in its
Certificate of Incorporation, and all of the outstanding shares of
capital stock of SFG Capital have been duly and validly authorized and
issued, are fully paid and non-assessable;
(iii) SFG Capital has duly authorized, executed and delivered
the Indenture, the Securities, the Registration Rights Agreement, the
Purchase Agreement, and the Loan Documents to which it is a party;
(iv) assuming due authorization by the parties thereto (other
than SFG Capital) (as to which authorization such counsel need not
express any opinion), the Securities, upon payment and delivery in
accordance with the Purchase Agreement, will constitute valid and
legally binding obligations of SFG Capital entitled to the benefits of
the Indenture, the Indenture is a valid and legally binding obligation
of SFG Capital, and the Securities and the Indenture are enforceable in
accordance with their terms against SFG Capital, subject, as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditor rights generally
and to general equity principles, including, without limitation, (i) the
possible unavailability of specific performance, injunctive relief or
any other equitable remedy and (ii) concepts of materiality,
reasonableness, good faith and fair dealing;
(v) assuming due authorization by the parties thereto (other
than SFG Capital) (as to which such authorization such counsel need not
express any opinion) each of the Purchase Agreement, the Registration
Rights Agreement and the Loan Documents to which SFG Capital is a party
constitutes a valid and legally binding agreement of SFG Capital
enforceable against SFG Capital in accordance with its terms, subject,
as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws relating to or
affecting creditors rights general and to general equity principles,
including, without limitation, (i) the possible unavailability of
specific performance, injunctive relief or any other equitable remedy
and (ii) concepts of materiality, reasonableness, good faith and fair
dealing; and provided further that (x) rights to indemnity and
contribution may be limited by applicable law and (y) such counsel need
express no opinion as to the creation, validity, enforceability,
perfection,
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non-perfection or priority of any security interest or lien purported to
be created by the Loan Documents or any remedies with respect thereto;
(vi) the execution, delivery and performance by SFG Capital of
each of the Indenture, the Registration Rights Agreement, the Purchase
Agreement and the Loan Documents to which it is a party, the issuance,
authentication, sale and delivery of the Securities and compliance by
SFG Capital with the terms thereof and the consummation of the
transactions contemplated thereby will not conflict with or result in a
breach or violation of the Certificate of Incorporation or By-Laws of
SFG Capital; no consent, approval, authorization, order, filing,
registration or qualification of or with any New York or federal court
or any New York or federal governmental agency or administrative body is
required to be obtained by SFG Capital solely as a result of its
execution, delivery and performance of the Indenture, the Securities,
the Purchase Agreement and the Registration Rights Agreement, except for
such consents, approvals, authorizations, filings, registrations or
qualifications (i) which shall have been obtained or made prior to the
Closing Date, (ii) the failure to obtain which would not have a Material
Adverse Effect or a material adverse effect on the ability of SFG
Capital to perform its obligations under such agreements or the
Securities, (iii) as may be necessary or advisable in connection with
the grant, recordation or perfection of any security interest granted by
the Loan Documents or (iv) as may be required to be obtained or made
under the Securities Act and applicable state securities laws as
provided in the Registration Rights Agreement;
(vii) the execution, delivery and performance by SFG Capital of
the Indenture, the Securities, the Registration Rights Agreement, the
Purchase Agreement and the Loan Documents to which it is a party do not
violate any New York or Federal law, rule or regulation;
(viii) SFG Capital is not (A) an "investment company" or a
company "controlled by" an investment company within the meaning of the
Investment Company Act and the rules and regulations of the Commission
thereunder or (B) a "holding company" or a "subsidiary company" of a
holding company or an "affiliate" thereof within the meaning of the
Public Utility Holding Company Act;
(ix) the statements in the Offering Memorandum under the heading
"Certain Federal Income Tax Considerations", to the extent that they
constitute summaries of matters of federal income tax law or regulations
or legal conclusions, have been reviewed by such counsel and fairly
summarize the matters described therein in all material respects;
(x) the Indenture conforms in all material respects with the
requirements of the Trust Indenture Act and the rules and regulations of
the Commission applicable to an indenture which is qualified thereunder;
(xi) the Indenture and the Securities conform in all material
respects to the description thereof contained in the Offering Memorandum
under the caption "Description of the Notes", and the Registration
Rights Agreement conforms in all
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material respects to the description thereof under the caption "Exchange
and Registration Rights Agreement"; and
(xii) assuming the accuracy of the representations, warranties
and agreements of each of the Issuers and the of the Initial Purchaser
contained in the Purchase Agreement, no registration of the Securities
under the Securities Act or qualification of the Indenture under the
Trust Indenture Act is required in connection with the issuance and sale
of the Securities by the Issuers and the offer, resale and delivery of
the Securities by the Initial Purchaser in the manner contemplated by
the Purchase Agreement and the Offering Memorandum.
Such counsel shall also state that (a) they have participated in
conferences with representatives of the Issuers, their independent
accountants, representatives of their counsel and representatives of the
Initial Purchaser and its counsel at which contents of the Offering
Memorandum and any amendment or supplement thereto were discussed, (b)
because the primary purpose of such counsel's professional engagement
was not to establish or confirm factual matters or financial, accounting
or statistical matters and because of the wholly or partially non-legal
character of many of the statements contained in the Offering
Memorandum, such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Offering Memorandum or any amendment or
supplement thereto (except as expressly provided in clause (ix) and (xi)
above), and makes no representation that such counsel has independently
verified the accuracy, completeness or fairness of such statements, (c)
based on the information which such counsel gained in the course of
rendering the services referred above, nothing has come to the attention
of such counsel that has caused it to believe that the Offering
Memorandum or any amendment or supplement thereto as of the date thereof
and as of the Closing Date, contained or contains an untrue statement of
a material fact or omitted or omits to state a material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and (d) notwithstanding the
foregoing, such counsel does not express any opinion or belief as to the
financial statements or other financial or statistical data contained in
the Offering Memorandum.
The opinions referred to above regarding the Loan Documents may
be set forth in a separate opinion letter delivered pursuant to Section
4.01(b) of the Credit Agreement (which specifically provides that the
Initial Purchaser may rely on such opinion letter) which may contain
qualifications customarily included in opinions of such kind.
In rendering such opinion, such counsel may state that such
opinion is limited to the law of the State of New York, the General
Corporation law of the State of Delaware and the federal law of the
United States. Such counsel may rely, to the extent such counsel deems
proper, on information supplied by officers of the Issuers, public
officials and other sources believed by such counsel to be responsible,
including certificates of responsible officers of the Issuers and public
officials which are furnished to the Initial Purchaser.
41
ANNEX C-1
Form of SFG Initial Letter
SFG shall have furnished to the Initial Purchaser a letter
of Price Waterhouse LLP, addressed to the Initial Purchaser and dated
the date of the Purchase Agreement, in form and substance satisfactory
to the Initial Purchaser, substantially to the effect set forth below:
(i) they are independent accountants with respect to SFG (and
its predecessors) within the meaning of Rule 101 of the Code of
Professional Conduct of the AICPA and its interpretations and rulings
thereunder;
(ii) based upon a reading of the latest unaudited financial
statements made available by SFG, the procedures of the AICPA for a
review of interim financial information as described in Statement of
Auditing Standards No. 71, a reading of the minutes of the meetings of
the Representative Committee of SFG LLC and inquiries of certain
officials of SFG who have responsibility for financial and accounting
matters and certain other limited procedures requested by the Initial
Purchaser and described in detail in such letter, nothing has come to
their attention that causes them to believe that any material
modifications should be made to the unaudited financial statements in
respect of SFG included in the Offering Memorandum for them to be in
conformity with generally accepted accounting principles;
(iii) based upon the procedures detailed in such letter with
respect to the period subsequent to the date of the last available
balance sheet for SFG, including a reading of the minutes of the
meetings of the Representative Committee of SFG LLC and inquiries of
certain officials of SFG who have responsibility for financial and
accounting matters, nothing has come to their attention that causes them
to believe that (A) at a specified date not more than three business
days prior to the date of such letter, there was any change in capital
structure, increase in long-term debt or decrease in net current assets
of SFG as compared with the amounts shown in the June 30, 1997 unaudited
balance sheet included in the Offering Memorandum or (B) for the period
from July 1, 1997 to a specified date not more than three business days
prior to the date of such letter, there were any decreases, as compared
with the corresponding period in the preceding year, in net sales,
income from operations, EBITDA or net income, except in all instances
for changes, increases or decreases that the Offering Memorandum
discloses have occurred or which are set forth in such letter, in which
case the letter shall be accompanied by an explanation by SFG as to the
significance thereof unless said explanation is not deemed necessary by
the Initial Purchaser;
(iv) they have performed certain other specified procedures as a
result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of SFG) set forth in the Offering Memorandum
agrees with the accounting records of SFG, excluding any questions of
legal interpretation; and
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(v) on the basis of a reading of the unaudited pro forma
financial information in respect of SFG included in the Offering
Memorandum, carrying out certain specified procedures, a reading of the
minutes of meetings of the Representative Committee of SFG LLC and
inquiries of certain officials of SFG who have responsibility for
financial and accounting matters and proving the arithmetic accuracy of
the application of the pro forma adjustments to the historical amounts
in such pro forma financial information, nothing came to their attention
which caused them to believe that such pro forma financial information
is not properly compiled on a pro forma basis as described in the notes
included in the Offering Memorandum.
43
ANNEX C-2
Form of Meadow Gold Dairies Initial Letter
SFG shall have furnished to the Initial Purchaser a letter
of Deloitte & Touche LLP, addressed to the Initial Purchaser and dated
the date of the Purchase Agreement, in form and substance satisfactory
to the Initial Purchaser, substantially to the effect set forth below:
(i) they are independent certified public accountants with
respect to the Meadow Gold Dairies (and its predecessors) within the
meaning of Rule 101 of the Code of Professional Conduct of the AICPA and
its interpretations and rulings thereunder;
(ii) based upon a reading of the latest unaudited financial
statements made available by the Meadow Gold Dairies, the procedures of
the AICPA for a review of interim financial information as described in
Statement of Auditing Standards No. 71, a reading of the minutes of the
meetings of the members of the board of directors of the Meadow Gold
Dairies and inquiries of certain officials of the Meadow Gold Dairies
who have responsibility for financial and accounting matters and certain
other limited procedures requested by the Initial Purchaser and
described in detail in such letter, nothing has come to their attention
that causes them to believe that any material modifications should be
made to the unaudited financial statements in respect of the Meadow Gold
Dairies included in the Offering Memorandum for them to be in conformity
with generally accepted accounting principles;
(iii) based upon the procedures detailed in such letter with
respect to the period subsequent to the date of the last available
balance sheet for the Meadow Gold Dairies, including a reading of the
minutes of the meetings of the members of the board of directors of the
Meadow Gold Dairies and inquiries of certain officials of the Meadow
Gold Dairies who have responsibility for financial and accounting
matters, nothing has come to their attention that causes them to believe
that (A) at a specified date not more than three business days prior to
the date of such letter, there was any change in capital structure,
increase in long-term debt or decrease in net current assets as compared
with the amounts shown in the June 30, 1997 unaudited balance sheet
included in the Offering Memorandum or (B) for the period from July 1,
1997 to a specified date not more than three business days prior to the
date of such letter, there were any decreases, as compared with the
corresponding period in the preceding year, in net sales, income from
operations, EBITDA or net income, except in all instances for changes,
increases or decreases that the Offering Memorandum discloses have
occurred or which are set forth in such letter, in which case the letter
shall be accompanied by an explanation by the Meadow Gold Dairies as to
the significance thereof unless said explanation is not deemed necessary
by the Initial Purchaser; and
(iv) they have performed certain other specified procedures as a
result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Meadow Gold Dairies) set forth in the
Offering
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Memorandum agrees with the accounting records of the Meadow Gold
Dairies, excluding any questions of legal interpretation.
