-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MqdNcYMCtdYJF+gn32T1PzFB8TVXl57KWzD/LkMKW6bY9shtpelcRJUF/HGbj33s +nZj9r0cqoBC9EZyjbYJew== 0000760775-98-000058.txt : 19980513 0000760775-98-000058.hdr.sgml : 19980513 ACCESSION NUMBER: 0000760775-98-000058 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19980328 FILED AS OF DATE: 19980512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WLR FOODS INC CENTRAL INDEX KEY: 0000760775 STANDARD INDUSTRIAL CLASSIFICATION: POULTRY SLAUGHTERING AND PROCESSING [2015] IRS NUMBER: 541295923 STATE OF INCORPORATION: VA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-17060 FILM NUMBER: 98615963 BUSINESS ADDRESS: STREET 1: P O BOX 7000 CITY: BROADWAY STATE: VA ZIP: 22815 BUSINESS PHONE: 5408967001 MAIL ADDRESS: STREET 1: 800 CO OP DRIVE CITY: TIMBERVILLE STATE: VA ZIP: 22853 FORMER COMPANY: FORMER CONFORMED NAME: WAMPLER LONGACRE ROCKINGHAM INC DATE OF NAME CHANGE: 19881114 FORMER COMPANY: FORMER CONFORMED NAME: WAMPLER LONGACRE INC DATE OF NAME CHANGE: 19880209 10-Q 1 QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 28, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to _________ COMMISSION FILE NUMBER 0-17060 WLR FOODS, INC. (Exact name of Registrant as specified in its charter) Virginia 54-1295923 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.) P.O. Box 7000 Broadway, Virginia 22815 (Address including Zip Code of Registrant's Principal Executive offices) (540) 896-7001 (Registrant's telephone number, including area code) Indicate by cross mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ) The number of shares outstanding of Registrant's Common Stock, no par value, at May 6, 1998 was 16,379,041 shares. 1 PART 1. FINANCIAL INFORMATION Item 1. Financial Statements WLR FOODS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) Thirteen weeks ended In thousands, except per share data MARCH 28, 1998 MARCH 29, 1997 Net sales $215,133 $222,225 Cost of sales 203,151 211,244 ------- ------- Gross profit 11,982 10,981 Selling, general and administrative expenses 23,522 22,991 ------- ------- Operating loss (11,540) (12,010) Other expense: Interest expense 6,262 3,261 Other, net (202) (124) ------- ------- Other expense 6,060 3,137 ------- ------- Loss before income taxes and minority interest (17,600) (15,147) Income tax benefit (6,336) (5,524) Minority interest in net earnings of consolidated subsidiary 0 14 ------- ------- NET LOSS ($11,264) ($9,637) ======= ======= BASIC AND DILUTED LOSS PER COMMON SHARE (NOTE 6) ($0.69) ($0.56) See accompanying Notes to Consolidated Financial Statements.
2 WLR FOODS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) Thirty-nine weeks ended In thousands, except per share data MARCH 28, 1998 MARCH 29, 1997 Net sales $718,041 $758,785 Cost of sales 666,516 716,065 ------- ------- Gross profit 51,525 42,720 Selling, general and administrative expenses 73,378 70,576 ------- ------- Operating loss (21,853) (27,856) Other expense: Interest expense 15,575 9,369 Other, net (659) (916) ------- ------- Other expense 14,916 8,453 ------- ------- Loss before income taxes and minority interest (36,769) (36,309) Income tax benefit (13,237) (13,249) Minority interest in net earnings of consolidated subsidiary 66 40 ------- ------- NET LOSS ($23,598) ($23,100) ======= ======= BASIC AND DILUTED LOSS PER COMMON SHARE (NOTE 6) ($1.45) ($1.30) CASH DIVIDENDS DECLARED PER COMMON SHARE (Note 5) 0 $0.12 See accompanying Notes to Consolidated Financial Statements.
3 WLR FOODS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
Dollars in thousands March 28, 1998 June 28, 1997 (unaudited) ASSETS Current Assets Cash and cash equivalents $284 $283 Accounts receivable, less allowance for doubtful accounts of $1,243 and $1,550. 60,584 72,462 Inventories (Note 2) 142,357 165,551 Income taxes receivable 1,032 4,567 Other current assets 2,307 2,301 ------- ------- Total current assets 206,564 245,164 Property, plant and equipment, net 154,497 159,426 Deferred income taxes 18,553 4,996 Other assets 6,612 7,142 ------- ------- TOTAL ASSETS $386,226 $416,728 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Notes payable to banks -- $4,031 Current maturities of long-term debt 1,997 186,391 Excess checks over bank balances 7,993 12,118 Trade accounts payable 27,614 35,005 Accrued expenses 27,870 26,657 Deferred income taxes 12,155 12,359 ------- ------- Total current liabilities 77,629 276,561 Long-term debt, excluding current maturities 199,487 5,040 Minority interest in consolidated subsidiary -- 592 Other liabilities and deferred credits 3,656 3,539 Common stock subject to repurchase -- 4,438 Shareholders' equity : Common stock, no par value. 67,658 64,206 Additional paid-in capital 2,974 2,974 Retained earnings 34,822 59,378 ------- ------- Total shareholders' equity 105,454 126,558 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $386,226 $416,728 ======= ======= See accompanying Notes to Consolidated Financial Statements.
4 WLR FOODS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) Thirty-nine weeks ended Dollars in thousands March 28,1998 March 29,1997 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ($23,598) ($23,100) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 19,592 21,218 Gain on sale of property, plant and equipment (52) (1) Deferred income taxes (13,761) (2,344) Other, net (287) 32 Change in operating assets and liabilities: Decrease in accounts receivable 11,878 12,273 Decrease in inventories 23,194 14,197 Decrease in other current assets 3,529 1,378 (Increase) decrease in long term assets 630 (820) Decrease in accounts payable (7,391) (10) Increase in accrued expenses and other 1,330 338 ------- ------- Net Cash Provided by Operating Activities 15,064 23,161 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (16,193) (6,978) Proceeds from sales of property, plant and equipment 1,582 209 ------- ------- Net Cash Used in Investing Activities (14,611) (6,769) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of revolver debt 23,040 81,999 Payments on long-term debt (6,423) (55,643) Financing Cost Paid (5,174) 0 Notes payable to banks (net of principal payments) (4,031) (30,764) Decrease in checks drawn not presented (4,125) (1,326) Issuance of common stock 699 972 Repurchase of common stock (4,438) (8,875) Dividends paid -- (3,192) ------- ------- Net Cash Used in Financing Activities (452) (16,829) ------- ------- Increase (decrease) in Cash and Cash Equivalents 1 (437) Cash and Cash Equivalents at Beginning of Fiscal Year 283 724 ------- ------- Cash and Cash Equivalents at End of Period $284 $287 ======= ======= Supplemental cash flow information: Cash paid (refunded) for : Interest $13,026 $6,882 Income taxes refunded (3,149) (10,418) The Company considers all highly liquid investments with maturities of 3 months or less at purchase to be cash equivalents.
5 Non-cash transactions in: Fiscal 1998: The Company issued 102,296 shares of stock in lieu of the regular cash dividend in the first quarter. The Company issued 889,898 stock warrants in the third quarter relating to the debt refinancing; of these 266,969 were immediately exercisable and were recorded at a value of $1,695,256. See accompanying Notes to Consolidated Financial Statements. 6 Notes to Consolidated Financial Statements WLR Foods, Inc. and Subsidiaries 1. Accounting Policies The consolidated financial statements presented herein, include the accounts of WLR Foods, Inc. and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. The consolidated balance sheet as of March 28, 1998, and the consolidated statements of operations for the thirteen and thirty-nine weeks ended March 28, 1998 and March 29, 1997, and the consolidated statements of cash flows for the thirty-nine weeks ended March 28, 1998 and March 29, 1997 are unaudited. In the opinion of management, all adjustments necessary for the fair presentation of such consolidated financial statements have been included. Such adjustments consisted only of normal recurring accruals. Interim results are not necessarily indicative of results for the entire fiscal year. The consolidated financial statements and notes are presented in conformity with the requirements for Form 10-Q and, accordingly, do not contain certain information included in the Company's annual consolidated financial statements and notes. The Company's unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Annual Report to Shareholders for the fiscal year ended June 28, 1997. In both, the accounting policies and principles used are consistent in all material respects. Certain fiscal 1997 amounts have been reclassified to conform with fiscal 1998 presentations. 2. Inventories A summary of inventories at March 28, 1998 and June 28, 1997 follows: (unaudited) Dollars in thousands March 28, 1998 June 28, 1997 Live poultry and breeder flocks $ 63,656 $ 74,984 Processed poultry and meat products 45,948 53,981 Packaging supplies, parts and other 16,305 17,188 Feed, grain and eggs 16,448 19,398 ------- ------- Total inventories $142,357 $165,551 ======= ======= 3. Acquisition of Common Stock The Company completed the final repurchase of its common stock from Cuddy Farms, Inc. early in fiscal year 1998 by purchasing approximately 446,000 shares of stock for $10 per share. 4. Debt Refinancing and Modification As of February 26, 1998, the Company restructured its fixed rate Senior Unsecured Notes and variable rate Unsecured Bank Notes. The Company's new facility consists of a $110 million term loan, $42 million in bonds, and a $105 million revolving line of credit. The term loan, bonds, and line of credit have an initial maturity of January 1, 2000, which may be extended for another year under certain circumstances. The debt is secured by essentially all of the 7 Company's assets with interest on approximately half of the revolver and the term loan based on prime plus 225 basis points. The remaining amount of the outstanding revolver is priced according to the London Inter-Bank Offering rate plus 300 basis points or prime plus 175 basis points. In conjunction with the debt modification, the Company issued warrants to purchase 889,898 shares of common stock of the Company at $.01 per share. The warrants may be reduced if the debt is paid off by certain dates prior to maturity. Warrants totaling 266,969 were immediately exercisable and resulted in the recording of additional debt discount of $1.7 million. The Company also incurred approximately $5 million of fees and costs to the lenders in conjunction with the refinancing which are being amortized as additional interest costs over the term of the debt. In addition, the Company expensed approximately $1.1 million of legal, consulting and appraisal costs incurred in the refinancing. 5. Stock Dividend On June 24, 1997, the Company's Board of Directors declared a stock dividend that was distributed on August 1, 1997 to shareholders of record on July 11, 1997. In lieu of the regular cash dividend, the dividend was paid in stock with .0064 shares being distributed for each share of common stock outstanding. 6. Earnings Per Share The Company adopted FASB No. 128, "Earnings Per Share," which supersedes APB Opinion No. 15, on December 27, 1997. This statement serves to simplify the computation of earnings per share and requires restatement of all prior periods presented in conformity with the statement. Options and contingent warrants to purchase shares of the Company's common stock were outstanding during the periods presented, but these options were not included in the computation of diluted earnings per share because the effect of including these options would have been anti-dilutive. Contingent shares, such as stock warrants, are included in the computation. The following table illustrates the computation: 3rd Qtr 3rd Qtr YTD YTD 03/28/98 03/29/97 03/28/98 03/29/97 Numerator - Net loss ($11,264) ($9,637) ($23,598) ($23,100) Denominator: Common shares outstanding 16,334 17,295 16,291 17,702 Effect of outstanding stock warrants 82 0 28 0 ------- ------- ------- ------- Basic and diluted weighted average common shares outstanding 16,416 17,295 16,319 17,702 ------- ------- ------- ------- Basic and diluted earnings per share ($0.69) ($0.56) ($1.45) ($1.30) ======= ======= ======= ======= 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations WLR Foods, Inc. (the Company) is a fully integrated poultry production, processing and marketing business with operations in Virginia, West Virginia, Pennsylvania and North Carolina. For the third fiscal quarter, net sales decreased $7.1 million when compared to the same quarter last year. This decrease was primarily due to lower chicken and turkey prices approximating $8 million. Lower grain costs of approximately $6 million and improved live performance resulted in an increase in gross profit to 5.6% in the third quarter versus 4.9% for the same quarter last year. Increased interest costs, resulting from a combination of higher rates and borrowing levels, lowered net earnings despite the improvement in operating income. Results of Operations Net sales for the quarter decreased 3.2% to $215.1 million as compared to $222.2 million for the same quarter last year. Third fiscal quarter chicken revenues as compared to last year s third quarter decreased 1%, the result of a 4% decrease in prices offset by a 3% increase in volume sold. Turkey revenues were down 3% as prices declined 5% and volume increased about 2% from the same quarter last year. For the first three quarters of fiscal 1998, net sales decreased 5% when compared to the same period last year. For the year to date in comparison to the same period last year, chicken and turkey pricing both declined, while volumes increased in chicken and declined slightly in turkey. Improved grain costs and live performance resulted in savings of approximately $6 million and $3 million, respectively, for the third quarter of 1998 versus the same quarter of 1997 and were the primary factors in the increase in gross profits of $1.0 million. Gross profits as a percent of sales increased to 5.6% from 4.9% for the same quarter last year. On a year-to-date basis, gross profits increased $8.8 million when compared to prior year-to-date results. Gross margins improved 1.6%, from the 5.6% earned in the thirty-nine weeks ended March 29, 1997 to 7.2% in the thirty-nine weeks ended March 28, 1998. Selling, general and administrative expenses increased $0.5 million or 2.3% compared to the third quarter last year, or from 10.3% to 10.9% as a percent of sales. The increase was primarily due to approximately $1.1 million in one-time costs and expenses related to the debt refinancing partially offset by proceeds realized from the stock demutualization of the Company's health insurance administrator. Year to date selling, general and administrative expenses increased $2.8 million, or 0.9% as a percent of sales when compared to the same period last year. The increase is primarily due to higher program costs related to sales of further processed product, and lower sales prices in both chicken and turkey. Interest expense was $3.0 million higher for the current quarter, and $6.2 million higher on a year to date basis. The increase is directly related to increased borrowing levels and higher interest rates. For the quarter, the Company had a net loss of $11.3 million or $.69 per share compared to a net loss of $9.6 million or $.56 per share for the same period last year. For the thirty-nine weeks ended March 28, 1998, the Company had a net loss of $23.6 million or $1.45 per share 9 compared to a net loss of $23.1 million or $1.30 per share for the thirty-nine weeks ended March 29, 1997. The effects of fewer shares outstanding due to the contractual repurchase of shares increased the loss per share in the current quarter and nine months year to date versus the same period in fiscal 1997 by four cents and eleven cents, respectively. Financial Condition and Liquidity The Company restructured its debt in February, 1998. The new facility consists of a $110 million term loan, $42 million in bonds, and a $105 million revolving line of credit. The debt is secured by essentially all of the Company's assets. Warrants were issued to purchase 889,898 shares of common stock of the Company at $.01 per share. The warrants may be reduced if the debt is paid off by certain dates prior to maturity. Accounts receivable balances have decreased $11.9 million and inventories have decreased $23.2 million as compared to the end of fiscal year 1997. The majority of the decrease in inventory was in live poultry where inventories were reduced by $11.3 million. Debt levels have increased $6.0 million on a year to date basis and $1.8 million in the current quarter. Capital Resources The Company s capital spending for the quarter and for the nine months was $5.4 million and $16.2 million, respectively, primarily for replacements of existing equipment, safety requirements, and projects with rapid pay backs. Depreciation expense was $6.7 million for the quarter, and $19.6 million for the nine months. Projected capital spending for fiscal year 1998 is expected to total $20 to $25 million. The Company is aware of the issues associated with the Year 2000 problem as the millennium approaches. Given the recent implementation and ongoing upgrading of most of the Company s information systems, management does not feel that costs related to the Year 2000 issue will have a material impact on its financial condition or results of operations. Company performance expectations or forward looking statements expressed from time to time are always subject to the possible material impact of any risks of the business. These risks include weather conditions impacting grain production and harvesting and live growout of poultry; feed supplies and prices; supplies and selling prices of poultry and competing meats; consumer preferences; governmental and regulatory intervention in the export/import of poultry; changes in the regulations governing production processes; and fluctuations in the general business climate. 10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits See attached Exhibit Index (b) Form 8-K Reporting Date January 27, 1998. Item Reported - Item 5, Other Events. WLR Foods, Inc. announced its plans to convert the Marshville, North Carolina turkey complex to chicken production by Fall of 1998. Reporting Date February 26, 1998. Item Reported - Item 5, Other Events. WLR Foods, Inc. announced the restructuring of its debt and the securing of an additional $55 million of borrowing capacity with a syndicate of lenders. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, this report is signed this _11_ day of May, 1998, by the Registrant's principal financial officer who is also authorized by the Registrant to sign on its behalf. WLR FOODS, INC. __/S/ Robert T. Ritter__ Robert T. Ritter, Chief Financial Officer and duly authorized signator for Registrant 11 EXHIBIT INDEX Exhibit No. Description 2.1 Revolving Credit Agreement, dated as of February 25, 1998 2.2 Form of Revolving Credit Note, dated as of February 25, 1998 2.3 Term Loan Agreement, dated as of February 25, 1998 2.4 Form of Term Note, dated as of February 25, 1998 2.5 Warrant Holders Rights Agreement, dated as of February 25, 1998 2.6 Form of Warrant to Purchase Common Stock at $0.1 Per Share 2.7 Security Agreement, dated as of February 25, 1998 2.8 WLR Foods, Inc. Pledge Agreement, dated as of February 25, 1998 2.9 Wampler Foods, Inc. Pledge Agreement, dated as of February 25, 1998 2.10 Note Purchase Agreement, dated as of February 25, 1998 2.11 Form of Variable Rate Note, dated as of February 25, 1998 2.12 Form of Subsidiaries Guaranty Agreement, dated as of February 25, 1998 27 Financial Data Schedule 12 EX-2.1 2 REVOLVING CREDIT AGREEMENT Exhibit 2.1 REVOLVING CREDIT AGREEMENT dated as of February 25, 1998, by and among WLR FOODS, INC., WAMPLER FOODS, INC., CASSCO ICE & COLD STORAGE, INC., WAMPLER SUPPLY COMPANY, INC., VALLEY RAIL SERVICE, INC., as Borrowers, the Revolving Credit Lenders referred to herein, and FIRST UNION NATIONAL BANK, as Agent. 1 TABLE OF CONTENTS ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 1.1 Definitions . . . . . . . . . . . . . 2 SECTION 1.2 General . . . . . . . . . . . . . . 21 SECTION 1.3 Other Definitions and Provisions . . 21 ARTICLE II CREDIT FACILITY . . . . . . . . . . . . . . . . . . . . 22 SECTION 2.1 Revolving Credit Loans . . . . . . 22 SECTION 2.2 Procedure for Advances of Revolving Loans . . . . . . . . . . . . . . . 22 SECTION 2.3 Repayment of Loans . . . . . . . . . 23 SECTION 2.4 Revolving Credit Notes . . . . . . . 24 SECTION 2.5 Permanent Reduction of the Aggregate Revolving Commitment . . . . . . . . 24 SECTION 2.6 Termination of Credit Facility . . . 24 SECTION 2.7 Use of Proceeds . . . . . . . . . . . 25 SECTION 2.8 Lockbox/Cash Collateral Account . . . 25 SECTION 2.9 Division of Revolving Credit Loans . 25 SECTION 2.10 Interim Borrowing Base Reporting Standard . . . . . . . . . . . . . . 26 ARTICLE III LETTER OF CREDIT FACILITY . . . . . . . . . . . . . . . . 26 SECTION 3.1 L/C Commitment SECTION 3.2 Procedure for Issuance of Letters of Credit . . . . . . . . . . . . . . . 27 SECTION 3.3 Commissions and Other Charges . . . . 27 SECTION 3.4 L/C Participation . . . . . . . . . . 28 SECTION 3.5 Reimbursement Obligation of the Borrower . . . . . . . . . . . . . . 29 SECTION 3.6 Obligations Absolute . . . . . . . . 29 SECTION 3.7 Effect of Application . . . . . . . . 30 SECTION 3.8 Existing Letters of Credit . . . . . 30 ARTICLE IV GENERAL REVOLVING LOAN PROVISIONS . . . . . . . . . . . . 30 SECTION 4.1 Interest . . . . . . . . . . . . . . 30 SECTION 4.2 Notice and Manner of Conversion or Continuation of Revolving Loans . . . 33 SECTION 4.3 Facility, Commitment and Agency Fees 34 SECTION 4.4 Manner of Payment . . . . . . . . . . 35 2 SECTION 4.5 Crediting of Payments and Proceeds . 35 SECTION 4.6 Nature of Obligations of Revolving Credit Lenders Regarding Extensions of Credit; Assumption by the Agent . . . 36 SECTION 4.7 Changed Circumstances . . . . . . . . 36 SECTION 4.8 Indemnity . . . . . . . . . . . . . . 38 SECTION 4.9 Capital Requirements . . . . . . . . 39 SECTION 4.10 Taxes . . . . . . . . . . . . . . . . 39 SECTION 4.11 Mandatory Prepayments . . . . . . . . 41 SECTION 4.12 Approved Miscellaneous Asset Sales . 42 ARTICLE V CLOSING; CONDITIONS OF CLOSING AND BORROWING . . . . . . 42 SECTION 5.1 Closing . . . . . . . . . . . . . . . 42 SECTION 5.2 Conditions to Closing and Initial Extensions of Credit . . . . . . . . 42 SECTION 5.3. Conditions to All Revolving Loans and Letters of Credit . . . . . . . . . . 45 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BORROWER . . . . . 46 SECTION 6.1 Representations and Warranties . . . 46 SECTION 6.2 Survival of Representations and Warranties Etc . . . . . . . . . . . 53 ARTICLE VII FINANCIAL INFORMATION AND NOTICES . . . . . . . . . . . . 53 SECTION 7.1 Financial Statements and Projections 53 SECTION 7.2 Officer's Compliance Certificate . . 55 SECTION 7.3 Accountants' Certificate . . . . . . 55 SECTION 7.4 Other Reports . . . . . . . . . . . . 56 SECTION 7.5 Notice of Litigation and Other Matters56 SECTION 7.6 Accuracy of Information . . . . . . . 57 ARTICLE VIII AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . 58 SECTION 8.1 Preservation of Corporate Existence and Related Matters . . . . . . . . . . . 58 SECTION 8.2 Maintenance of Property . . . . . . . 58 SECTION 8.3 Insurance . . . . . . . . . . . . . . 58 SECTION 8.4 Accounting Methods and Financial Records . . . . . . . . . . . . . . . 59 SECTION 8.5 Payment and Performance of Obligations59 SECTION 8.6 Compliance With Laws and Approvals . 59 SECTION 8.7 Environmental Laws . . . . . . . . . 59 SECTION 8.8 Compliance with ERISA . . . . . . . . 60 SECTION 8.9 Compliance With Agreements . . . . . 60 3 SECTION 8.10 Conduct of Business . . . . . . . . . 60 SECTION 8.11 Visits and Inspections . . . . . . . 60 SECTION 8.12 Further Assurances . . . . . . . . . 60 SECTION 8.13 Meeting with Revolving Credit Lender 61 SECTION 8.14 Year 2000 Issues . . . . . . . . . . 61 SECTION 8.15 Employment of Outside Accountants and Financial Consultants . . . . . . . . 61 SECTION 8.16 Maintenance of Bank Accounts . . . . 61 SECTION 8.17 Interest Rate Protection . . . . . . 61 ARTICLE IX FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . 62 SECTION 9.1 Minimum Monthly EBITDA . . . . . . . 62 SECTION 9.2 Minimum Quarterly EBITDA . . . . . . 62 SECTION 9.3 Limitation on Capital Expenditures . 63 ARTICLE X NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 63 SECTION 10.1 Limitations on Debt . . . . . . . . . 63 SECTION 10.2 Limitations on Contingent Obligations 64 SECTION 10.3 Limitations on Liens . . . . . . . . 64 SECTION 10.4 Limitations on Acquisitions . . . . . 65 SECTION 10.5 Limitations on Mergers and Liquidation65 SECTION 10.6 Limitations on Sale of Assets . . . . 65 SECTION 10.7 Transactions with Affiliates . . . . 66 SECTION 10.8 Certain Accounting Changes . . . . . 66 SECTION 10.9 Compliance with ERISA . . . . . . . . 66 SECTION 10.10 Limitations on New Equity, Dividends and Distributions . . . . . . . . . . 67 SECTION 10.11 Transfers to Subsidiaries . . . . . . 67 SECTION 10.12 Limitations on Investments . . . . . 67 SECTION 10.13 Limitations on Certain Agreements . . 67 ARTICLE XI DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . 68 SECTION 11.1 Events of Default . . . . . . . . . . 68 SECTION 11.2 Remedies . . . . . . . . . . . . . . 70 SECTION 11.3 Rights and Remedies Cumulative; Non- Waiver; etc . . . . . . . . . . . . . 71 ARTICLE XII THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . 72 SECTION 12.1 Appointment . . . . . . . . . . . . . 72 SECTION 12.2 Delegation of Duties . . . . . . . . 72 SECTION 12.3 Exculpatory Provisions . . . . . . . 72 SECTION 12.4 Reliance by the Agent . . . . . . . . 73 SECTION 12.5 Notice of Default . . . . . . . . . . 73 4 SECTION 12.6 Non-Reliance on the Agent and other Revolving Credit Lenders . . . . . . 73 SECTION 12.7 Indemnification . . . . . . . . . . . 74 SECTION 12.8 The Agent in Its Individual Capacity 74 SECTION 12.9 Resignation of the Agent; Successor Agent . . . . . . . . . . . . . . . . 75 SECTION 12.10 Settlement . . . . . . . . . . . . . 75 ARTICLE XIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 76 SECTION 13.1 Notices . . . . . . . . . . . . . . . 76 SECTION 13.2 Expenses . . . . . . . . . . . . . . 78 SECTION 13.3 Set-off . . . . . . . . . . . . . . . 79 SECTION 13.4 Governing Law . . . . . . . . . . . . 79 SECTION 13.5 Consent to Jurisdiction . . . . . . . 79 SECTION 13.6 Waiver of Jury Trial; Waiver of Punitive Damages . . . . . . . . . . 80 SECTION 13.7 Reversal of Payments . . . . . . . . 80 SECTION 13.8 Injunctive Relief . . . . . . . . . . 80 SECTION 13.9 Accounting Matters . . . . . . . . . 80 SECTION 13.10 Successors and Assigns; Participations81 SECTION 13.11 Amendments, Waivers and Consents; Renewal . . . . . . . . . . . . . . . 84 SECTION 13.12 Performance of Duties . . . . . . . . 85 SECTION 13.13 Indemnification . . . . . . . . . . . 85 SECTION 13.14 All Powers Coupled with Interest . . 85 SECTION 13.15 Survival of Indemnities . . . . . . . 85 SECTION 13.16 Titles and Captions . . . . . . . . . 86 SECTION 13.17 Severability of Provisions . . . . . 86 SECTION 13.18 Counterparts . . . . . . . . . . . . 86 SECTION 13.19 Term of Agreement . . . . . . . . . . 86 SECTION 13.20 Adjustments . . . . . . . . . . . . . 86 5 EXHIBITS Exhibit A - Form of Revolving Credit Note Exhibit B - Form of Notice of Borrowing Exhibit C - Form of Borrowing Base Certificate Exhibit D - Form of Repayment Notice Exhibit E - Form of Letter of Credit Application Exhibit F - Form of Notice of Conversion/Continuation Exhibit G - Form of Quarterly Unaudited Consolidated and Consolidating Balance Sheet Exhibit H - Form of Officer's Compliance Certificate Exhibit I - Form of Assignment and Acceptance SCHEDULES Schedule 4.11(b) - Existing Stock Incentive Programs Schedule 6.1(a) - Jurisdictions of Organization and Qualification to Do Business as Foreign Corporation Schedule 6.1(b) - Subsidiaries, Capitalization and Shareholders Schedule 6.1(h) - Franchise, Licenses, Patents and Tradenames Schedule 6.1(j) - ERISA Plans Schedule 6.1(n) - Collective Bargaining Agreements Schedule 6.1(s) - Schedule of Leased Real Property Schedule 6.1(v) - Litigation Schedule 6.1(z) - Outstanding Options, Warrants or Other Rights Schedule 8.15 - Work Plan Schedule 10.1(c) - Existing Debt Schedule 10.2(b) - Existing Contingent Obligations Schedule 10.3(f) - Existing Liens 6 This REVOLVING CREDIT AGREEMENT (the "Agreement"), dated as of February 25, 1998, is made and entered into by and among WLR FOODS, INC., ("WLR"), WAMPLER FOODS, INC. ("Wampler"), CASSCO ICE & COLD STORAGE, INC. ("Cassco"), WAMPLER SUPPLY COMPANY, INC. ("Wampler Supply"), and VALLEY RAIL SERVICE, INC. ("Valley Rail"), all corporations organized under the laws of the Commonwealth of Virginia, the Revolving Credit Lenders who are or may become a party to this Agreement, and FIRST UNION NATIONAL BANK, for itself and as Agent for the Revolving Credit Lenders. WLR, Wampler, Cassco, Wampler Supply and Valley Rail are referred to herein jointly and severally as the "Borrower." The liabilities and obligations of WLR, Wampler, Cassco, Wampler Supply and Valley Rail hereunder are joint and several, and the word "Borrower," as used herein, means each of them, any of them and/or all of them as the context may require. BACKGROUND A. WLR, as borrower, and Cassco and Wampler, as guarantors, are parties to that certain Credit Agreement, dated January 1, 1997, pursuant to which the Revolving Credit Lenders extended a revolving credit facility (the "Existing Revolving Credit Facility") to WLR in an amount not to exceed One Hundred Sixty Million Dollars ($160,000,000). B. WLR, as borrower, and Cassco and Wampler, as guarantors, and First Union are parties to a certain Loan Agreement dated as of January 1, 1997 (the "Time Loan Agreement") which has terminated undrawn by mutual consent of the parties. C. WLR, Cassco, Wampler, Wampler Supply and Valley Rail are part of an integrated financial enterprise and have requested the Lenders to: (i) provide a new revolving credit facility in the maximum amount of $105,000,000; (ii) restructure a portion of the Existing Revolving Credit Facility, after the principal amount outstanding (including the aggregate face amount of all outstanding letters of credit) has been reduced to $110,000,000, into a term loan; (iii) provide the new revolving credit facility pursuant to the terms of this Agreement; and (iv) restructure the Existing Revolving Credit Facility as provided in the other Loan Documents executed as of the date hereof. D. The Revolving Credit Lenders have agreed to this request subject to the terms and conditions of this Agreement and the other Loan Documents. E. The Borrower will materially benefit from the restructure of the Existing Revolving Credit Facility and the new revolving credit to be provided as set forth in the Loan Documents. 7 NOW, THEREFORE, for good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged by the parties hereto, such parties hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 Definitions. The following terms when used in this Agreement shall have the meanings assigned to them below: "Account" shall have the meaning given to that term in the Uniform Commercial Code and, in addition, shall include any right to payment for goods sold or leased or services rendered which is evidenced by an instrument or chattel paper. "Affiliate" means, with respect to any Person (the "First Person"), any other Person (other than a Subsidiary of the First Person) which directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the First Person or any of its Subsidiaries. The term "control" means (a) the power to vote five percent (5%) or more of the securities or other equity interests of a Person having ordinary voting power, or (b) the possession, directly or indirectly, of any other power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. The term Affiliate shall not include, in the case of the Borrower, Pioneering Management Corporation. "Agent" means First Union in its capacity as Agent hereunder, and any successor thereto appointed pursuant to Section 12.9. "Agent's Office" means the office of the Agent specified in or determined in accordance with the provisions of Section 13.1. "Aggregate Revolving Credit Commitment" means the aggregate amount of the Revolving Credit Lenders' Commitments hereunder, as such amount may be reduced at any time or from time to time pursuant to Section 2.5. On the Closing Date, the Aggregate Revolving Credit Commitment shall be One Hundred and Five Million Dollars ($105,000,000). "Agreement" means this Revolving Credit Agreement, as amended or modified from time to time. "Amendment Fee" shall have the meaning ascribed in Section 4.3(b). 8 "Applicable Law" means all applicable provisions of constitutions, statutes, rules, regulations and orders of all Governmental Authorities and all orders and decrees of all courts and arbitrators. "Applicable Margin" shall have the meaning assigned thereto in Section 4.1(c). "Application" means an application, in the form specified by the Issuing Lender from time to time, requesting the Issuing Lender to issue a Letter of Credit. "Approved Contract Growers" shall mean those Persons who, from time to time, hold live chicken and turkey inventory owned by Wampler under and subject to grower contracts which preserve and in every way maintain the title of Wampler in and to such inventory to the satisfaction of Wampler and its counsel. "Approved Miscellaneous Asset Sale" shall mean any sale or sales by the Borrower of any real or personal property which (i) for the first year following the Closing Date do(es) not generate Net Proceeds of more than $7,500,000 in the aggregate, or more than $2,500,000 for any individual sale; and (ii) for each one-year period thereafter do(es) not generate Net Proceeds of more than $1,000,000 in the aggregate for such twelve-month period. "Asset Sale" means any sale, sale-leaseback, mortgage of real property or any other disposition (including the grant of any option, warrant or other right to purchase such property) by any Person of any of its real or tangible personal property or assets (other than sales permitted by subsections (a), (b), and (c) of Section 10.6 and the sale of Equipment, the proceeds of which are applied to the prepayment of any Purchase Money Debt secured by a Lien on such Equipment). "Assignment and Acceptance" shall have the meaning assigned thereto in Section 13.10. "Available Commitment" means, as to any Revolving Credit Lender at any time, an amount equal to the excess, if any, of (a) such Revolving Credit Lender's Commitment over (b) such Revolving Credit Lender's Extensions of Credit. "Base Rate" means, at any time, the higher of (a) the Prime Rate or (b) the Federal Funds Rate plus 1/2 of 1%; each change in the Base Rate shall take effect simultaneously with the corresponding change or changes in the Prime Rate or the Federal Funds Rate. "Base Rate Loan" means any Loan bearing interest at a rate based upon the Base Rate as provided in Section 4.1(a). 9 "Borrower" means WLR, Wampler, Cassco, Wampler Supply, and Valley Rail, in their capacities as joint and several borrowers hereunder, and each of them, any of them and/or all of them as the context may require. "Borrowing Base" means, at any time, a dollar amount equal to the sum of the following amounts as they exist at that time: (a) eighty five percent (85%) of all Eligible Accounts; plus (b) the sum of (A) sixty percent (60%) of Eligible Processed Inventory; plus (B) sixty percent (60%) of Eligible Packaging Supplies Inventory; plus (C) sixty percent (60%) of Eligible Feed, Grain and Eggs Inventory; plus (D) forty-five percent (45%) of Eligible Live Poultry Inventory; minus (c) the amount of any Borrowing Base Reserve. "Borrowing Base Reserve" means a dollar reserve established from time to time by the Agent in the exercise of its reasonable discretion following written notice to the Borrower describing in reasonable detail the reason for the establishment of such reserve. "Business Day" means (a) for all purposes other than as set forth in clause (b) below, any day other than a Saturday, Sunday or legal holiday on which banks in Charlotte, North Carolina and London, England, are open for the conduct of their commercial banking business, and (b) with respect to all notices and determinations in connection with, and payments of principal and interest on, any LIBOR Rate Loan, any day that is a Business Day described in clause (a) and that is also a day for trading by and between banks in Dollar deposits in the London interbank market. "Capital Asset" means, with respect to the Borrower and its Subsidiaries, any asset that would, in accordance with GAAP, be required to be classified and accounted for as a capital asset on a Consolidated balance sheet of the Borrower and its Subsidiaries. "Capital Expenditures" means, with respect to the Borrower and its Subsidiaries for any period, the aggregate cost of all capital assets acquired by any such Person during such period, determined without duplication on a Consolidated basis in accordance with GAAP. "Capital Lease" means, with respect to the Borrower and its Subsidiaries, any lease of any property that would, in accordance with GAAP, be required to be classified and accounted for as a capital lease on a Consolidated balance sheet of the Borrower and its Subsidiaries. 10 "Change in Control" shall have the meaning assigned thereto in Section 11.1(m). "Closing Date" means the date of this Agreement or such later Business Day upon which the Notes are originally executed and delivered to the Revolving Credit Lenders. "Code" means the Internal Revenue Code of 1986, and the rules and regulations thereunder, each as amended or supplemented from time to time. "Collateral" means all of the assets, property and interests in property of the Borrower and its Subsidiaries, whether now owned or hereafter acquired, that shall, from time to time, secure the Obligations, including without limitation the Collateral described in the Security Documents and any property or interests provided in addition to or in substitution for any of the foregoing. "Collateral Agent" means First Union in its capacity as Collateral Agent under the Security Documents. "Commitment" means, as to any Revolving Credit Lender at any time, the obligation of such Revolving Credit Lender to make Revolving Loans to and issue or participate in Letters of Credit issued for the account of the Borrower hereunder in an aggregate principal or face amount at any time outstanding not to exceed the amount so identified beneath such Revolving Credit Lender's name on the signature pages hereof, as the same may be reduced or modified at any time or from time to time pursuant to Sections 2.5 and 13.10. "Commitment Percentage" means, as to any Revolving Credit Lender at any time, the ratio of (a) the amount of the Commitment of such Revolving Credit Lender to (b) the Aggregate Revolving Credit Commitment of all of the Revolving Credit Lenders, expressed as a percentage. "Consolidated" means, when used with reference to financial statements or financial statement items of the Borrower and its Subsidiaries, such statements or items on a consolidated basis in accordance with applicable principles of consolidation under GAAP. "Contingent Obligation" means, with respect to the Borrower and its Subsidiaries, without duplication, any obligation, contingent or otherwise, of any such Person pursuant to which such Person has directly or indirectly guaranteed any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of any such Person (a) to purchase or pay (or advance or supply funds for the 11 purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement condition or otherwise) or (b) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term Contingent Obligation shall not include endorsements for collection or deposit in the ordinary course of business or executory contracts. "Coverage Ratio" means, as of the close of any Fiscal Quarter, the Borrower's Consolidated cumulative four quarter EBITDA ending with the close of such Fiscal Quarter divided by the Borrower's Consolidated cumulative four quarter Interest Expense ending with the close of such Fiscal Quarter. "Credit Facility" means the collective reference to the Revolving Credit Facility and the L/C Facility. "Debt" means, with respect to the Borrower and its Subsidiaries at any date and without duplication, Capital Leases and debt incurred, guaranteed (whether directly or indirectly) or assumed for money borrowed or for the deferred (for sixty days or more) purchase price of property or services purchased, excluding accounts payable (other than for borrowed money), deferred compensation payable to current or former employees and other accrued expenses incurred in the ordinary course of business if the same are not overdue in a material amount or are being contested in good faith and by appropriate proceedings. Debt shall include all obligations of the Borrower or any of its Subsidiaries pursuant to Derivative Agreements entered into in the ordinary course of business for the purpose of mitigating risk. "Default" means any of the events specified in Section 11.1 which with the passage of time, the giving of notice or any other condition, would constitute an Event of Default. "Derivative Agreement" means any agreement with respect to any exchange-traded or over-the-counter transaction, contract, instrument, security, obligation or undertaking of whatever nature that constitutes (in whole or in part) a forward, future, option, swap, cap, collar, floor or combination thereof, or anything similar to any of the foregoing, whether for physical delivery or cash settlement, which is entered into for the purpose of mitigating risk in connection with a commodity price or index. 12 "Dollars" or "$" means, unless otherwise qualified, dollars in lawful currency of the United States. "EBITDA" means, for any period, (a) Net Income of the Borrower and its Subsidiaries on a Consolidated basis for such period, plus (b) the sum of the following for such period to the extent deducted in the determination of Net Income: (i) Interest Expense, (ii) income and franchise taxes, and (iii) amortization, depreciation and other non- cash charges (including amortization of good will and other intangible assets). "Eligible Accounts" means the aggregate face amount of all of the Borrower's Accounts to the extent each individual Account meets all of the following criteria: (a) The Account arose from a bona fide outright sale of goods by Wampler and/or Cassco, under an enforceable contract, within the United States, to a Person located within the United States (or elsewhere if accompanied by an irrevocable letter of credit reasonably acceptable to the Agent issued in favor of Wampler and/or Cassco at the request of such Person), and such goods have been shipped to the appropriate account debtor, or the sale has otherwise been consummated, in accordance with such contract; (b) The Account is at all times subject to a valid, enforceable and first priority perfected Lien in favor of the Collateral Agent for the benefit of the Lenders except to the extent such Lien may be subject to Limited Grower Payable Liens; (c) The title of Wampler and/or Cassco to the Account, and, except as to the account debtor, to any goods to be sold or leased in connection with the Account, is absolute and is not subject to any prior assignment or Lien except to the extent such Lien may be subject to Limited Grower Payable Liens; (d) The amount of the Account shown on the books of Wampler and/or Cassco and on any invoice or statement delivered to the Agent is owing to Wampler and/or Cassco and net of any partial payment that has been made thereon by any Person; (e) The Account is not a contra account and the amount of the Account stated on the Borrowing Base is net of: any claim of reduction, counterclaim, set-off, recoupment, or any claim for credits, allowances or adjustments by the account debtor because of returned, inferior or damaged goods or unsatisfactory services and any customary discounts allowed for prompt payment; (f) The account debtor has not returned or refused to accept or retain any of the goods from the sale or furnishing of which the Account arose; 13 (g) The Account does not when aggregated with all other Accounts of such account debtor, exceed fifteen percent (15%) of the face value of all Accounts of either Wampler or Cassco in the aggregate then outstanding; (h) The Account is due and payable not more than thirty (30) days from the date of the invoice therefor; (i) The age of the Account, calculated from the due date therefor, is not more than twenty eight (28) days in the case of Wampler, or thirty (30) days in the case of Cassco; (j) Not more than fifty percent (50%) of all Accounts payable by the account debtor (or any affiliate of such account debtor) are older than twenty eight (28) days from the invoice due date, in the case of Wampler, and thirty (30) days from the invoice due date, in the case of Cassco; (k) The Account does not arise out of a contract with, or order from, an account debtor that, by its terms, forbids or makes the assignment of that Account to the Agent void or unenforceable; (l) The Borrower has not received any note, trade acceptance, draft or other instrument or chattel paper with respect to or in payment of the Account, and, if any such instrument is received, the Borrower will immediately notify the Agent and at the latter's request, endorse or assign and deliver the same to the Agent; provided, however, that upon such endorsement or assignment and delivery to the Agent, if the Account is otherwise eligible, the Account shall be deemed to be an Eligible Account; (m) The account debtor is not insolvent nor the subject of any dissolution, termination of existence, insolvency, business failure, appointment of a receiver for any part of its property, assignment for the benefit of creditors by, or the filing of any petition in bankruptcy or the commencement of any proceeding under any bankruptcy or insolvency laws by or against such account debtor; (n) The account debtor is not the United States of America, or any department, agency or instrumentality thereof, unless the Borrower has complied in all respects with the Federal Assignment of Claims Act of 1940; (o) The account debtor is not an Affiliate of the Borrower; and (p) The Account is not one which the Agent, in its reasonable discretion, has determined to be disputed, compromised or 14 otherwise uncollectible for the full face amount of such Account. "Eligible Assignee" means, with respect to any assignment of the rights, interest and obligations of a Revolving Credit Lender hereunder, a Person that is at the time of such assignment (a) a bank having combined capital and surplus in excess of $500,000,000 and whose senior debt is rated BBB or higher by Standard & Poor's Ratings Group (or has a comparable rating from another rating agency), (b) a finance company, insurance company or other financial entity which does or can extend credit of the type extended hereunder, that has total assets in excess of $500,000,000 and whose senior debt is rated BBB or higher by Standard & Poor's Ratings Group (or has a comparable rating from another rating agency), (c) already a Revolving Credit Lender hereunder (whether as an original party to this Agreement or as the assignee of another Revolving Credit Lender), (d) the successor (whether by transfer of assets, merger or otherwise) to all or substantially all of the commercial lending business of the assigning Revolving Credit Lender, or (e) any other Person that has been approved in writing as an Eligible Assignee by the Agent, which approval shall not unreasonably be withheld, provided, that for purposes of this clause (e), if such Person is a direct competitor of the Borrower, such Person must also be approved in writing as an Eligible Assignee by the Borrower. "Eligible Feed, Grain and Eggs Inventory" means that portion of Eligible Inventory consisting of feed, grain, and turkey and chicken eggs ready for use in the ordinary course of the Borrower's business. "Eligible Inventory" means the gross amount of the Borrower's Inventory valued at the lower of cost (on a first in, first out basis) or market which meets all of the following criteria: (a) The Inventory is owned solely by the Borrower and the Borrower holds good, valid and marketable title to such Inventory; (b) Except for Permitted Liens, the Inventory is at all times subject to a valid, enforceable and first priority perfected Lien in favor of the Agent for the benefit of the Lenders; (c) The Inventory is readily saleable in a bona fide arm's length transaction, or is usable, in the ordinary course of business of Wampler and/or Cassco; (d) Except for Permitted Liens, the title of Wampler and/or Cassco to the inventory is absolute and is not subject to any prior 15 assignment or Lien, except the security interests of the Lenders; (e) The Inventory is in a facility located in the United States and within a jurisdiction in which the Lenders' security interests have attached and are perfected by the filing of financing statements under Applicable Law; (f) If the Inventory is located on leased premises or in a warehouse not owned by the Borrower, a landlord's or warehouseman's waiver satisfactory in form and substance to the Agent shall have been delivered to the Agent for such premises; (g) If the Inventory consists of eggs, live chicken or turkeys, other livestock or other Farm Products (as defined in the Security Agreement), such Farm Products Inventory is not: (i) deemed to be diseased, out-of-condition and unmerchantable according to standards promulgated by the United States Department of Agriculture or any other federal, state or local governmental agency or any department or division thereof having regulatory authority over the Borrower or any of Borrower's assets or activities; (ii) except for Approved Contract Growers, in the possession of third parties not covered by negotiable warehouse receipts or negotiable ocean bills of lading issued by either (a) warehouseman licensed and bonded by the United States Department of Agriculture or (b) a recognized ocean carrier having an office in the United States and a financial condition reasonably acceptable to the Revolving Credit Lenders, which receipts or bills designate the Revolving Credit Lender directly or by endorsement as the only person to whom or to whose order the warehouseman or carrier is legally obligated to deliver such goods; and (h) If the Inventory is located with an Approved Contract Grower, no account payable owed by the Borrower to such Approved Contract Grower shall be past due for more than fifteen days. "Eligible Live Poultry Inventory" means that portion of Eligible Inventory consisting of live chickens and turkeys ready for sale or use in the ordinary course of the Borrower's business. "Eligible Processed Inventory" means that portion of Eligible Inventory consisting of finished chicken, turkey, and other meat products which are ready for sale in the ordinary course of the Borrower's business. "Eligible Packaging Supplies Inventory" means that portion of Eligible Inventory consisting of packaging supplies ready for use in the ordinary course of the Borrower's business. 16 "Employee Benefit Plan" means any employee benefit plan within the meaning of Section 3(3) of ERISA which (a) is maintained for employees of the Borrower or any ERISA Affiliate or (b) has at any time within the preceding six years been maintained for the employees of the Borrower or any current or former ERISA Affiliate. "Environmental Laws" means any and all federal, state and local laws, statutes, ordinances, rules, regulations, permits, licenses, approvals, interpretations and orders of courts or Governmental Authorities, relating to the protection of the environment, including, but not limited to, requirements pertaining to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation, handling, reporting, licensing, permitting, investigation or remediation of Hazardous Materials. Environmental Laws include, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601 et. seq.) , the Hazardous Material Transportation Act (49 U.S.C. Section 331 et. seq.) , the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et. seq.) , the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et. seq.) , the Clean Air Act (42 U.S.C. Section 7401 et. seq.) , the Toxic Substances Control Act (15 U.S.C. Section 2601 et. seq.), the Safe Drinking Water Act (42 U.S.C. Section 300, et. seq.), and the Environmental Protection Agency's regulations relating to underground storage tanks (40 C.F.R. Parts 280 and 281), and the rules and regulations promulgated under each of these statutes, each as amended or modified from time to time. "ERISA" means the Employee Retirement Income Security Act of 1974, and the rules and regulations thereunder, each as amended or modified from time to time. "ERISA Affiliate" means any Person who, together with the Borrower, is treated as a single employer within the meaning of Section 414 (b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA. "Eurodollar Reserve Percentage" means, for any day, the percentage (expressed as a decimal and rounded upwards, if necessary, to the next higher 1/100th of 1%) which is in effect for such day as prescribed by the Federal Reserve Board (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) in respect of Eurocurrency liabilities or any similar category of liabilities for a member bank of the Federal Reserve System in New York City. 17 "Event of Default" means any of the events specified in Section 11.1, provided that any requirement for passage of time, giving of notice, or any other condition, has been satisfied. "Extension Criteria" means that at the time of any request by the Borrower to extend the Non-Default Maturity Date of the Revolving Credit Loans in accordance with Section 2.1(b) of this Agreement and as of the Extension Date that: (i) there exists no Default or Event of Default under the Agreement; (ii) at all times prior to the Extension Date there has not occurred any Default or Event of Default which has not been cured or been waived in writing by the Agent, on behalf of the Revolving Credit Lenders during the applicable cure period, if any; (iii) the Borrower shall have simultaneously extended the maturity date of the Note Obligations as provided in the Note Agreement; and (iv) the Borrower shall have paid the Extension Fee. "Extensions of Credit" means, as to any Revolving Credit Lender at any time, an amount equal to the sum of: (a) the aggregate principal amount of all Revolving Loans made by such Revolving Credit Lender then outstanding; and (b) such Revolving Credit Lender's Commitment Percentage of the L/C Obligations then outstanding. "Extension Fee" means, in the event that the Borrower elects to exercise the Revolving Credit Extension Option, a fee payable to the Agent for the ratable benefit of the Revolving Credit Lenders on or prior to the Extension Date equal to one percent (1%) of the Aggregate Revolving Credit Commitment as of the Extension Date. "FDIC" means the Federal Deposit Insurance Corporation, or any successor thereto. "Federal Funds Rate" means, the rate per annum (rounded upwards, if necessary, to the next higher 1/100th of 1%) representing the daily effective federal funds rate as quoted by the Agent and confirmed in Federal Reserve Board Statistical Release H.15 (519) or any successor or substitute publication selected by the Agent. If, for any reason, such rate is not available, then "Federal Funds Rate" shall mean a daily rate which is determined, in the opinion of the Agent, to be the rate at which federal funds are being offered for sale in the national federal funds market at 9:00 a.m. (Charlotte time). Rates for weekends or holidays shall be the same as the rate for the most immediate preceding Business Day. "First Union" means First Union National Bank, a national banking association, and its successors. 18 "Fiscal Year" means the fiscal year of the Borrower and its Subsidiaries ending on the Saturday closest to June 30. For purposes of determining any fiscal quarter hereunder (a "Fiscal Quarter"): (a) the first fiscal quarter ("First Fiscal Quarter") of any Fiscal Year (the "Current Year") shall end thirteen (13) weeks after the end of the preceding Fiscal Year (the "Prior Year"); (b) the second fiscal quarter ("Second Fiscal Quarter") of the Current Year shall end twenty-six (26) weeks after the end of the Prior Year; (c) the third fiscal quarter ("Third Fiscal Quarter") of the Current Year shall end thirty-nine (39) weeks after the end of the Prior Year; and (d) the fourth fiscal quarter ("Fourth Fiscal Quarter") of the Current Year shall end on the last day of the Current Year. For purposes of determining any fiscal month-end hereunder (a "Fiscal Month"), any Fiscal Month shall end on the Saturday closest to the last day of such month. "GAAP" means generally accepted accounting principles, as recognized by the American Institute of Certified Public Accountants and the Financial Accounting Standards Board, consistently applied and maintained on a consistent basis for the Borrower and its Subsidiaries throughout the period indicated and consistent with the prior financial practice of the Borrower and its Subsidiaries. "Governmental Approvals" means all authorizations, consents, approvals, licenses and exemptions of, registrations and filings with, and reports to, all Governmental Authorities. "Governmental Authority" means any nation, province, state or political subdivision thereof, and any government or any Person exercising executive, legislative, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Hazardous Materials" means any substances or materials: (a) defined as hazardous substances in the Comprehensive Environmental Response Compensation Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. or in regulations issued thereunder; (b) defined as hazardous wastes in the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Section 6901, et seq. or in regulations issued thereunder; (c) defined as toxic substances in the Toxic Substances Control Act, 15 U.S.C. Section 2601, et seq., or in regulations issued thereunder; or (d) animal wastes. "Intercreditor Agreement" means that certain Collateral Agency and Intercreditor Agreement dated as of the Closing Date by and among the Revolving Credit Lenders and the other parties thereto. 19 "Interest Expense" means, with respect to the Borrower and its Subsidiaries for any period, the gross interest expense (including without limitation interest expense attributable to Capital Leases) of the Borrower and its Subsidiaries, all determined for such period on a Consolidated basis in accordance with GAAP. "Interest Period" shall have the meaning assigned thereto in Section 4.1(b). "Interest Rate Protection Agreements" means any interest rate or currency hedging agreement or arrangement approved by the Agent (such approval not to be unreasonably withheld) entered into by the Borrower and designed to protect against fluctuations in interest rates. "Inventory" shall have the meaning given to that term in the Uniform Commercial Code. "Issuing Lender" means First Union, in its capacity as issuer of any Letter of Credit, or any successor thereto. "Leased Real Property" shall mean real property owned by the Borrower and leased to one or more Persons as more fully set forth on Schedule 6.1(s). "Lenders" means the collective reference to the Revolving Credit Lenders, the Term Lenders, and the Note Lenders. "L/C Commitment" means Twenty Million Dollars ($20,000,000). "L/C Facility" means the letter of credit facility established pursuant to Article III hereof. "L/C Obligations" means at any time, an amount equal to the sum of: (a) the aggregate undrawn and unexpired amount of the then outstanding Letters of Credit; and (b) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to Section 3.5. "L/C Participants" means the collective reference to all the Revolving Credit Lenders other than the Issuing Lender. "Lending Office" means, with respect to any Revolving Credit Lender, the office of such Revolving Credit Lender maintaining such Revolving Credit Lender's Commitment Percentage of the Loans. "Letters of Credit" shall have the meaning assigned thereto in Section 3.1. 20 "Leverage Ratio" shall mean, as of the close of any Fiscal Quarter, Total Debt divided by the Borrower's Consolidated cumulative four quarter EBITDA ending with the close of such Fiscal Quarter. "LIBOR" means the rate for deposits in Dollars for a period equal to the Interest Period selected which appears on the Telerate Page 3750 at approximately 11:00 a.m. London time, two (2) Business Days prior to the commencement of the applicable Interest Period. If, for any reason, such rate is not available, then "LIBOR" shall mean the rate per annum at which, as determined by the Agent, Dollars in the amount of $3,000,000 are being offered to lending banks at approximately 11:00 a.m. London time, two (2) Business Days prior to the commencement of the applicable Interest Period for settlement in immediately available funds by lending banks in the London interbank market for a period equal to the Interest Period selected. "LIBOR Rate" means a rate per annum (rounded upwards, if necessary, to the next higher 1/l00th of l%) determined by the Agent pursuant to the following formula: LIBOR Rate = LIBOR --------------- 1.00 - Eurodollar Reserve Percentage "LIBOR Rate Loan" means any Loan bearing interest at a rate based upon the LIBOR Rate as provided in Section 4.1(a). "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capital Lease or other title retention agreement relating to such asset, other than an asset which the Borrower holds as the lessee under a lease which is not a Capital Lease. "Limited Grower Payable Liens" means any lien arising in favor of any Approved Contract Grower with respect to any inventory or other property owned by the Borrower under the Packers and Stockyards Act, Va. Code section 43-32, and/or other comparable state statutes, unless such liens arise in connection with accounts payable over 15 days past due and have an aggregate value in excess of $1,500,000. "Loan" means any Revolving Loan, the Term Loan, and all Revolving Loans and the Term Loan collectively as the context requires. 21 "Loan Documents" means, collectively, this Agreement, the Term Loan Agreement, the Notes, the Applications, the Security Documents, the Lockbox Agreement, the Warrant Agreement, the Intercreditor Agreement, any Derivative Agreement executed by any Revolving Credit Lender, and each other document, instrument and agreement executed and delivered by the Borrower, its Subsidiaries or their counsel in connection with this Agreement or otherwise referred to herein or contemplated hereby, all as may be amended or modified from time to time. "Lock Box Agreement" shall mean an agreement or agreements between the Borrower and any one or more of the Revolving Credit Lenders, as required under Section 2.8 of this Agreement, together with all amendments, modifications, exhibits and schedules thereto as may be in effect from time to time. "Material Adverse Effect" means, with respect to the Borrower, a material adverse effect on the properties, business, operations or condition (financial or otherwise) of the Borrower, taken as a whole, or the ability of the Borrower, taken as a whole, to perform its obligations under the Loan Documents or Material Contracts to which it is a party. "Material Contract" means: (a) any contract or other agreement, instrument, lease, or other evidence of understanding, written or oral, of the Borrower or any of its Subsidiaries involving monetary liability of or to any such Person in an amount per annum in excess of $2,000,000; or (b) any other contract or other agreement, instrument, lease, or other evidence of understanding, written or oral, of the Borrower or any of its Subsidiaries, the failure to comply with which could reasonably be expected to have a Material Adverse Effect. "Mortgages" mean, collectively, those Mortgages and Deeds of Trust executed and delivered to or for the benefit of the Lenders as of the Closing Date. "Multiemployer Plan", means a "multiemployer plan" as defined in Section 4001(a) (3) of ERISA to which the Borrower or any ERISA Affiliate is making, or is accruing an obligation to make, contributions within the preceding six years. "Net Income" means, with respect to the Borrower and its Subsidiaries for any period, the Consolidated net income (or loss) of the Borrower and its Subsidiaries for such period determined in accordance with GAAP; provided, that there shall be excluded from Consolidated net income (or loss): (a) the income (or loss) of any Person (other than a Subsidiary of the Borrower) in which the Borrower has an ownership interest unless received by the Borrower in a cash distribution; (b) the income (or loss) of any Person accrued prior to the date it became a Subsidiary of the Borrower or is merged into or 22 consolidated with the Borrower; and (c) extraordinary items. "Net Proceeds" means, with respect to any sale, lease, transfer or other disposition of assets by the Borrower or any of its Subsidiaries, or any issuance by the Borrower or any of its Subsidiaries of any capital stock or other debt or equity securities permitted hereunder, the aggregate amount of cash received for such assets or securities (including, without limitation, any payments received for non-competition covenants, consulting or management fees, and any portion of the amount received evidenced by a seller promissory note or other evidence of Debt), net of (i) amounts reserved, if any, for taxes payable with respect to any such sale (after application of any available losses, credits or other offsets), (ii) reasonable. and customary transaction costs properly attributable to such transaction and payable by the Borrower or any of its Subsidiaries (other than to an Affiliate) in connection with such sale, lease, transfer or other disposition of assets or issuance of any capital stock or other securities, including, without limitation, commissions and underwriting discounts, and (iii) until actually received by the Borrower or any of its Subsidiaries, any portion of the amount received held in escrow or evidenced by a seller promissory note or non-compete agreement or covenant for which compensation is paid over time. Upon receipt by the Borrower or any of its Subsidiaries of amounts referred to in item (iii) of the preceding sentence, such amounts shall then be deemed to be "Net Proceeds." "Net Revenue" means, with respect to the Borrower and its subsidiaries for any period, net revenue for such period determined on a Consolidated basis in accordance with GAAP. "1997 Agreement" means the Credit Agreement dated as of January 1, 1997, among WLR, as Borrower, Cassco and Wampler, as guarantors, the Revolving Credit Lenders and the Agent. "Non-Default Maturity Date" shall have the meaning set forth below in the definition of "Revolving Loan Termination Date." "Notes" means, collectively, the Revolving Credit Notes and the Term Notes. "Note Agreement" means that certain Note Purchase Agreement dated as of the date hereof by and between WLR and various note lenders thereunder. "Note Lenders" means, collectively, each Person executing the Note Agreement as a lender, together with the successors and assigns of each Note Lender. 23 "Notice of Borrowing" shall have the meaning assigned thereto in Section 2.2 (a). "Notice of Conversion/Continuation" shall have the meaning assigned thereto in Section 4.2. "Obligations" means, collectively, the Term Loan Obligations, the Revolving Credit Obligations. "Officer's Compliance Certificate" shall have the meaning assigned thereto in Section 7.2. "Other Taxes" shall have the meaning assigned thereto in Section 4.10 (b). "PBGC" means the Pension Benefit Guaranty Corporation or any successor agency. "Pension Plan" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of the Code and which: (a) is maintained for employees of the Borrower or any ERISA Affiliates; or (b) has at any time within the preceding six years been maintained for the employees of the Borrower or any of their current or former ERISA Affiliates. "Permitted Liens" shall mean those liens and encumbrances (other than those in favor of the Collateral Agent) permitted pursuant to Section 10.3. "Person" means an individual, corporation, partnership, association, trust, business trust, joint venture, joint stock company, pool, syndicate, sole proprietorship, unincorporated organization, Governmental Authority or other entity. "Pledge Agreements" means, collectively, the WLR Pledge Agreement and the Wampler Pledge Agreement. "Prime Rate" means, at any time, the rate of interest per annum publicly announced from time to time by the Agent as its prime rate. Each change in the Prime Rate shall be effective as of the opening of business on the day such change in the Prime Rate occurs. The parties hereto acknowledge that the rate announced publicly by the Agent as its Prime Rate is an index or base rate and shall not necessarily be its lowest or best rate charged to its customers or other banks. "Purchase Money Debt" means any Debt incurred by the Borrower in the ordinary course of business for the purpose of and actually used in acquiring any Capital Asset and such Debt is either (i) held by a seller of such Capital Asset to the Borrower to secure all or part of the purchase price thereof, or (ii) held by a Person who, by making 24 advances to, or incurring an obligation on behalf of, the Borrower gives value to the Borrower to enable the Borrower to acquire rights in or the use of such Capital Asset. "Ratable Share" shall have the meaning assigned thereto in the Intercreditor Agreement. "Register" shall have the meaning assigned thereto in Section 13.10(d). "Reimbursement Obligation" means the obligation of the Borrower to reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under Letters of Credit. "Required Revolving Credit Lenders" means, at any date, any combination of holders of at least seventy-five percent (75%) of the aggregate unpaid principal amount of the Revolving Credit Notes, or if no amounts are outstanding under the Revolving Credit Notes, any combination of Lenders whose Commitment Percentages aggregate at least seventy-five percent (75%). "Revolving Credit Extension Option" means the option of the Borrower as set forth in Section 2.1(b) hereof to extend the Non- Default Maturity Date for a one year period. "Revolving Credit Facility" means the revolving credit facility established pursuant to Article II hereof. "Revolving Credit Lender" means each Person executing this Agreement as a Revolving Credit Lender set forth on the signature pages hereto and each Person that hereafter becomes a party to this Agreement as a Revolving Credit Lender pursuant to Section 13.10. "Revolving Credit Notes" means the separate Revolving Credit Notes made by the Borrower payable to the order of each Revolving Credit Lender, substantially in the form of Exhibit "A" hereto, evidencing the Revolving Credit Facility, and any amendments and modifications thereto, any substitutes therefor, and any replacements, restatements, renewals or extension thereof, in whole or in part. "Revolving Credit Obligations" means, in each case, whether now in existence or hereafter arising: (a) the principal of and interest (including interest accruing after the filing of any bankruptcy or similar petition) on the Revolving Loans; (b) the L/C Obligations; (c) all payment and other obligations owing by the Borrower to any Revolving Credit Lender or the Agent under any Derivative Agreement as permitted pursuant to Section 10.3(h); and (d) all other fees and commissions (including attorney's fees), charges, indebtedness, loans, 25 liabilities, financial accommodations, obligations, covenants and duties owing by the Borrower to the Revolving Credit Lenders or the Agent, of every kind, nature and description, direct or indirect, absolute or contingent, due or to become due under the Loan Documents, except to the extent such Obligations arise solely under the Term Loan Agreement and the Term Notes. "Revolving Loan" means any Loan made to the Borrower pursuant to Section 2.1, and all such Loans collectively as the context requires. "Revolving Loan Termination Date" means the earlier of: (a) January 1, 2000, or, if the Borrower exercises the Revolving Credit Extension Option, January 1, 2001 (as the case may be, the "Non- Default Maturity Date"); (b) the date of the reduction of the Aggregate Revolving Credit Commitment to zero by the Borrower pursuant to Section 2.5(a); or (c) the date upon which any one or more Events of Default shall have occurred. "Security" means any funds, agreements, property, rights or interests of any nature whatsoever, guaranties of and any subordination and/or standby agreements related to the obligations which have been or hereafter are mortgaged, pledged, assigned, transferred, executed or delivered, directly or indirectly, to the Agent or any Lender as security for or guaranty of the payment or performance of any Obligation. "Security Agreement" means the Security Agreement by the Borrower in favor of the Collateral Agent for the benefit of the Lenders, as amended, restated, modified or otherwise supplemented. "Security Documents" means the collective reference to the Security Agreement, the Pledge Agreements, the Mortgages, the Trademark Assignment, the Valley Rail Assignment, the Intercreditor Agreement and each other agreement or writing, if any, pursuant to which the Borrower or any Subsidiary thereof pledges or grants a security interest, lien, mortgage, encumbrance or charge in any property or assets securing the Obligations. "Solvent" means, as to the Borrower and its Subsidiaries on a particular date, that any such Person (a) has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage and is able to pay its debts as they mature, (b) owns property having a value, both at fair valuation and at present fair saleable value, greater than the amount required to pay its probable liabilities (including contingencies), 26 and (c) does not reasonably believe that it will incur debts or liabilities beyond its ability to pay such debts or liabilities as they mature. "Subsidiary" means as to any Person, any corporation, partnership or other entity of which more than fifty percent (50%) of the outstanding capital stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or other managers of such corporation, partnership or other entity is at the time, directly or indirectly, owned by or the management is otherwise controlled by such Person (irrespective of whether, at the time, capital stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency). Unless otherwise qualified, references to "Subsidiary" or "Subsidiaries" herein shall refer to those of the Borrower. "Tangible Net Worth" means the Consolidated net worth of the Borrower and its Subsidiaries determined without taking into account goodwill, trademarks, trade names, copyrights, franchise rights and other assets of a similar nature (with the exception of loan closing or similar costs required to be capitalized). "Taxes" shall have the meaning assigned thereto in Section 4.10(a). "Term Lenders" means, collectively, each Person executing the Term Loan Agreement as a Term Lender. "Term Loan" means the term loan facility established pursuant to the Term Loan Agreement. "Term Loan Agreement" means the Term Loan Agreement dated as of the Closing Date by and among the Agent, the Term Lenders, and the Borrower. "Term Loan Notes" means the separate Notes made by the Borrower payable to the order of each Term Lender, substantially in the form of Exhibit "B" to the Term Loan Agreement, evidencing the Term Loan, and any amendments and modifications thereto, any substitutes therefor, and any replacements, restatements, renewals or extension thereof, in whole or in part. "Term Loan Obligations" means, in each case, whether now in existence or hereafter arising, the principal of and interest on the Term Loan and all other fees and commissions (including attorney's fees), charges, indebtedness, loans, liabilities, financial accommodations (including all payments and other obligations owing by the Borrower to any Term Lender or the Agent under any Derivative Agreement), obligations, covenants and duties owing by the Borrower to 27 the Term Lenders or the Agent, of every kind, nature and description, direct or indirect, absolute or contingent, due or to become due under the Loan Documents, except to the extent such Obligations arise solely under the Revolving Credit Agreement and the Revolving Credit Notes. "Termination Event" means: (a) a "Reportable Event" described in Section 4043 of ERISA; or (b) the withdrawal of the Borrower or any ERISA Affiliate from a defined benefit Pension Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA; or (c) the termination of a defined benefit Pension Plan, the filing of a notice of intent to terminate a defined benefit Pension Plan or the treatment of a defined benefit Pension Plan amendment as a termination under Section 4041 of ERISA; or (d) the institution of proceedings to terminate, or the appointment of a trustee with respect to, any Pension Plan by the PBGC; or (e) any other event or condition which would constitute grounds under Section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; or (f) the partial or complete withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer Plan; or (g) the imposition of a Lien pursuant to Section 412 of the Code or Section 302 of ERISA; or (h) any event or condition which results in the reorganization or insolvency of a Multiemployer Plan under Sections 4241 or 4245 of ERISA; or (i) any event or condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA. "Total Debt" means, with respect to the Borrower and its Subsidiaries at any date of determination and without duplication, all Debt of the Borrower and its Subsidiaries on a Consolidated basis. Total Debt shall not include any Debt under a Derivative Agreement. "Trademark Assignment" means the Assignment of Trademarks by the Borrower in favor of the Collateral Agent for the benefit of the Lenders, as amended, restated, modified, or otherwise supplemented. "Uniform Customs" means the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500. "UCC" means the Uniform Commercial Code as in effect in the State of New York. "United States" means the United States of America. 28 "Valley Rail Assignment" means that Assignment of Partnership Interest executed by Valley Rail in favor of the Collateral Agent for the ratable benefit of the Lenders. "Wampler Pledge Agreement" means the Pledge Agreement executed by Wampler, as pledgor, in favor of the Collateral Agent, for the ratable benefit of the Lenders, as amended, restated, modified, or otherwise supplemented. "Warrant Agreement" means collectively, the Warrant Holders Agreement and the Warrant each dated as of the Closing Date executed by WLR, in favor of the Collateral Agent for ratable benefit of the Lenders, as amended, restated, modified or otherwise supplemented. "Wholly-Owned" means, with respect to a Subsidiary, a Subsidiary all of the shares of capital stock or other ownership interests of which are, directly or indirectly, owned or controlled by the Borrower and/or one or more of its Wholly-Owned Subsidiaries. "WLR Pledge Agreement" means the Pledge Agreement executed by WLR, as Pledgor, in favor of the Collateral Agent for ratable benefit of the Lenders, as amended, restated, modified or otherwise supplemented. SECTION 1.2 General. All terms of an accounting nature not specifically defined herein shall have the meaning assigned thereto by GAAP. Unless otherwise specified, a reference in this Agreement to a particular section, subsection, Schedule or Exhibit is a reference to that section, subsection, Schedule or Exhibit of this Agreement. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter. Any reference herein to "Charlotte time" shall refer to the applicable time of day in Charlotte, North Carolina. SECTION 1.3 Other Definitions and Provisions. (a) Use of Capitalized Terms. Unless otherwise defined therein, all capitalized terms defined in this Agreement shall have the defined meanings when used in this Agreement, the Notes and the other Loan Documents or any certificate, report or other document made or delivered pursuant to this Agreement. (b) Miscellaneous. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. 29 ARTICLE II CREDIT FACILITY SECTION 2.1 Revolving Credit Loans. (a) General Provisions. Subject to the terms and conditions of this Agreement, each Lender severally agrees to make Revolving Loans to the Borrower from time to time from the Closing Date through the Revolving Loan Termination Date as requested by the Borrower in accordance with the terms of Section 2.2; provided that the aggregate principal amount of all outstanding Revolving Loans (after giving effect to any amount requested) shall not exceed the lesser of: (i) the Aggregate Revolving Credit Commitment less the L/C Obligations; or (ii) the Borrowing Base less the L/C Obligations; and provided further that the principal amount of outstanding Revolving Loans from any Revolving Credit Lender to the Borrower shall not at any time exceed such Revolving Credit Lender's Commitment less the L/C Obligations attributable to such Revolving Credit Lender. Each Revolving Loan by a Revolving Credit Lender shall be in a principal amount equal to such Revolving Credit Lender's Commitment Percentage of the aggregate principal amount of Revolving Loans requested on such occasion. Subject to the terms and conditions hereof, the Borrower may borrow, repay and reborrow Revolving Loans hereunder until the Revolving Loan Termination Date. (b) Extension Option. As of June 30, 1999 (the "Extension Date"), the Borrower may elect to extend the Non-Default Maturity date of the Revolving Credit Facility from January 1, 2000 to January 1, 2001 (the "Extension Option"); provided that on and at all times prior to the Extension Date, the Borrower is in compliance with the Extension Criteria. The Borrower shall provide the Revolving Credit Lenders with written notification of its intention to exercise the Extension Option prior to the Extension Date. SECTION 2.2 Procedure for Advances of Revolving Loans. (a) Requests for Borrowing. In order to obtain a Revolving Loan, the Borrower shall give the Agent irrevocable prior written notice in the form attached hereto as Exhibit "B" (a "Notice of Borrowing") not later than 11:00 a.m. (Charlotte time) (i) on the same Business Day as each Base Rate Loan, and (ii) at least three (3) Business Days before each LIBOR Rate Loan, of its intention to borrow, specifying: (A) the date of such borrowing, which shall be a Business Day; (B) the amount of such borrowing, which shall be (i) with respect to Base Rate Loans in an aggregate principal amount of $1,000,000 or a 30 whole multiple of $250,000 in excess thereof, and (ii) with respect to LIBOR Rate Loans in an aggregate principal amount of $3,000,000 or a whole multiple of $1,000,000 in excess thereof; (C) whether the Revolving Loans are to be LIBOR Rate Loans or Base Rate Loans; (D) in the case of a LIBOR Rate Loan, the duration of the Interest Period applicable thereto; and (E) a Borrowing Base Certificate in the form attached as Exhibit "C." Notices received after 11:00 a.m. (Charlotte time) shall be deemed received on the next Business Day. The Agent shall promptly notify the Revolving Credit Lenders of each Notice of Borrowing. (b) Disbursement of Revolving Loans. Not later than 2:00 p.m. (Charlotte time) on the proposed borrowing date for a Revolving Loan, each Revolving Credit Lender will make available to the Agent, for the account of the Borrower, at the office of the Agent in funds immediately available to the Agent, such Revolving Credit Lender's Commitment Percentage of the Revolving Loans to be made on such borrowing date. The Borrower hereby irrevocably authorizes the Agent to disburse the proceeds of each borrowing requested pursuant to this Section 2.2 in immediately available funds by crediting such proceeds to such deposit account of the Borrower maintained with the Agent, or by wire transfer to such other account, as may be specified in the most recent Account Designation Direction delivered by the Borrower to the Agent. Subject to Section 4.6 hereof, the Agent shall not be obligated to disburse the proceeds of any Revolving Loan requested pursuant to this Section 2.2 until each Revolving Credit Lender shall have made available to the Agent its Commitment Percentage of such Revolving Loan. SECTION 2.3 Repayment of Loans. (a) Repayment on Revolving Loan Termination Date. The Borrower shall repay the outstanding principal amount of all Revolving Loans in full, together with all accrued but unpaid interest thereon, on the Revolving Loan Termination Date. (b) Mandatory Repayment of Excess Revolving Loans. If at any time the outstanding principal amount of all Revolving Loans exceeds the lesser of (i) the Aggregate Revolving Credit Commitment less the L/C Obligations, or (ii) the Borrowing Base less the L/C Obligations, the Borrower shall repay immediately upon notice from the Agent, by payment to the Agent for the account of the Revolving Credit Lenders, the Revolving Loans in an amount equal to such excess. Each such repayment shall be accompanied by accrued interest on the amount repaid and any amount required to be paid pursuant to Section 4.8 hereof. (c) Optional Repayments. The Borrower may at any time and from time to time repay the Revolving Loans, in whole or in part, upon at least three (3) Business Days' irrevocable notice to the Agent with 31 respect to LIBOR Rate Loans and contemporaneous irrevocable notice with respect to Base Rate Loans, specifying the date and amount of repayment and whether the repayment is of LIBOR Rate Loans, Base Rate Loans, or a combination thereof, and, if of a combination thereof, the amount allocable to each and the amount of the repayment allocable to each LIBOR Rate Loan being repaid. Upon receipt of such notice, which shall be in the form attached hereto as Exhibit "D," the Agent shall promptly notify each Revolving Credit Lender. If any such notice is given, the amount specified in such notice shall be due and payable on the date set forth in such notice. Partial repayments shall be in an aggregate amount of $1,000,000 or a whole multiple of $250,000 in excess thereof with respect to Base Rate Loans, and $3,000,000 or a whole multiple of $1,000,000 in excess thereof with respect to any LIBOR Rate Loan. (d) Limitation on Repayment of LIBOR Rate Loans. The Borrower may not repay any LIBOR Rate Loan on any day other than on the last day of the Interest Period applicable thereto unless such repayment is accompanied by any amount required to be paid pursuant to Section 4.8 hereof. SECTION 2.4 Revolving Credit Notes. Each Revolving Credit Lender's Revolving Loans and the obligation of the Borrower to repay such Revolving Loans shall be evidenced by a Revolving Credit Note executed by the Borrower payable to the order of such Revolving Credit Lender representing the Borrower's obligation to pay such Revolving Credit Lender's Commitment or, if less, the aggregate unpaid principal amount of all Revolving Loans made and to be made by such Revolving Credit Lender to the Borrower hereunder, plus interest and all other fees, charges and other amounts due thereon. Each Revolving Credit Note shall be dated as of the date hereof and shall bear interest on the unpaid principal amount thereof at the applicable interest rate per annum specified in Section 4.1. SECTION 2.5 Permanent Reduction of the Aggregate Revolving Commitment. (a) The Borrower shall have the right at any time and from time to time, upon at least three (3) Business Days prior written notice to the Agent, to permanently reduce, in whole at any time or in part from time to time, without premium or penalty, the Aggregate Revolving Credit Commitment in an aggregate principal amount not less than $3,000,000 or any whole multiple of $3,000,000 in excess thereof. (b) Each permanent reduction permitted pursuant to this Section 2.5 shall be accompanied by a payment of principal sufficient to reduce the aggregate outstanding Extensions of Credit of the Revolving Credit Lenders after such reduction to the Aggregate Revolving Credit 32 Commitment as so reduced and by payment of accrued interest on the amount of such repaid principal. Any reduction of the Aggregate Revolving Credit Commitment to zero shall be accompanied by payment of all outstanding Obligations and furnishing of cash collateral satisfactory to the Agent for all L/C Obligations. Such cash collateral shall be applied in accordance with Section 11.2(b). If the reduction of the Aggregate Revolving Credit Commitment requires the repayment of any LIBOR Rate Loan, such reduction may be made only on the last day of the then current Interest Period applicable thereto unless such repayment is accompanied by any amount required to be paid pursuant to Section 4.8 hereof. SECTION 2.6 Termination of Credit Facility. The Credit Facility shall terminate on the earlier of (i) the Revolving Loan Termination Date; (ii) the date of termination, whether automatically or by the Agent on behalf of the Revolving Credit Lenders, pursuant to Section 11.2 (a); or (iii) on such prior date as the Borrower, by notice to the Agent, shall have repaid the Obligations in full. SECTION 2.7 Use of Proceeds. The Borrower shall, on the Closing Date, pay: (i) the amount of $50,000,000 less the face amount of all Existing 1997 Letters of Credit (as hereafter defined) to the Revolving Credit Lenders on account of Obligations as defined in the 1997 Agreement with the remaining principal balance under the 1997 Agreement becoming the Term Loan; and (ii) the balance, if any, due to First Union under the Time Loan Facility shall be paid and thereupon be terminated. The Borrower shall use the balance of proceeds under the Revolving Loans for working capital and general corporate requirements of the Borrower and its Subsidiaries, including the payment of certain fees and expenses incurred in connection with the transactions provided for herein and the payment of Debt. The Borrower shall not be required to pay any Revolving Credit Lender any amount pursuant to Section 4.8 of the 1997 Agreement by reason of the payment or prepayment of a LIBOR Rate Loan (as defined in the 1997 Agreement) on a date other than the last day of an Interest Period (as defined in the 1997 Agreement) so long as such payment or prepayment is made under the preceding sentence. SECTION 2.8 Lockbox/Cash Collateral Account. The Borrower shall establish a lockbox with one or more of the Revolving Credit Lenders for the receipt of all remittances from its account debtors, and shall immediately direct all of its account debtors to remit payments directly to such lockbox; and shall sign all agreements reasonably necessary to establish a lockbox and pay all reasonable charges of the Revolving Credit Lenders associated therewith. The Borrower shall not have any right of access to, or withdrawal from such lockbox or the cash collateral account described below. All 33 collections of Accounts or remittances representing proceeds of other Collateral received at any time by the Borrower shall be held in trust for the Agent and the Revolving Credit Lenders and shall be promptly delivered, in specie, to the Agent, for the benefit of the Revolving Credit Lenders. All collections delivered to any Revolving Credit Lender shall be deposited on the same Business Day as delivered to such Revolving Credit Lender, and thereafter promptly transferred by such Revolving Credit Lender to the Borrower's cash collateral account with the Agent. Provided no Event of Default shall have occurred under this Agreement, the Agent shall apply such collections to reduce the outstanding balance of the Revolving Loans on the Business Day when such collections are deemed to be treated as collected funds. The Agent is not, however, required to credit the Borrower's cash collateral account for the amount of any item of payment which is unsatisfactory to the Agent and the Agent may charge the Borrower's account for the amount of any payment which is returned to the Agent unpaid. SECTION 2.9 Division of Revolving Credit Loans. The Revolving Credit Lenders and the Borrower acknowledge and agree that the Aggregate Revolving Credit Commitment consists of two distinct Tranches including a principal commitment of $50,000,000 attributable to principal amounts advanced by the Revolving Credit Lenders under the 1997 Agreement (the "Tranche I Portion") and a principal commitment of $55,000,000 attributable to the new revolving credit provided by the Revolving Credit Lenders as of the Closing Date (the "Tranche II Portion"). Except as otherwise explicitly set forth in this Agreement, the Tranche I Portion and the Tranche II Portion will be treated as one and the same Aggregate Revolving Credit Commitment; provided however, that: (i) the aggregate of all Revolving Loans outstanding from time to time shall be deemed drawn first from the Tranche I Portion and drawn second from the Tranche II Portion only to the extent the Tranche I Portion is fully drawn; and (ii) ordinary course repayments and reductions received from time to time on account of the Revolving Loans shall be applied first to the Tranche II Portion and second to the Tranche I Portion. SECTION 2.10 Interim Borrowing Base Reporting Standard. Notwithstanding anything to the contrary contained in this Agreement, at any time prior to March 31, 1998, the Borrower may supply Borrowing Base information based upon previous month-end balances updated pursuant to a roll-forward calculation in form satisfactory to the Agent. 34 ARTICLE III LETTER OF CREDIT FACILITY SECTION 3.1 L/C Commitment. Subject to the terms and conditions hereof, the Issuing Lender, in reliance on the agreements of the other Revolving Credit Lenders set forth in Section 3.4(a), agrees to issue standby and commercial letters of credit ("Letters of Credit") for the account of the Borrower on any Business Day from the Closing Date through but not including the Revolving Loan Termination Date in such form as may be approved from time to time by the Issuing Lender; provided that the Issuing Lender shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the Available Commitment of any Revolving Credit Lender would be less than zero. Each Letter of Credit shall (A) be denominated in Dollars in a minimum amount of $1,000,000 for standby Letters of Credit and $25,000 for commercial Letters of Credit, (B) be a standby or commercial letter of credit issued to support obligations of the Borrower or any of its Subsidiaries, contingent or otherwise, incurred in the ordinary course of business, (C) expire on a date satisfactory to the Issuing Lender, which date shall be no later than the Non-Default Maturity Date and (D) be subject to the Uniform Customs and, to the extent not inconsistent therewith, the laws of the State of New York. The Issuing Lender shall not at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause the Issuing Lender or any L/C Participant to exceed any limits imposed by, any Applicable Law. References herein to "issue" and derivations thereof with respect to Letters of Credit shall also include extensions or modifications of any existing Letters of Credit, unless the context otherwise requires. SECTION 3.2 Procedure for Issuance of Letters of Credit. The Borrower may from time to time request that the Issuing Lender issue a Letter of Credit by delivering to the Issuing Lender an application therefor, in the form attached hereto as Exhibit "E," completed to the satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may request. Upon receipt of any Application, the Issuing Lender shall process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall, subject to Section 3.1 and Article V hereof, promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing Lender and the Borrower. The Issuing Lender shall furnish to the Borrower a copy of such Letter of Credit and furnish to each Revolving 35 Credit Lender a copy of such Letter of Credit and the amount of each Revolving Credit Lender's participation therein, all promptly following the issuance of such Letter of Credit. SECTION 3.3 Commissions and Other Charges. (a) With regard to standby Letters of Credit, the Borrower shall pay to the Agent, for the account of the Issuing Lender and the L/C Participants, a letter of credit commission with respect to each standby Letter of Credit in an amount equal to a rate per annum, as specified below, on the face amount of such standby Letter of Credit. Such standby Letter of Credit commission shall be payable quarterly in advance. In the case of commercial Letters of Credit, the Borrower shall pay to the Agent for the account of the Issuing Lender and the L/C Participants, a commercial Letter of Credit commission with respect to each commercial Letter of Credit in an amount equal to the rate specified below multiplied by the face amount of such commercial Letter of Credit. Such commercial Letter of Credit commission shall be payable in full upon negotiation. In each case, such rate shall be the Applicable Margin for Tranche I LIBOR Rate Loans as in effect from time to time. (b) In addition to the foregoing commission, the Borrower shall pay the Issuing Lender an issuance fee in accordance with the Issuing Lender's normal and customary practices, and such other customary ancillary fees as the Issuing Lender might charge with respect to each Letter of Credit, including cable fees and amendment fees. (c) The Agent shall, promptly following its receipt thereof, distribute to the Issuing Lender and the L/C Participants all commissions received by the Agent pursuant to subsection (a) in accordance with their respective Commitment Percentages. SECTION 3.4 L/C Participation. (a) The Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce the Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant's own account and right an undivided interest equal to such L/C Participant's Commitment Percentage in the Issuing Lender's obligations and rights under each Letter of Credit issued hereunder and the amount of each draft paid by the Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with the Issuing Lender that, if a draft is paid under any Letter of Credit for which the Issuing Lender is not reimbursed in 36 full by the Borrower in accordance with the terms of this Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at the Issuing Lender's address for notices specified herein an amount equal to such L/C Participant's Commitment Percentage of the amount of such draft, or any part thereof, which is not so reimbursed. (b) Upon becoming aware of any amount required to be paid by any L/C Participant to the Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion of any payment made by the Issuing Lender under any Letter of Credit, the Issuing Lender shall notify each L/C Participant of the amount and due date of such required payment and such L/C Participant shall pay to the Issuing Lender the amount specified on the applicable due date; provided that such L/C Participant shall not be required to make such payment earlier than four (4) hours after its receipt of such notification. If any such amount is paid to the Issuing Lender after the date such payment is due, such L/C Participant shall pay to the Issuing Lender on demand, in addition to such amount, the product of (i) such amount, times (ii) the daily average Federal Funds Rate as determined by the Agent during the period from and including the date such payment is due to the date on which such payment is immediately available to the Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. A certificate of the Issuing Lender with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error. With respect to payment to the Issuing Lender of the unreimbursed amounts described in this Section 3.4(b), if the L/C Participants receive notice that any such payment is due (A) prior to or at 1:00 p.m. (Charlotte time) on any Business Day, such payment shall be due that Business Day, and (B) after 1:00 p.m. (Charlotte time) on any Business Day, such payment shall be due on the following Business Day. (c) Whenever, at any time after the Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its Commitment Percentage of such payment in accordance with this Section 3.4, the Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise), or any payment of interest on account thereof, the Issuing Lender will distribute to such L/C Participant its pro rata share thereof; provided that in the event that any such payment received by the Issuing Lender shall be required to be returned by the Issuing Lender, such L/C Participant shall return to the Issuing Lender the portion thereof previously distributed by the Issuing Lender to it. SECTION 3.5 Reimbursement Obligation of the Borrower. The Borrower agrees to reimburse the Issuing Lender on each date on which 37 the Issuing Lender notifies the Borrower of the date and amount of a draft paid under any Letter of Credit for the amount of (a) such draft so paid and (b) any taxes, fees, charges or other costs or expenses incurred by the Issuing Lender in connection with such payment. Each such payment shall be made to the Issuing Lender at its address for notices specified herein in lawful money of the United States and in immediately available funds. Interest shall be payable on any and all amounts remaining unpaid by the Borrower under this Article III from the date such amounts become payable (whether at stated maturity, by acceleration or otherwise) until payment in full at the rate which would be payable on any outstanding Base Rate Loans which were then overdue. If the Borrower fails to timely reimburse the Issuing Lender on the date the Borrower receives the notice referred to in this Section 3.5, the Borrower shall be deemed to have timely given a Notice of Borrowing hereunder to the Agent requesting the Revolving Credit Lenders to make a Base Rate Loan on such date in an amount equal to the amount of such drawing and, subject to the satisfaction or waiver of the conditions precedent specified in Article V, the Revolving Credit Lenders shall make Base Rate Loans in such amount, the proceeds of which shall be applied to reimburse the Issuing Lender for the amount of the related drawing and costs and expenses. SECTION 3.6 Obligations Absolute. The Borrower's obligations under this Article III (including without limitation the Reimbursement Obligation) shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Borrower may have or have had against the Issuing Lender or any beneficiary of a Letter of Credit. The Borrower also agrees with the Issuing Lender that the Issuing Lender shall not be responsible for, and the Borrower's Reimbursement Obligation under Section 3.5 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. The Issuing Lender shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by the Issuing Lender's gross negligence or willful misconduct. The Borrower agrees that any action taken or omitted by the Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Customs and, to the extent not inconsistent therewith, the 38 UCC shall be binding on the Borrower and shall not result in any liability of the Issuing Lender to the Borrower. The responsibility of the Issuing Lender to the Borrower in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are in conformity with such Letter of Credit. SECTION 3.7 Effect of Application. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Article III, the provisions of this Article III shall apply. SECTION 3.8 Existing Letters of Credit. If, on the Closing Date, there are any letters of credit outstanding under the 1997 Agreement (as the case may be, the "Existing 1997 Letters of Credit"), such Existing 1997 Letters of Credit shall be deemed to be Letters of Credit outstanding under this Agreement within the limitations of the L/C Commitment set forth in this Agreement, provided that the fees payable with respect to any Existing 1997 Letter of Credit, until such time as such Existing 1997 Letter of Credit expires or is renewed, will be subject to the fee structure in effect on the Closing date under the 1997 Agreement. ARTICLE IV GENERAL REVOLVING LOAN PROVISIONS SECTION 4.1 Interest. (a) Interest Rate Options. Subject to the provisions of this Section 4.1, at the election of the Borrower, the aggregate principal balance of the Revolving Credit Notes or any portion thereof shall earn interest at the Base Rate or the LIBOR Rate plus, in each case, the Applicable Margin as set forth below. The Borrower shall select the rate of interest and Interest Period, if any, applicable to any Revolving Loan at the time a Notice of Borrowing is given pursuant to Section 2.2 or at the time a Notice of Conversion/Continuation is given pursuant to Section 4.2. Each Revolving Loan or portion thereof bearing interest based on the Base Rate shall be a "Base Rate Loan," and each Revolving Loan or portion thereof bearing interest based on the LIBOR Rate shall be a "LIBOR Rate Loan." Any Revolving Loan or any portion thereof as to which the Borrower has not duly specified an interest rate as provided herein shall be deemed a Base Rate Loan. Notwithstanding anything to the contrary contained in this Agreement 39 or in any of the other Loan Documents, except for LIBOR Rate Loans in effect as of the Closing Date, the Borrower may not elect the LIBOR Rate for any Tranche I Revolving Loan hereunder unless and until the Borrower shall have delivered its quarterly Financial Statements as of September 26, 1998 to the Agent demonstrating that the Borrower is in full compliance with the Loan Documents. (b) Interest Periods. In connection with each LIBOR Rate Loan, the Borrower, by giving notice at the times described in Section 4.1(a), shall elect an interest period (each, an "Interest Period") to be applicable to such Revolving Loan, which Interest Period shall be a period of one (1), two (2) or three (3) months with respect to each LIBOR Rate Loan; provided that: (i) the Interest Period shall commence on the date of advance of or conversion to any LIBOR Rate Loan and, in the case of immediately successive Interest Periods, each successive Interest Period shall commence on the date on which the next preceding Interest Period expires; (ii) if any Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided that if any Interest Period with respect to a LIBOR Rate Loan would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iii) any Interest Period with respect to a LIBOR Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the relevant calendar month at the end of such Interest Period; (iv) no Interest Period shall extend beyond the Revolving Loan Termination Date; (v) there shall be no more than six (6) Interest Periods outstanding at any time; provided, that if the Borrower is in compliance with and permitted to choose the LIBOR Rate for new Revolving Loans under Section 4.1(a), there shall be no more than ten (10) Interest Periods outstanding at any time; and (vi) for any LIBOR Rate Loan made on or within five Business Days after the Closing Date, the Interest Period may be a period of (A) not less than 15 days or more than 40 days or (B) one, two or three months. (c) Applicable Margin. 40 Subject in every way to the restriction on availability of Tranche I LIBOR Rate Loans in Section 4.1(a), the Applicable Margin provided for in Section 4.1 with respect to the Revolving Loans (the "Applicable Margin") shall be as follows: (i) Tranche I Applicable Margin. With respect to the Tranche I Portion of the Revolving Credit Obligations: (A) as of and at all times following the Closing Date unless modified pursuant to subparagraph (B) hereof: Base Rate Loans: two and one-fourths percent (2 1/4%) LIBOR Rate Loans: three and one-half percent (3 1/2%) (B) for each Fiscal Quarter thereafter beginning with the First Fiscal Quarter of 1999, determined by reference to the Leverage Ratio and the Coverage Ratio as of the end of the Fiscal Quarter immediately preceding the delivery of the Applicable Officer's compliance certificate, in accordance with the following pricing matrix: Leverage Ratio Coverage Ratio Base Rate + LIBOR Rate + greater than or less than or 2.25% 3.50% equal to 5.0 to equal to 2.25 to 1.00 1.00 less than 5.00 greater than 2.25 1.50% 2.50% to 1.00 but equal to 1.00 but less to or greater than than or equal to 4.00 to 1.00 3.00 to 1.00 less than 4.0 to greater than 3.00 0.75% 1.75% 1.00 to 1.00 Adjustments, if any, in the Applicable Margin shall be made by the Agent on the tenth (10th) Business Day after receipt by the Agent of quarterly financial statements for the Borrower and the accompanying Officer's Compliance Certificate setting forth the Leverage Ratio and Coverage Ratio of the Borrower as of the most recent Fiscal Quarter end. Subject to Section 4.1(d), in the event the Borrower fails to deliver 41 such financial statements and certificate within the time required by Section 7.1(a) hereof, the Applicable Margin shall be the highest Applicable Margin set forth above until the delivery of such financial statements and certificate. (ii) Tranche II Applicable Margin. With respect to the Tranche II Portion of the Revolving Credit Obligations at all times: Base Rate Loans: one and three- fourths percent (1 3/4%) LIBOR Rate Loans: three percent (3%) (d) Default Rate. Upon the occurrence and during the continuance of an Event of Default, (i) the Borrower shall no longer have the option to request LIBOR Rate Loans, (ii) all outstanding LIBOR Rate Loans shall bear interest at a rate per annum two percent (2%) in excess of the rate then applicable to LIBOR Rate Loans until the end of the applicable Interest Period and thereafter at a rate equal to two percent (2.0%) in excess of the rate then applicable to Base Rate Loans, and (iii) all outstanding Base Rate Loans shall bear interest at a rate per annum equal to two percent (2.0%) in excess of the rate then applicable to Base Rate Loans. Interest shall continue to accrue on the Revolving Credit Notes after the filing by or against the Borrower of any petition seeking any relief in bankruptcy or under any act or law pertaining to insolvency or debtor relief, whether state, federal or foreign. (e) Interest Payment and Computation. Interest on each Base Rate Loan shall be payable in arrears on the last Business Day of each calendar quarter commencing on the last Business Day of the calendar quarter in which the Closing Date occurs. Interest on each LIBOR Rate Loan shall be payable on the last day of each Interest Period applicable thereto. All interest, fees and commissions provided hereunder shall be computed (i) in the case of a LIBOR Rate Loan, on the basis of a 360-day year and the actual number of days elapsed, and (ii) in the case of a Base Rate Loan, on the basis of a 365/366-day year and the actual number of days elapsed. (f) Maximum Rate. In no contingency or event whatsoever shall the aggregate of all amounts deemed interest hereunder or under any of the Revolving Credit Notes charged or collected pursuant to the terms of this Agreement or pursuant to any of the Revolving Credit Notes exceed the highest rate permissible under any Applicable Law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that the Revolving Credit Lenders have charged or received interest hereunder 42 in excess of the highest applicable rate, the rate in effect hereunder shall automatically be reduced to the maximum rate permitted by Applicable Law and the Revolving Credit Lenders shall at the Agent's option promptly refund to the Borrower any interest received by Revolving Credit Lenders in excess of the maximum lawful rate or shall apply such excess to the principal balance of the Obligations. It is the intent hereof that the Borrower not pay or contract to pay, and that neither the Agent nor any Revolving Credit Lender receive or contract to receive, directly or indirectly in any manner whatsoever, interest in excess of that which may be paid by the Borrower under Applicable Law. SECTION 4.2 Notice and Manner of Conversion or Continuation of Revolving Loans. Provided that no Event of Default has occurred and is then continuing, the Borrower shall have the option to (a) convert at any time all or any portion of its outstanding Base Rate Loans in a principal amount equal to $3,000,000 or any whole multiple of $1,000,000 in excess thereof into one or more LIBOR Rate Loans, or (b) upon the expiration of any Interest Period, (i) convert all or any part of its outstanding LIBOR Rate Loans in a principal amount equal to $3,000,000 or a whole multiple of $1,000,000 in excess thereof into Base Rate Loans, or (ii) continue such LIBOR Rate Loans as LIBOR Rate Loans. Whenever the Borrower desires to convert or continue Revolving Loans as provided above, the Borrower shall give the Agent irrevocable prior written notice in the form attached as Exhibit "F" (a "Notice of Conversion/Continuation") not later than 11:00 a.m. (Charlotte time) three (3) Business Days before the day on which a proposed conversion or continuation of such Revolving Loan is to be effective specifying (i) the Revolving Loans to be converted or continued, and, in the case of any LIBOR Rate Loan resulting from a conversion or to be continued, the last day of the Interest Period therefor, (ii) the effective date of such conversion or continuation (which shall be a Business Day), and (iii) the principal amount of such Revolving Loans to be converted or continued. The Agent shall promptly notify the Revolving Credit Lenders of such Notice of Conversion/Continuation. SECTION 4.3 Facility, Commitment and Agency Fees. (a) Facility Fee. Commencing on the Closing Date, the Borrower shall pay to the Agent, for the account of the Revolving Credit Lenders, a nonrefundable facility fee at a rate per annum equal to the average daily Facility Fee Rate (as defined in Section 4.3(d)), as in effect during the applicable calendar quarter (or portion thereof ending on the Revolving Loan Termination Date) referred to in the following sentence, on the average unused daily amount of the Aggregate Revolving Credit Commitment. The facility fee shall be payable in arrears on the last Business Day of each calendar quarter 43 during the term of this Agreement commencing on the last Business Day of the calendar quarter in which the Closing Date occurs, and on the Revolving Loan Termination Date. Such facility fee shall be distributed by the Agent to the Revolving Credit Lenders pro rata in accordance with the Revolving Credit Lenders, respective Commitment Percentages. (b) Amendment Fee. In order to compensate the Agent and the Revolving Credit Lenders for restructuring and syndicating the Revolving Loans and for its obligations hereunder, the Borrower agrees to pay to the Agent, for the account of the Revolving Credit Lenders, a non-refundable amendment fee (the "Amendment Fee") in an amount equal to one percent (1%) of each Revolving Credit Lender's Revolving Credit Commitment in full on the Closing Date. (c) Agent's and Other Fees. The Borrower shall pay to the Agent, for its account, the fees set forth in the separate fee letter agreement executed by the Borrower and the Agent pertaining to the Loan Documents. (d) Facility Fee Rate. The Facility Fee Rate to be used in calculating the facility fee provided for in Section 4.3(a) (the "Facility Fee Rate") shall be one-half of one percent (1/2%). SECTION 4.4 Manner of Payment. Each payment (including repayments described in Article II) by the Borrower on account of the principal of or interest on the Revolving Loans or of any fee, commission or other amounts (including the Reimbursement Obligation) payable to the Revolving Credit Lenders under this Agreement or any Revolving Credit Note shall be made not later than 1:00 p.m. (Charlotte time) on the date specified for payment under this Agreement to the Agent for the account of the Revolving Credit Lenders pro rata in accordance with their respective Commitment Percentages (except as otherwise explicitly provided herein with respect to fees) at the Agent's Office, in Dollars, in immediately available funds and shall be made without any set-off, counterclaim or deduction whatsoever. Any payment received after such time but before 2:00 p.m. (Charlotte time) on such day shall be deemed a payment on such date for the purposes of Section 11.1, but for all other purposes shall be deemed to have been made on the next succeeding Business Day. Any payment received after 2:00 p.m. (Charlotte time) shall be deemed to have been made on the next succeeding Business Day for all purposes. Upon receipt by the Agent of each such payment, the Agent shall credit each Revolving Credit Lender's account with its pro rata share of such payment in accordance with such Revolving Credit Lender's Commitment Percentage (except as otherwise explicitly provided herein with 44 respect to fees) and shall wire advice of the amount of such credit to each Revolving Credit Lender. Each payment to the Agent of the Issuing Lender's fees or L/C Participants' commissions shall be made in like manner, but for the account of the Issuing Lender or the L/C Participants, as the case may be. Subject to Section 4.1(b) (ii), if any payment under this Agreement or any Revolving Credit Note shall be specified to be made upon a day which is not a Business Day, it shall be made on the next succeeding day which is a Business Day and such extension of time shall in such case be included in computing any interest if payable along with such payment. SECTION 4.5 Crediting of Payments and Proceeds. In the event that the Borrower shall fail to pay any of the obligations when due and the Obligations have been accelerated pursuant to Section 11.2, all payments received by the Revolving Credit Lenders upon the Revolving Credit Notes and the other Obligations and all net proceeds from the enforcement of the obligations shall be applied first to all expenses then due and payable by the Borrower hereunder, then to all indemnity obligations then due and payable by the Borrower hereunder, then to all Agent's and Issuing Lender's fees then due and payable, then to all commitment and other fees and commissions then due and payable, then to accrued and unpaid interest on the Revolving Credit Notes, the Reimbursement Obligation and any termination payments due in respect of a Derivative Agreement with any Revolving Credit Lender pro rata in accordance with all such amounts due, then to the principal amount of the Revolving Credit Notes and Reimbursement Obligation and then to the cash collateral account described in Section 11.2(b) hereof to the extent of any L/C Obligations then outstanding, in that order. SECTION 4.6 Nature of Obligations of Revolving Credit Lenders Regarding Extensions of Credit; Assumption by the Agent. The obligations of the Revolving Credit Lenders under this Agreement to make the Revolving Loans and issue or participate in Letters of Credit are several and are not joint or joint and several. Unless the Agent shall have received notice from a Revolving Credit Lender prior to a proposed borrowing date with respect to a Revolving Loan that such Revolving Credit Lender will not make available to the Agent such Revolving Credit Lender's ratable portion of the amount to be borrowed on such date (which notice shall not release such Revolving Credit Lender of its obligations hereunder), the Agent may assume that such Revolving Credit Lender has made such portion available to the Agent on the proposed borrowing date in accordance with Section 2.2(b) and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If such amount is made available to the Agent on a date after such borrowing date, such Revolving Credit Lender shall pay to the Agent on demand an amount, 45 until paid, equal to the product of (a) the amount of such Revolving Credit Lender's Commitment Percentage of such borrowing, times (b) the daily average Federal Funds Rate during such period as determined by the Agent, times (c) a fraction the numerator of which is the number of days that elapse from and including such borrowing date to the date on which such Revolving Credit Lender's Commitment Percentage of such borrowing shall have become immediately available to the Agent and the denominator of which is 360. A certificate of the Agent with respect to any amounts owing under this Section shall be conclusive, absent manifest error. If such Revolving Credit Lender's Commitment Percentage of such borrowing is not made available to the Agent by such Revolving Credit Lender within three (3) Business Days of such borrowing date, the Agent shall be entitled to recover such amount made available by the Agent with interest thereon at the rate per annum applicable to Base Rate Loans hereunder, on demand, from the Borrower. The failure of any Revolving Credit Lender to make its Commitment Percentage of any Revolving Loan available shall not relieve it or any other Revolving Credit Lender of its obligation, if any, hereunder to make its Commitment Percentage of such Revolving Loan available on such borrowing date, but no Revolving Credit Lender shall be responsible for the failure of any other Revolving Credit Lender to, make its Commitment Percentage of such Revolving Loan available on the borrowing date. SECTION 4.7 Changed Circumstances. (a) Circumstances Affecting LIBOR Rate Availability. If with respect to any Interest Period the Agent or any Revolving Credit Lender (after consultation with Agent) shall determine that, by reason of circumstances affecting the foreign exchange and interbank markets generally, deposits in Eurodollars, in the applicable amounts, are not being quoted via Telerate Page 3750 or offered to the Agent or such Revolving Credit Lender for such Interest Period, then the Agent shall forthwith give notice thereof to the Borrower. Thereafter, until the Agent notifies the Borrower that such circumstances no longer exist, the obligation of the Revolving Credit Lenders to make LIBOR Rate Loans, and the right of the Borrower to convert any Revolving Loan to or continue any Revolving Loan as a LIBOR Rate Loan shall be suspended, and the Borrower shall repay in full (or cause to be repaid in full) the then outstanding principal amount of each such LIBOR Rate Loans together with accrued interest thereon, on the last day of the then current Interest Period applicable to such LIBOR Rate Loan or convert the then outstanding principal amount of each such LIBOR Rate Loan to a Base Rate Loan as of the last day of such Interest Period. (b) Laws Affecting LIBOR Rate Availability. If, after the date hereof, the introduction of, or any change in, any Applicable Law or any change in the interpretation or administration thereof by any 46 Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any of the Revolving Credit Lenders (or any of their respective Lending Offices) with any request or directive (whether or not having the force of law) of any such Authority, central bank or comparable agency, shall make it unlawful or impossible for any of the Revolving Credit Lenders (or any of their respective Lending Offices) to honor its obligations hereunder to make or maintain any LIBOR Rate Loan, such Revolving Credit Lender shall promptly give notice thereof to the Agent and the Agent shall promptly give notice to the Borrower and the other Revolving Credit Lenders. Thereafter, until the Agent notifies the Borrower that such circumstances no longer exist, (i) the obligations of the Revolving Credit Lenders to make LIBOR Rate Loans and the right of the Borrower to convert any Revolving Loan or continue any Revolving Loan as a LIBOR Rate Loan shall be suspended and thereafter the Borrower may select only Base Rate Loans hereunder, and (ii) if any of the Revolving Credit Lenders may not lawfully continue to maintain a LIBOR Rate Loan to the end of the then current Interest Period applicable thereto as a LIBOR Rate Loan, the applicable LIBOR Rate Loan shall immediately be converted to a Base Rate Loan for the remainder of such Interest Period. (c) Increased Costs. If, after the date hereof, the introduction of, or any change in, any Applicable Law, or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any of the Revolving Credit Lenders (or any of their respective Lending offices) with any request or directive (whether or not having the force of law) of such Authority, central bank or comparable agency: (i) shall subject any of the Revolving Credit Lenders (or any of their respective Lending Offices) to any tax, duty or other charge with respect to any Revolving Credit Note, Letter of Credit or Application or shall change the basis of taxation of payments to any of the Revolving Credit Lenders (or any of their respective Lending Offices) of the principal of or interest on any Revolving Credit Note, Letter of Credit or Application or any other amounts due under this Agreement in respect thereof (except for changes in the rate of tax on the overall net income of any of the Revolving Credit Lenders or any of their respective Lending Offices imposed by the jurisdiction in which such Revolving Credit Lender is organized or is or should be qualified to do business or such Lending Office is located); or (ii) shall impose, modify or deem applicable any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit, insurance or capital 47 or similar requirement against assets of, deposit with or for the account of, or credit extended by any of the Revolving Credit Lenders (or any of their respective Lending Offices) or shall impose on any of the Revolving Credit Lenders (or any of their respective Lending Offices) or the foreign exchange and interbank markets any other condition affecting any Revolving Credit Note; and the result of any of the foregoing is to increase the costs to any of the Revolving Credit Lenders of maintaining any LIBOR Rate Loan or issuing or participating in Letters of Credit or to reduce the yield or amount of any sum received or receivable by any of the Revolving Credit Lenders under this Agreement or under the Revolving Credit Notes in respect of a LIBOR Rate Loan or Letter of Credit or Application, then such Revolving Credit Lender shall promptly notify the Agent, and the Agent shall promptly notify the Borrower of such fact and demand compensation therefor and, within fifteen (15) days after such notice by the Agent, the Borrower shall pay to such Revolving Credit Lender such additional amount or amounts as will compensate such Revolving Credit Lender for such increased cost or reduction. The Agent will promptly notify the Borrower of any event of which it has knowledge which will entitle such Revolving Credit Lender to compensation pursuant to this Section 4.7(c); provided that the Agent shall incur no liability whatsoever to the Revolving Credit Lenders or the Borrower in the event it fails to do so. The amount of such compensation shall be determined, in the applicable Revolving Credit Lender's sole discretion, based upon the assumption that such Revolving Credit Lender funded its Commitment Percentage of the LIBOR Rate Loans in the London interbank market, and using any reasonable attribution or averaging methods which such Revolving Credit Lender deems appropriate and practical. A certificate of such Revolving Credit Lender setting forth the basis for determining such amount or amounts necessary to compensate such Revolving Credit Lender shall be forwarded to the Borrower through the Agent and shall be conclusively presumed to be correct save for manifest error. SECTION 4.8 Indemnity. The Borrower hereby indemnifies each of the Revolving Credit Lenders against any loss or expense which may arise or be attributable to each Revolving Credit Lender's obtaining, liquidating or employing deposits or other funds acquired to effect, fund or maintain any Revolving Loan (a) as a consequence of any failure by the Borrower to make any payment when due of any amount due hereunder in connection with a LIBOR Rate Loan, (b) due to any failure of the Borrower to borrow on a date specified therefor in a Notice of Borrowing or Notice of Conversion/Continuation or (c) due to any payment, prepayment or conversion of any LIBOR Rate Loan on a date other than the last day of the Interest Period therefor. The amount 48 of such loss or expense shall be determined, in the applicable Revolving Credit Lender's sole discretion, based upon the assumption that such Revolving Credit Lender funded its Commitment Percentage of the LIBOR Rate Loans in the London interbank market, and using any reasonable attribution or averaging methods which such Revolving Credit Lender deems appropriate and practical. A certificate of such Revolving Credit Lender setting forth the basis for determining such amount or amounts necessary to compensate such Revolving Credit Lender shall be forwarded to the Borrower through the Agent and shall be conclusively presumed to be correct save for manifest error. SECTION 4.9 Capital Requirements. If either (a) the introduction of, or any change in, or in the interpretation of, any Applicable Law or (b) compliance with any guideline or request from any central bank or comparable agency or other Governmental Authority (whether or not having the force of law), has or would have the effect of reducing the rate of return on the capital of, or has affected or would affect the amount of capital required to be maintained by, any Revolving Credit Lender or any corporation controlling such Revolving Credit Lender as a consequence of, or with reference to the Commitments and other commitments of this type, below the rate which the Revolving Credit Lender or such other corporation could have achieved but for such introduction, change or compliance, then within fifteen (15) Business Days after written demand by any such Revolving Credit Lender, the Borrower shall pay to such Revolving Credit Lender from time to time as specified by such Revolving Credit Lender additional amounts sufficient to compensate such Revolving Credit Lender or other corporation for such reduction. A certificate as to such amounts submitted to the Borrower and the Agent by such Revolving Credit Lender, shall, in the absence of manifest error, be presumed to be correct and binding for all purposes. SECTION 4.10 Taxes. (a) Payments Free and Clear. Any and all payments by the Borrower hereunder or under the Revolving Credit Notes or the Letters of Credit shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholding, and all liabilities with respect thereto excluding, (i) in the case of each Revolving Credit Lender and the Agent, income and franchise taxes imposed by the jurisdiction under the laws of which such Revolving Credit Lender or the Agent (as the case may be) is organized or is or should be qualified to do business or any political subdivision thereof and (ii) in the case of each Revolving Credit Lender, income and franchise taxes imposed by the 49 jurisdiction of such Revolving Credit Lender's Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Revolving Credit Note or Letter of Credit to any Revolving Credit Lender or the Agent, (A) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 4.10) such Revolving Credit Lender or the Agent (as the case may be) receives an amount equal to the amount such party would have received had no such deductions been made, (B) the Borrower shall make such deductions, (C) the Borrower shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with Applicable Law, and (D) the Borrower shall deliver to the Agent evidence of such payment to the relevant taxing authority or other authority in the manner provided in Section 4.10(d). (b) Stamp and Other Taxes. In addition, the Borrower shall pay any present or future stamp, registration, recordation or documentary taxes or any other similar fees or charges or excise or property taxes, levies of the United States or any state or political subdivision thereof or any applicable foreign jurisdiction which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, the Revolving Loans, the Letters of Credit, the other Loan Documents, or the perfection of any rights or security interest in respect thereto (hereinafter referred to as "Other Taxes"). (c) Indemnity. The Borrower shall indemnify each Revolving Credit Lender and the Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 4.10) paid by such Revolving Credit Lender or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Such indemnification shall be made within thirty (30) days from the date such Revolving Credit Lender or the Agent (as the case may be) makes written demand therefor. (d) Evidence of Payment. Within thirty (30) days after the date of any payment of Taxes or Other Taxes, the Borrower shall furnish to the Agent, at its address referred to in Section 13.1, the original or a certified copy of a receipt evidencing payment thereof or other evidence of payment satisfactory to the Agent. 50 (e) Delivery of Tax Forms. Each Revolving Credit Lender organized under the laws of a jurisdiction other than the United States or any state thereof shall deliver to the Borrower, with a copy to the Agent, on the Closing Date or concurrently with the delivery of the relevant Assignment and Acceptance, as applicable, (i) two United States Internal Revenue Service Forms 4224 or Forms 1001, as applicable (or successor forms) properly completed and certifying in each case that such Revolving Credit Lender is entitled to a complete exemption from withholding or deduction for or on account of any United States federal income taxes, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the case may be, to establish an exemption from United States backup withholding taxes. Each such Revolving Credit Lender further agrees to deliver to the Borrower, with a copy to the Agent, a Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms or manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower, certifying in the case of a Form 1001 or 4224 that such Revolving Credit Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes (unless in any such case an event (including without limitation any change in treaty law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders such forms inapplicable or the exemption to which such forms relate unavailable and such Revolving Credit Lender notifies the Borrower and the Agent that it is not entitled to receive payments without deduction or withholding of United States federal income taxes) and, in the case of a Form W-8 or W-9, establishing an exemption from United States backup withholding tax. (f) Survival. Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 4.10 shall survive the payment in full of the Obligations and the termination of the Commitments. SECTION 4.11 Mandatory Prepayments. (a) Asset Sales. Within two (2) Business Days after the consummation by the Borrower or any Subsidiary of any Asset Sale, the Borrower shall apply ninety percent (90%) of the Net Proceeds realized from such Asset Sale to permanently reduce the Term Loan Obligations, the Note Obligations, and the Revolving Credit Obligations by forwarding such Net Proceeds (the "Asset Sale Net Proceeds") to the Agent and the Note Lenders in the respective percentages as set forth in Section 7(e) of the Intercreditor Agreement; provided that if no Event of Default has occurred under this Agreement as of the date such 51 Net Proceeds are made available, the Borrower may apply the first twelve million dollars ($12,000,000) in Net Proceeds generated from Asset Sales, reduced by the Net Proceeds applied from Miscellaneous Asset Sales, to either: (i) its bona fide costs and expenses actually incurred in connection with the conversion of its Marshville Facility (collectively, "Marshville Conversion Expenses"); or (ii) if at any time on or before November 30, 1998, no such expenses have been incurred or are outstanding and no Event of Default has occurred, then to the projected Marshville Conversion Expenses pursuant to the financial projections supplied to the Agent by the Borrower on February 4, 1998, provided that if on November 30, 1998, any funds are held in reserve pursuant to this subsection (ii) such funds will be released to the Agent and the Note Lenders for distribution in accordance with the Intercreditor Agreement. The Borrower shall provide to the Agent an accounting of the Marshville Conversion Expenses at the time of such application certified as true and correct by the Chief Financial Officer of the Borrower. (b) New Equity. Within two (2) Business Days after the consummation of any issuance by the Borrower or any of its Subsidiaries of any capital stock or other equity securities (as the case may be, a "New Equity Issue"), the Borrower shall apply an amount equal to fifty percent (50%) of the Net Proceeds of such New Equity Issue to permanently reduce the Term Loan Obligations, the Note Obligations, and the Revolving Credit Obligations by forwarding such Net Proceeds (the "New Equity Net Proceeds") to the Agent and the Note Lenders in the respective percentages as set forth in Section 7 (e) of the Intercreditor Agreement, provided that the Borrower's existing stock incentive programs, as more fully described in Schedule 4.11(b) hereof, to the extent limited to aggregate equity values of $2,000,000 or less on an annual basis, shall not constitute a New Equity Issue for purposes hereof. (c) New Subordinated Debt. Within two (2) Business Days after the consummation of any transaction pursuant to which the Borrower or any subsidiary obtains unsecured Debt subordinated to the prior payment and performance of the Borrower's Obligations to the Revolving Credit Lenders, the Term Lenders, and the Note Lenders and on terms satisfactory to the Agent (as the case may be, an "Approved Subordinated Debt Transaction"), the Borrower shall apply an amount equal to one hundred percent (100%) of the Net Proceeds of such Approved Subordinated Debt Transaction to permanently reduce the Term Loan Obligations, the Revolving Credit Obligations, and the Note Obligations by forwarding such Net Proceeds (the "Subordinated Debt Net Proceeds") to the Agent and the Note Lenders in the respective percentages as set forth in Section 7 (e) of the Intercreditor Agreement. 52 SECTION 4.12 Approved Miscellaneous Asset Sales. From and after the Closing Date, the Borrower may, without the prior consent of the Agent or any Revolving Credit Lender, consummate any Approved Miscellaneous Asset Sale, provided that the full amount of all Approved Miscellaneous Asset Sales shall be applied to reduce dollar for dollar the $12,000,000 allowance for the Marshville Conversion Expenses and further provided that if on the date any Net Proceeds from Miscellaneous Asset Sales are made available, the Marshville Conversion Expenses have been fully credited, the Borrower shall apply ninety percent (90%) of the balance of such Miscellaneous Asset Sale Net Proceeds to permanently reduce the Term Loan Obligations, the Revolving Credit Obligations and the Note Obligations, by forwarding such Net Proceeds (the "Miscellaneous Asset Sale Net Proceeds") to the Agent and the Note Lenders in the respective percentages as set forth in Section 7 (e) of the Intercreditor Agreement. ARTICLE V CLOSING; CONDITIONS OF CLOSING AND BORROWING SECTION 5.1 Closing. The closing shall take place at the offices of Duane, Morris & Heckscher LLP at 2:00 p.m. on February 25, 1998, or on such other date as the parties hereto shall mutually agree. SECTION 5.2 Conditions to Closing and Initial Extensions of Credit. The obligation of the Revolving Credit Lenders to close this Agreement and to make the initial Revolving Loan or issue the initial Letter of Credit is subject to the satisfaction of each of the following conditions: (a) Executed Loan Documents. This Agreement, the Revolving Credit Notes and each of the other Loan Documents shall have been duly authorized, executed and delivered to the Agent by the parties thereto, shall be in full force and effect and no default shall exist thereunder, and the Borrower shall have delivered original counterparts thereof to the Agent. (b) Closing Certificates; etc. (i) Officers's Certificate of Borrower. The Agent shall have received a certificate from the chief executive officer or chief financial officer of the Borrower, in form and substance satisfactory to the Agent, to the effect that all representations and warranties of the Borrower contained in this Agreement and the other Loan Documents are true, correct and complete; that the Borrower is not in violation of any of the covenants contained in this Agreement and the other Loan Documents; that, after giving effect to the transactions contemplated 53 by this Agreement, no Default or Event of Default has occurred and is continuing; and that the Borrower has satisfied each of the closing conditions. (ii) Certificate of Secretary of the Borrower. The Agent shall have received a certificate of the secretary or assistant secretary of the Borrower certifying that attached thereto is a true and complete copy of the articles of incorporation of the Borrower and all amendments thereto, certified as of a recent date by the appropriate Governmental Authority in its jurisdiction of incorporation; that attached thereto is a true and complete copy of the bylaws of the Borrower as in Effect on the date of such certification; that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of the Borrower authorizing the bor- rowings contemplated hereunder and the execution, delivery and perform- ance of this Agreement and the other Loan Documents to which it is a party; and as to the incumbency and genuineness of the signature of each officer of the Borrower executing Loan Documents to which it is a party. (iii) Certificates of Good Standing. The Agent shall have received long form certificates as of a recent date of the good standing of the Borrower under the laws of its jurisdiction of organization and each other jurisdiction where the Borrower is qualified to do business. (iv) Opinions of Counsel. The Agent shall have received favorable opinions of counsel to the Borrower addressed to the Agent and the Revolving Credit Lenders with respect to the Borrower, the Loan Documents and such other matters as the Revolving Credit Lenders shall request. (v) Tax Forms. The Agent shall have received copies of the United States Internal Revenue Service forms required by Section 4.10(e) hereof. (c) Consents; No Adverse Change. (i) Governmental and Third Party Approvals. All necessary material approvals, authorizations and consents, if any be required, of any Person and of all Governmental Authorities and courts having jurisdiction with respect to the transactions contemplated by this Agreement and the other Loan Documents shall have been obtained. (ii) Permits and Licenses. All material permits and licenses, including permits and licenses required under Applicable Laws, necessary to the conduct of business by the Borrower and its Subsidiaries shall have been obtained. 54 (iii) No Injunction, Etc. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain substantial damages in respect of, or which is related to or arises out of this Agreement or the other Loan Documents or the consummation of the transactions contemplated hereby or thereby, or which, in the Agent's discretion, would make it inadvisable to consummate the transactions contemplated by this Agreement and such other Loan Documents. (iv) No Material Adverse Change. There shall not have occurred any material adverse change in the business, condition (financial or otherwise), operations, or properties of the Borrower taken as a whole, or any event, condition or state of facts that will or could be reasonably expected to have a Material Adverse Effect, since June 28, 1997, except as disclosed in the Borrower's unaudited quarterly financial statements dated as of December 27, 1997. (v) No Event of Default. No Default or Event of Default shall have occurred and be continuing. (d) Financial Matters. (i) Financial Statements. The Agent shall have received the most recent audited consolidated and consolidating financial statements of the Borrower and its Subsidiaries and the quarterly unaudited financial statements of the Borrower as of December 27, 1997, all in form and substance satisfactory to the Agent. (ii) Financial Condition Certificate. The Borrower shall have delivered to the Agent a certificate, in form and substance satisfactory to the Agent, and certified as accurate in all respects by the chief executive officer or chief financial officer of the Borrower, that the Borrower and each of its Subsidiaries are each Solvent. (iii) Payment at Closing; Fee Letters. There shall have been paid by the Borrower to the Agent and the Revolving Credit Lenders the fees set forth or referenced in Section 4.3 and any other accrued and unpaid fees or commissions due hereunder (including, without limitation, legal fees and expenses), and to any other Person such amount as may be due thereto in connection with the transactions contemplated hereby, including all taxes, fees and other charges in connection with the execution, delivery, recording, filing and registration of any of the Loan Documents. The Agent shall have received duly authorized and executed copies of the fee letter agreement referred to in Section 4.3(c). 55 (e) Miscellaneous. (i) Notice of Borrowing. The Agent shall have received written instructions from the Borrower to the Agent directing the payment of any proceeds of Revolving Loans made under this Agreement that are to be paid on the Closing Date. (ii) Proceedings and Documents. All opinions, certificates and other instruments and all proceedings in connection with the transactions contemplated by this Agreement shall be satisfactory in form and substance to the Revolving Credit Lenders. The Revolving Credit Lenders shall have received copies of all other instruments and other evidence as the Revolving Credit Lenders may reasonably request in form and substance satisfactory to the Revolving Credit Lenders, with respect to the transactions contemplated by this Agreement and the taking of all actions in connection therewith. (iii) Due Diligence and Other Documents. The Borrower shall have delivered to the Agent such other documents, certificates and opinions as the Agent reasonably requests, certified by a secretary or assistant secretary of the Borrower as a true and correct copy thereof. (iv) Insurance Company Documents. The Borrower shall have delivered to the Agent fully-executed copies of the Note Agreement (as defined in the Intercreditor Agreement) and all other documents executed in connection therewith. SECTION 5.3 Conditions to All Revolving Loans and Letters of Credit. The obligations of the Revolving Credit Lenders to make, continue or convert any Revolving Loan or issue any Letter of Credit is subject to the satisfaction of the following conditions precedent on the relevant borrowing or issue date, as applicable: (i) Continuation of Representations and Warranties. The representations and warranties contained in Article VI shall be true and correct on and as of such borrowing or issuance date with the same effect as if made on and as of such date, except that the foregoing shall not apply to the representations and warranties set forth with respect to Section 6.1(o) hereof, nor with respect to Section 6.1(p) hereof except as Section 6.1(p) relates to the most recent Financial Statements delivered by the Borrower to the Agent. (ii) No Existing Default. No Default or Event of Default shall have occurred and be continuing hereunder (A) on the borrowing date with respect to such Revolving Loan or after giving effect to the Revolving Loans to be made on such date or (B) on the issue date with 56 respect to such Letter of Credit or after giving effect to such Letters of Credit on such date. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BORROWER SECTION 6.1 Representations and Warranties. To induce the Agent to enter into this Agreement and the Revolving Credit Lenders to make the Revolving Loans or issue or participate in the Letters of Credit, the Borrower hereby represents and warrants to the Agent and Revolving Credit Lenders that: (a) Organization; Power; Qualification. Each of the Borrower and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, has the power and authority to own its properties and to carry on its business as now being and hereafter proposed to be conducted and is duly qualified and authorized to do business in each jurisdiction (other than a jurisdiction in which the failure to so qualify would not have a Material Adverse Effect) in which the character of its properties or the nature of its business requires such qualification and authorization. The jurisdictions in which the Borrower and its Subsidiaries are organized and qualified to do business are described on Schedule 6.1(a). (b) Ownership. Each Subsidiary of the Borrower is listed on Schedule 6.1(b). The capitalization of the Borrower and its Subsidiaries consists of the number of shares, authorized, issued and outstanding, of such classes and series, with or without par value, described on Schedule 6.1(b). All outstanding shares have been duly authorized and validly issued and are fully paid and nonassessable. The shareholders of the Subsidiaries of the Borrower and the number of shares owned by each are described on Schedule 6.1(b). There are no outstanding stock purchase warrants, subscriptions, options, securities, instruments or other rights of any type or nature whatsoever, which are convertible into, exchangeable for or otherwise provide for or permit the issuance of capital stock of the Borrower or its Subsidiaries, except as described on Schedule 6.1(b). (c) Authorization of Agreement, Loan Documents and Borrowing. Each of the Borrower and its Subsidiaries has the right, power and authority and has taken all necessary corporate and other action to authorize the execution, delivery and performance of this Agreement and each of the other Loan Documents to which it is a party in accordance with their respective terms. This Agreement and each of the other Loan Documents have been duly executed and delivered by the 57 duly authorized officers of the Borrower and each of its Subsidiaries party thereto, and each such document constitutes the legal, valid and binding obligation of the Borrower or its Subsidiary party thereto, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar state or federal debt or relief laws from time to time in effect which affect the enforcement of creditors' rights in general and the availability of equitable remedies. (d) Compliance of Agreement, Loan Documents and Borrowing with Laws, Etc. The execution, delivery and performance by the Borrower and its Subsidiaries of the Loan Documents to which each such Person is a party, in accordance with their respective terms, the borrowings hereunder and the transactions contemplated hereby, do not and will not, by the passage of time, the giving of notice or otherwise, (i) require any Governmental Approval or violate any Applicable Law relating to the Borrower or any of its Subsidiaries; (ii) conflict with, result in a breach of or constitute a default under the articles of incorporation, bylaws or other organizational documents of the Borrower or any of its Subsidiaries or any indenture, agreement or other instrument to which such Person is a party or by which any of its properties may be bound or any Governmental Approval relating to such Person; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by such Person other than Liens arising under the Loan Documents. (e) Compliance with Law; Governmental Approvals. Each of the Borrower and its Subsidiaries (i) has all material Governmental Approvals required by any Applicable Law for it to conduct its business, each of which is in full force and effect, is final and not subject to review on appeal and is not the subject of any pending or, to the best of its knowledge, threatened attack by direct or collateral proceeding; and (ii) is in compliance in all material respects with each Governmental Approval applicable to it and in compliance in all material respects with all other Applicable Laws relating to it or any of its respective properties. (f) Tax Returns and Payments. Each of the Borrower and its Subsidiaries has duly filed or caused to be filed all federal, state, local and other tax returns required by Applicable Law to be filed (other than returns the failure of which to be filed would not result in a Material Adverse Effect), and has paid, or made adequate provision for the payment of, all federal, state, local and other taxes, assessments and governmental charges or levies upon it and its property, income, profits and assets which are due and payable (other than taxes, assessments, charges and levies the failure of which to be paid would not result in a Material Adverse Effect). Except as set 58 forth on Schedule 6.1(f), no Governmental Authority has asserted any Lien or other claim against the Borrower or any Subsidiary thereof with respect to unpaid taxes which has not been discharged or resolved. The charges, accruals and reserves on the books of the Borrower and any of its Subsidiaries in respect of federal, state, local and other taxes for all Fiscal Years and portions thereof since the organization of the Borrower and any of its Subsidiaries are in the judgment of the Borrower adequate, and the Borrower does not anticipate any additional taxes or assessments for any of such years. (g) Copyright Matters. The Borrower and its Subsidiaries have recorded or deposited with and paid to the United States Copyright Offices, and the Register of Copyrights all notices, statements of account, royalty fees and other documents and instruments required under the United States Copyright Act, and neither the Borrower nor any Subsidiary thereof is liable to any Person for copyright infringement under the United States Copyright Act as a result of its business operations. (h) Franchises, Licenses, Patents and Trademarks. Each of the Borrower and its Subsidiaries owns or possesses rights to use all franchises, licenses, patents, patent rights or licenses, patent applications, trademarks, trademark rights, trade names, trade name rights, copyrights and rights with respect to the foregoing which are required to conduct its business, and all such franchises, licenses, patents, patent rights or licenses, patent applications, trademarks, trademark rights, trade names, trade name rights, copyrights and rights are described on Schedule 6.1(h). No event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any such rights. (i) Environmental Matters. (i) The properties of the Borrower and its Subsidiaries, to their knowledge, do not contain and have not previously contained, any Hazardous Materials in amounts or concentrations which (A) constitute or constituted a material violation of, or (B) could give rise to material liability under, applicable Environmental Laws; (ii) To the knowledge of the Borrower and its Subsidiaries, (A) such properties and all operations conducted in connection therewith are in compliance in all material respects, and have been in compliance in all material respects, with all applicable Environmental Laws, and (B) there is no contamination at, under or about such properties or such operations which could interfere with the continued operation of such properties or impair in a material amount the fair 59 saleable value of any property which would have a material saleable value in the absence of such contamination; (iii) Neither the Borrower nor any Subsidiary thereof has received any notice of any material violation, alleged material violation, material noncompliance, material liability or potential material liability regarding environmental matters or compliance with Environmental Laws with regard to any of their properties or the operations conducted in connection therewith, nor does the Borrower or any Subsidiary thereof have knowledge or reason to believe that any such notice will be received or is being threatened; (iv) To the knowledge of the Borrower and its Subsidiaries, (A) Hazardous Materials have not been transported or disposed of from the properties of the Borrower and its Subsidiaries in violation of, or in a manner or to a location which could give rise to material liability under, Environmental Laws, and (B) no Hazardous Materials have been generated, treated, stored or disposed of at, on or under any of such properties in violation of, or in a manner that could give rise to material liability under, any applicable Environmental Laws; (v) No judicial proceedings or governmental or administrative action is pending, or, to the knowledge of the Borrower, threatened, under any Environmental Law to which the Borrower or any Subsidiary thereof is or will be named as a party with respect to such properties or operations conducted in connection therewith which, if decided adversely to the Borrower or a Subsidiary, might have a material adverse effect upon the Borrower or a Subsidiary, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to such properties or such operations which involve a material liability of the Borrower or any Subsidiary; and (vi) To the Borrower's knowledge, there has been no release, or the threat of release, of Hazardous Materials at or from such properties, in violation of or in amounts or in a manner that could give rise to material liability under Environmental Laws. (j) ERISA. (i) Neither the Borrower nor any ERISA Affiliate maintains or contributes to, or has any obligation under, any Employee Benefit Plans which are defined benefit plans or welfare plans providing post- retirement medical benefits, other than those identified on Schedule 6.1(j); 60 (ii) the Borrower and each ERISA Affiliate is in compliance in all material respects with all applicable provisions of ERISA and the regulations and published interpretations thereunder with respect to all Employee Benefit Plans except for any required amendments for which the remedial amendment period as defined in Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified, and each trust related to such plan has been determined to be exempt under Section 501(a) of the Code. No liability has been incurred by the Borrower or any ERISA Affiliate which remains unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan or any Multiemployer Plan; (iii) No Pension Plan has been terminated, nor has any accumulated funding deficiency (as defined in Section 412 of the Code) been incurred (without regard to any waiver granted under Section 412 of the Code), nor has any funding waiver from the Internal Revenue Service been received or requested with respect to any Pension Plan, nor has the Borrower or any ERISA Affiliate failed to make any contributions or to pay any amounts due and owing as required by Section 412 of the Code, Section 302 of ERISA or the terms of any Pension Plan prior to the due dates of such contributions under Section 412 of the Code or Section 302 of ERISA, nor has there been any event requiring any disclosure under election 4041(c)(3)(C) or 4063(a) of ERISA with respect to any Pension Plan; (iv) Neither the Borrower nor any ERISA Affiliate has: (A) engaged in a nonexempt prohibited transaction described in Section 406 of the ERISA or Section 4975 of the Code; (B) incurred any liability to the PBGC which remains outstanding other than the payment of premiums and there are no premium payments which are due and unpaid; (C) failed to make a required contribution or payment to a Multiemployer Plan; or (D) failed to make a required installment or other required payment under Section 412 of the Code; (v) No Termination Event has occurred or is reasonably expected to occur; and (vi) No proceeding, claim, lawsuit and/or investigation is existing or, to the best knowledge of the Borrower after due inquiry, threatened concerning or involving any (A) employee welfare benefit plan (as defined in Section 3(i) of ERISA) currently maintained or contributed to by the Borrower or any ERISA Affiliate, (B) Pension Plan or (C) Multiemployer Plan. (k) Margin Stock. Neither the Borrower nor any Subsidiary thereof is engaged principally or as one of its activities in the 61 business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" (as each such term is defined or used in Regulations G and U of the Board of Governors of the Federal Reserve System). No part of the proceeds of any of the Revolving Loans or Letters of Credit will be used for purchasing or carrying margin stock or for any purpose which violates, or which would be, inconsistent with, the provisions of Regulation G, T, U or X of such Board of Governors. (l) Government Regulation. Neither the Borrower nor any Subsidiary thereof is an "investment company" or a company "controlled" by an "investment company" (as each such term is defined or used in the Investment Company Act of 1940, as amended), and neither the Borrower nor any Subsidiary thereof is, or after giving effect to any Extension of Credit will be, subject to regulation under the Public Utility Holding Company Act of 1935 or the Interstate Commerce Act, each as amended, or any other Applicable Law which limits its ability to incur or consummate the transactions contemplated hereby. (m) Material Contracts. Each Material Contract is, and after giving effect to the consummation of the transactions contemplated by the Loan Documents will be, in full force and effect in accordance with the terms thereof. (n) Employee Relations. Except as set forth on Schedule 6.1(n), the Borrower is not party to any collective bargaining agreement, nor has any labor union been recognized as the representative of its employees. Each of the Borrower and its Subsidiaries has a stable work force in place. The Borrower knows of no pending, threatened or contemplated strikes, work stoppage or other collective labor disputes involving its employees or those of its Subsidiaries. (o) Burdensome Provisions. Neither the Borrower nor any Subsidiary thereof is a party to any indenture, agreement, lease or other instrument, or subject to any corporate or partnership restriction, Governmental Approval or Applicable Law which is so unusual or burdensome as in the foreseeable future could be reasonably expected to have a Material Adverse Effect. The Borrower and its Subsidiaries do not presently anticipate that future expenditures needed to meet the provisions of any statutes, orders, rules or regulations of a Governmental Authority will be so burdensome as to have a Material Adverse Effect. (p) Financial Statements. The Consolidated and consolidating audited financial statements of the Borrower and its Subsidiaries dated June 28, 1997 and the Consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as of December 27, 1997 and the related statements of income and retained earnings and cash 62 flows for the periods then ended, copies of which have been furnished to the Agent and each Revolving Credit Lender, fairly present the assets, liabilities and financial position of the Borrower and its Subsidiaries as at such dates, and the results of the operations and changes of financial position for the periods then ended. All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP. The Borrower and its Subsidiaries have no Debt, obligation or other unusual forward or long-term commitment which is not fairly reflected in the foregoing financial statements or in the notes thereto. (q) No Material Adverse Change. Since June 28, 1997 except as disclosed in the Borrower's unaudited quarterly financial statements dated as of December 27, 1997, there has been no material adverse change in the properties, business, operations, or condition (financial or otherwise) of the Borrower and its Subsidiaries, including, but not limited to, any material adverse change resulting from any fire, explosion, accident, drought, storm, hail, earthquake, embargo, act of God, or of the public enemy or other casualty (whether or not covered by insurance). (r) Solvency. As of the Closing Date and after giving effect to each Extension of Credit made hereunder, the Borrower and each of its Subsidiaries will be Solvent. (s) Titles to Properties. Each of the Borrower and its Subsidiaries has such title to the real property owned by it as is necessary or desirable to the conduct of its business and valid and legal title to all of its personal property and assets, including, but not limited to, those reflected on the balance sheets of the Borrower and its Subsidiaries delivered pursuant to Section 6.1(p). Any real property owned by the Borrower that is currently subject to any lease, is listed together with a description of all such leases on Schedule 6.1(s). (t) Liens. None of the properties and assets of the Borrower or any Subsidiary thereof is subject to any Lien, except Liens permitted pursuant to Section 10.3. No financing statement under the Uniform Commercial Code of any state which names the Borrower or any Subsidiary thereof or any of their respective trade names or divisions as debtor and which has not been terminated, has been filed in any state or other jurisdiction and neither the Borrower nor any Subsidiary thereof has signed any such financing statement or any security agreement authorizing any secured party thereunder to file any such financing statement, except to perfect those Liens permitted by Section 10.3 hereof or signed with respect to leases other than Capital Leases and except for Liens in favor of the Agent for the benefit of the Revolving Credit Lenders. 63 (u) Debt and Contingent Obligations. Except with respect to the 1997 Credit Agreement and any noteholder agreement which is superseded as of the Closing Date, the Borrower and its Subsidiaries have performed and are in compliance in all material respects with all of the terms of their Debt and Contingent Obligations and all instruments and agreements relating thereto, and no default or event of default which has not been waived, or event or condition which with notice or lapse of time or both would constitute such a default or event of default, on the part of the Borrower or its Subsidiaries exists with respect to any such Debt or Contingent Obligation. (v) Litigation. Except as set forth on Schedule 6.1(v), there are no actions, suits or proceedings pending nor, to the knowledge of the Borrower, threatened against or in any other way relating adversely to or affecting the Borrower or any Subsidiary thereof or any of their respective properties in any court or before any arbitrator of any kind or before or by any Governmental Authority in which a decision adverse to the Borrower or such Subsidiary can reasonably be expected to have a Material Adverse Effect. (w) Absence of Defaults. No event has occurred or is continuing which constitutes a Default or an Event of Default which has not been waived, or which constitutes, or which with the passage of time or giving of notice or both would constitute, a default or event of default, which has not been waived, by the Borrower or any Subsidiary thereof under any Material Contract or judgment, decree or order to which the Borrower or its Subsidiaries is a party or by which the Borrower or its Subsidiaries or any of their respective properties may be bound or which would require the Borrower or its Subsidiaries to make any payment thereunder prior to the scheduled maturity date therefor. (x) Accuracy and Completeness of Information. All written information, reports and other papers and data produced by or on behalf of the Borrower or any Subsidiary thereof and furnished to the Revolving Credit Lenders were, at the time the same were so furnished, complete and correct in all respects to the extent necessary to give the recipient a true and accurate knowledge of the subject matter. No document furnished or written statement made to the Agent or the Revolving Credit Lenders by the Borrower or any Subsidiary thereof in connection with the negotiation, preparation or execution of this Agreement or any of the Loan Documents contains or will contain any untrue statement of a fact material to the credit worthiness of the Borrower or its Subsidiaries or omits or will omit to state a fact necessary in order to make the statements contained therein not misleading. The Borrower is not aware of any facts which it has not disclosed in writing to the Agent having a Material Adverse Effect, or 64 insofar as the Borrower can now foresee, could reasonably be expected to have a Material Adverse Effect. (y) Rockingham Subsidiaries. Rockingham Poultry, Inc. is not an active corporate entity and does not own or otherwise hold any assets. Rockingham Poultry, Inc. (VI) holds only one asset consisting of a bank account at Banco Popular (Puerto Rico) in the name of Rockingham Poultry, Inc. (VI) (the "RVI Account") which RVI Account shall at no time contain an amount more than $15,000. (z) WLR Common Stock. As of the date hereof, there are 16,335,058 shares of the Common Stock, no par value, of WLR issued and outstanding. Except as set forth on Schedule 6.1(z) attached hereto: (a) there are no outstanding options, warrants or other rights to acquire shares of WLR Common Stock, whether or not presently exercisable; (b) there are no outstanding securities convertible into shares of WLR Common Stock, whether or not presently convertible; and (c) there are no understandings, agreements or commitments with respect to the issuance of any such securities. SECTION 6.2 Survival of Representations and Warranties Etc. All representations and warranties set forth in this Article VI and all representations and warranties contained in any certificate, or any of the Loan Documents (including but not limited to any such representation or warranty made in or in connection with any amendment thereto) shall constitute representations and warranties made under this Agreement. All representations and warranties made under this Agreement shall be made or deemed to be made at and as of the Closing Date, shall survive the Closing Date and shall not be waived by the execution and delivery of this Agreement, any investigation made by or on behalf of the Revolving Credit Lenders or any borrowing hereunder. ARTICLE VII FINANCIAL INFORMATION AND NOTICES Until all the Obligations have been finally and indefeasibly paid and satisfied in full and the Commitments terminated, unless consent has been obtained in the manner set forth in Section 13.11 hereof, the Borrower will furnish or cause to be furnished to the Agent at the Agent's Office (with copies for each Revolving Credit Lender) and the Agent at its address set forth in Section 13.1 hereof, or such other office as may be designated by the Agent from time to time: 65 SECTION 7.1 Financial Statements and Projections. (a) Quarterly Financial Statements. As soon as practicable and in any event within forty-five (45) days after the end of each fiscal quarter, an unaudited Consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as of the close of such fiscal quarter in the form as attached as Exhibit "G," an unaudited Consolidated and consolidating statement of income for the fiscal quarter then ended and that portion of the Fiscal Year then ended and an unaudited Consolidated and consolidating statement of cash flows for that portion of the Fiscal Year then ended, including the notes, if any, thereto, all in reasonable detail setting forth in comparative form the corresponding figures for the preceding Fiscal Year and prepared by the Borrower in accordance with GAAP and, if applicable, containing disclosure of the effect on the financial position or results of operations of any material change in the application of accounting principles and practices during the period and certified by the chief financial officer of the Borrower to present fairly in all material respects the financial condition of the Borrower and its Subsidiaries as of their respective dates and the results of operations of the Borrower and its Subsidiaries for the respective periods then ended, subject to normal year end adjustments. (b) Annual Financial Statements. As soon as practicable and in any event within ninety (90) days after the end of each Fiscal Year, an audited Consolidated and unaudited consolidating balance sheet of the Borrower and its Subsidiaries as of the close of such Fiscal Year and audited Consolidated and unaudited consolidating statements of income, retained earnings and cash flows for the Fiscal Year then ended, including the notes thereto, all in reasonable detail setting forth in comparative form the corresponding figures for the preceding Fiscal Year and certified by an independent certified public accounting firm acceptable to the Agent in accordance with GAAP and, if applicable, containing disclosure of the effect on the financial position or results of operation of any change in the application of accounting principles and practices during the year, and accompanied by a report thereon by such certified public accountants that is not qualified with respect to scope limitations imposed by the Borrower or any of its Subsidiaries or with respect to accounting principles followed by the Borrower or any of its Subsidiaries not in accordance with GAAP. (c) Monthly Financial Statements. As soon as practicable and in any event within thirty days after the end of each calendar month, such financial information as may be required by written notification to the Borrower from the Agent on or before March 31, 1998. 66 (d) SEC Filings. Within three (3) Business Days after their filing with the Securities and Exchange Commission (the "SEC"), copies of the Borrower's 10-K and 10-Q and any other periodic financial statements which the Borrower or any of its Subsidiaries is required to file with the SEC. (e) Financial Projections. Within thirty (30) days after each such request, such financial projections for the Borrower and its Subsidiaries as the Agent may from time to time reasonably request. (f) Three Year Business Plan. On or before June 1, 1998, a copy of the Borrower's three year business plan (the "Three Year Business Plan") in form and substance satisfactory to the Required Revolving Credit Lenders and the Agent. (g) Weekly Borrowing Base Certificates and Information. On each Monday before 2:00 p.m., for the immediately preceding week ending Friday, a Borrowing Base Certificate together with such additional information relating to the Collateral and the calculation of the Borrowing Base as may be required by the Agent by written notification to the Borrower on or before March 31, 1998. SECTION 7.2 Officer's Compliance Certificate. At each time financial statements are delivered pursuant to Sections 7.1 (a) or (b) and at such other times as the Agent shall reasonably request, a certificate of the chief financial officer or the treasurer of the Borrower in the form of Exhibit "H" attached hereto (an "Officer's Compliance Certificate"): (a) stating that such officer has reviewed such financial statements and such statements fairly present the financial condition of the Borrower as of the dates indicated and the results of its operations and cash flows for the periods indicated; (b) stating that to such officer's knowledge, based on a reasonable examination sufficient to enable him to make an informed statement, no Default or Event of Default exists, or, if such is not the case, specifying such Default or Event of Default and its nature, when it occurred, whether it is continuing and the steps being taken by the Borrower with respect to such Default or Event of Default; and (c) setting forth as at the end of such Fiscal Month, Fiscal Quarter, or Fiscal Year, as the case may be, the calculations required to establish whether or not the Borrower and its Subsidiaries were in compliance with the financial covenants set forth in Article IX hereof as at the end of each respective period, and, with the delivery of the 67 calculations as at the end of any Fiscal Quarter or Fiscal Year, the actual Coverage Ratio and Leverage Ratio for purposes of calculating the Applicable Margin for Tranche I Loans. SECTION 7.3 Accountants' Certificate. At each time financial statements are delivered pursuant to Section 7.1(b), a certificate of the independent public accountants certifying such Consolidated financial statements addressed to the Agent for the benefit of the Revolving Credit Lenders: (a) stating that in making the examination necessary for the certification of such financial statements, they obtained no knowledge of any Default or Event of Default or, if such is not the case, specifying such Default or Event of Default and its nature and period of existence; and (b) including the calculations certified by such accountants required to establish whether or not the Borrower and its Subsidiaries are in compliance with the financial covenants set forth in Article IX hereof as at the end of each respective period. SECTION 7.4 Other Reports. (a) Promptly upon receipt thereof, copies of all reports, if any, submitted to the Borrower or its Board of Directors by its independent public accountants in connection with their auditing function, excluding any management report and any management responses thereto (which shall nevertheless be made available as provided in Section 8.11); and (b) Such other information regarding the operations, business affairs and financial condition of the Borrower or any of its Subsidiaries as the Agent or any Revolving Credit Lender may reasonably request, including, without limitation, consolidating financial statements and summary product sales information as provided on company-prepared fact sheets. SECTION 7.5 Notice of Litigation and Other Matters. Prompt (but in no event later than five (5) days after the Chief Executive Officer, Chief Financial Officer, or any Vice President of WLR obtains knowledge thereof) telephonic and written notice of: (a) the commencement of all proceedings and investigations by or before any Governmental Authority and all actions and proceedings in any court or before any arbitrator against or involving the Borrower or any Subsidiary thereof or any of their respective properties, assets or businesses in which a decision adverse to the Borrower or such Subsidiary can reasonably be expected to have a Material Adverse Effect; 68 (b) any notice of any violation (including, without limitation, a violation of Environmental Laws) received by the Borrower or any Subsidiary thereof from any Governmental Authority which violation could reasonably be expected to have a Material Adverse Effect; (c) any labor controversy that has resulted in, or threatens to result in, a strike or other work action against the Borrower or any Subsidiary thereof, which strike or work action, if continued, can reasonably be expected to have a Material Adverse Effect; (d) any attachment, judgment, lien (except Permitted Liens), levy or order exceeding $3,000,000 that may be assessed against the Borrower or any Subsidiary thereof; (e) any Default or Event of Default, or any event which constitutes or which with the passage of time or giving of notice or both would constitute a default or event of default under any Material Contract to which the Borrower or any of its Subsidiaries is a party or by which the Borrower or any Subsidiary thereof or any of their respective properties may be bound, and any corrective action which the Borrower or any of its Subsidiaries has taken or proposes to take with respect thereto; (f) (i) the establishment of any new Employee Benefit Plan which is a defined benefit plan or a welfare plan providing post-retirement benefits, the commencement of contributions to any such plan to which the Borrower or any ERISA Affiliate was not previously contributing or any increase in the benefits of any such existing Employee Benefit Plan which would increase the projected liability of the Borrower and/or one or more ERISA Affiliates by $1,000,000 or more; (ii) each funding waiver request filed with respect to any Employee Benefit Plan and all communications received or sent by the Borrower or any ERISA Affiliate with respect to such request; (iii) the failure of the Borrower or any ERISA Affiliate to make a required installment or payment under Section 302 of ERISA or Section 412 of the Code by the due date; (iv) any Termination Event or "prohibited transaction", as such term is defined in Section 406 of ERISA or Section 4975 of the Code, in connection with any Employee Benefit Plan or any trust created thereunder which can reasonably be expected to have a Material Adverse Effect, along with a description of the nature thereof, what action the Borrower has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto; (v) any unfavorable determination letter from the Internal Revenue Service regarding the qualification of an Employee Benefit Plan under Section 401(a) of the Code if the failure of such Employee Benefit Plan to be qualified can reasonably be expected to 69 have a Material Adverse Effect (along with a copy thereof); (vi) all notices received by the Borrower or any ERISA Affiliate of the PBGC's intent to terminate any Pension Plan or to have a trustee appointed to administer any Pension Plan; (vii) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by the Borrower or any ERISA Affiliate with the Internal Revenue Service with respect to each Pension Plan; (viii) all notices received by the Borrower or any ERISA Affiliate from a Multiemployer Plan sponsor concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA; and (ix) the Borrower obtaining knowledge or reason to know that the Borrower or any ERISA Affiliate has filed or intends to file a notice of intent to terminate any Pension Plan under a distress termination within the meaning of Section 4041 (c) of ERISA; and (g) any event which makes any of the representations set forth in Section 6.1 inaccurate in any material respect. SECTION 7.6 Accuracy of Information. All written information, reports, statements and other papers and data furnished by or on behalf of the Borrower to the Agent or any Revolving Credit Lender (other than financial forecasts) whether pursuant to this Article VII or any other provision of this Agreement, or any of the Security Documents, shall be, at the time the same is so furnished, complete and correct in all material respects to the extent necessary to give the Agent or any Revolving Credit Lender complete, true and accurate knowledge of the subject matter based on the Borrower's knowledge thereof. ARTICLE VIII AFFIRMATIVE COVENANTS Until all of the Obligations have been finally and indefeasibly paid and satisfied in full and the Commitments terminated, unless consent has been obtained in the manner provided for in Section 13.11, the Borrower will, and will cause each of its Subsidiaries to: SECTION 8.1 Preservation of Corporate Existence and Related Matters. Except as permitted by Section 10.5, preserve and maintain its separate corporate existence and all rights, franchises, licenses and privileges necessary to the conduct of its business; and qualify and remain qualified as a foreign corporation and authorized to do business in each jurisdiction in which time failure to so qualify would have a Material Adverse Effect. 70 SECTION 8.2 Maintenance of Property. Protect and preserve all properties useful in and material to its business, including copyrights, patents, trade names and trademarks; maintain in good working order and condition all buildings, equipment and other tangible real and personal property; and from time to time make or cause to be made all renewals, replacements and additions to such property necessary for the conduct of its business, so that the business carried on in connection therewith may be properly and advantageously conducted at all times. SECTION 8.3 Insurance. Carry at all times with financially sound and reputable insurance companies which have ratings from A. M. Best & Co. of "A" or higher or are otherwise acceptable to the Agent: (a) all workers' compensation or similar insurance as may be required under the laws of any jurisdiction; (b) public liability insurance against claims for personal injury, death or property damage suffered upon, in or about any premises occupied by it or occurring as a result of the ownership, maintenance or operation by it of any automobile, truck or other vehicle or as a result of the use of products manufactured, constructed or sold by it, or services rendered by it; (c) business interruption insurance covering risk of loss as a result of the cessation for all or any part of one year of any substantial part of the business conducted by it; (d) hazard insurance against such other hazards as are usually insured against by business entities of established reputation engaged in like businesses and similarly situated, including, without limitation, fire (flood, if applicable) and extended coverage; and (e) such other insurance as the Agent may from time to time reasonably require, and pay all premiums on the policies for all such insurance when and as they become due and take all other actions necessary to maintain such policies in full force and effect at all times. CIGNA is an acceptable insurer for purposes of this Section unless the Agent, at the request of the Required Revolving Credit Lenders, notifies the Borrower that CIGNA is unacceptable. The Borrower shall cause each hazard insurance policy to provide, and the insurer issuing each such policy to certify to the Agent, that (a) if such insurance be proposed to be canceled or materially changed for any reason whatsoever, such insurer will promptly notify the Agent and such cancellation or change shall not be effective for 30 days after receipt by the Agent of such notice, unless the effect of such change is to extend or increase coverage under the policy; (b) the Agent, for the benefit of the Revolving Credit Lenders, shall be named as lender loss payee with respect to personal property and mortgagee with respect to real property; and (c) the Agent will have the right, at its election, to remedy any default in the payment of premiums within 30 days of notice from the insurer of such default. The foregoing covenants regarding insurance are in addition to, and not intended to supersede, those covenants regarding insurance set forth in the Security Documents. In the event and to 71 the extent of any conflict between the provisions of this Agreement and the provisions of the Security Documents regarding the insuring of Collateral, the provisions of the Security Documents with respect thereto shall govern. SECTION 8.4 Accounting Methods and Financial Records. Maintain a system of accounting, and keep such books, records and accounts (which shall be true and complete in all material respects) as may be required or as may be necessary to permit the preparation of financial statements in accordance with GAAP and in compliance with the regulations of any Governmental Authority having jurisdiction over it or any of its properties. SECTION 8.5 Payment and Performance of Obligations. Pay and perform all Obligations under this Agreement and the other Loan Documents, and pay or perform (a) all taxes, assessments and other governmental charges that may be levied or assessed upon it or any of its property, and (b) all other indebtedness, obligations and liabilities in accordance with customary trade practices; provided that the Borrower or such Subsidiary may contest any item described in this Section 8.5 in good faith so long as adequate reserves are maintained with respect thereto in accordance with GAAP. SECTION 8.6 Compliance With Laws and Approvals. Observe and remain in compliance in all material respects with all Applicable Laws and maintain in full force and effect all material Governmental Approvals, in each case applicable to the conduct of its business. SECTION 8.7 Environmental Laws. In addition to and without limiting the generality of Section 8.6, (a) comply in all material respects with, and ensure such compliance in all material respects by all tenants and subtenants, if any, with, all applicable Environmental Laws and obtain and comply with and maintain, and ensure that all tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws; (b) conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws, and promptly comply with all lawful orders and directives of any Governmental Authority regarding Environmental Laws; and (c) defend, indemnify and hold harmless the Agent and the Revolving Credit Lenders, and their respective parents, Subsidiaries, Affiliates, employees, agents, officers and directors, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation of, noncompliance with or liability under any Environmental Laws applicable to the operations of the Borrower or such Subsidiary, or any orders, requirements or demands of Governmental Authorities 72 related thereto, including, without limitation, reasonable attorney's and consultant's fees, investigation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing arise out of the negligence or willful misconduct of the party seeking indemnification therefor. SECTION 8.8 Compliance with ERISA. In addition to and without limiting the generality of Section 8.6, (a) make timely payment of contributions required to meet the minimum funding standards set forth in ERISA with respect to any Employee Benefit Plan; (b) not take any action or fail to take action the result of which could be a liability to the PBGC or to a Multiemployer Plan; (c) not participate in any prohibited transaction that could result in any material civil penalty under ERISA or tax under the Code; (d) furnish to the Agent upon the Agent's request such additional information about any Employee Benefit Plan as may be reasonably requested by the Agent; and (e) operate each Employee Benefit Plan in such a manner that will not incur any tax liability under Section 4980B of the Code or any liability to any qualified beneficiary as defined in Section 4980B of the Code. SECTION 8.9 Compliance With Agreements. Comply in all material respects with each term, condition and provision of all leases, agreements and other instruments entered into in the conduct of its business including, without limitation, any Material Contract; provided that the Borrower or such Subsidiary may contest any such lease, agreement or other instrument in good faith through applicable proceedings so long as adequate reserves are maintained in accordance with GAAP. SECTION 8.10 Conduct of Business. Engage only in businesses in substantially the same fields as the businesses conducted on the Closing Date and in lines of business reasonably related thereto. SECTION 8.11 Visits and Inspections. Permit representatives of the Agent or any Revolving Credit Lender, from time to time, after reasonable notice, to visit and inspect its properties; inspect, audit and make extracts from its books, records and files, including, but not limited to, management letters prepared by independent accountants; and discuss with its principal officers, and its independent accountants, its business, assets, liabilities, financial condition, results of operations and business prospects. SECTION 8.12 Further Assurances. Make, execute and deliver all such additional and further acts, things, deeds and instruments as the Agent or any Revolving Credit Lender may reasonably require to document and consummate the transactions contemplated hereby and to 73 vest completely in and insure the Agent and the Revolving Credit Lenders their respective rights under this Agreement, the Revolving Credit Notes, the Letters of Credit and the other Loan Documents. SECTION 8.13 Meeting with Revolving Credit Lenders. Participate in meetings at least twice annually with all Revolving Credit Lenders wishing to participate therein at a date, time and location satisfactory to the Agent and fully disclose in such meeting the material future business plans of the Borrower and its Subsidiaries. SECTION 8.14 Year 2000 Issues. Take all action necessary to assure that the Borrower's computer based systems are able to operate and effectively process data including dates on and after January 1, 2000. At the request of the Agent, the Borrower shall provide the Agent assurance acceptable to the Agent of the Borrower's Year 2000 compatibility. SECTION 8.15 Employment of Outside Accountants and Financial Consultants. Employ Ernst & Young LLP or another outside accounting firm and/or financial consulting firm acceptable to the Agent for the purpose of providing consulting and related financial services to the Borrower as more fully described in the work plan attached as Schedule 8.15. The Borrower will continuously employ a chief financial officer and related accounting and financial employees reasonably acceptable to the Agent until the Obligations have been paid in full. For purposes of this Section 8.15, current Chief Financial Officer is acceptable to the Agent as chief financial officer of the Borrower. If the Borrower fails to employ continuously a chief financial officer and related accounting and financial employees reasonably acceptable to the Agent, the Borrower will employ an outside accounting and/or financial consulting firm acceptable to the Agent to perform such tasks as the Agent may designate. If the Borrower wishes to terminate the accounting firm and/or financial consulting firm which is performing the services described in the work plan attached as Schedule 8.15 prior to its completion, the Borrower must obtain the prior written consent of the Agent. For purposes of computing EBITDA under the financial covenants contained in Article IX of this Agreement and the Term Loan Agreement, fees and expenses which have been paid prior to the date of this Agreement and which may be paid after the date of this Agreement to the outside accounting firm and/or financial consulting firm referred to in this Section 8.15 will not be considered an expense in calculating EBITDA. SECTION 8.16 Maintenance of Bank Accounts. Except for a deposit account with a balance at no time to exceed $15,000 maintained 74 in the name of Rockingham Poultry (VI) at Banco Popular (Puerto Rico), maintain all of its depository, disbursement and other accounts with the Agent and/ or any Revolving Credit Lender. SECTION 8.17 Interest Rate Protection. As promptly as practicable, and in any event within 60 days after the Closing Date, enter into, and thereafter for a period of not less than two years from the Closing Date maintain in effect, one or more Interest Rate Protection Agreements on such terms and with such parties as shall be reasonably satisfactory to the Agent, the effect of which shall be to fix or limit the interest costs to the Borrower with respect to at least fifty percent (50%) of the amount outstanding under the Term Loan, the Note Agreement, and projected outstanding amount for Revolving Credit Loans. ARTICLE IX FINANCIAL COVENANTS Commencing on June 27, 1998, and continuing until all of the Obligations have been finally and indefeasibly paid and satisfied in full and the Commitments terminated, unless consent has been obtained in the manner set forth in Section 13.11 hereof, the Borrower and its Subsidiaries on a Consolidated basis will not: SECTION 9.1 Minimum Monthly EBITDA. As of the end of any Fiscal Month, permit the Borrower's Consolidated Cumulative twelve month EBITDA ending with such Fiscal Month, to be less than the dollar amount corresponding to such period set forth below: Minimum Cumulative Fiscal Month Ended Twelve Month EBITDA July 1998 $10,701,000 August 1998 $15,248,000 September 1998 $17,048,000 October 1998 $21,089,000 November 1998 $23,646,000 December 1998 $29,821,000 SECTION 9.2 Minimum Quarterly EBITDA. As of the end of any Fiscal Quarter, permit the Borrower's Consolidated cumulative four- quarter EBITDA ending with such Fiscal Quarter to be less than the dollar amount corresponding to the period set forth below: 75 Minimum Cumulative Fiscal Quarter Ended Four Quarter EBITDA Third Fiscal Quarter 1999 $41,456,000 Fourth Fiscal Quarter 1999 $53,830,000 First Fiscal Quarter 2000 $62,646,000 Second Fiscal Quarter 2000 $69,333,000 Third Fiscal Quarter 2000 $71,082,000 Fourth Fiscal Quarter 2000 $74,151,000 First Fiscal Quarter 2001 $75,963,000 Second Fiscal Quarter 2001 $77,852,000 SECTION 9.3 Limitation on Capital Expenditures. Make or incur Capital Expenditures in any cumulative four Fiscal Quarter period ending with such Fiscal Quarter, which would exceed an aggregate amount for such period corresponding to such period as set forth below: Maximum Capital Quarter Ended Expenditures Fourth Fiscal Quarter 1998 $30,856,000 First Fiscal Quarter 1999 $36,562,000 Second Fiscal Quarter 1999 $35,800,000 Third Fiscal Quarter 1999 $32,500,000 Fourth Fiscal Quarter 1999 $27,700,000 First Fiscal Quarter 2000 $24,000,000 Second Fiscal Quarter 2000 $24,000,000 Third Fiscal Quarter 2000 $24,000,000 Fourth Fiscal Quarter 2000 $24,000,000 First Fiscal Quarter 2001 $24,000,000 Second Fiscal Quarter 2001 $24,000,000 ARTICLE X NEGATIVE COVENANTS Until all of the Obligations have been finally and indefeasibly paid and satisfied in full and the Commitments terminated, unless consent has been obtained in the manner set forth in Section 13.11 hereof, the Borrower has not and will not, and will not permit any of its Subsidiaries to: SECTION 10.1 Limitations on Debt. Create, incur, assume or suffer to exist any Debt except: (a) The Obligations; (b) Debt created under the Note Agreement and related documents; 76 (c) Debt existing on the Closing Date as described on Schedule 10.1(c) and the renewal and refinancing (but not the increase) thereof; provided, however, that until such time as the Obligations are indefeasibly paid in full, the Borrower shall not refinance any portion of the Debt on a secured basis; (d) [intentionally left blank] (e) Debt consisting of Contingent Obligations permitted by Section 10.2(b); (f) Debt from Approved Subordinated Debt Transaction(s) as provided in Article IV hereof; (g) Purchase Money Debt (including Capital Leases) in an aggregate amount not to exceed $5,000,000 on any date of determination. SECTION 10.2 Limitations on Contingent Obligations. Create, incur, assume or suffer to exist any Contingent Obligations except: (a) Contingent Obligations in favor of the Agent for the benefit of the Agent and the Revolving Credit Lenders and/or the Term Lenders; (b) Contingent Obligations existing on the Closing Date as described on Schedule 10.2(b) (but not the increase) thereof; and (c) Other Contingent Obligations in an aggregate amount not to exceed $1,000,000 at any time. SECTION 10.3 Limitations on Liens. Create, incur, assume or suffer to exist, any Lien on or with respect to any of its assets or properties (including shares of capital stock), real or personal, whether now owned or hereafter acquired, except: (a) Liens for taxes, assessments and other governmental charges or levies (excluding any Lien imposed pursuant to any of the provisions of ERISA or Environmental Laws) not yet due or as to which the period of grace (not to exceed thirty (30) days), if any, related thereto has not expired or which are being contested in good faith and by appropriate proceedings if adequate reserves are maintained to the extent required by GAAP; (b) The claims of materialmen, mechanics, carriers, warehousemen, processors or landlords for labor, materials, supplies or rentals, and/or statutory liens incurred in the ordinary course of business which in the aggregate do not at any time exceed $1,000,000, 77 and (i) which are not overdue for a period of more than thirty (30) days or (ii) which are being contested in good faith and by appropriate proceedings; (c) Liens consisting of deposits or pledges made in the ordinary course of business in connection with, or to secure payment of, obligations under workers' compensation, unemployment insurance or similar legislation or obligations (not to exceed $10,000,000); (d) Liens constituting encumbrances in the nature of zoning restrictions, easements and rights or restrictions of record on the use of real property, which in the aggregate are not substantial in amount and which do not, in any case, detract from the value of such property or impair the use thereof in the ordinary conduct of business; (e) Liens of the Collateral Agent for the benefit of the Agent and the Revolving Credit Lenders, the Term Lenders and/or the Note Lenders; (f) Any Lien existing on the Closing Date which is described on Schedule 10.3(f); (g) Limited Grower Payable Liens; (h) Liens on personal property held in a margin account by the counter party with respect to a Derivative Agreement relating to commodities, so long as (i) such Derivative Agreement was entered into in the ordinary course of business solely for the purpose of mitigating risk and (ii) the aggregate fair market value of all personal property held in all such margin accounts does not at any time exceed $10,000,000; and (i) Liens created on account of Purchase Money Debt authorized pursuant to Section 10.1(g) hereof. SECTION 10.4 Limitations on Acquisitions. Without the prior written consent of each Revolving Credit Lender, acquire any significant part of the assets of any Person which is not a Subsidiary or acquire the capital stock or other ownership interest in any Person. SECTION 10.5 Limitations on Mergers and Liquidation. Merge, consolidate or enter into any similar combination with any other Person or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution); or enter into any new business activities or ventures (including joint ventures) not related to its present business; except that Wampler Supply may be merged or liquidated into any Borrower. 78 SECTION 10.6 Limitations on Sale of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, the sale of any receivables and leasehold interests and any sale leaseback or similar transaction), whether now owned or hereafter acquired except: (a) the sale of inventory in the ordinary course of business; (b) the sale of obsolete assets no longer used or usable in the business of the Borrower or any of its Subsidiaries; (c) the sale or discount without recourse of accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof; (d) Asset Sales as proposed in the Three Year Business Plan to the extent approved and accepted by each of the Revolving Credit Lenders; (e) Approved Miscellaneous Asset Sales; and (f) Any asset sales agreed to in writing between the Borrower and each of the Revolving Credit Lenders. SECTION 10.7 Transactions with Affiliates. Directly or indirectly: (a) make any material loan or advance to, or purchase or assume any note or other obligation in a material amount to or from, any of its officers, directors, shareholders or other Affiliates (which is/are not a Borrower), or to or from any member of the immediate family of any of its officers, directors, shareholders or other Affiliates (which is/are not a Borrower), or subcontract any operations to any of its Affiliates (which is/are not a Borrower), or (b) enter into, or be a party to, any transaction with any of its Affiliates (which is/are not a Borrower), except pursuant to the reasonable requirements of its business and upon fair and reasonable terms that are no less favorable to it than would obtain in a comparable arm's length transaction with a Person not its Affiliate. SECTION 10.8 Certain Accounting Changes. Change its Fiscal Year end, or make any change in its accounting treatment and reporting practices except as permitted by GAAP. SECTION 10.9 Compliance with ERISA. (a) Permit the occurrence of any Termination Event which would result in a liability to the Borrower or any ERISA Affiliate in excess of $5,000,000; (b) permit the present value of all benefit liabilities under all Pension Plans (determined under the actuarial assumptions used for Code and ERISA 79 funding purposes) to exceed the current value of the assets of such Pension Plans allocable to such benefit liabilities by more than $5,000,000; (c) permit any accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code) with respect to any Pension Plan, whether or not waived; (d) fail to make any contribution or payment to any Multiemployer Plan which the Borrower or any ERISA Affiliate may be required to make under any agreement relating to such Multiemployer Plan, or any law pertaining thereto which results in or is likely to result in a liability in excess of $5,000,000; (e) engage, or permit the Borrower or any ERISA Affiliate to engage, in any prohibited transaction under Section 406 of ERISA or Section 4975 of the Code for which a civil penalty pursuant to Section 502(i) of ERISA a tax pursuant to Section 4975 of the Code in excess of $5,000,000 is imposed; (f) permit the establishment of any Employee Benefit Plan providing post-retirement welfare benefits (other than an Employee Benefit Plan which provides such benefits solely for a select group of present or former management employees) or establish or amend any Employee Benefit Plan which establishment or amendment could reasonably be expected to result in liability to the Borrower or any ERISA Affiliate or increase the obligation of the Borrower or any ERISA Affiliate to a Multiemployer Plan which liability or increase, individually or together with all similar liabilities and increases, is material to the Borrower or any ERISA Affiliate; or (g) fail, or permit the Borrower or any ERISA Affiliate to fail, to establish, maintain and operate each Employee Benefit Plan in compliance in all material respects with the provisions of ERISA, the Code and all other applicable laws and the regulations and interpretations thereof. SECTION 10.10 Limitations on New Equity, Dividends and Distributions. Except as provided in the Warrant Agreement and related documents, declare or pay any dividend, or make any distributions of cash or property, to holders of any shares of its capital stock on account of such shares, or, directly or indirectly, redeem or otherwise acquire any such shares or any option, warrant or right to acquire any such shares except for the reacquisition of the shares held in an escrow account in connection with the acquisition of the Goldsboro facility. SECTION 10.11 Transfers to Subsidiaries. Transfer any assets now or hereafter owned by the Borrower to any Subsidiary which is not a Borrower, except to the extent WLR may transfer funds to Rockingham Poultry, Inc. (VI) to maintain a balance in the RVI Account of no more than $15,000. SECTION 10.12 Limitations on Investments. Purchase, invest in, or make any loan in the nature of an investment in the stocks, bonds, notes or other securities or evidence of Debt of any Person, or make 80 any loan or advance to or for the benefit of any Person except for the following (collectively, "Permitted Investments"): (i) short-term obligations of the Treasury of the United States of America; (ii) certificates of deposit issued by banks with shareholders' equity of at least $100,000,000; (iii) repurchase agreements not exceeding 29 days in duration issued by banks with shareholders' equity of at least $100,000,000; (iv) notes and other instruments generally known as "commercial paper" which arise out of current transactions, which have maturities at the time of issuance thereof not exceeding nine months and which have, at the time of such purchase, investment or other acquisition, the highest credit rating of Standard & Poor's Corporation or Moody's Investors Service, Inc.; provided that to the extent the Borrower shall seek to make any of the foregoing Permitted Investments, it shall notify the Agent in writing in advance and shall comply with such steps as the Agent may require to evidence the perfected security interests of the Revolving Credit Lenders therein. SECTION 10.13 Limitations on Certain Agreements. Enter into any Derivative Agreement or Interest Rate Protection Agreement with any Revolving Credit Lender to the extent that any liability created thereunder would be secured by any Collateral. ARTICLE XI DEFAULT AND REMEDIES SECTION 11.1 Events of Default. Each of the following shall constitute an Event of Default, whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any Governmental Authority or otherwise: (a) Default in Payment of Principal of Revolving Loans and Reimbursement Obligations. The Borrower shall default in any payment of principal of any Revolving Loan, Revolving Credit Note or Reimbursement Obligation as and when due (whether at maturity, by reason of acceleration or otherwise). (b) Other Payment Default. The Borrower shall default in the payment as and when due (whether at maturity, by reason of acceleration or otherwise) of interest on any Revolving Loan, Revolving Credit Note or Reimbursement Obligation or the payment of any other Obligation, and such a default shall continue unremedied for five (5) Business Days provided, that if the default referenced in this paragraph (b) arises only under a Mortgage, the five (5) Business 81 Days referenced in this paragraph (b) will commence after written notice of such default shall have been given by the Agent to the Borrower. (c) Misrepresentation. Any representation or warranty made by the Borrower or any of its Subsidiaries under this Agreement, any Loan Document or any amendment hereto or thereto, shall at any time prove to have been incorrect or misleading in any material respect when made. (d) Default in Performance of Certain Covenants. The Borrower shall default in the performance or observance of any covenant or agreement contained in Sections 7.5(e) or Articles IX or X of this Agreement. (e) Default in Performance of Other Covenants and Conditions. The Borrower or any Subsidiary thereof shall default in the Performance or observance of any term, covenant, condition or agreement contained in this Agreement (other than as specifically provided for otherwise in this Section 11.1) or any other Loan Document and such default shall continue for a period of thirty (30) days after written notice thereof has been given to the Borrower by the Agent. (f) Derivative Agreements and Interest Rate Protection Agreements. Any termination payment shall be due by the Borrower under any Derivative Agreement or Interest Rate Protection Agreement and such amount is not paid within five (5) Business Days of the due date thereof. (g) Debt Cross-Default. The Borrower or any of its Subsidiaries shall (i) default in the payment of any Debt (other than the Revolving Credit Notes or any Reimbursement Obligation) the aggregate outstanding amount of which is equal to or in excess of $3,000,000 beyond the period of grace if any, provided in the instrument or agreement under which such Debt was created; or (ii) default in the observance or performance of any other agreement or condition relating to any Debt (other than the Obligations) the aggregate outstanding amount of which is equal to or in excess of $3,000,000 or contained in any instrument or agreement evidencing, securing or relating thereto or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Debt (or a trustee or agent on behalf of such holder or holders) to cause, with the giving of notice if required, any such Debt to become due prior to its stated maturity (any applicable grace period having expired). (h) Voluntary Bankruptcy Proceeding. The Borrower or any Subsidiary thereof shall (i) commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect); (ii) file a petition seeking to take advantage of any other laws, domestic or 82 foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition for adjustment of debts; (iii) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws; (iv) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of a substantial part of its property, domestic or foreign; (v) admit in writing its inability to pay its debts as they become due; (vi) make a general assignment for the benefit of creditors; or (vii) take any corporate action for the purpose of authorizing any of the foregoing. (i) Involuntary Bankruptcy Proceeding. A case or other proceeding shall be commenced against the Borrower or any Subsidiary thereof in any court of competent jurisdiction seeking (i) relief under the federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or adjustment of debts; or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like for the Borrower or any Subsidiary thereof or for all or any substantial part of their respective assets, domestic or foreign, and such case or proceeding shall continue undismissed or unstayed for a period of sixty (60) consecutive calendar days, or an order granting the relief requested in such case or proceeding (including, but not limited to, an order for relief under such federal bankruptcy laws) shall be entered. (j) Failure of Agreements. (i) any material provision of this Agreement or of any other Loan Document shall for any reason cease to be valid and binding on the Borrower or a Subsidiary party thereto or any such Person shall so state in writing; or (ii) this Agreement or any other Loan Document shall for any reason cease to create a valid and perfected first priority Lien on, or security interest in, any of the Collateral purported to be covered thereby, in each case other than in accordance with the express terms hereof or thereof, provided that no Event of Default shall have occurred pursuant to this subparagraph (j)(ii) if the Borrower, within five (5) Business Days notice from the Agent, takes such steps as are necessary to create a valid and perfected first priority Lien in such Collateral. (k) Judgment. A judgment or order for the payment of money which exceeds $2,500,000 in amount shall be entered against the Borrower or any of its Subsidiaries by any court and such judgment or order shall continue undischarged or unstayed for a period of thirty (30) calendar days. 83 (l) Attachment. A warrant or writ of attachment or execution or similar process shall be issued against any property of the Borrower or any of its Subsidiaries which exceeds $2,500,000 in value and such warrant or process shall continue undischarged or unstayed for a period of thirty (30) calendar days. (m) Change in Control. (a) Any person or group of persons (within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended) other than the current board of directors of the Borrower, shall obtain ownership or control in one or more series of transactions of more than fifty percent (50%) of the common stock and fifty percent (50%) of the voting power of the Borrower entitled to vote in the election of members of the board of directors of the Borrower (a "Change in Control"). (n) Term Loan Events of Default. Any one or more Events of Default occurs under the Term Loan Agreement. (o) Note Agreement Events of Default. Any one or more Events of Default occurs under the Note Agreement. SECTION 11.2 Remedies. Upon the occurrence of an Event of Default and at the request of each of the Revolving Credit Lenders, the Agent shall, by notice to the Borrower: (a) Acceleration; Termination of Facilities. Declare the principal of and interest on the Revolving Loans, the Revolving Credit Notes and the Reimbursement Obligations at the time outstanding, and all other amounts owed to the Revolving Credit Lenders and to the Agent under this Agreement or any of the other Loan Documents (including, without limitation, all L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) and all other obligations, to be forthwith due and payable, whereupon the same shall immediately become due and payable without presentment, demand, protest or other notice of any kind, all of which are expressly waived, anything in this Agreement or the other Loan Documents to the contrary notwithstanding, and terminate the Credit Facility and any right of the Borrower to request borrowings or Letters of Credit thereunder; provided, that upon the occurrence of an Event of Default specified in Section 11.1(h) or (i), the Credit Facility shall be automatically terminated and all obligations shall automatically become due and payable, without notice, declaration or demand of any kind. (b) Letters of Credit. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding paragraph, 84 require the Borrower at such time to deposit in a cash collateral account opened by the Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts held in such cash collateral account shall be applied by the Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay the other Obligations. After all such Letters of Credit shall have expired or been fully drawn upon, the Reimbursement Obligation shall have been satisfied and all other Obligations shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower. (c) Rights of Collection. Exercise on behalf of the Revolving Credit Lenders all of its other rights and remedies under this Agreement, the other Loan Documents and Applicable Law, in order to satisfy all of the Borrower's obligations. (d) Setoff. Exercise or direct any Revolving Credit Lender to exercise any and all setoff rights as described in Section 13.3 hereof or as otherwise provided under Applicable Law. SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc. The enumeration of the rights and remedies of the Agent and the Revolving Credit Lenders set forth in this Agreement is not intended to be exhaustive and the exercise by the Agent and the Revolving Credit Lenders of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in addition to any other right or remedy given hereunder or under the Loan Documents or that may now or hereafter exist in law or in equity or by suit or otherwise. No delay or failure to take action on the part of the Agent or any Revolving Credit Lender in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude other or further exercise thereof or the exercise of any other right, power or privilege or shall be construed to be a waiver of any Event of Default. No course of dealing between the Borrower, the Agent and the Revolving Credit Lenders or their respective agents or employees shall be effective to change, modify or discharge any provision of this Agreement or any of the other Loan Documents or to constitute a waiver of any Event of Default. ARTICLE XII THE AGENT SECTION 12.1 Appointment. Each of the Revolving Credit Lenders hereby irrevocably designates and appoints First Union as Agent of 85 such Revolving Credit Lender under this Agreement and the other Loan Documents and each such Revolving Credit Lender irrevocably authorizes First Union as Agent for such Revolving Credit Lender, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement and such other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement or such other Loan Documents, the Agent shall not have any duties or responsibilities, except-those expressly set forth herein and therein, or any fiduciary relationship with any Revolving Credit Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or the other Loan Documents or otherwise exist against the Agent. SECTION 12.2 Delegation of Duties. The Agent may execute any of its respective duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by the Agent. SECTION 12.3 Exculpatory Provisions. Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in fact, Subsidiaries or Affiliates shall be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or the other Loan Documents (except for actions occasioned solely by its or such Person's own gross negligence or willful misconduct), or (b) responsible in any manner to any of the Revolving Credit Lenders for any recitals, statements, representations or warranties made by the Borrower or any of its Subsidiaries or any officer thereof contained in this Agreement or the other Loan Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or the other Loan Documents or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the other Loan Documents or for any failure of the Borrower or any of its Subsidiaries to perform its obligations hereunder or thereunder. The Agent shall not be under any obligation to any Revolving Credit Lender to ascertain or to, inquire as to the observance or performance of any of the agreements contained in, or conditions of this Agreement, or to inspect the properties, books or records of the Borrower or any of its Subsidiaries. 86 SECTION 12.4 Reliance by the Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by the Agent. The Agent may deem and treat the payee of any Revolving Credit Note as the owner thereof for all purposes unless such Revolving Credit Note shall have been transferred in accordance with Section 13.10 hereof. The Agent shall be fully justified in failing or refusing to take any action under this Agreement and the other Loan Documents unless it shall first receive such advice or concurrence of the Required Revolving Credit Lenders (or, when expressly required hereby or by the relevant other Loan Document, all the Revolving Credit Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Revolving Credit Lenders against any and all liability and expenses which may be incurred by it by reason of taking or continuing to take any such action except for its own gross negligence or willful misconduct. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the Revolving Credit Notes in accordance with a request of the Required Revolving Credit Lenders (or, when expressly required hereby, all the Revolving Credit Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Revolving Credit Lenders and all future holders of the Revolving Credit Notes. SECTION 12.5 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless it has received notice from a Revolving Credit Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Agent receives such a notice, it shall promptly give notice thereof to the Revolving Credit Lenders. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Revolving Credit Lenders; provided that unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable. SECTION 12.6 Non-Reliance on the Agent and other Revolving Credit Lenders. Each Revolving Credit Lender expressly acknowledges that neither the Agent nor any of its respective officers, directors, 87 employees, agents, attorneys-in-fact, Subsidiaries or Affiliates has made any representations or warranties to it and that no act by the Agent hereinafter taken, including any review of the affairs of the Borrower or any of its Subsidiaries, shall be deemed to constitute any representation or warranty by the Agent to any Revolving Credit Lender. Each Revolving Credit Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Revolving Credit Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and credit worthiness of the Borrower and its Subsidiaries and made its own decision to make its Loans and issue or participate in Letters of Credit hereunder and enter into this Agreement. Each Revolving Credit Lender also represents that it will, independently and without reliance upon the Agent or any other Revolving Credit Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and credit worthiness of the Borrower and its Subsidiaries. Except for notices, reports and other documents expressly required to be furnished to the Revolving Credit Lenders by the Agent hereunder or by the other Loan Documents, the Agent shall not have any duty or responsibility to provide any Revolving Credit Lender with any credit or other information concerning the business, operations, property, financial and other condition or credit worthiness of the Borrower or any of its Subsidiaries which may come into the possession of the Agent or any of its respective officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates. SECTION 12.7 Indemnification. The Revolving Credit Lenders agree to indemnify the Agent in its capacity as such and (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to the respective amounts of their Commitment Percentages, from and against, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Revolving Credit Notes or any Reimbursement Obligation) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of this Agreement or the other Loan Documents, or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Revolving 88 Credit Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Agent's bad faith, gross negligence or willful misconduct. The agreements in this Section 12.7 shall survive the payment of the Revolving Credit Notes, any Reimbursement Obligation and all other amounts payable hereunder and the termination of this Agreement. SECTION 12.8 The Agent in Its Individual Capacity. The Agent and its respective Subsidiaries and Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Agent were not an Agent hereunder. With respect to any Revolving Loans made or renewed by it and any Revolving Credit Note issued to it and with respect to any Letter of Credit issued by it or participated in by it, the Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Revolving Credit Lender and may exercise the same as though it were not an Agent, and the terms "Revolving Credit Lender" and "Revolving Credit Lenders" shall include the Agent in its individual capacity. SECTION 12.9 Resignation of the Agent; Successor Agent. Subject to the appointment and acceptance of a successor as provided below, the Agent may resign at any time by giving notice thereof to the Revolving Credit Lenders and the Borrower. Upon any such resignation, the Required Revolving Credit Lenders shall have the right to appoint a successor Agent, which successor shall have minimum capital and surplus of at least $500,000,000. If no successor Agent shall have been so appointed by the Required Revolving Credit Lenders and shall have accepted such appointment within thirty (30) days after the Agent's giving of notice of resignation, then the Agent may, on behalf of the Revolving Credit Lenders, appoint a successor Agent, which successor shall have minimum capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 12.9 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. SECTION 12.10 Settlement. The Agent and the Revolving Credit Lenders hereby agree that each Revolving Credit Lender's funded portion of the Revolving Loans is intended to be equal at all times to such Revolving Credit Lender's Commitment Percentage of the outstanding Revolving Loans. The Agent and the Revolving Credit 89 Lenders agree (which agreement shall not be for the benefit of or enforceable by any Borrower) that in order to facilitate the administration of this Agreement and the other Loan Documents, at the option of the Agent, notwithstanding anything in this Agreement to the contrary, settlement among them as to the Revolving Loans may take place on a periodic basis in accordance with the following provisions: (a) The Agent shall request settlement ("Settlement") with the Revolving Credit Lenders on a basis not less frequently than once during each seven (7) day period, or on a more frequent basis if so determined by the Agent, with respect to each outstanding Revolving Loan by notifying the other Revolving Credit Lenders by telecopy, telephone or other similar form of transmission, of such requested Settlement, no later than 11:00 a.m. (Charlotte, North Carolina time) on the date of such requested Settlement (the "Settlement Date"). Each Revolving Credit Lender shall make the amount of such Revolving Credit Lender's Commitment Percentage of the outstanding principal amount of the Revolving Loans with respect to which Settlement is requested available to the Agent, in same day funds, to such account of the Agent as the Agent may designate, not later than 11:00 a.m. (Charlotte, North Carolina time), on the Settlement Date applicable thereto. Such amounts made available to the Agent shall be applied against the amounts of the Revolving Loans and shall constitute Revolving Loans of such Revolving Credit Lenders. If any such amount is not made available to the Agent by any Revolving Credit Lender on the Settlement Date applicable thereto, the Agent shall be entitled to recover such amount on demand from such Revolving Credit Lender together with interest thereon at the Federal Funds Rate for the first three (3) days from and after the Settlement Date and thereafter at the interest rate then applicable to the Revolving Loans with respect to which Settlement is to be made. (b) If any payments are received by the Agent which, in accordance with the terms of this Agreement are to be applied to the reduction of the Revolving Loans, the Agent may apply such payments to its Revolving Loans. If, as of any Settlement Date, payments received since the then immediately preceding Settlement Date have been applied to the Agent's Revolving Loans as provided for in the immediately preceding sentence, then the Agent shall pay such amounts to the Revolving Credit Lenders, to be applied to the outstanding Revolving Loans of such Revolving Credit Lenders, such that each Revolving Credit Lender shall have outstanding, as of such Settlement Date, after giving effect to such payments, its Commitment Percentage of such Revolving Loans; provided, that the Agent may offset payments due its pursuant to this sentence against payments due to the Agent pursuant to subsection (a) hereof on the applicable Settlement Date, 90 and require the other Revolving Credit Lenders, as applicable, to make only the net amount of the payment due. ARTICLE XIII MISCELLANEOUS SECTION 13.1 Notices. (a) Method of Communication. Except as otherwise provided in this Agreement, all notices and communications hereunder shall be in writing, or by telephone subsequently confirmed in writing. Any notice shall be effective if delivered by hand delivery or sent via telecopy, recognized overnight courier service or certified mail, return receipt requested, and shall be presumed to be received by a party hereto (i) on the date of delivery if delivered by hand or sent by telecopy, (ii) on the next Business Day if sent by recognized overnight courier service and (iii) on the third Business Day following the date sent by certified mail, return receipt requested. (b) Addresses for Notices. Notices to any party shall be sent to it at the following addresses, or any other address as to which all the other parties are notified in writing. If to the Borrower: WLR Foods, Inc. 800 Co-op Drive Timberville, Virginia 22853 Attention: Robert Ritter, CFO Telephone No.: (540) 896-7001 Telecopy No.: (540) 896-0498 Or, if sent by mail: WLR Foods, Inc. P.O. Box 7000 Broadway, Virginia 22815 Attention: Robert Ritter, CFO If to First Union as Revolving Credit Lender: First Union National Bank 301 College Street, DC-5 NC 0737 Charlotte, NC 28288-0737 Attention: Julie Bouhuys, SVP Telephone No.: (704) 383-0349 Telecopy No.: (704) 374-3300; and First Union National Bank 201 South Jefferson Street 91 Roanoke, Virginia 24011 Attention: George Calfo Telephone No.: (540) 563-7769 Telecopy No.: (540) 561-5262 If to CoreStates Bank, N.A. as Revolving Credit Lender: CoreStates Bank, N.A. FC 1-8-3-8 1345 Chestnut Street Philadelphia, Pennsylvania 19102 Attention: John D. Brady Telephone No.: (215) 786-2160 Telecopy No.: (215) 973-6745 92 If to Harris Trust and Savings Bank as Revolving Credit Lender: Harris Trust and Savings Bank 111 West Monroe Chicago, Illinois 60690 Attention: Agribusiness Division Telephone No.: (312) 461-3795 Telecopy No.: (312) 765-8095 If to Crestar Bank as Crestar Bank Revolving Credit Lender: 510 S. Jefferson Street Roanoke, VA 24011 Attention: George W. Coleman, Jr. Telephone No.: 540-982-3285 Telecopy No.: 540-982-3056 If to the Agent: First Union National Bank 301 College Street, DC-5 NC 0737 Charlotte, NC 28288-0737 Attention: Julie Bouhuys, SVP Telephone No.: (704) 383-0349 Telecopy No.: (704) 374-3300; and First Union National Bank 201 South Jefferson Street Roanoke, Virginia 24011 Attention: George Calfo Telephone No.: (540) 563-7769 Telecopy No.: (540) 561-5262 SECTION 13.2 Expenses. The Borrower will pay all out-of-pocket expenses of the Agent in connection with: (i) the preparation, execution and delivery of this Agreement and each of the other Loan Documents, whenever the same shall be executed and delivered, including all out-of-pocket syndication and due diligence expenses, appraiser's fees, search fees, title insurance premiums, recording fees, taxes and reasonable fees and disbursements of counsel for the Agent; (ii) the preparation, execution and delivery of any waiver, amendment or consent by the Agent or the Revolving Credit Lenders relating to this Agreement or any of the other Loan Documents including reasonable fees and disbursements of counsel for the Agent, search fees, appraiser's fees, recording fees and taxes imposed in connection therewith; and (iii) administering, monitoring, negotiating and/or enforcing their respective rights under the Credit Facility, including consulting with one or more persons, including appraisers, accountants, engineers and attorneys, concerning or related to the nature, scope or value of any Collateral or any right or remedy of the Agent or any Revolving Credit Lender hereunder or under any of the other Loan Documents, including any review of factual matters in 93 connection therewith, which expenses shall include the reasonable fees and disbursements of such Persons. SECTION 13.3 Set-off. In addition to any rights now or hereafter granted under Applicable Law and not by way of limitation of any such rights, upon and after the occurrence of any Event of Default and during the continuance thereof, the Revolving Credit Lenders and any assignee or participant of a Revolving Credit Lender in accordance with Section 13.10 are hereby authorized by the Borrower at any time or from time to time, without notice to the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, time or demand, including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured, excluding government securities required by Applicable Law to be held as security for worker's compensation and similar claims) and any other indebtedness at any time held or owing by the Revolving Credit Lenders, or any such assignee or participant to or for the credit or the account of the Borrower against and on account of the Obligations irrespective of whether or not (a) the Revolving Credit Lenders shall have made any demand under this Agreement or any of the other Loan Documents or (b) the Agent shall have declared any or all of the Obligations to be due and payable as permitted by Section 11.2 and although such obligations shall be contingent or unmatured. SECTION 13.4 Governing Law. This Agreement, the Revolving Credit Notes and the other Loan Documents, unless otherwise expressly set forth therein, shall be governed by, construed and enforced in accordance with the laws of the State of New York, without reference to the conflicts or choice of law principles thereof. SECTION 13.5 Consent to Jurisdiction. The Borrower hereby irrevocably consents to the personal jurisdiction of the United States District Court for the Southern District of New York and the Supreme Court of the State of New York - County of New York in any action, claim or other proceeding arising out of any dispute in connection with this Agreement, the Revolving Credit Notes and the other Loan Documents, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations. The Borrower hereby irrevocably consents to the service of a summons and complaint and other process in any action, claim or proceeding brought by the Agent or any Revolving Credit Lender in connection with this Agreement, the Revolving Credit Notes or the other Loan Documents, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations, on behalf of itself or its property, in the manner specified in Section 13.1. Nothing in this Section 13.5 shall affect the right of the Agent or any Revolving Credit Lender to serve legal process in any other manner permitted by Applicable Law or affect the 94 right of the Agent or any Revolving Credit Lender to bring any action or proceeding against the Borrower or its properties in the courts of any other jurisdictions. SECTION 13.6 Waiver of Jury Trial; Waiver of Punitive Damages. (a) WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE AGENT, EACH REVOLVING CREDIT LENDER AND THE BORROWER HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING, OUT OF OR ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. (b) Waiver of Punitive Damages. The Borrower and the Agent, on behalf of itself and the Revolving Credit Lenders, agree that they shall not have a remedy of punitive or exemplary damages against the other in any Dispute and hereby waive any right or claim to punitive or exemplary damages they have now or which may arise in the future in connection with any Dispute whether the Dispute is resolved by arbitration or judicially. SECTION 13.7 Reversal of Payments. To the extent the Borrower makes a payment or payments to the Agent for the ratable benefit of the Revolving Credit Lenders or the Agent receives any payment or proceeds of the Collateral which payments or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds repaid, the obligations or part thereof intended to be satisfied shall be revived and continued in full force and effect as if such payment or proceeds had not been received by the Agent. SECTION 13.8 Injunctive Relief. The Borrower recognizes that, in the event the Borrower fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, any remedy of law may prove to be inadequate relief to the Revolving Credit Lenders. Therefore, the Borrower agrees that the Revolving Credit Lenders, at the Revolving Credit Lenders' option, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages. SECTION 13.9 Accounting Matters. All financial and accounting calculations, measurements and computations made for any purpose relating to this Agreement, including, without limitation, all computations utilized by the Borrower or any Subsidiary thereof to determine compliance with any covenant contained herein, shall, except 95 as otherwise expressly contemplated hereby or unless there is an express written direction by the Agent to the contrary agreed to by the Borrower, be performed in accordance with GAAP. In the event that changes in GAAP shall be mandated by the Financial Accounting Standards Board, or any similar accounting body of comparable standing, or shall be recommended by the Borrower's certified public accountants, to the extent that such changes would modify such accounting terms or the interpretation or computation thereof, such changes shall be followed in defining such accounting terms only from and after the date the Borrower, the Agent and the Revolving Credit Lenders shall have amended this Agreement to the extent necessary to reflect any such changes in the financial covenants and other terms and conditions of this Agreement. SECTION 13.10 Successors and Assigns; Participations. (a) Benefit of Agreement. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Agent and the Revolving Credit Lenders, all future holders of the Revolving Credit Notes, and their respective successors and assigns, except that the Borrower shall not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Revolving Credit Lender. Nothing set forth in any guaranty shall impair, as between the Borrower, the Agent and the Revolving Credit Lenders, the obligations of the Borrower hereunder and under the other Loan Documents. (b) Assignment by Revolving Credit Lenders. Each Revolving Credit Lender may, with the consent of the Agent, which consent shall not be unreasonably withheld, assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including, without limitation, all or a portion of the Extensions of Credit at the time owing to it and the Revolving Credit Notes held by it); provided that: (i) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Revolving Credit Lender's rights and obligations under this Agreement with respect to the Credit Facility and shall be accompanied by a like assignment on a pro rata basis of any Term Loan attributable to such Revolving Credit Lender in its capacity as a Term Lender under the Term Loan Agreement; (ii) if less than all of the assigning Revolving Credit Lender's Commitment is to be assigned, the Commitment so assigned (plus, if applicable, the amount of any Term Loan or any portion thereof also assigned by such Revolving Credit Lender in its capacity as a Term Lender under the Term Loan Agreement) shall not be less than $5,000,000; 96 (iii) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance in the form of Exhibit "I" attached hereto (an "Assignment and Acceptance"), together with any Revolving Credit Note or Revolving Credit Notes subject to such assignment; (iv) such assignment shall not, without the consent of the Borrower, require the Borrower to file a registration statement with the Securities and Exchange Commission or apply to or qualify the Revolving Loans or the Revolving Credit Notes under the blue sky laws of any state; and (v) the assigning Revolving Credit Lender shall pay to the Agent an assignment fee of $5,000 upon the execution by such Revolving Credit Lender of the Assignment and Acceptance; provided that no such fee shall be payable upon any assignment by a Revolving Credit Lender to an Affiliate thereof. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five (5) Business Days after the execution thereof, (A) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Revolving Credit Lender hereby and (B) the assigning Revolving Credit Lender thereunder shall, to the extent provided in such assignment, be released from its obligations under this Agreement. (c) Rights and Duties Upon Assignment. By executing and delivering an Assignment and Acceptance, the assigning Revolving Credit Lender thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as set forth in such Assignment and Acceptance. (d) Register. The Agent shall maintain a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Revolving Credit Lenders and the amount of the Extensions of Credit with respect to each Revolving Credit Lender from time to time (the "Register"). The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Agent and the Revolving Credit Lenders may treat each person whose name is recorded in the Register as a Revolving Credit Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Revolving Credit Lender at any reasonable time and from time to time upon reasonable prior notice. 97 (e) Issuance of New Revolving Credit Notes. Upon its receipt of an Assignment and Acceptance executed by an assigning Revolving Credit Lender and an Eligible Assignee together with any Revolving Credit Note or Revolving Credit Notes subject to such assignment and the written consent to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is substantially in the form of Exhibit "I": (i) accept such Assignment and Acceptance; (ii) record the information contained therein in the Register; (iii) give prompt notice thereof to the Revolving Credit Lenders and the Borrower; and (iv) promptly deliver a copy of such Assignment and Acceptance to the Borrower. Within five (5) Business Days after receipt of notice, the Borrower shall execute and deliver to the Agent, in exchange for the surrendered Revolving Credit Note or Revolving Credit Notes, a new Revolving Credit Note or Revolving Credit Notes to the order of such Eligible Assignee in amounts equal to the Commitment assigned to it pursuant to such Assignment and Acceptance and a new Revolving Credit Note or Revolving Credit Notes to the order of the assigning Revolving Credit Lender in an amount equal to the Commitment retained by it hereunder. Such new Revolving Credit Note or Revolving Credit Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Revolving Credit Note or Revolving Credit Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of the assigned Revolving Credit Notes delivered to the assigning Revolving Credit Lender. The new Revolving Credit Note or Revolving Credit Notes shall be in substitution for and not in cancellation of, release or satisfaction of the surrendered Revolving Credit Note or Revolving Credit Notes. (f) Participation. Each Revolving Credit Lender may, with the consent of the Agent, which consent shall not be unreasonably withheld, sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment and its Extensions of Credit and the Revolving Credit Notes held by it); provided that: (i) each such participation shall be in an amount not less than $5,000,000; 98 (ii) such Revolving Credit Lender's obligations under this Agreement including, without limitation, its Commitment, shall remain unchanged; (iii) such Revolving Credit Lender shall remain solely responsible to the other parties hereto for the performance of such obligations; (iv) such Revolving Credit Lender shall remain the holder of the Revolving Credit Notes held by it for all purposes of this Agreement; (v) the Borrower, the Agent and the other Revolving Credit Lenders shall continue to deal solely and directly with such Revolving Credit Lender in connection with such Revolving Credit Lender's rights and obligations under this Agreement; (vi) such Revolving Credit Lender shall not permit such participant the right to approve any waivers, amendments or other modifications to this Agreement or any other Loan Document other than waivers, amendments or modifications which would reduce the principal of or the interest rate on any Revolving Loan or Reimbursement Obligation, extend the term or increase the amount of the Commitment of such participant, reduce the amount of any fees to which such participant is entitled or extend any scheduled payment date for principal; and (vii) any such disposition shall not, without the consent of the Borrower, require the Borrower to file a registration statement with the Securities and Exchange Commission or apply to qualify the Revolving Loans or the Revolving Credit Notes under the blue sky law of any state. (g) Disclosure of Information; Confidentiality. The Agent and the Revolving Credit Lenders shall hold all non-public information obtained pursuant to the Loan Documents in accordance with their customary procedures for handling confidential information. Any Revolving Credit Lender may, in connection with any assignment, proposed assignment, participation or proposed participation pursuant to this Section 13.10, disclose to the assignee, participant, proposed assignee or proposed participant, any information relating to the Borrower furnished to such Revolving Credit Lender by or on behalf of the Borrower; provided that prior to any such disclosure, each such assignee, proposed assignee, participant or proposed participant shall agree with the Borrower or such Revolving Credit Lender (which in the case of an agreement with only such Revolving Credit Lender, the Borrower shall be recognized as a third party beneficiary thereof) to preserve the confidentiality of any confidential information relating to the Borrower received from such Revolving Credit Lender. 99 (h) Certain Pledges or Assignments. Nothing herein, or in any other document regarding the transaction herein, shall prohibit any Revolving Credit Lender from pledging or assigning any Revolving Credit Note, including collateral therefor, to any Federal Reserve Bank in accordance with Applicable Law. SECTION 13.11 Amendments, Waivers and Consents; Renewal. Except as set forth below, any term, covenant, agreement or condition of this Agreement or any of the other Loan Documents may be amended or waived by the Required Revolving Credit Lenders, and any consent given by the Required Revolving Credit Lenders, if, but only if, such amendment, waiver or consent is in writing signed by the Required Revolving Credit Lenders (or by the Agent with the consent of the Required Revolving Credit Lenders) and delivered to the Agent and, in the case of an amendment, signed by the Borrower; provided that no amendment, waiver or consent shall (a) change the amount or extend the time of the obligation of the Revolving Credit Lenders to make Revolving Loans or issue or participate in Letters of Credit (including without limitation pursuant to Section 2.6 but not including changes or adjustments to the Borrowing Base), (b) change the originally scheduled time or times of payment of the principal of any Revolving Loan or Reimbursement Obligation or the time or times of payment of interest on any Revolving Loan or Reimbursement Obligation, (c) decrease the rate of interest payable on any Revolving Loan or Reimbursement Obligation, (d) change the amount or time of payment of any fees payable by the Borrower hereunder, (e) release the Borrower (or any of them) from all or any portion of the Obligations hereunder; (f) release any Collateral except as specifically authorized in the Loan Documents and in connection with the approved asset sales set forth in Article X hereof; (g) amend, waive or alter any provision of Article I (Definitions), Article IX (Financial Covenants), Article X (Negative Covenants) or Article XI (Default and Remedies) hereof; or (h) amend the provisions of this Section 13.11 or the definition of Required Revolving Credit Lenders, without the prior written consent of each Revolving Credit Lender. In addition, no amendment, waiver or consent to the provisions of Article XII shall be made without the written consent of the Agent. SECTION 13.12 Performance of Duties. The Borrower's obligations under this Agreement and each of the Loan Documents shall be performed by the Borrower at its sole cost and expense. SECTION 13.13 Indemnification. The Borrower agrees to reimburse the Agent and the Revolving Credit Lenders for all reasonable costs and expenses, including all counsel, appraisal, or other expert or consultant fees and disbursements incurred, and to indemnify and hold the Agent and the Revolving Credit Lenders harmless from and against 100 all losses suffered by the Agent and the Revolving Credit Lenders in connection with (i) the exercise by the Agent or the Revolving Credit Lenders of any right or remedy granted to them under this Agreement or any of the other Loan Documents, (ii) any claim, and the prosecution or defense thereof, arising out of or in any way connected with this Agreement or any of the other Loan Documents, and (iii) the collection or enforcement of the Obligations or any of them; provided that the Borrower shall not be obligated to reimburse the Agent or any Revolving Credit Lender for costs and expenses, or indemnify the Agent or any Revolving Credit Lender for any loss, resulting from the gross negligence or willful misconduct of the Agent or any Revolving Credit Lender. SECTION 13.14 All Powers Coupled with Interest. All powers of attorney and other authorizations granted to the Revolving Credit Lenders, the Agent and any Persons designated by the Agent or any Revolving Credit Lender pursuant to any provisions of this Agreement or any of the other Loan Documents shall be deemed coupled with an interest and shall be irrevocable so long as any of the Obligations remain unpaid or unsatisfied or the Credit Facility has not been terminated. SECTION 13.15 Survival of Indemnities. Notwithstanding any termination of this Agreement, the indemnities to which the Agent and the Revolving Credit Lenders are entitled under the provisions of this Article XIII and any other provision of this Agreement and the Loan Documents shall continue in full force and effect and shall protect the Agent and the Revolving Credit Lenders against events arising after such termination as well as before. SECTION 13.16 Titles and Captions. Titles and captions of Articles, Sections and subsections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement. SECTION 13.17 Severability of Provisions. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remainder of such provision or the remaining provisions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 13.18 Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and shall be binding upon all parties, their successors and assigns, and all of which taken together shall constitute one and the same agreement. 101 SECTION 13.19 Term of Agreement. This Agreement shall remain in effect from the Closing Date through and including the date upon which all Obligations shall have been indefeasibly and irrevocably paid and satisfied in full. No termination of this Agreement shall affect the rights and obligations of the parties hereto arising prior to such termination. SECTION 13.20 Adjustments. If any Revolving Credit Lender (a "Benefitted Lender") shall at any time receive any payment of all or part of its Extensions of Credit, or interest thereon, or if any Revolving Credit Lender shall at any time receive any collateral in respect to its Extensions of Credit (whether voluntarily or involuntarily, by setoff or otherwise) in a greater proportion than any such payment to and collateral received by any other Revolving Credit Lender, if any, in respect of such other Revolving Credit Lender's Extensions of Credit, or interest thereon, such Benefitted Lender shall purchase for cash from the other Revolving Credit Lenders such portion of each such other Revolving Credit Lender's Extensions of Credit or shall provide such other Revolving Credit Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Revolving Credit Lenders based upon the Revolving Credit Lenders, Commitment Percentages; provided that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned to the extent of such recovery, but without interest. The Borrower agrees that each Revolving Credit Lender so purchasing a portion of another Revolving Credit Lender's Extensions of Credit may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Revolving Credit Lender were the direct holder of such portion. 102 WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers, all as of the day and year first written above. WLR FOODS, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Vice President WAMPLER FOODS, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Treasurer CASSCO ICE & COLD STORAGE, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Vice President WAMPLER SUPPLY COMPANY, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Vice President VALLEY RAIL SERVICE, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Vice President 103 FIRST UNION NATIONAL BANK, as Agent and Revolving Credit Lender By:__/S/ Julie Bouhuys__ Name: Julie Bouhuys Title: Senior Vice President Tranche I Commitment Percentage: 35% Tranche I Commitment: $17,500,000 Tranche II Commitment Percentage: 38.8235% Tranche II Commitment: $21,352,941 CORESTATES BANK, N.A. By:__/S/ Carol A. Williams__ Name: Carol A. Williams Title: Senior Vice President Tranche I Commitment Percentage: 35% Tranche I Commitment: $17,500,000 Tranche II Commitment Percentage: 32.9412% Tranche II Commitment: $18,117,647 HARRIS TRUST AND SAVINGS BANK By:__/S/ Carl A. Blackham__ Name: Carl A. Blackham Title: Vice President Tranche I Commitment Percentage: 20% Tranche I Commitment: $10,000,000 Tranche II Commitment Percentage: 18.8235% Tranche II Commitment: $10,352,941 104 CRESTAR BANK By:__/S/ George W. Coleman, Jr.__ Name: George W. Coleman, Jr. Title: Senior Vice President Tranche I Commitment Percentage: 10% Tranche I Commitment: $5,000,000 Tranche II Commitment Percentage: 9.4118% Tranche II Commitment: $5,176,471 105 EX-2.2 3 FORM REVOLVING CREDIT NOTE Exhibit 2.2 REVOLVING CREDIT NOTE (First Union National Bank-Tranche II) $21,352,941 February 25, 1998 FOR VALUE RECEIVED, the undersigned, WLR Foods, Inc., a corporation organized under the laws of the Commonwealth of Virginia ("WLR"), Cassco Ice & Cold Storage, Inc., a corporation organized under the laws of the Commonwealth of Virginia ("Cassco"), Wampler Foods, Inc., a corporation organized under the laws of the Commonwealth of Virginia ("Wampler"), Wampler Supply Company, Inc., a corporation organized under the laws of the Commonwealth of Virginia ("Wampler Supply"), and Valley Rail Service, Inc., a corporation organized under the laws of the Commonwealth of Virginia ("Valley," and, together with WLR, Cassco, Wampler, and Wampler Supply, the "Borrower"), hereby promise to pay to the order of First Union National Bank (the "Bank"), at the times, at the place and in the manner provided in the Revolving Credit Agreement, defined herein, the principal sum of up to TWENTY-ONE MILLION THREE HUNDRED AND FIFTY-TWO THOUSAND NINE HUNDRED AND FORTY- ONE Dollars ($21,352,941), or, if less, the aggregate unpaid principal amount of all Revolving Credit Loans disbursed by the Bank under the Revolving Credit Agreement (as defined herein) together with interest at the rates as in effect from time to time with respect to each portion of the principal amount hereof, determined and payable as provided in the Revolving Credit Agreement. This Note is a Revolving Credit Note referred to in, and is entitled to the benefits of, the Revolving Credit Agreement dated as of February 25, 1998 (as amended, restated or otherwise modified, the "Revolving Credit Agreement") by and among the Borrower, the Lenders (including the Bank) which are or may become parties thereto (the "Lenders"), and First Union National Bank, as Agent. The Revolving Credit Agreement contains, among other things, provisions for the time, place and manner of payment of this Note, the determination of the interest rate borne by and fees payable in respect of this Note, acceleration of the payment of this Note upon the happening of certain stated events and the mandatory repayment of this Note under certain circumstances. The terms of the Revolving Credit Agreement are incorporated herein by reference. The Borrower agrees to pay on demand all costs of collection, including reasonable attorneys' fees, if any part of this Note, principal or interest, is collected with the aid of an attorney. Presentment for payment, notice of dishonor, protest and notice of protest are hereby waived. 1 THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO CONFLICTS OR CHOICE OF LAW PRINCIPLES THEREOF. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 2 IN WITNESS WHEREOF, the Borrower has caused this Revolving Credit Note to be executed under seal by a duly authorized officer as of the day and year first above written. WLR FOODS, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Vice President CASSCO ICE & COLD STORAGE, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Vice President WAMPLER FOODS, INC. By:__/S/ Robert T. Ritter Robert T. Ritter Treasurer WAMPLER SUPPLY COMPANY, INC. By:__/S/ Robert T. Ritter Robert T. Ritter Vice President VALLEY RAIL SERVICE, INC. By:__/S/ Robert T. Ritter Robert T. Ritter Vice President 3 EX-2.3 4 TERM LOAN AGREEMENT Exhibit 2.3 TERM LOAN AGREEMENT dated as of February 25, 1998, by and among WLR FOODS, INC., WAMPLER FOODS, INC., CASSCO ICE & COLD STORAGE, INC., WAMPLER SUPPLY COMPANY, INC., VALLEY RAIL SERVICE, INC., as Borrowers, the Term Lenders referred to herein, and FIRST UNION NATIONAL BANK, as Agent 1 TABLE OF CONTENTS ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 1.1 Definitions . . . . . . . . . . 2 SECTION 1.2 General . . . . . . . . . . . . 15 SECTION 1.3 Other Definitions and Provisions16 ARTICLE II TERM LOAN FACILITY . . . . . . . . . . . . . . . . . . . 16 SECTION 2.1 Term Loan . . . . . . . . . . . 16 SECTION 2.2 Term Loan Principal Classification . . . . . . . . 16 SECTION 2.3 Repayment of Term Loan . . . . 16 SECTION 2.4 Optional Prepayments of Term Loan . . . . . . . . . . . . . 17 SECTION 2.5 Term Notes . . . . . . . . . . 17 SECTION 2.6 Termination of Term Loan . . . 17 SECTION 2.7 Use of Proceeds . . . . . . . . 17 ARTICLE III [RESERVED] . . . . . . . . . . . . . . . . . . . . 17 ARTICLE IV GENERAL LOAN PROVISIONS . . . . . . . . . . . . . . . . 18 SECTION 4.1 Interest . . . . . . . . . . . 18 SECTION 4.2 Amendment and Agency Fees . . 19 SECTION 4.3 Manner of Payment . . . . . . 19 SECTION 4.4 Crediting of Payments and Proceeds . . . . . . . . . . . 20 SECTION 4.5 [RESERVED] . . . . . . . . . . 20 SECTION 4.6 Capital Requirements . . . . . 20 SECTION 4.7 Taxes . . . . . . . . . . . . . 20 SECTION 4.8 Mandatory Prepayments . . . . . 22 SECTION 4.9 Approved Miscellaneous Asset Sales . . . . . . . . . . . . . 23 ARTICLE V CLOSING; CONDITIONS OF CLOSING AND BORROWING . . . . . 23 SECTION 5.1 Closing . . . . . . . . . . . . 23 SECTION 5.2 Conditions to Closing and Initial Term Loan . . . . . . . 24 2 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BORROWER . . . . . 26 SECTION 6.1 Representations and Warranties 26 SECTION 6.2 Survival of Representations and Warranties Etc . . . . . . 33 ARTICLE VII FINANCIAL INFORMATION AND NOTICES . . . . . . . . . . . 33 SECTION 7.1 Financial Statements and Projections . . . . . . . . . . 33 SECTION 7.2 Officer's Compliance Certificate . . . . . . . . . 35 SECTION 7.3 Accountants' Certificate . . . 35 SECTION 7.4 Other Reports . . . . . . . . . 35 SECTION 7.5 Notice of Litigation and Other Matters . . . . . . . . . 36 SECTION 7.6 Accuracy of Information . . . . 37 ARTICLE VIII AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . 37 SECTION 8.1 Preservation of Corporate Existence and Related Matters . 37 SECTION 8.2 Maintenance of Property . . . . 37 SECTION 8.3 Insurance . . . . . . . . . . . 38 SECTION 8.4 Accounting Methods and Financial Records . . . . . . . 38 SECTION 8.5 Payment and Performance of Obligations . . . . . . . . . . 38 SECTION 8.6 Compliance With Laws and Approvals . . . . . . . . . . . 39 SECTION 8.7 Environmental Laws . . . . . . 39 SECTION 8.8 Compliance with ERISA . . . . . 39 SECTION 8.9 Compliance With Agreements . . 39 SECTION 8.10 Conduct of Business . . . . . . 40 SECTION 8.11 Visits and Inspections . . . . 40 SECTION 8.12 Further Assurances . . . . . . 40 SECTION 8.13 Meeting with Term Lenders . . . 40 SECTION 8.14 Year 2000 Issues . . . . . . . 40 SECTION 8.15 Employment of Outside Accountants and Financial Consultants . . . . . . . . . . 40 SECTION 8.16 Maintenance of Bank Accounts . 41 SECTION 8.17 Interest Rate Protection . . . 41 ARTICLE IX FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . 41 SECTION 9.1 Minimum Monthly EBITDA . . . . 41 SECTION 9.2 Minimum Quarterly EBITDA . . . 42 3 SECTION 9.3 Limitation on Capital Expenditures . . . . . . . . . 42 ARTICLE X NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . 42 SECTION 10.1 Limitations on Debt . . . . . . 43 SECTION 10.2 Limitations on Contingent Obligations . . . . . . . . . 43 SECTION 10.3 Limitations on Liens . . . . . 43 SECTION 10.4 Limitations on Acquisitions . . 44 SECTION 10.5 Limitations on Mergers, Liquidation and New Business Ventures . . . . . . . . . . . 44 SECTION 10.6 Limitations on Sale of Assets . 44 SECTION 10.7 Transactions with Affiliates . 45 SECTION 10.8 Certain Accounting Changes . . 45 SECTION 10.9 Compliance with ERISA . . . . . 45 SECTION 10.10 Limitations on New Equity, Dividends and Distributions . . 46 SECTION 10.11 Transfers to Subsidiaries . . . 46 SECTION 10.12 Limitations on Investments . . 46 SECTION 10.13 Limitations on Certain Agreements . . . . . . . . . . 46 ARTICLE XI DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . 47 SECTION 11.1 Events of Default . . . . . . . 47 SECTION 11.2 Remedies . . . . . . . . . . . 49 SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc . . . . . . . . 50 ARTICLE XII THE AGENT . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 12.1 Appointment . . . . . . . . . . 50 SECTION 12.2 Delegation of Duties . . . . . 50 SECTION 12.3 Exculpatory Provisions . . . . 50 SECTION 12.4 Reliance by the Agent . . . . . 51 SECTION 12.5 Notice of Default . . . . . . . 51 SECTION 12.6 Non-Reliance on the Agent and other Term Lenders . . . . . . 51 SECTION 12.7 Indemnification . . . . . . . 52 SECTION 12.8 The Agent in Its Individual Capacity . . . . . . . . . . . 52 SECTION 12.9 Resignation of the Agent; Successor Agent . . . . . . . . 53 4 ARTICLE XIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 53 SECTION 13.1 Notices . . . . . . . . . . . . 53 SECTION 13.2 Expenses . . . . . . . . . . . 55 SECTION 13.3 Set-off . . . . . . . . . . . . 55 SECTION 13.4 Governing Law . . . . . . . . . 56 SECTION 13.5 Consent to Jurisdiction . . . . 56 SECTION 13.6 Waiver of Jury Trial; Waiver of Punitive Damages . . . . . . 56 SECTION 13.7 Reversal of Payments . . . . . 57 SECTION 13.8 Injunctive Relief . . . . . . . 57 SECTION 13.9 Accounting Matters . . . . . . 57 SECTION 13.10 Successors and Assigns; Participations . . . . . . . . 58 SECTION 13.11 Amendments, Waivers and Consents; Renewal . . . . . . . 61 SECTION 13.12 Performance of Duties . . . . . 61 SECTION 13.13 Indemnification . . . . . . . . 61 SECTION 13.14 All Powers Coupled with Interest . . . . . . . . . . . 62 SECTION 13.15 Survival of Indemnities . . . . 62 SECTION 13.16 Titles and Captions . . . . . . 62 SECTION 13.17 Severability of Provisions . . 62 SECTION 13.18 Counterparts . . . . . . . . . 62 SECTION 13.19 Term of Agreement . . . . . . . 62 SECTION 13.20 Adjustments . . . . . . . . . . 62 5 EXHIBITS Exhibit A - Form of Revolving Credit Note (referenced in Section 1.1) Exhibit B - Form of Term Loan Note (referenced in Section 1.1) Exhibit C - Form of Prepayment Notice (referenced in Section 2.4(a)) Exhibit D - Form of Quarterly Unaudited Consolidated and Consolidating Balance Sheet (referenced in Section 7.1(a)) Exhibit E - Form of Officer's Compliance Certificate (referenced in Section 7.2) Exhibit F - Form of Assignment and Acceptance (referenced in Section 13.10(b)(iii)) 6 SCHEDULES Schedule 4.8(b) - Existing Stock Incentive Programs Schedule 6.1(a) - Jurisdictions of Organization and Qualification to Do Business as Foreign Corporation Schedule 6.1(b) - Subsidiaries, Capitalization and Shareholders Schedule 6.1(f) - Government Lien Assertions Schedule 6.1(h) - Franchise, Licenses, Patents and Tradenames Schedule 6.1(j) - ERISA Plans Schedule 6.1(n) - Collective Bargaining Agreements Schedule 6.1(s) - Leased Real Property Schedule 6.1(v) - Litigation Schedule 6.1(z) - Outstanding Options, Warrants or Other Rights Schedule 8.15 - Work Plan Schedule 10.1(c) - Existing Debt Schedule 10.2(b) - Existing Contingent Obligations Schedule 10.3(f) - Existing Liens 7 This TERM LOAN AGREEMENT (the "Agreement"), dated as of February 25, 1998, is made and entered into by and among WLR FOODS, INC., ("WLR"), WAMPLER FOODS, INC. ("Wampler"), CASSCO ICE & COLD STORAGE, INC. ("Cassco"), WAMPLER SUPPLY COMPANY, INC. ("Wampler Supply"), and VALLEY RAIL SERVICE, INC. ("Valley Rail"), all corporations organized under the laws of the Commonwealth of Virginia, the Term Lenders who are or may become a party to this Agreement, and FIRST UNION NATIONAL BANK, for itself and as Agent for the Term Lenders. WLR, Wampler, Cassco, Wampler Supply and Valley Rail are referred to herein jointly and severally as the "Borrower." The liabilities and obligations of WLR, Wampler, Cassco, Wampler Supply and Valley Rail hereunder are joint and several, and the word "Borrower," as used herein, means each of them, any of them and/or all of them as the context may require. BACKGROUND A. WLR, as borrower, and Cassco and Wampler, as guarantors, are parties to that certain Credit Agreement, dated January 1, 1997, pursuant to which the Term Lenders extended a revolving credit facility (the "Existing Revolving Credit Facility") to WLR in an amount not to exceed One Hundred Sixty Million Dollars ($160,000,000). B. WLR, as borrower, and Cassco and Wampler, as guarantors, and First Union are parties to a certain Loan Agreement dated as of January 1, 1997 (the "Time Loan Agreement") which has terminated undrawn by mutual consent of the parties. C. WLR, Cassco, Wampler, Wampler Supply and Valley Rail are part of an integrated financial enterprise and have requested the Term Lenders to: (i) provide a revolving credit facility in the maximum amount of $105,000,000; (ii) restructure a portion of the Existing Revolving Credit Facility, after the principal amount outstanding (including the aggregate face amount of all outstanding letters of credit) has been reduced to $110,000,000, into a term loan as provided herein; (iii) provide the new revolving credit facility pursuant to the terms of the Revolving Credit Agreement (hereafter defined); and (iv) restructure the Existing Revolving Credit Facility as provided in this Agreement and the other Loan Documents executed as of the date hereof. D. The Term Lenders have agreed to this request subject to the terms and conditions of this Agreement and the other Loan Documents. E. The Borrower will materially benefit from the restructure of the Existing Revolving Credit Facility and the new revolving credit to be provided as set forth in the Loan Documents. 8 E. THIS AGREEMENT IS ISSUED IN ORDER TO AMEND, RESTATE AND EVIDENCE, AND TO BE A SUBSTITUTE FOR, BUT NOT TO BE A PAYMENT, SATISFACTION, CANCELLATION OR A NOVATION OF THAT PORTION OF EXISTING REVOLVING CREDIT FACILITY BEING CONVERTED TO A TERM LOAN HEREUNDER. THE EXECUTION OF THIS AGREEMENT BY THE PARTIES HERETO DOES NOT EXTINGUISH THE OBLIGATIONS EVIDENCED BY THE EXISTING REVOLVING CREDIT FACILITY OR ANY PORTION THEREOF AND THE LIABILITIES OF THE BORROWER THEREUNDER AND HEREUNDER ARE CONTINUOUS. THIS AGREEMENT DOES NOT EVIDENCE ANY NEW ADVANCES OF CREDIT AND DOES NOT REFLECT ANY AGREEMENT BY THE TERM LENDERS FOR THE EXTENSION OF ANY ADDITIONAL CREDIT TO THE BORROWER. NOW, THEREFORE, for good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged by the parties hereto, such parties hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 Definitions. The following terms when used in this Agreement shall have the meanings assigned to them below: "Affiliate" means, with respect to any Person (the "First Person"), any other Person (other than a Subsidiary of the First Person) which directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the First Person or any of its Subsidiaries. The term "control" means (a) the power to vote five percent (5%) or more of the securities or other equity interests of a Person having ordinary voting power, or (b) the possession, directly or indirectly, of any other power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. The term Affiliate shall not include, in the case of the Borrower, Pioneering Management Corporation. "Agent" means First Union in its capacity as Agent hereunder, and any successor thereto appointed pursuant to Section 12.9. "Agent's Office" means the office of the Agent specified in or determined in accordance with the provisions of Section 13.1. "Aggregate Term Loan" means the aggregate amount of the Term Lenders' Term Loans under this Agreement, as such amount may be reduced at any time or from time to time pursuant to Article II hereof. On the Closing Date, the Aggregate Term Loan shall be One Hundred Ten Million Dollars ($110,000,000). 9 "Agreement" means this Term Loan Agreement, as amended or modified from time to time. "Amendment Fee" shall have the meaning ascribed in Section 4.2 hereof. "Applicable Law" means all applicable provisions of constitutions, statutes, rules, regulations and orders of all Governmental Authorities and all orders and decrees of all courts and arbitrators. "Approved Contract Growers" shall mean those persons who, from time to time, hold live chicken and turkey inventory owned by Wampler under and subject to grower contracts which preserve and in every way maintain the title of Wampler in and to such inventory to the satisfaction of Wampler and its counsel. "Approved Miscellaneous Asset Sale" shall mean any sale or sales by the Borrower of any real or personal property which (i) for the first year following the Closing Date do(es) not generate Net Proceeds of more than $7,500,000 in the aggregate, or more than $2,500,000 for any individual sale; and (ii) for each one-year period thereafter do(es) not generate Net Proceeds of more than $1,000,000 in the aggregate for such twelve-month period. "Asset Sale" means any sale, sale-leaseback, mortgage of real property or any other disposition (including the grant of any option, warrant or other right to purchase such property) by any Person of any of its real or tangible personal property or assets (other than permitted by subsections (a), (b), and (c) of Section 10.6 and the sale of Equipment, the proceeds of which are applied to the prepayment of any Purchase Money Debt secured by a Lien on such Equipment). "Assignment and Acceptance" shall have the meaning assigned thereto in Section 13.10. "Base Rate" means, at any time, the higher of (a) the Prime Rate or (b) the Federal Funds Rate plus 1/2 of 1%; each change in the Base Rate shall take effect simultaneously with the corresponding change or changes in the Prime Rate or the Federal Funds Rate. "Borrower" means WLR, Wampler, Cassco, Wampler Supply, and Valley Rail, in their capacities as joint and several borrowers hereunder, and each of them, any of them and/or all of them as the context may require. "Business Day" means for all purposes any day other than a Saturday, Sunday or legal holiday on which banks in Charlotte, North 10 Carolina and London, England, are open for the conduct of their commercial banking business. "Capital Asset" means, with respect to the Borrower and its Subsidiaries, any asset that would, in accordance with GAAP, be required to be classified and accounted for as a capital asset on a Consolidated balance sheet of the Borrower and its Subsidiaries. "Capital Expenditures" means, with respect to the Borrower and its Subsidiaries for any period, the aggregate cost of all capital assets acquired by any such Person during such period, determined without duplication on a Consolidated basis in accordance with GAAP. "Capital Lease" means, with respect to the Borrower and its Subsidiaries, any lease of any property that would, in accordance with GAAP, be required to be classified and accounted for as a capital lease on a Consolidated balance sheet of the Borrower and its Subsidiaries. "Change in Control" shall have the meaning assigned thereto in Section 11.1(m). "Closing Date" means the date of this Agreement or such later Business Day upon which the Term Notes are originally executed and delivered to the Term Lenders. "Code" means the Internal Revenue Code of 1986, and the rules and regulations thereunder, each as amended or supplemented from time to time. "Collateral" means all of the assets, property and interests in property of the Borrower and its Subsidiaries, whether now owned or hereafter acquired, that shall, from time to time, secure the Obligations, including without limitation the Collateral described in the Security Documents and any property or interests provided in addition to or in substitution for any of the foregoing. "Collateral Agent" means First Union in its capacity as Collateral Agent under the Security Documents. "Consolidated" means, when used with reference to financial statements or financial statement items of the Borrower and its Subsidiaries, such statements or items on a consolidated basis in accordance with applicable principles of consolidation under GAAP. "Contingent Obligation" means, with respect to the Borrower and its Subsidiaries, without duplication, any obligation, contingent or 11 otherwise, of any such Person pursuant to which such Person has directly or indirectly guaranteed any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of any such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement condition or otherwise) or (b) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term Contingent Obligation shall not include endorsements for collection or deposit in the ordinary course of business or executory contracts. "Coverage Ratio" means, as of the close of any Fiscal Quarter, the Borrower's Consolidated cumulative four quarter EBITDA ending with the close of such Fiscal Quarter divided by the Borrower's Consolidated cumulative four quarter Interest Expense ending with the close of such Fiscal Quarter. "Debt" means, with respect to the Borrower and its Subsidiaries at any date and without duplication, Capital Leases and debt incurred, guaranteed (whether directly or indirectly) or assumed for money borrowed or for the deferred (for sixty days or more) purchase price of property or services purchased, excluding accounts payable (other than for borrowed money), deferred compensation payable to current or former employees and other accrued expenses incurred in the ordinary course of business if the same are not overdue in a material amount or are being contested in good faith and by appropriate proceedings. Debt shall include all obligations of the Borrower or any of its Subsidiaries pursuant to Derivative Agreements entered into in the ordinary course of business for the purpose of mitigating risk. "Default" means any of the events specified in Section 11.1 which, with the passage of time, the giving of notice or any other condition, would constitute an Event of Default. "Derivative Agreement" means any agreement with respect to any exchange-traded or over-the-counter transaction, contract, instrument, security, obligation or undertaking of whatever nature that constitutes (in whole or in part) a forward, future, option, swap, cap, collar, floor or combination thereof, or anything similar to any of the foregoing, whether for physical delivery or cash settlement, which is entered into for the purpose of mitigating risk in connection with a commodity price or index. 12 "Dispute" means any dispute, claim or controversy arising out of, connected with or relating to this Agreement. "Dollars" or "$" means, unless otherwise qualified, dollars in lawful currency of the United States. "EBITDA" means, for any period, (a) Net Income of the Borrower and its Subsidiaries on a Consolidated basis for such period, plus (b) the sum of the following for such period to the extent deducted in the determination of Net Income: (i) Interest Expense, (ii) income and franchise taxes, and (iii) amortization, depreciation and other non- cash charges (including amortization of good will and other intangible assets). "Eligible Assignee" means, with respect to any assignment of the rights, interest and obligations of a Term Lender hereunder, a Person that is at the time of such assignment (a) a bank having combined capital and surplus in excess of $500,000,000 and whose senior debt is rated BBB or higher by Standard & Poor's Ratings Group (or has a comparable rating from another rating agency), (b) a finance company, insurance company or other financial entity which does or can extend credit of the type extended hereunder, that has total assets in excess of $500,000,000 and whose senior debt is rated BBB or higher by Standard & Poor's Ratings Group (or has a comparable rating from another rating agency), (c) already a Term Lender hereunder (whether as an original party to this Agreement or as the assignee of another Term Lender), (d) the successor (whether by transfer of assets, merger or otherwise) to all or substantially all of the commercial lending business of the assigning Term Lender, or (e) any other Person that has been approved in writing as an Eligible Assignee by the Agent, which approval shall not be unreasonably withheld, provided, that for purposes of this clause (e), if such Person is a direct competitor of the Borrower, such Person must also be approved in writing as an Eligible Assignee by the Borrower. "Employee Benefit Plan" means any employee benefit plan within the meaning of Section 3(3) of ERISA which (a) is maintained for employees of the Borrower or any ERISA Affiliate or (b) has at any time within the preceding six years been maintained for the employees of the Borrower or any current or former ERISA Affiliate. "Environmental Laws" means any and all federal, state and local laws, statutes, ordinances, rules, regulations, permits, licenses, approvals, interpretations and orders of courts or Governmental Authorities, relating to the protection of the environment, including, but not limited to, requirements pertaining to the manufacture, processing, distribution, use, treatment, storage, disposal, 13 transportation, handling, reporting, licensing, permitting, investigation or remediation of Hazardous Materials. Environmental Laws include, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601 et. seq.) , the Hazardous Material Transportation Act (49 U.S.C. Section 331 et. seq.) , the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et. seq.) , the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et. seq.) , the Clean Air Act (42 U.S.C. Section 7401 et. seq.) , the Toxic Substances Control Act (15 U.S.C. Section 2601 et. seq.), the Safe Drinking Water Act (42 U.S.C. Section 300, et. seq.), and the Environmental Protection Agency's regulations relating to underground storage tanks (40 C.F.R. Parts 280 and 281), and the rules and regulations promulgated under each of these statutes, each as amended or modified from time to time. "ERISA" means the Employee Retirement Income Security Act of 1974, and the rules and regulations thereunder, each as amended or modified from time to time. "ERISA Affiliate" means any Person who, together with the Borrower, is treated as a single employer within the meaning of Section 414 (b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA. "Event of Default" means any of the events specified in Section 11.1, provided that any requirement for passage of time, giving of notice, or any other condition, has been satisfied. "Extension Criteria" means that at the time of any request by the Borrower to extend the Non-Default Maturity Date of the Term Loan in accordance with Section 2.1 (b) of this Agreement and as of the Extension Date that: (i) there exists no Default or Event of Default under the Agreement; (ii) at all times prior to the Extension Date there has not occurred any Default or Event of Default which has not been cured or been waived in writing by the Agent, on behalf of the Term Lenders during the applicable cure period, if any; (iii) the Borrower shall have simultaneously extended the maturity date of the Note Obligations as provided in the Note Agreement; and (iv) the Borrower shall have paid the Extension Fee. "Extension Fee" means, in the event that the Borrower elects to exercise the Term Loan Extension Option, a fee payable to the Agent for the ratable benefit of the Term Lenders on or prior to the Extension Date equal to one percent (1%) of the principal balance outstanding under the Term Loan as of the Extension Date. "FDIC" means the Federal Deposit Insurance Corporation, or any successor thereto. 14 "Federal Funds Rate" means, the rate per annum (rounded upwards, if necessary, to the next higher 1/100th of 1%) representing the daily effective federal funds rate as quoted by the Agent and confirmed in Federal Reserve Board Statistical Release H.15 (519) or any successor or substitute publication selected by the Agent. If, for any reason, such rate is not available, then "Federal Funds Rate" shall mean a daily rate which is determined, in the opinion of the Agent, to be the rate at which federal funds are being offered for sale in the national federal funds market at 9:00 a.m. (Charlotte time). Rates for weekends or holidays shall be the same as the rate for the most immediate preceding Business Day. "First Union" means First Union National Bank, a national banking association, and its successors and assigns. "Fiscal Year" means the fiscal year of the Borrower and its Subsidiaries ending on the Saturday closest to June 30. For purposes of determining any fiscal quarter hereunder: (a "Fiscal Quarter") (a) the first fiscal quarter ("First Fiscal Quarter") of any Fiscal Year (the "Current Year") shall end thirteen (13) weeks after the end of the preceding Fiscal Year (the "Prior Year"); (b) the second fiscal quarter ("Second Fiscal Quarter") of the Current Year shall end twenty-six (26) weeks after the end of the Prior Year; (c) the third fiscal quarter ("Third Fiscal Quarter") of the Current Year shall end thirty-nine (39) weeks after the end of the Prior Year; and (d) the fourth fiscal quarter ("Fourth Fiscal Quarter") of the Current Year shall end on the last day of the Current Year. For purposes of determining any fiscal month-end hereunder (a "Fiscal Month"), any Fiscal Month shall end on the Saturday closest to the last day of such month. "GAAP" means generally accepted accounting principles, as recognized by the American Institute of Certified Public Accountants and the Financial Accounting Standards Board, consistently applied and maintained on a consistent basis for the Borrower and its Subsidiaries throughout the period indicated and consistent with the prior financial practice of the Borrower and its Subsidiaries. "Governmental Approvals" means all authorizations, consents, approvals, licenses and exemptions of, registrations and filings with, and reports to, all Governmental Authorities. "Governmental Authority" means any nation, province, state or political subdivision thereof, and any government or any Person exercising executive, legislative, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. 15 "Hazardous Materials" means any substances or materials: (a) defined as hazardous substances in the Comprehensive Environmental Response Compensation Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. or in regulations issued thereunder; (b) defined as hazardous wastes in the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Section 6901, et seq. or in regulations issued thereunder; (c) defined as toxic substances in the Toxic Substances Control Act, 15 U.S.C. Section 2601, et seq., or in regulations issued thereunder; or (d) animal wastes. "Intercreditor Agreement" means that certain Collateral Agency and Intercreditor Agreement dated as of the Closing Date by and among the Term Lenders and the other parties thereto. "Interest Expense" means, with respect to the Borrower and its Subsidiaries for any period, the gross interest expense (including without limitation interest expense attributable to Capital Leases) of the Borrower and its Subsidiaries, all determined for such period on a Consolidated basis in accordance with GAAP. "Interest Rate Protection Agreements" means any interest rate or currency hedging agreement or arrangement approved by the Agent (such approval not to be unreasonably withheld) entered into by the Borrower and designed to protect against fluctuations in interest rates. "Leased Real Property" shall mean real property owned by the Borrower and leased to one or more Persons as more fully set forth on Schedule 6.1(s). "L/C Obligations" means at any time, an amount equal to the sum of: (a) the aggregate undrawn and unexpired amount of the then outstanding Letters of Credit; and (b) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to Section 3.5 of the Revolving Credit Agreement. "Lenders" means the collective reference to the Revolving Credit Lenders, the Term Lenders, and the Note Lenders. "Lending Office" means, with respect to any Term Lender, the office of such Term Lender maintaining such Term Lender's Term Loan. "Letters of Credit" shall have the meaning assigned thereto in Section 3.1(a) of the Revolving Credit Agreement. "Leverage Ratio" shall mean, as of the close of any Fiscal Quarter, Total Debt divided by the Borrower's Consolidated cumulative 16 four quarter EBITDA ending with the close of such Fiscal Quarter. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capital Lease or other title retention agreement relating to such asset, other than an asset which the Borrower holds as the lessee under a lease which is not a Capital Lease. "Limited Grower Payable Liens" means any lien arising in favor of any Approved Contract Grower with respect to any inventory or other property owned by the Borrower under the Packers and Stockyards Act, Va. Code Section 43-32, and/or other comparable state statutes, unless such liens arise in connection with accounts payable over fifteen (15) days past due and have an aggregate value in excess of $1,500,000. "Loan" means any Revolving Loan, the Term Loan, and all Revolving Loans and the Term Loan collectively as the context requires. "Loan Documents" means, collectively, this Agreement, the Revolving Credit Agreement, the Notes, the Applications, the Security Documents, the Lockbox Agreement, the Warrant Agreement, the Intercreditor Agreement, any Derivative Agreement executed by any Term Lender, and each other document, instrument and agreement executed and delivered by the Borrower, its Subsidiaries or their counsel in connection with this Agreement or otherwise referred to herein or contemplated hereby, all as may be amended or modified from time to time. "Lock Box Agreement" shall mean an agreement or agreements between the Borrower and any one or more of the Revolving Credit Lenders, as required under the Revolving Credit Agreement, together with all amendments, modifications, exhibits and schedules thereto may be in effect from time to time. "Mandatory Prepayment Net Proceeds" means, collectively, the Asset Sale Net Proceeds, New Equity Net Proceeds, Subordinated Debt Net Proceeds, and Miscellaneous Asset Sale Net Proceeds. "Material Adverse Effect" means, with respect to the Borrower, a material adverse effect on the properties, business, operations or condition (financial or otherwise) of the Borrower, taken as a whole, or the ability of the Borrower, taken as a whole, to perform its obligations under the Loan Documents or Material Contracts, to which it is a party. 17 "Material Contract" means: (a) any contract or other agreement, instrument, lease or other evidence of understanding, written or oral, of the Borrower or any of its Subsidiaries involving monetary liability of or to any such Person in an amount per annum in excess of $2,000,000; or (b) any other contract or other agreement, instrument, lease or other evidence of understanding, written or oral, of the Borrower or any of its Subsidiaries, the failure to comply with which could reasonably be expected to have a Material Adverse Effect. "Mortgages" mean, collectively, those Mortgages and Deeds of Trust executed and delivered to or for the benefit of the Term Lenders as of the Closing Date. "Multiemployer Plan", means a "multiemployer plan" as defined in Section 4001(a) (3) of ERISA to which the Borrower or any ERISA Affiliate is making, or is accruing an obligation to make, contributions within the preceding six years. "Net Income" means, with respect to the Borrower and its Subsidiaries for any period, the Consolidated net income (or loss) of the Borrower and its Subsidiaries for such period determined in accordance with GAAP; provided, that there shall be excluded from Consolidated net income (or loss): (a) the income (or loss) of any Person (other than a Subsidiary of the Borrower) in which the Borrower has an ownership interest unless received by the Borrower in a cash distribution; (b) the income (or loss) of any Person accrued prior to the date it became a Subsidiary of the Borrower or is merged into or consolidated with the Borrower; and (c) extraordinary items. "Net Proceeds" means, with respect to any sale, lease, transfer or other disposition of assets by the Borrower or any of its Subsidiaries, or any issuance by the Borrower or any of its Subsidiaries of any capital stock or other debt or equity securities permitted hereunder, the aggregate amount of cash received for such assets or securities (including, without limitation, any payments received for non-competition covenants, consulting or management fees, and any portion of the amount received evidenced by a seller promissory note or other evidence of Debt), net of (i) amounts reserved, if any, for taxes payable with respect to any such sale (after application of any available losses, credits or other offsets), (ii) reasonable. and customary transaction costs properly attributable to such transaction and payable by the Borrower or any of its Subsidiaries (other than to an Affiliate) in connection with such sale, lease, transfer or other disposition of assets or issuance of any capital stock or other securities, including, without limitation, commissions and underwriting discounts, and (iii) until actually received by the Borrower or any of its Subsidiaries, any portion of the amount received held in escrow or evidenced by a seller promissory 18 note or non-compete agreement or covenant for which compensation is paid over time. Upon receipt by the Borrower or any of its Subsidiaries of amounts referred to in item (iii) of the preceding sentence, such amounts shall then be deemed to be "Net Proceeds." "Net Revenue" means, with respect to the Borrower and its subsidiaries for any period, net revenue for such period determined on a Consolidated basis in accordance with GAAP. "1997 Agreement" means the Credit Agreement dated as of January 1, 1997, among WLR, as Borrower, Cassco and Wampler, as guarantors, the lenders thereunder, and the Agent. "Non-Default Maturity Date" shall have the meaning set forth below in the definition of "Term Loan Termination Date." "Notes" means, collectively, the Revolving Credit Notes and the Term Notes. "Note Agreement" means that certain Note Purchase Agreement dated as of the date hereof by and between WLR and various note lenders thereunder. "Note Lenders" means, collective, each Person executing the Note Agreement as a lender. "Obligations" means, collectively, the Term Loan Obligations and the Revolving Credit Obligations. "Officer's Compliance Certificate" shall have the meaning assigned thereto in Section 7.2. "Other Taxes" shall have the meaning assigned thereto in Section 4.10 (b) . "PBGC" means the Pension Benefit Guaranty Corporation or any successor agency. "Pension Plan" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of the Code and which: (a) is maintained for employees of the Borrower or any ERISA Affiliates; or (b) has at any time within the preceding six years been maintained for the employees of the Borrower or any of their current or former ERISA Affiliates. "Permitted Liens" shall mean those liens and encumbrances (other than those in favor of the Collateral Agent) permitted pursuant to Section 10.3 19 "Person" means an individual, corporation, partnership, association, trust, business trust, joint venture, joint stock company, pool, syndicate, sole proprietorship, unincorporated organization, Governmental Authority or other entity. "Pledge Agreements" means, collectively, the WLR Pledge Agreement and the Wampler Pledge Agreement. "Prime Rate" means, at any time, the rate of interest per annum publicly announced from time to time by the Agent as its prime rate. Each change in the Prime Rate shall be effective as of the opening of business on the day such change in the Prime Rate occurs. The parties hereto acknowledge that the rate announced publicly by the Agent as its Prime Rate is an index or base rate and shall not necessarily be its lowest or best rate charged to its customers or other banks. "Purchase Money Debt" means any Debt incurred by the Borrower in the ordinary course of business for the purpose of and actually used in acquiring any Capital Asset and such Debt is either (i) held by a seller of such Capital Asset to the Borrower to secure all or part of the purchase price thereof, or (ii) held by a Person who, by making advances to, or incurring an obligation on behalf of, the Borrower gives value to the Borrower to enable the Borrower to acquire rights in or the use of such Capital Asset. "Ratable Share" shall have the meaning given to such term in the Intercreditor Agreement. "Register" shall have the meaning assigned thereto in Section 13.10(d). "Reimbursement Obligation" means the obligation of the Borrower to reimburse the Issuing Revolving Credit Lender pursuant to Section 3.5 of the Revolving Credit Agreement. "Required Term Lenders" means, at any date, any combination of holders of at least seventy five percent (75%) of the aggregate unpaid principal amount of the Term Notes, or if no amounts are outstanding under the Term Notes, any combination of Term Lenders whose Term Loan Percentages aggregate at least seventy five percent (75%). "Revolving Credit Agreement" means the Revolving Credit Agreement dated as of the date hereof by and among the Agent, the Revolving Credit Lenders, and the Borrower, as amended or modified from time to time. 20 "Revolving Credit Facility" means the revolving credit facility established pursuant to Article II of the Revolving Credit Agreement. "Revolving Credit Lenders" means each Person executing the Revolving Credit Agreement as a Revolving Credit Lender and each Person that hereafter becomes a Revolving Credit Lender. "Revolving Credit Notes" means the separate Revolving Credit Notes made by the Borrower payable to the order of each Revolving Credit Lender, substantially in the form of Exhibit "A" hereto, evidencing the Revolving Credit Facility, and any amendments and modifications thereto, any substitutes therefor, and any replacements, restatements, renewals or extension thereof, in whole or in part. "Revolving Credit Obligations" means, in each case, whether now in existence or hereafter arising: (a) the principal of and interest (including interest accruing after the filing of any bankruptcy or similar petition) on the Revolving Loans; (b) the L/C Obligations; (c) all payment and other obligations owing by the Borrower to any Revolving Credit Lender or the Agent under any Derivative Agreement as permitted pursuant to Section 10.3(h); and (d) all other fees and commissions (including attorney's fees), charges, indebtedness, loans, liabilities, financial accommodations, obligations, covenants and duties owing by the Borrower to the Revolving Credit Lenders or the Agent, of every kind, nature and description, direct or indirect, absolute or contingent, due or to become due, under the Loan Documents, except to the extent such obligations arise solely under the Term Loan Agreement and the Term Notes. "Revolving Loan" means any Loan made to the Borrower pursuant to Section 2.1 of the Revolving Credit Agreement. "Security" means any funds, agreements, property, rights or interests of any nature whatsoever, guaranties of and any subordination and/or standby agreements related to the obligations which have been or hereafter are mortgaged, pledged, assigned, transferred, executed or delivered, directly or indirectly, to the Collateral Agent, any Revolving Credit Lender and/or any Term Lender as security for or guaranty of the payment or performance of any Obligation. "Security Agreement" means the Security Agreement by the Borrower in favor of the Collateral Agent for the benefit of the Lenders, as amended, restated, modified or otherwise supplemented. "Security Documents" means the collective reference to the Security Agreement, the Pledge Agreements, the Mortgages, the 21 Trademark Assignment, the Valley Rail Assignment, the Intercreditor Agreement and each other agreement or writing, if any, pursuant to which the Borrower or any Subsidiary thereof pledges or grants a security interest, lien, mortgage, encumbrance or charge in any property or assets securing the Obligations. "Solvent" means, as to the Borrower and its Subsidiaries on a particular date, that any such Person (a) has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage and is able to pay its debts as they mature, (b) owns property having a value, both at fair valuation and at present fair saleable value, greater than the amount required to pay its probable liabilities (including contingencies), and (c) does not reasonably believe that it will incur debts or liabilities beyond its ability to pay such debts or liabilities as they mature. "Subsidiary" means as to any Person, any corporation, partnership or other entity of which more than fifty percent (50%) of the outstanding capital stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or other managers of such corporation, partnership or other entity is at the time, directly or indirectly, owned by or the management is otherwise controlled by such Person (irrespective of whether, at the time, capital stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency). Unless otherwise qualified, references to "Subsidiary" or "Subsidiaries" herein shall refer to those of the Borrower. "Tangible Net Worth" means the Consolidated net worth of the Borrower and its Subsidiaries determined without taking into account goodwill, trademarks, trade names, copyrights, franchise rights and other assets of a similar nature (with the exception of loan closing or similar costs required to be capitalized). "Taxes" shall have the meaning assigned thereto in Section 4.7(a). "Term Lender" means each Person executing this Agreement as a Term Lender set forth on the signature pages hereto and each Person that hereafter becomes a party to this Agreement as a Term Lender pursuant to Section 13.10. "Term Loan" means, as to any individual Term Lender at any time, an amount equal to the aggregate principal amount of the Term Loan made by such Term Lender then outstanding, and, as to the Term Lenders collectively at any time, the amount equal to the aggregate principal 22 amount of all Term Loans made by all Term Lenders then outstanding. "Term Loan Extension Option" means the option of the Borrower as set forth in Section 2.1(b) hereof to extend the Non-Default Maturity Date for a one year period. "Term Loan Percentage" means, as to any Term Lender at any time, the ratio of (a) the amount of the Term Loan of such Term Lender to (b) the Aggregate Term Loans of all of the Term Lenders, expressed as a percentage. "Term Loan Termination Date" means the earlier of: (a) January 1, 2000, or, if the Borrower exercises the Term Loan Extension Option, January 1, 2001 (as the case may be, the "Non-Default Maturity Date"); (b) the date of the indefeasible payment in full of the Term Loan by the Borrower; or (c) the date upon which any one or more Events of Default shall have occurred. "Term Notes" means the separate Notes made by the Borrower payable to the order of each Term Lender, substantially in the form of Exhibit "B" hereto, evidencing the Term Loan, and any amendments and modifications thereto, any substitutes therefor, and any replacements, restatements, renewals or extension thereof, in whole or in part. "Term Loan Obligations" means, in each case, whether now in existence or hereafter arising, the principal of and interest on the Term Loan and all other fees and commissions (including attorney's fees), charges, indebtedness, loans, liabilities, financial accommodations (including all payment and other obligations owing by the Borrower to any Term Lender or the Agent under any Derivative Agreement), obligations, covenants and duties owing by the Borrower to the Term Lenders or the Agent, of every kind, nature and description, direct or indirect, absolute or contingent, due or to become due, under the Loan Documents, except to the extent such obligations arise solely under the Revolving Credit Agreement and the Revolving Credit Notes. "Termination Event" means: (a) a "Reportable Event" described in Section 4043 of ERISA; or (b) the withdrawal of the Borrower or any ERISA Affiliate from a defined benefit Pension Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA; or (c) the termination of a defined benefit Pension Plan, the filing of a notice of intent to terminate a defined benefit Pension Plan or the treatment of a defined benefit Pension Plan amendment as a termination under Section 4041 of ERISA; or (d) the institution of proceedings to terminate, or the appointment of a trustee with respect to, any Pension Plan by the PBGC; or (e) any other event or condition which would constitute grounds under Section 23 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; or (f) the partial or complete withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer Plan; or (g) the imposition of a Lien pursuant to Section 412 of the Code or Section 302 of ERISA; or (h) any event or condition which results in the reorganization or insolvency of a Multiemployer Plan under Sections 4241 or 4245 of ERISA; or (i) any event or condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA. "Total Debt" means, with respect to the Borrower and its Subsidiaries at any date of determination and without duplication, all Debt of the Borrower and its Subsidiaries on a Consolidated basis. Total Debt shall not include any Debt under a Derivative Agreement. "Trademark Assignment" means, collectively the Assignment of Trademarks by WLR in favor of the Collateral Agent for the ratable benefit of the Lenders, as amended, restated, modified, or otherwise supplemented. "UCC" means the Uniform Commercial Code as in effect in the State of New York. "United States" means the United States of America. "Valley Rail Assignment" means that Assignment of Partnership Interest executed by Valley Rail in favor of the Collateral Agent for the ratable benefit of the Lenders. "Wampler Pledge Agreement" means the Pledge Agreement executed by Wampler, as pledgor, in favor of the Collateral Agent, for the ratable benefit of the Lenders, as amended, restated, modified, or otherwise supplemented. "Warrant Agreement" means collectively the Warrant Holders Agreement and the Warrant each dated as of the Closing Date executed by WLR, in favor of the Collateral Agent for ratable benefit of the Lenders, as amended, restated, modified or otherwise supplemented. "Wholly-Owned" means, with respect to a Subsidiary, a Subsidiary all of the shares of capital stock or other ownership interests of which are, directly or indirectly, owned or controlled by the Borrower and/or one or more of its Wholly-Owned Subsidiaries. "WLR Pledge Agreement" means the Pledge Agreement executed by WLR, as Pledgor, in favor of the Collateral Agent for ratable benefit 24 of the Lenders, as amended, restated, modified or otherwise supplemented. SECTION 1.2 General. All terms of an accounting nature not specifically defined herein shall have the meaning assigned thereto by GAAP. Unless otherwise specified, a reference in this Agreement to a particular section, subsection, Schedule or Exhibit is a reference to that section, subsection, Schedule or Exhibit of this Agreement. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter. Any reference herein to "Charlotte time" shall refer to the applicable time of day in Charlotte, North Carolina. SECTION 1.3 Other Definitions and Provisions. (a) Use of Capitalized Terms. Unless otherwise defined therein, all capitalized terms defined in this Agreement shall have the defined meanings when used in this Agreement, the Revolving Credit Agreement, the Notes and the other Loan Documents or any certificate, report or other document made or delivered pursuant to this Agreement. (b) Miscellaneous. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. ARTICLE II TERM LOAN FACILITY SECTION 2.1 Term Loan. (a) Generally. Subject to the terms and conditions of this Agreement, each Term Lender severally agrees to make a Term Loan to the Borrower as of the Closing Date through the Term Loan Termination Date in an original principal amount equal to the amount set forth in the Term Note attributable to such Term Lender. (b) Term Loan Extension Option. As of June 30, 1999 (the "Extension Date"), the Borrower may elect to extend the Non-Default Maturity date of the Term Loan from January 1, 2000 to January 1, 2001 (the "Term Loan Extension Option"); provided that on and at all times prior to the Extension Date, the Borrower is in compliance with the Extension Criteria. The Borrower shall provide the Lenders with 25 written notification of its intention to exercise the Extension Option prior to the Extension Date. SECTION 2.2 Term Loan Principal Classification. The Term Loan shall be established solely by a partial reclassification and restructure of each Term Lender's Loans under the 1997 Agreement. Neither the Agent nor any of the Term Lenders will be required to advance new funds to the Borrower for the Term Loan under this Agreement. SECTION 2.3 Repayment of Term Loan. Beginning on March 31, 1999, and continuing on the last day of each calendar quarter thereafter (that is, each June 30, September 30, December 31, and March 31 thereafter), the Borrower will pay principal under the Term Loan in an amount equal to $989,902.50 (a "Mandatory Term Loan Principal Payment"), provided that any Mandatory Prepayment Net Proceeds received by the Term Lenders shall be applied to reduce Mandatory Term Loan Principal Payments in the order of maturity. The Borrower will submit all Mandatory Term Loan Principal Payments to the Agent for the ratable benefit of the Term Lenders. The Borrower shall pay interest on the Term Loan in accordance with Section 4.1. If not sooner paid, the entire amount of the Term Loan Obligations will be immediately due and payable to the Agent upon the occurrence of the Term Loan Termination Date. SECTION 2.4 Optional Prepayments of Term Loan. (a) Optional Prepayments. The Borrower may at any time and from time to time prepay the Term Loan, in whole or in part, upon at least one (1) Business Day's irrevocable notice in the form attached hereto as Exhibit "C." Upon receipt of such notice, the Agent shall promptly notify each Term Lender. If any such notice is given, the amount specified in such notice shall be due and payable on the date set forth in such notice. Partial prepayments shall be in an aggregate amount of $1,000,000 or a whole multiple of $500,000 in excess thereof (b) Manner of Application. Each prepayment under this Section 2.4 shall be applied to the principal installments due on the Term Loan on a pro rata basis according to the Term Loan Percentage of each Term Lender and in the inverse order of maturity. SECTION 2.5 Term Notes. The obligation of the Borrower to repay the Term Loan made by each Term Lender shall be evidenced by a Term Note in the form attached hereto as Exhibit "B," payable to the order of such Term Lender. Each Term Note issued on the Closing Date shall be dated the Closing Date and shall bear interest on the unpaid principal amount thereof at the applicable interest rate per annum specified in Section 4.1. 26 SECTION 2.6 Termination of Term Loan. The Term Loan shall terminate on the earlier of (i) the Term Loan Termination Date; or (ii) the date of termination, whether automatically or by the Agent on behalf of the Term Lenders, pursuant to Section 11.2 (a). SECTION 2.7 Use of Proceeds. The Borrower acknowledges and agrees that the principal amount of the Term Loan as of the Closing Date represents a restructuring of amounts outstanding under the 1997 Agreement. No Term Lender shall be required to make any advance to the Borrower on account of the Term Loan. To the extent that any principal amount restructured hereunder constitutes a LIBOR Loan (as defined in the 1997 Agreement), such LIBOR Loan shall be deemed converted to a Base Rate Loan as of the Closing Date. The Borrower shall not be required to pay any Term Lender any amount pursuant to Section 4.8 of the 1997 Agreement by reason of the payment or prepayment of a LIBOR Rate Loan (as defined in the 1997 Agreement) on a date other than the last day of an Interest Period (as defined in the 1997 Agreement). ARTICLE III [RESERVED] ARTICLE IV GENERAL LOAN PROVISIONS SECTION 4.1 Interest. (a) Interest Rate. The aggregate principal balance of the Term Notes or any portion thereof shall earn interest at the Base Rate plus the Applicable Margin as set forth below. (b) Applicable Margin. The Applicable Margin provided for in Section 4.1(a) with respect to the Term Loan (the "Applicable Margin") shall be as follows: (i) as of and at all times following the Closing Date unless modified pursuant to subparagraph (B) hereof, the Base Rate plus two and one-fourths percent (2-1/4%); (ii) if the Borrower shall have delivered its quarterly Financial Statements as of September 26, 1998 to the Agent and the Agent shall have confirmed that the Borrower is in compliance with the Loan Documents, for each Fiscal Quarter thereafter beginning with the First Fiscal Quarter of 1999, determined by reference to the Leverage 27 Ratio and the Coverage Ratio as of the end of the Fiscal Quarter immediately preceding the delivery of the Applicable Officer's compliance certificate, in accordance with the following pricing matrix: Leverage Ratio Coverage Ratio Base Rate + greater than or equal less than or equal 2.25% to 5.0 to 1.00 to 2.25 to 1.00 less than 5.00 to 1.00 greater than 2.25 to 1.50% but equal to or greater but less than or than 4.00 to 1.00 1.00 equal to 3.00 to 1.00 less than 4.0 to 1.00 greater than 3.00 to 1.00 0.75% 28 Adjustments, if any, in the Applicable Margin shall be made by the Agent on the tenth (10th) Business Day after receipt by the Agent of quarterly financial statements for the Borrower and the accompanying Officer's Compliance Certificate setting forth the Leverage Ratio and Coverage Ratio of the Borrower as of the most recent Fiscal Quarter end. Subject to Section 4.1(c), in the event the Borrower fails to deliver such financial statements and certificate within the time required by Section 7.1(a) hereof, the Applicable Margin shall be the highest Applicable Margin set forth above until the delivery of such financial statements and certificate. (c) Default Rate. Upon the occurrence and during the continuance of an Event of Default, the Term Loan shall bear interest at a rate per annum equal to the Base Rate plus four and one-fourths percent (4-1/4%) (the "Default Rate"). Default Rate interest shall continue to accrue on the Term Notes after the filing by or against the Borrower of any petition seeking any relief in bankruptcy or under any act or law pertaining to insolvency or debtor relief, whether state, federal or foreign. (d) Interest Payment and Computation. Interest on the Term Loan shall be payable in arrears on the last Business Day of each calendar quarter commencing on the last Business Day of the calendar quarter in which the Closing Date occurs. All interest, fees and commissions provided hereunder shall be computed on the basis of a 365/366-day year and the actual number of days elapsed. (e) Maximum Rate. In no contingency or event whatsoever shall the aggregate of all amounts deemed interest hereunder or under any of the Term Notes charged or collected pursuant to the terms of this Agreement or pursuant to any of the Term Notes exceed the highest rate permissible under any Applicable Law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that the Term Lenders have charged or received interest hereunder in excess of the highest applicable rate, the rate in effect hereunder shall automatically be reduced to the maximum rate permitted by Applicable Law and the Term Lenders shall at the Agent's option promptly refund to the Borrower any interest received by Term Lenders in excess of the maximum lawful rate or shall apply such excess to the principal balance of the Term Loan Obligations. It is the intent hereof that the Borrower not pay or contract to pay, and that neither the Agent nor any Term Lender receive or contract to receive, directly or indirectly in any manner whatsoever, interest in excess of that which may be paid by the Borrower under Applicable Law. 29 SECTION 4.2 Amendment and Agency Fees. (a) Amendment Fee. In order to compensate the Agent and the Term Lenders for restructuring and syndicating the Loans and for its obligations hereunder, the Borrower agrees to pay to the Agent, for the account of the Term Lenders, a non-refundable amendment fee (the "Amendment Fee") in an amount equal to one percent (1%) of each Term Lender's Term Loan payable in full on the Closing Date. (b) Agent's Other Fees. The Borrower shall pay to the Agent, for its account, the fees set forth in the separate fee letter agreement executed by the Borrower and the Agent pertaining to the Loan Documents. SECTION 4.3 Manner of Payment. Each payment (including repayments described in Article II) by the Borrower on account of the principal of or interest on the Term Loan or of any fee, commission or other amounts payable to the Term Lenders under this Agreement or any Term Note shall be made not later than 1:00 p.m. (Charlotte time) on the date specified for payment under this Agreement to the Agent for the account of the Term Lenders pro rata in accordance with their respective Term Loan Percentages (except as otherwise explicitly provided herein with respect to fees) at the Agent's Office, in Dollars, in immediately available funds and shall be made without any set-off, counterclaim or deduction whatsoever. Any payment received after such time but before 2:00 p.m. (Charlotte time) on such day shall be deemed a payment on such date for the purposes of Section 11.1, but for all other purposes shall be deemed to have been made on the next succeeding Business Day. Any payment received after 2:00 p.m. (Charlotte time) shall be deemed to have been made on the next succeeding Business Day for all purposes. Upon receipt by the Agent of each such payment, the Agent shall credit each Term Lender's account with its pro rata share of such payment in accordance with such Term Lender's Term Loan Percentage (except as otherwise explicitly provided herein with respect to fees) and shall wire advice of the amount of such credit to each Term Lender. SECTION 4.4 Crediting of Payments and Proceeds. In the event that the Borrower shall fail to pay any of the obligations when due and the Term Loan Obligations have been accelerated pursuant to Section 11.2, all payments received by the Term Lenders upon the Term Notes and the other Term Loan Obligations and all net proceeds from the enforcement of the obligations shall be applied first to all expenses then due and payable by the Borrower hereunder, then to all indemnity obligations then due and payable by the Borrower hereunder, then to all Agent's fees then due and payable, then to all commitment and other fees and commissions then due and payable, then to accrued 30 and unpaid interest on the Term Notes, with any Term Lender pro rata in accordance with all such amounts due, then to the principal amount of the Term Notes. SECTION 4.5 [RESERVED] SECTION 4.6 Capital Requirements. If either (a) the introduction of, or any change in, or in the interpretation of, any Applicable Law or (b) compliance with any guideline or request from any central bank or comparable agency or other Governmental Authority (whether or not having the force of law), has or would have the effect of reducing the rate of return on the capital of, or has affected or would affect the amount of capital required to be maintained by, any Term Lender or any corporation controlling such Term Lender as a consequence of, or with reference to the Term Loan, below the rate which the Term Lender or such other corporation could have achieved but for such introduction, change or compliance, then within fifteen (15) Business Days after written demand by any such Term Lender, the Borrower shall pay to such Term Lender from time to time as specified by such Term Lender additional amounts sufficient to compensate such Term Lender or other corporation for such reduction. A certificate as to such amounts submitted to the Borrower and the Agent by such Term Lender, shall, in the absence of manifest error, be presumed to be correct and binding for all purposes. SECTION 4.7 Taxes. (a) Payments Free and Clear. Any and all payments by the Borrower hereunder or under the Term Notes shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholding, and all liabilities with respect thereto excluding, (i) in the case of each Term Lender and the Agent, income and franchise taxes imposed by the jurisdiction under the laws of which such Term Lender or the Agent (as the case may be) is organized or is or should be qualified to do business or any political subdivision thereof and (ii) in the case of each Term Lender, income and franchise taxes imposed by the jurisdiction of such Term Lender's Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Term Note to any Term Lender or the Agent, (A) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 4.7(a)) such Term Lender or the Agent 31 (as the case may be) receives an amount equal to the amount such party would have received had no such deductions been made, (B) the Borrower shall make such deductions, (C) the Borrower shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with Applicable Law, and (D) the Borrower shall deliver to the Agent evidence of such payment to the relevant taxing authority or other authority in the manner provided in this Section. (b) Stamp and Other Taxes. In addition, the Borrower shall pay any present or future stamp, registration, recordation or documentary taxes or any other similar fees or charges or excise or property taxes, levies of the United States or any state or political subdivision thereof or any applicable foreign jurisdiction which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, the Term Loan, the other Loan Documents, or the perfection of any rights or security interest in respect thereto (hereinafter referred to as "Other Taxes"). (c) Indemnity. The Borrower shall indemnify each Term Lender and the Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section) paid by such Term Lender or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Such indemnification shall be made within thirty (30) days from the date such Term Lender or the Agent (as the case may be) makes written demand therefor. (d) Evidence of Payment. Within thirty (30) days after the date of any payment of Taxes or Other Taxes, the Borrower shall furnish to the Agent, at its address referred to in Section 13.1, the original or a certified copy of a receipt evidencing payment thereof or other evidence of payment satisfactory to the Agent. (e) Delivery of Tax Forms. Each Term Lender organized under the laws of a jurisdiction other than the United States or any state thereof shall deliver to the Borrower, with a copy to the Agent, on the Closing Date or concurrently with the delivery of the relevant Assignment and Acceptance, as applicable, (i) two United States Internal Revenue Service Forms 4224 or Forms 1001, as applicable (or successor forms) properly completed and certifying in each case that such Term Lender is entitled to a complete exemption from withholding or deduction for or on account of any United States federal income taxes, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the case may be, to establish an exemption from United States backup withholding taxes. Each such Term Lender further agrees to deliver to the Borrower, with a copy to the Agent, a Form 1001 or 4224 and Form W-8 or W-9, or successor 32 applicable forms or manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower, certifying in the case of a Form 1001 or 4224 that such Term Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes (unless in any such case an event (including without limitation any change in treaty law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders such forms inapplicable or the exemption to which such forms relate unavailable and such Term Lender notifies the Borrower and the Agent that it is not entitled to receive payments without deduction or withholding of United States federal income taxes) and, in the case of a Form W-8 or W-9, establishing an exemption from United States backup withholding tax. (f) Survival. Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 4.7 shall survive the payment in full of the Obligations and the termination of the Term Loan. SECTION 4.8 Mandatory Prepayments. (a) Asset Sales. Within two (2) Business Days after the consummation by the Borrower or any Subsidiary of any Asset Sale, the Borrower shall apply ninety percent (90%) of the Net Proceeds realized from such Asset Sale to permanently reduce the Term Loan Obligations, the Note Obligations, and the Revolving Credit Obligations by forwarding such Net Proceeds (the "Asset Sale Net Proceeds") to the Agent and the Note Lenders in the respective percentages as set forth in Section 7(e) of the Intercreditor Agreement; provided that if no Event of Default has occurred under this Agreement as of the date such Net Proceeds are made available, the Borrower may apply the first twelve million dollars ($12,000,000) in Net Proceeds generated from Asset Sales, reduced by the Net Proceeds applied from Miscellaneous Asset Sales, to either: (i) its bona fide costs and expenses actually incurred in connection with the conversion of its Marshville Facility (collectively, "Marshville Conversion Expenses"); or (ii) if at any time on or before November 30, 1998, no such expenses have been incurred or are outstanding and no Event of Default has occurred, then to the projected Marshville Conversion Expenses pursuant to the financial projections provided to the Agent on February 4, 1998, provided that if on November 30, 1998, any funds are held in reserve pursuant to this subsection (ii), then such funds will be released to the Agent and the Note Lenders for distribution in accordance with the Intercreditor Agreement. The Borrower shall provide to the Agent an 33 accounting of the Marshville Conversion Expenses at the time of such application certified as true and correct by the Chief Financial Officer of the Borrower. (b) New Equity. Within two (2) Business Days after the consummation of any issuance by the Borrower or any of its Subsidiaries of any capital stock or other equity securities (as the case may be, a "New Equity Issue"), the Borrower shall apply an amount equal to fifty percent (50%) of the Net Proceeds of such New Equity Issue to permanently reduce the Term Loan Obligations, the Note Obligations, and the Revolving Credit Obligations by forwarding such Net Proceeds (the "New Equity Net Proceeds") to the Agent and the Note Lenders in the respective percentages as set forth in Section 7(e) of the Intercreditor Agreement, provided that the Borrower's existing stock incentive programs, as more fully described in Schedule 4.8(b) hereof, to the extent limited to aggregate equity values of $2,000,000 or less on an annual basis, shall not constitute a New Equity Issue for purposes hereof. (c) New Subordinated Debt. Within two (2) Business Days after the consummation of any transaction pursuant to which the Borrower or any subsidiary obtains unsecured Debt subordinated to the prior payment and performance of the Borrower's Obligations to the Revolving Credit Lenders, the Term Lenders, and the Note Lenders and on terms satisfactory to the Agent (as the case may be, an "Approved Subordinated Debt Transaction"), the Borrower shall apply an amount equal to one hundred percent (100%) of the Net Proceeds of such Approved Subordinated Debt Transaction to permanently reduce the Term Loan Obligations, the Revolving Credit Obligations, and the Note Obligations by forwarding such Net Proceeds (the "Subordinated Debt Net Proceeds") to the Agent and the Note Lenders in the respective percentages as set forth in Section 7(e) of the Intercreditor Agreement. SECTION 4.9 Approved Miscellaneous Asset Sales. From and after the Closing Date, the Borrower may, without the prior consent of the Agent or any Term Lender, consummate any Approved Miscellaneous Asset Sale, provided that the full amount of all Approved Miscellaneous Asset Sales shall be applied to reduce dollar for dollar the $12,000,000 allowance for the Marshville Conversion Expenses and further provided that if on the date any Net Proceeds from Miscellaneous Asset Sales are made available, the Marshville Conversion Expenses have been fully credited, the Borrower shall apply ninety percent (90%) of the balance of such Miscellaneous Asset Sale Net Proceeds to permanently reduce the Term Loan Obligations, the Revolving Credit Obligations and the Note Obligations, by forwarding such Net Proceeds (the "Miscellaneous Asset Sale Net Proceeds") to the Agent and the Note Lenders in the respective percentages as set forth in Section 7(e) of the Intercreditor Agreement. 34 ARTICLE V CLOSING; CONDITIONS OF CLOSING AND BORROWING SECTION 5.1 Closing. The closing shall take place at the offices of Duane, Morris & Heckscher LLP at 2:00 p.m. on February 25, 1998, or on such other date as the parties hereto shall mutually agree. SECTION 5.2 Conditions to Closing and Initial Term Loan. The obligation of the Term Lenders to close this Agreement and to make the Term Loan is subject to the satisfaction of each of the following conditions: (a) Executed Loan Documents. This Agreement, the Term Notes and each of the other Loan Documents shall have been duly authorized, executed and delivered to the Agent by the parties thereto, shall be in full force and effect and no default shall exist thereunder, and the Borrower shall have delivered original counterparts thereof to the Agent. (b) Closing Certificates; etc. (i) Officer's Certificate of Borrower. The Agent shall have received a certificate from the chief executive officer or chief financial officer of the Borrower, in form and substance satisfactory to the Agent, to the effect that all representations and warranties of the Borrower contained in this Agreement and the other Loan Documents are true, correct and complete; that the Borrower is not in violation of any of the covenants contained in this Agreement and the other Loan Documents; that, after giving effect to the transactions contemplated by this Agreement, no Default or Event of Default has occurred and is continuing; and that the Borrower has satisfied each of the closing conditions. (ii) Certificate of Secretary of the Borrower. The Agent shall have received a certificate of the secretary or assistant secretary of the Borrower certifying that attached thereto is a true and complete copy of the articles of incorporation of the Borrower and all amendments thereto, certified as of a recent date by the appropriate Governmental Authority in its jurisdiction of incorporation; that attached thereto is a true and complete copy of the bylaws of the Borrower as in Effect on the date of such certification; that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of the Borrower authorizing the borrowings contemplated hereunder and the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party; and as to the incumbency and genuineness of the signature of each officer of the Borrower executing Loan Documents to which it is a party. 35 (iii) Certificates of Good Standing. The Agent shall have received long form certificates as of a recent date of the good standing of the Borrower under the laws of its jurisdiction of organization and each other jurisdiction where the Borrower is qualified to do business. (iv) Opinions of Counsel. The Agent shall have received favorable opinions of counsel to the Borrower addressed to the Agent and the Term Lenders with respect to the Borrower, the Loan Documents and such other matters as the Term Lenders shall request. (v) Tax Forms. The Agent shall have received copies of the United States Internal Revenue Service forms required by Section 4.7(e) hereof. (c) Consents; No Adverse Change. (i) Governmental and Third Party Approvals. All necessary material approvals, authorizations and consents, if any be required, of any Person and of all Governmental Authorities and courts having jurisdiction with respect to the transactions contemplated by this Agreement and the other Loan Documents shall have been obtained. (ii) Permits and Licenses. All material permits and licenses, including permits and licenses required under Applicable Laws, necessary to the conduct of business by the Borrower and its Subsidiaries shall have been obtained. (iii) No Injunction, Etc. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain substantial damages in respect of, or which is related to or arises out of this Agreement or the other Loan Documents or the consummation of the transactions contemplated hereby or thereby, or which, in the Agent's discretion, would make it inadvisable to consummate the transactions contemplated by this Agreement and such other Loan Documents. (iv) No Material Adverse Change. There shall not have occurred any material adverse change in the business, condition (financial or otherwise), operations, or properties of the Borrower taken as a whole, or any event, condition or state of facts that will or could be reasonably expected to have a Material Adverse Effect, since June 28, 1997 except as disclosed in the Borrower's unaudited quarterly financial statements dated as of December 27, 1997. 36 (v) No Event of Default. No Default or Event of Default shall have occurred and be continuing. (d) Financial Matters. (i) Financial Statements. The Agent shall have received the most recent audited consolidated and consolidating financial statements of the Borrower and its Subsidiaries and the quarterly unaudited financial statements of the Borrower as of December 27, 1997, all in form and substance satisfactory to the Agent. (ii) Financial Condition Certificate. The Borrower shall have delivered to the Agent a certificate, in form and substance satisfactory to the Agent, and certified as accurate in all respects by the chief executive officer or chief financial officer of the Borrower, that the Borrower and each of its Subsidiaries are each Solvent. (iii) Payment at Closing; Fee Letters. There shall have been paid by the Borrower to the Agent and the Term Lenders the fees set forth or referenced in Section 4.2 and any other accrued and unpaid fees or commissions due hereunder (including, without limitation, legal fees and expenses), and to any other Person such amount as may be due thereto in connection with the transactions contemplated hereby, including all taxes, fees and other charges in connection with the execution, delivery, recording, filing and registration of any of the Loan Documents. The Agent shall have received duly authorized and executed copies of the fee letter agreement referred to in Section 4.2. (e) Miscellaneous. (i) Proceedings and Documents. All opinions, certificates and other instruments and all proceedings in connection with the transactions contemplated by this Agreement shall be satisfactory in form and substance to the Term Lenders. The Term Lenders shall have received copies of all other instruments and other evidence as the Term Lenders may reasonably request in form and substance satisfactory to the Term Lenders, with respect to the transactions contemplated by this Agreement and the taking of all actions in connection therewith. (ii) Due Diligence and Other Documents. The Borrower shall have delivered to the Agent such other documents, certificates and opinions as the Agent reasonably requests, certified by a secretary or assistant secretary of the Borrower as a true and correct copy thereof. 37 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BORROWER SECTION 6.1 Representations and Warranties. To induce the Agent to enter into this Agreement and the Term Lenders to make the Term Loan, the Borrower hereby represents and warrants to the Agent and Term Lenders that: (a) Organization; Power; Qualification. Each of the Borrower and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, has the power and authority to own its properties and to carry on its business as now being and hereafter proposed to be conducted and is duly qualified and authorized to do business in each jurisdiction (other than a jurisdiction in which the failure to so qualify would not have a Material Adverse Effect) in which the character of its properties or the nature of its business requires such qualification and authorization. The jurisdictions in which the Borrower and its Subsidiaries are organized and qualified to do business are described on Schedule 6.1(a). (b) Ownership. Each Subsidiary of the Borrower is listed on Schedule 6.1(b). The capitalization of the Borrower and its Subsidiaries consists of the number of shares, authorized, issued and outstanding, of such classes and series, with or without par value, described on Schedule 6.1(b). All outstanding shares have been duly authorized and validly issued and are fully paid and nonassessable. The shareholders of the Subsidiaries of the Borrower and the number of shares owned by each are described on Schedule 6.1(b). There are no outstanding stock purchase warrants, subscriptions, options, securities, instruments or other rights of any type or nature whatsoever, which are convertible into, exchangeable for or otherwise provide for or permit the issuance of capital stock of the Borrower or its Subsidiaries, except as described on Schedule 6.1(b). (c) Authorization of Agreement, Loan Documents and Borrowing. Each of the Borrower and its Subsidiaries has the right, power and authority and has taken all necessary corporate and other action to authorize the execution, delivery and performance of this Agreement and each of the other Loan Documents to which it is a party in accordance with their respective terms. This Agreement and each of the other Loan Documents have been duly executed and delivered by the duly authorized officers of the Borrower and each of its Subsidiaries party thereto, and each such document constitutes the legal, valid and binding obligation of the Borrower or its Subsidiary party thereto, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium 38 or similar state or federal debt or relief laws from time to time in effect which affect the enforcement of creditors' rights in general and the availability of equitable remedies. (d) Compliance of Agreement, Loan Documents and Borrowing with Laws, Etc. The execution, delivery and performance by the Borrower and its Subsidiaries of the Loan Documents to which each such Person is a party, in accordance with their respective terms, the borrowings hereunder and the transactions contemplated hereby, do not and will not, by the passage of time, the giving of notice or otherwise, (i) require any Governmental Approval or violate any Applicable Law relating to the Borrower or any of its Subsidiaries; (ii) conflict with, result in a breach of or constitute a default under the articles of incorporation, bylaws or other organizational documents of the Borrower or any of its Subsidiaries or any indenture, agreement or other instrument to which such Person is a party or by which any of its properties may be bound or any Governmental Approval relating to such Person; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by such Person other than Liens arising under the Loan Documents. (e) Compliance with Law; Governmental Approvals. Each of the Borrower and its Subsidiaries (i) has all material Governmental Approvals required by any Applicable Law for it to conduct its business, each of which is in full force and effect, is final and not subject to review on appeal and is not the subject of any pending or, to the best of its knowledge, threatened attack by direct or collateral proceeding; and (ii) is in compliance in all material respects with each Governmental Approval applicable to it and in compliance in all material respects with all other Applicable Laws relating to it or any of its respective properties. (f) Tax Returns and Payments. Each of the Borrower and its Subsidiaries has duly filed or caused to be filed all federal, state, local and other tax returns required by Applicable Law to be filed (other than returns the failure of which to be filed would not result in a Material Adverse Effect), and has paid, or made adequate provision for the payment of, all federal, state, local and other taxes, assessments and governmental charges or levies upon it and its property, income, profits and assets which are due and payable (other than taxes, assessments, charges and levies the failure of which to be paid would not result in a Material Adverse Effect). Except as set forth on Schedule 6.1(f), no Governmental Authority has asserted any Lien or other claim against the Borrower or any Subsidiary thereof with respect to unpaid taxes which has not been discharged or resolved. The charges, accruals and reserves on the books of the 39 Borrower and any of its Subsidiaries in respect of federal, state, local and other taxes for all Fiscal Years and portions thereof since the organization of the Borrower and any of its Subsidiaries are in the judgment of the Borrower adequate, and the Borrower does not anticipate any additional taxes or assessments for any of such years. (g) Copyright Matters. The Borrower and its Subsidiaries have recorded or deposited with and paid to the United States Copyright Offices, and the Register of Copyrights all notices, statements of account, royalty fees and other documents and instruments required under the United States Copyright Act, and neither the Borrower nor any Subsidiary thereof is liable to any Person for copyright infringement under the United States Copyright Act as a result of its business operations. (h) Franchises, Licenses, Patents and Trademarks. Each of the Borrower and its Subsidiaries owns or possesses rights to use all franchises, licenses, patents, patent rights or licenses, patent applications, trademarks, trademark rights, trade names, trade name rights, copyrights and rights with respect to the foregoing which are required to conduct its business, and all such franchises, licenses, patents, patent rights or licenses, patent applications, trademarks, trademark rights, trade names, trade name rights, copyrights and rights are described on Schedule 6.1(h). No event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any such rights. (i) Environmental Matters. (i) The properties of the Borrower and its Subsidiaries, to their knowledge, do not contain and have not previously contained, any Hazardous Materials in amounts or concentrations which (A) constitute or constituted a material violation of, or (B) could give rise to material liability under, applicable Environmental Laws; (ii) To the knowledge of the Borrower and its Subsidiaries, (A) such properties and all operations conducted in connection therewith are in compliance in all material respects, and have been in compliance in all material respects, with all applicable Environmental Laws, and (B) there is no contamination at, under or about such properties or such operations which could interfere with the continued operation of such properties or impair in a material amount the fair saleable value of any property which would have a material saleable value in the absence of such contamination; (iii) Neither the Borrower nor any Subsidiary thereof has received any notice of any material violation, alleged material 40 violation, material noncompliance, material liability or potential material liability regarding environmental matters or compliance with Environmental Laws with regard to any of their properties or the operations conducted in connection therewith, nor does the Borrower or any Subsidiary thereof have knowledge or reason to believe that any such notice will be received or is being threatened; (iv) To the knowledge of the Borrower and its Subsidiaries, (A) Hazardous Materials have not been transported or disposed of from the properties of the Borrower and its Subsidiaries in violation of, or in a manner or to a location which could give rise to material liability under, Environmental Laws, and (B) no Hazardous Materials have been generated, treated, stored or disposed of at, on or under any of such properties in violation of, or in a manner that could give rise to material liability under, any applicable Environmental Laws; (v) No judicial proceedings or governmental or administrative action is pending, or, to the knowledge of the Borrower, threatened, under any Environmental Law to which the Borrower or any Subsidiary thereof is or will be named as a party with respect to such properties or operations conducted in connection therewith which, if decided adversely to the Borrower or a Subsidiary, might have a material adverse effect upon the Borrower or a Subsidiary, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to such properties or such operations which involve a material liability of the Borrower or any Subsidiary; and (vi) To the Borrower's knowledge, there has been no release, or the threat of release, of Hazardous Materials at or from such properties, in violation of or in amounts or in a manner that could give rise to material liability under Environmental Laws. (j) ERISA. (i) Neither the Borrower nor any ERISA Affiliate maintains or contributes to, or has any obligation under, any Employee Benefit Plans which are defined benefit plans or welfare plans providing post- retirement medical benefits, other than those identified on Schedule 6.1(j); (ii) the Borrower and each ERISA Affiliate is in compliance in all material respects with all applicable provisions of ERISA and the regulations and published interpretations thereunder with respect to all Employee Benefit Plans except for any required amendments for 41 which the remedial amendment period as defined in Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified, and each trust related to such plan has been determined to be exempt under Section 501(a) of the Code. No liability has been incurred by the Borrower or any ERISA Affiliate which remains unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan or any Multiemployer Plan; (iii) No Pension Plan has been terminated, nor has any accumulated funding deficiency (as defined in Section 412 of the Code) been incurred (without regard to any waiver granted under Section 412 of the Code), nor has any funding waiver from the Internal Revenue Service been received or requested with respect to any Pension Plan, nor has the Borrower or any ERISA Affiliate failed to make any contributions or to pay any amounts due and owing as required by Section 412 of the Code, Section 302 of ERISA or the terms of any Pension Plan prior to the due dates of such contributions under Section 412 of the Code or Section 302 of ERISA, nor has there been any event requiring any disclosure under election 4041(c)(3)(C) or 4063(a) of ERISA with respect to any Pension Plan; (iv) Neither the Borrower nor any ERISA Affiliate has: (A) engaged in a nonexempt prohibited transaction described in Section 406 of the ERISA or Section 4975 of the Code; (B) incurred any liability to the PBGC which remains outstanding other than the payment of premiums and there are no premium payments which are due and unpaid; (C) failed to make a required contribution or payment to a Multiemployer Plan; or (D) failed to make a required installment or other required payment under Section 412 of the Code; (v) No Termination Event has occurred or is reasonably expected to occur; and (vi) No proceeding, claim, lawsuit and/or investigation is existing or, to the best knowledge of the Borrower after due inquiry, threatened concerning or involving any (A) employee welfare benefit plan (as defined in Section 3(i) of ERISA) currently maintained or contributed to by the Borrower or any ERISA Affiliate, (B) Pension Plan or (C) Multiemployer Plan. (k) Margin Stock. Neither the Borrower nor any Subsidiary thereof is engaged principally or as one of its activities in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" (as each such term is defined or used in Regulations G and U of the Board of Governors of the Federal Reserve System). No part of the proceeds of the Term Loan will be used for purchasing or carrying margin stock or for any purpose which violates, 42 or which would be, inconsistent with, the provisions of Regulation G, T, U or X of such Board of Governors. (l) Government Regulation. Neither the Borrower nor any Subsidiary thereof is an "investment company" or a company "controlled" by an "investment company" (as each such term is defined or used in the Investment Company Act of 1940, as amended), and neither the Borrower nor any Subsidiary thereof is, or after giving effect to any Extension of Credit will be, subject to regulation under the Public Utility Holding Company Act of 1935 or the Interstate Commerce Act, each as amended, or any other Applicable Law which limits its ability to incur or consummate the transactions contemplated hereby. (m) Material Contracts. Each Material Contract is, and after giving effect to the consummation of the transactions contemplated by the Loan Documents will be, in full force and effect in accordance with the terms thereof. (n) Employee Relations. Except as set forth on Schedule 6.1(n), the Borrower is not party to any collective bargaining agreement, nor has any labor union been recognized as the representative of its employees. Each of the Borrower and its Subsidiaries has a stable work force in place. The Borrower knows of no pending, threatened or contemplated strikes, work stoppage or other collective labor disputes involving its employees or those of its Subsidiaries. (o) Burdensome Provisions. Neither the Borrower nor any Subsidiary thereof is a party to any indenture, agreement, lease or other instrument, or subject to any corporate or partnership restriction, Governmental Approval or Applicable Law which is so unusual or burdensome as in the foreseeable future could be reasonably expected to have a Material Adverse Effect. The Borrower and its Subsidiaries do not presently anticipate that future expenditures needed to meet the provisions of any statutes, orders, rules or regulations of a Governmental Authority will be so burdensome as to have a Material Adverse Effect. (p) Financial Statements. The Consolidated and consolidating audited financial statements of the Borrower and its subsidiaries dated June 28, 1997 and the Consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as of December 27, 1997 and the related statements of income and retained earnings and cash flows for the periods then ended, copies of which have been furnished to the Agent and each Term Lender, fairly present the assets, liabilities and financial position of the Borrower and its Subsidiaries as at such dates, and the results of the operations and 43 changes of financial position for the periods then ended. All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP. The Borrower and its Subsidiaries have no Debt, obligation or other unusual forward or long-term commitment which is not fairly reflected in the foregoing financial statements or in the notes thereto. (q) No Material Adverse Change. Since June 28, 1997, except as disclosed in the Borrower's unaudited quarterly financial statements dated as of December 27, 1997, there has been no material adverse change in the properties, business, operations, or condition (financial or otherwise) of the Borrower and its Subsidiaries, including, but not limited to, any material adverse change resulting from any fire, explosion, accident, drought, storm, hail, earthquake, embargo, act of God, or of the public enemy or other casualty (whether or not covered by insurance). (r) Solvency. As of the Closing Date and after giving effect to each Extension of Credit made hereunder, the Borrower and each of its Subsidiaries will be Solvent. (s) Titles to Properties. Each of the Borrower and its Subsidiaries has such title to the real property owned by it as is necessary or desirable to the conduct of its business and valid and legal title to all of its personal property and assets, including, but not limited to, those reflected on the balance sheets of the Borrower and its Subsidiaries delivered pursuant to Section 6.1(p). Any real property owned by the Borrower that is currently subject to any lease is listed together with a description of all such leases in Schedule 6.1(s). (t) Liens. None of the properties and assets of the Borrower or any Subsidiary thereof is subject to any Lien, except Liens permitted pursuant to Section 10.3. No financing statement under the Uniform Commercial Code of any state which names the Borrower or any Subsidiary thereof or any of their respective trade names or divisions as debtor and which has not been terminated, has been filed in any state or other jurisdiction and neither the Borrower nor any Subsidiary thereof has signed any such financing statement or any security agreement authorizing any secured party thereunder to file any such financing statement, except to perfect those Liens permitted by Section 10.3 hereof or signed with respect to leases other than Capital Leases and except for Liens in favor of the Agent for the benefit of the Term Lenders. (u) Debt and Contingent Obligations. Except with respect to the 1997 Credit Agreement and any noteholder agreement which is superseded as of the Closing Date, the Borrower and its Subsidiaries have performed and are in compliance in all material respects with all of 44 the terms of their Debt and Contingent Obligations and all instruments and agreements relating thereto, and no default or event of default which has not been waived, or event or condition which with notice or lapse of time or both would constitute such a default or event of default, on the part of the Borrower or its Subsidiaries exists with respect to any such Debt or Contingent Obligation. (v) Litigation. Except as set forth on Schedule 6.1(v), there are no actions, suits or proceedings pending nor, to the knowledge of the Borrower, threatened against or in any other way relating adversely to or affecting the Borrower or any Subsidiary thereof or any of their respective properties in any court or before any arbitrator of any kind or before or by any Governmental Authority in which a decision adverse to the Borrower or such Subsidiary can reasonably be expected to have a Material Adverse Effect. (w) Absence of Defaults. No event has occurred or is continuing which constitutes a Default or an Event of Default which has not been waived, or which constitutes, or which with the passage of time or giving of notice or both would constitute, a default or event of default, which has not been waived, by the Borrower or any Subsidiary thereof under any Material Contract or judgment, decree or order to which the Borrower or its Subsidiaries is a party or by which the Borrower or its Subsidiaries or any of their respective properties may be bound or which would require the Borrower or its Subsidiaries to make any payment thereunder prior to the scheduled maturity date therefor. (x) Accuracy and Completeness of Information. All written information, reports and other papers and data produced by or on behalf of the Borrower or any Subsidiary thereof and furnished to the Term Lenders were, at the time the same were so furnished, complete and correct in all respects to the extent necessary to give the recipient a true and accurate knowledge of the subject matter. No document furnished or written statement made to the Agent or the Term Lenders by the Borrower or any Subsidiary thereof in connection with the negotiation, preparation or execution of this Agreement or any of the Loan Documents contains or will contain any untrue statement of a fact material to the credit worthiness of the Borrower or its Subsidiaries or omits or will omit to state a fact necessary in order to make the statements contained therein not misleading. The Borrower is not aware of any facts which it has not disclosed in writing to the Agent having a Material Adverse Effect, or insofar as the Borrower can now foresee, could reasonably be expected to have a Material Adverse Effect. 45 (y) Rockingham Subsidiaries. Rockingham Poultry, Inc. is not an active corporate entity and does not own or otherwise hold any assets. Rockingham Poultry, Inc. (VI) holds only one asset consisting of a bank account at Banco Popular (Puerto Rico) in the name of Rockingham Poultry, Inc. (VI) (the "RVI Account") which RVI Account shall at no time contain an amount more than $15,000. (z) WLR Common Stock. As of the date hereof, there are 16,335,058 shares of the Common Stock, no par value, of WLR issued and outstanding. Except as set forth on Schedule 6.1(z) attached hereto: (a) there are no outstanding options, warrants or other rights to acquire shares of WLR Common Stock, whether or not presently exercisable; (b) there are no outstanding securities convertible into shares of WLR Common Stock, whether or not presently convertible; and (c) there are no understandings, agreements or commitments with respect to the issuance of any such securities. SECTION 6.2 Survival of Representations and Warranties Etc. All representations and warranties set forth in this Article VI and all representations and warranties contained in any certificate, or any of the Loan Documents (including but not limited to any such representation or warranty made in or in connection with any amendment thereto) shall constitute representations and warranties made under this Agreement. All representations and warranties made under this Agreement shall be made or deemed to be made at and as of the Closing Date, shall survive the Closing Date and shall not be waived by the execution and delivery of this Agreement, any investigation made by or on behalf of the Term Lenders or any borrowing hereunder. ARTICLE VII FINANCIAL INFORMATION AND NOTICES Until all the Obligations have been finally and indefeasibly paid and satisfied in full, unless consent has been obtained in the manner set forth in Section 13.11 hereof, the Borrower will furnish or cause to be furnished to the Agent at the Agent's Office (with copies for each Term Lender) and the Agent at its address set forth in Section 13.1 hereof, or such other office as may be designated by the Agent from time to time: SECTION 7.1 Financial Statements and Projections. (a) Quarterly Financial Statements. As soon as practicable and in any event within forty-five (45) days after the end of each fiscal quarter, an unaudited Consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as of the close of such fiscal 46 quarter in the form as attached as Exhibit "D," an unaudited Consolidated and consolidating statement of income for the fiscal quarter then ended and that portion of the Fiscal Year then ended and an unaudited Consolidated and consolidating statement of cash flows for that portion of the Fiscal Year then ended, including the notes, if any, thereto all in reasonable detail setting forth in comparative form the corresponding figures for the preceding Fiscal Year and prepared by the Borrower in accordance with GAAP and, if applicable, containing disclosure of the effect on the financial position or results of operations of any material change in the application of accounting principles and practices during the period and certified by the chief financial officer of the Borrower to present fairly in all material respects the financial condition of the Borrower and its Subsidiaries as of their respective dates and the results of operations of the Borrower and its Subsidiaries for the respective periods then ended, subject to normal year end adjustments. (b) Annual Financial Statements. As soon as practicable and in any event within ninety (90) days after the end of each Fiscal Year, an audited Consolidated and unaudited consolidating balance sheet of the Borrower and its Subsidiaries as of the close of such Fiscal Year and audited Consolidated and unaudited consolidating statements of income, retained earnings and cash flows for the Fiscal Year then ended, including the notes thereto, all in reasonable detail setting forth in comparative form the corresponding figures for the preceding Fiscal Year and certified by an independent certified public accounting firm acceptable to the Agent in accordance with GAAP and, if applicable, containing disclosure of the effect on the financial position or results of operation of any change in the application of accounting principles and practices during the year, and accompanied by a report thereon by such certified public accountants that is not qualified with respect to scope limitations imposed by the Borrower or any of its Subsidiaries or with respect to accounting principles followed by the Borrower or any of its Subsidiaries not in accordance with GAAP. (c) Monthly Financial Statements. As soon as practicable and in any event within thirty days after the end of each calendar month, such financial information as may be required by written notification to the Borrower from the Agent on or before March 31, 1998. (d) SEC Filings. Within three (3) Business Days after their filing with the Securities and Exchange Commission (the "SEC"), copies of the Borrower's 10-K and 10-Q and any other periodic financial statements which the Borrower or any of its Subsidiaries is required to file with the SEC. 47 (e) Financial Projections. Within thirty (30) days after each such request, such financial projections for the Borrower and its Subsidiaries as the Agent may from time to time reasonably request. (f) Three Year Business Plan. On or before June 1, 1998, a copy of the Borrower's three year business plan (the "Three Year Business Plan") in form and substance satisfactory to the Required Term Lenders and the Agent. SECTION 7.2 Officer's Compliance Certificate. At each time financial statements are delivered pursuant to Sections 7.1 (a) or (b) and at such other times as the Agent shall reasonably request, a certificate of the chief financial officer or the treasurer of the Borrower in the form of Exhibit "E" attached hereto (an "Officer's Compliance Certificate"): (a) stating that such officer has reviewed such financial statements and such statements fairly present the financial condition of the Borrower as of the dates indicated and the results of its operations and cash flows for the periods indicated; (b) stating that to such officer's knowledge, based on a reasonable examination sufficient to enable him to make an informed statement, no Default or Event of Default exists, or, if such is not the case, specifying such Default or Event of Default and its nature, when it occurred, whether it is continuing and the steps being taken by the Borrower with respect to such Default or Event of Default; and (c) setting forth as at the end of such Fiscal Month, Fiscal Quarter, Fiscal Year, as the case may be, the calculations required to establish whether or not the Borrower and its Subsidiaries were in compliance with the financial covenants set forth in Article IX hereof as at the end of each respective period, and with the delivery of the calculations as at the end of any Fiscal Quarter or Fiscal Year the actual Coverage Ratio and Leverage Ratio for purposes of calculating the Applicable Margin for Term Loans. SECTION 7.3 Accountants' Certificate. At each time financial statements are delivered pursuant to Section 7.1(b), a certificate of the independent public accountants certifying such financial statements addressed to the Agent for the benefit of the Term Lenders: (a) stating that in making the examination necessary for the certification of such financial statements, they obtained no knowledge of any Default or Event of Default or, if such is not the case, 48 specifying such Default or Event of Default and its nature and period of existence; and (b) including the calculations certified by such accountants required to establish whether or not the Borrower and its Subsidiaries are in compliance with the financial covenants set forth in Article IX hereof as at the end of each respective period. SECTION 7.4 Other Reports. (a) Promptly upon receipt thereof, copies of all reports, if any, submitted to the Borrower or its Board of Directors by its independent public accountants in connection with their auditing function, excluding any management report and any management responses thereto (which shall nevertheless be made available as provided in Section 8.11); and (b) Such other information regarding the operations, business affairs and financial condition of the Borrower or any of its Subsidiaries as the Agent or any Term Lender may reasonably request, including, without limitation, consolidating financial statements and summary product sales information as provided on company-prepared fact sheets. SECTION 7.5 Notice of Litigation and Other Matters. Prompt (but in no event later than five (5) days after the Chief Executive Officer, Chief Financial Officer, or any Vice President of WLR obtains knowledge thereof) telephonic and written notice of: (a) the commencement of all proceedings and investigations by or before any Governmental Authority and all actions and proceedings in any court or before any arbitrator against or involving the Borrower or any Subsidiary thereof or any of their respective properties, assets or businesses in which a decision adverse to the Borrower or such Subsidiary can reasonably be expected to have a Material Adverse Effect; (b) any notice of any violation (including, without limitation, a violation of Environmental Laws) received by the Borrower or any Subsidiary thereof from any Governmental Authority which violation could reasonably be expected to have a Material Adverse Effect; (c) any labor controversy that has resulted in, or threatens to result in, a strike or other work action against the Borrower or any Subsidiary thereof, which strike or work action, if continued, can reasonably be expected to have a Material Adverse Effect; 49 (d) any attachment, judgment, lien (except Permitted Liens), levy or order exceeding $3,000,000 that may be assessed against the Borrower or any Subsidiary thereof; (e) any Default or Event of Default, or any event which constitutes or which with the passage of time or giving of notice or both would constitute a default or event of default under any Material Contract to which the Borrower or any of its Subsidiaries is a party or by which the Borrower or any Subsidiary thereof or any of their respective properties may be bound, and any corrective action which the Borrower or any of its Subsidiaries has taken or proposes to take with respect thereto; (f) (i) the establishment of any new Employee Benefit Plan which is a defined benefit plan or a welfare plan providing post-retirement benefits, the commencement of contributions to any such plan to which the Borrower or any ERISA Affiliate was not previously contributing or any increase in the benefits of any such existing Employee Benefit Plan which would increase the projected liability of the Borrower and/or one or more ERISA Affiliates by $1,000,000 or more; (ii) each funding waiver request filed with respect to any Employee Benefit Plan and all communications received or sent by the Borrower or any ERISA Affiliate with respect to such request; (iii) the failure of the Borrower or any ERISA Affiliate to make a required installment or payment under Section 302 of ERISA or Section 412 of the Code by the due date; (iv) any Termination Event or "prohibited transaction", as such term is defined in Section 406 of ERISA or Section 4975 of the Code, in connection with any Employee Benefit Plan or any trust created thereunder which can reasonably be expected to have a Material Adverse Effect, along with a description of the nature thereof, what action the Borrower has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto; (v) any unfavorable determination letter from the Internal Revenue Service regarding the qualification of an Employee Benefit Plan under Section 401(a) of the Code if the failure of such Employee Benefit Plan to be qualified can reasonably be expected to have a Material Adverse Effect (along with a copy thereof); (vi) all notices received by the Borrower or any ERISA Affiliate of the PBGC's intent to terminate any Pension Plan or to have a trustee appointed to administer any Pension Plan; (vii) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by the Borrower or any ERISA Affiliate with the Internal Revenue Service with respect to each Pension Plan; (viii) all notices received by the Borrower or any ERISA Affiliate from a Multiemployer Plan sponsor concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA; and (ix) the Borrower obtaining knowledge or reason to know that the Borrower or any ERISA Affiliate has filed or 50 intends to file a notice of intent to terminate any Pension Plan under a distress termination within the meaning of Section 4041 (c) of ERISA; and (g) any event which makes any of the representations set forth in Section 6.1 inaccurate in any material respect. SECTION 7.6 Accuracy of Information. All written information, reports, statements and other papers and data furnished by or on behalf of the Borrower to the Agent or any Term Lender (other than financial forecasts) whether pursuant to this Article VII or any other provision of this Agreement, or any of the Security Documents, shall be, at the time the same is so furnished, complete and correct in all material respects to the extent necessary to give the Agent or any Term Lender complete, true, and accurate knowledge of the subject matter based on the Borrower's knowledge thereof. ARTICLE VIII AFFIRMATIVE COVENANTS Until all of the Obligations have been finally and indefeasibly paid and satisfied in full and the Term Loan terminated, unless consent has been obtained in the manner provided for in Section 13.11, the Borrower will, and will cause each of its Subsidiaries to: SECTION 8.1 Preservation of Corporate Existence and Related Matters. Except as permitted by Section 10.5, preserve and maintain its separate corporate existence and all rights, franchises, licenses and privileges necessary to the conduct of its business; and qualify and remain qualified as a foreign corporation and authorized to do business in each jurisdiction in which time failure to so qualify would have a Material Adverse Effect. SECTION 8.2 Maintenance of Property. Protect and preserve all properties useful in and material to its business, including copyrights, patents, trade names and trademarks; maintain in good working order and condition all buildings, equipment and other tangible real and personal property; and from time to time make or cause to be made all renewals, replacements and additions to such property necessary for the conduct of its business, so that the business carried on in connection therewith may be properly and advantageously conducted at all times. SECTION 8.3 Insurance. Carry at all times with financially sound and reputable insurance companies which have ratings from A. M. Best & Co. of "A" or higher or are otherwise acceptable to the Agent: (a) all workers' compensation or similar insurance as may be required 51 under the laws of any jurisdiction; (b) public liability insurance against claims for personal injury, death or property damage suffered upon, in or about any premises occupied by it or occurring as a result of the ownership, maintenance or operation by it of any automobile, truck or other vehicle or as a result of the use of products manufactured, constructed or sold by it, or services rendered by it; (c) business interruption insurance covering risk of loss as a result of the cessation for all or any part of one year of any substantial part of the business conducted by it; (d) hazard insurance against such other hazards as are usually insured against by business entities of established reputation engaged in like businesses and similarly situated, including, without limitation, fire (flood, if applicable) and extended coverage; and (e) such other insurance as the Agent may from time to time reasonably require, and pay all premiums on the policies for all such insurance when and as they become due and take all other actions necessary to maintain such policies in full force and effect at all times. CIGNA is an acceptable insurer for purposes of this Section unless the Agent, at the request of the Required Term Lenders, notifies the Borrower that CIGNA is unacceptable. The Borrower shall cause each hazard insurance policy to provide, and the insurer issuing each such policy to certify to the Agent, that (a) if such insurance be proposed to be canceled or materially changed for any reason whatsoever, such insurer will promptly notify the Agent and such cancellation or change shall not be effective for 30 days after receipt by the Agent of such notice, unless the effect of such change is to extend or increase coverage under the policy; (b) the Agent, for the benefit of the Term Lenders, shall be named as lender loss payee with respect to personal property and mortgagee with respect to real property; and (c) the Agent will have the right, at its election, to remedy any default in the payment of premiums within 30 days of notice from the insurer of such default. The foregoing covenants regarding insurance are in addition to, and not intended to supersede, those covenants regarding insurance set forth in the Security Documents. In the event and to the extent of any conflict between the provisions of this Agreement and the provisions of the Security Documents regarding the insuring of Collateral, the provisions of the Security Documents with respect thereto shall govern. SECTION 8.4 Accounting Methods and Financial Records. Maintain a system of accounting, and keep such books, records and accounts (which shall be true and complete in all material respects) as may be required or as may be necessary to permit the preparation of financial statements in accordance with GAAP and in compliance with the regulations of any Governmental Authority having jurisdiction over it or any of its properties. 52 SECTION 8.5 Payment and Performance of Obligations. Pay and perform all Obligations under this Agreement and the other Loan Documents, and pay or perform (a) all taxes, assessments and other governmental charges that may be levied or assessed upon it or any of its property, and (b) all other indebtedness, obligations and liabilities in accordance with customary trade practices; provided that the Borrower or such Subsidiary may contest any item described in this Section 8.5 in good faith so long as adequate reserves are maintained with respect thereto in accordance with GAAP. SECTION 8.6 Compliance With Laws and Approvals. Observe and remain in compliance in all material respects with all Applicable Laws and maintain in full force and effect all material Governmental Approvals, in each case applicable to the conduct of its business. SECTION 8.7 Environmental Laws. In addition to and without limiting the generality of Section 8.6, (a) comply in all material respects with, and ensure such compliance in all material respects by all tenants and subtenants, if any, with, all applicable Environmental Laws and obtain and comply with and maintain, and ensure that all tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws; (b) conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws, and promptly comply with all lawful orders and directives of any Governmental Authority regarding Environmental Laws; and (c) defend, indemnify and hold harmless the Agent and the Term Lenders, and their respective parents, Subsidiaries, Affiliates, employees, agents, officers and directors, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation of, noncompliance with or liability under any Environmental Laws applicable to the operations of the Borrower or such Subsidiary, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, reasonable attorney's and consultant's fees, investigation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing arise out of the negligence or willful misconduct of the party seeking indemnification therefor. SECTION 8.8 Compliance with ERISA. In addition to and without limiting the generality of Section 8.6, (a) make timely payment of contributions required to meet the minimum funding standards set forth in ERISA with respect to any Employee Benefit Plan; (b) not take any action or fail to take action the result of which could be a liability 53 to the PBGC or to a Multiemployer Plan; (c) not participate in any prohibited transaction that could result in any material civil penalty under ERISA or tax under the Code; (d) furnish to the Agent upon the Agent's request such additional information about any Employee Benefit Plan as may be reasonably requested by the Agent; and (e) operate each Employee Benefit Plan in such a manner that will not incur any tax liability under Section 4980B of the Code or any liability to any qualified beneficiary as defined in Section 4980B of the Code. SECTION 8.9 Compliance With Agreements. Comply in all material respects with each term, condition and provision of all leases, agreements and other instruments entered into in the conduct of its business including, without limitation, any Material Contract; provided that the Borrower or such Subsidiary may contest any such lease, agreement or other instrument in good faith through applicable proceedings so long as adequate reserves are maintained in accordance with GAAP. SECTION 8.10 Conduct of Business. Engage only in businesses in substantially the same fields as the businesses conducted on the Closing Date and in lines of business reasonably related thereto. SECTION 8.11 Visits and Inspections. Permit representatives of the Agent or any Term Lender, from time to time, after reasonable notice, to visit and inspect its properties; inspect, audit and make extracts from its books, records and files, including, but not limited to, management letters prepared by independent accountants; and discuss with its principal officers, and its independent accountants, its business, assets, liabilities, financial condition, results of operations and business prospects. SECTION 8.12 Further Assurances. Make, execute and deliver all such additional and further acts, things, deeds and instruments as the Agent or any Term Lender may reasonably require to document and consummate the transactions contemplated hereby and to vest completely in and insure the Agent and the Term Lenders their respective rights under this Agreement, the Term Notes and the other Loan Documents. SECTION 8.13 Meeting with Term Lenders. Participate in meetings at least twice annually with all Term Lenders wishing to participate therein at a date, time and location satisfactory to the Agent and fully disclose in such meeting the material future business plans of the Borrower and its Subsidiaries. SECTION 8.14 Year 2000 Issues. Take all action necessary to assure that the Borrower's computer based systems are able to operate 54 and effectively process data including dates on and after January 1, 2000. At the request of the Agent, the Borrower shall provide the Agent assurance acceptable to the Agent of the Borrower's Year 2000 compatibility. SECTION 8.15 Employment of Outside Accountants and Financial Consultants. Employ Ernst & Young LLP or another outside accounting firm and/or financial consulting firm acceptable to the Agent for the purpose of providing consulting and related financial services to the Borrower as more fully described in the work plan attached as Schedule 8.15. The Borrower will continuously employ a chief financial officer and related accounting and financial employees reasonably acceptable to the Agent until the Obligations have been paid in full. For purposes of this Section 8.15, current Chief Financial Officer is acceptable to the Agent as chief financial officer of the Borrower. If the Borrower fails to employ continuously a chief financial officer and related accounting and financial employees reasonably acceptable to the Agent, the Borrower will employ an outside accounting and/or financial consulting firm acceptable to the Agent to perform such tasks as the Agent may designate. If the Borrower wishes to terminate the accounting firm and/or financial consulting firm which is performing the services described in the work plan attached as Schedule 8.15 prior to its completion, the Borrower must obtain the prior written consent of the Agent. For purposes of computing EBITDA under the financial covenants contained in Article IX of this Agreement and the Term Loan Agreement, fees and expenses which have been paid prior to the date of this Agreement and which may be paid after the date of this Agreement to the outside accounting firm and/or financial consulting firm referred to in this Section 8.15 will not be considered an expense in calculating EBITDA. SECTION 8.16 Maintenance of Bank Accounts. Except for a deposit account with a balance at no time to exceed $15,000 maintained in the name of Rockingham Poultry (VI) at Banco Popular (Puerto Rico), maintain all of its depository, disbursement and other accounts with the Agent and/or any Lender. SECTION 8.17 Interest Rate Protection. As promptly as practicable, and in any event within 60 days after the Closing Date, enter into, and thereafter for a period of not less than two years maintain in effect, one or more Interest Rate Protection Agreements on such terms and with such parties as shall be reasonably satisfactory to the Agent, the effect of which shall be to fix or limit the interest costs to the Borrower with respect to at least fifty percent (50%) of the amount outstanding under the Term Loan, the Note Agreement, and projected outstanding amount for Revolving Credit Loans. 55 ARTICLE IX FINANCIAL COVENANTS Commencing on June 27, 1998, and continuing until all of the Obligations have been finally and indefeasibly paid and satisfied in full, unless consent has been obtained in the manner set forth in Section 13.11 hereof, the Borrower and its Subsidiaries on a Consolidated basis will not: SECTION 9.1 Minimum Monthly EBITDA. As of the end of any Fiscal Month, permit the Borrower's Consolidated Cumulative twelve month EBITDA ending with such Fiscal Month, to be less than the dollar amount corresponding to such period set forth below: Minimum Cumulative Fiscal Month Ended Twelve Month EBITDA July 1998 $10,701,000 August 1998 $15,248,000 September 1998 $17,048,000 October 1998 $21,089,000 November 1998 $23,646,000 December 1998 $29,821,000 SECTION 9.2 Minimum Quarterly EBITDA. As of the end of any Fiscal Quarter, permit the Borrower's Consolidated cumulative four- quarter EBITDA ending with such Fiscal Quarter to be less than the dollar amount corresponding to such period set forth below: Fiscal Quarter Ended Minimum Cumulative Four Quarter EBITDA Third Fiscal Quarter 1999 $41,456,000 Fourth Fiscal Quarter 1999 $53,830,000 First Fiscal Quarter 2000 $62,646,000 Second Fiscal Quarter 2000 $69,333,000 Third Fiscal Quarter 2000 $71,082,000 Fourth Fiscal Quarter 2000 $74,151,000 First Fiscal Quarter 2001 $75,963,000 Second Fiscal Quarter 2001 $77,852,000 SECTION 9.3 Limitation on Capital Expenditures. Make or incur Capital Expenditures in any cumulative four Fiscal Quarter period ending with such Fiscal Quarter, which would exceed an aggregate amount for such period corresponding to such period as set forth below: 56 Quarter Ended Maximum Capital Expenditures Fourth Fiscal Quarter 1998 $30,856,000 First Fiscal Quarter 1999 $36,562,000 Second Fiscal Quarter 1999 $35,800,000 Third Fiscal Quarter 1999 $32,500,000 Fourth Fiscal Quarter 1999 $27,700,000 First Fiscal Quarter 2000 $24,000,000 Second Fiscal Quarter 2000 $24,000,000 Third Fiscal Quarter 2000 $24,000,000 Fourth Fiscal Quarter 2000 $24,000,000 First Fiscal Quarter 2001 $24,000,000 Second Fiscal Quarter 2001 $24,000,000 ARTICLE X NEGATIVE COVENANTS Until all of the Obligations have been finally and indefeasibly paid and satisfied in full, unless consent has been obtained in the manner set forth in Section 13.11 hereof, the Borrower has not and will not, and will not permit any of its Subsidiaries to: SECTION 10.1 Limitations on Debt. Create, incur, assume or suffer to exist any Debt except: (a) The Obligations; (b) Debt created under the Note Agreement and related documents. (c) Debt existing on the Closing Date as described on Schedule 10.1(c) and the renewal and refinancing (but not the increase) thereof; provided, however, that until such time as the Obligations are indefeasibly paid in full, the Borrower shall not refinance any portion of the Debt on a secured basis; (d) [intentionally left blank] (e) Debt consisting of Contingent Obligations permitted by Section 10.2(b); (f) Debt from Approved Subordinated Debt Transaction(s) as provided in Article IV hereof; and (g) Purchase Money Debt (including Capital Leases) in an aggregate amount not to exceed $5,000,000 on any date of determination. 57 SECTION 10.2 Limitations on Contingent Obligations. Create, incur, assume or suffer to exist any Contingent Obligations except: (a) Contingent Obligations in favor of the Agent for the benefit of the Agent and the Term Lenders and/or the Revolving Credit Lenders; (b) Contingent Obligations existing on the Closing Date as described on Schedule 10.2(b) (but not any increase thereof); and (c) Other Contingent Obligations in an aggregate amount not to exceed $1,000,000 at any time. SECTION 10.3 Limitations on Liens. Create, incur, assume or suffer to exist, any Lien on or with respect to any of its assets or properties (including shares of capital stock), real or personal, whether now owned or hereafter acquired, except: (a) Liens for taxes, assessments and other governmental charges or levies (excluding any Lien imposed pursuant to any of the provisions of ERISA or Environmental Laws) not yet due or as to which the period of grace (not to exceed thirty (30) days), if any, related thereto has not expired or which are being contested in good faith and by appropriate proceedings if adequate reserves are maintained to the extent required by GAAP; (b) The claims of materialmen, mechanics, carriers, warehousemen, processors or landlords for labor, materials, supplies or rentals and/or other statutory liens incurred in the ordinary course of business which in the aggregate do not at any time exceed $1,000,000; and (i) which are not overdue for a period of more than thirty (30) days; or (ii) which are being contested in good faith and by appropriate proceedings; (c) Liens consisting of deposits or pledges made in the ordinary course of business in connection with, or to secure payment of, obligations under workers' compensation, unemployment insurance or similar legislation or obligations (not to exceed $10,000,000); (d) Liens constituting encumbrances in the nature of zoning restrictions, easements and rights or restrictions of record on the use of real property, which in the aggregate are not substantial in amount and which do not, in any case, detract from the value of such property or impair the use thereof in the ordinary conduct of business; 58 (e) Liens of the Collateral Agent for the benefit of the Agent and the Term Lenders, the Revolving Credit Lenders, and/or the Note Lenders; (f) Any Lien existing on the Closing Date which is described on Schedule 10.3(f); (g) Limited Grower Payable Liens; and (h) Liens on personal property held in a margin account by the counter party with respect to a Derivative Agreement relating to commodities or natural resources, so long as (i) such Derivative Agreement was entered into in the ordinary course of business solely for the purpose of mitigating risk and (ii) the aggregate fair market value of all personal property held in all such margin accounts does not at any time exceed $10,000,000; and (i) Liens created on account of Purchase Money Debt authorized pursuant to Section 10.1(g) hereof. SECTION 10.4 Limitations on Acquisitions. Without the prior written consent of each Term Lender, acquire any significant part of the assets of any Person which is not a Subsidiary or acquire the capital stock or other ownership interest in any Person. SECTION 10.5 Limitations on Mergers, Liquidation and New Business Ventures. Merge, consolidate or enter into any similar combination with any other Person or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution); or enter into any new business activities or ventures (including joint ventures) not related to its present business except that Wampler Supply may be merged or liquidated into any Borrower. SECTION 10.6 Limitations on Sale of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, the sale of any receivables and leasehold interests and any sale leaseback or similar transaction), whether now owned or hereafter acquired except: (a) the sale of inventory in the ordinary course of business; (b) the sale of obsolete assets no longer used or usable in the business of the Borrower or any of its Subsidiaries; 59 (c) the sale or discount without recourse of accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof; (d) Asset Sales as proposed in the Three Year Business Plan to the extent approved and accepted by each of the Term Lenders; (e) Approved Miscellaneous Asset Sales; and (f) Any asset sales agreed to in writing between the Borrower and each of the Term Lenders. SECTION 10.7 Transactions with Affiliates. Directly or indirectly: (a) make any material loan or advance to, or purchase or assume any note or other obligation in a material amount to or from, any of its officers, directors, shareholders or other Affiliates (which is/are not a Borrower), or to or from any member of the immediate family of any of its officers, directors, shareholders or other Affiliates (which is/are not a Borrower), or subcontract any operations to any of its Affiliates (which is/are not a Borrower), or (b) enter into, or be a party to, any transaction with any of its Affiliates (which is/are not a Borrower), except pursuant to the reasonable requirements of its business and upon fair and reasonable terms that are no less favorable to it than would obtain in a comparable arm's length transaction with a Person not its Affiliate. SECTION 10.8 Certain Accounting Changes. Change its Fiscal Year end, or make any change in its accounting treatment and reporting practices except as permitted by GAAP. SECTION 10.9 Compliance with ERISA. (a) Permit the occurrence of any Termination Event which would result in a liability to the Borrower or any ERISA Affiliate in excess of $5,000,000; (b) permit the present value of all benefit liabilities under all Pension Plans (determined under the actuarial assumptions used for Code and ERISA funding purposes) to exceed the current value of the assets of such Pension Plans allocable to such benefit liabilities by more than $5,000,000; (c) permit any accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code) with respect to any Pension Plan, whether or not waived; (d) fail to make any contribution or payment to any Multiemployer Plan which the Borrower or any ERISA Affiliate may be required to make under any agreement relating to such Multiemployer Plan, or any law pertaining thereto which results in or is likely to result in a liability in excess of $5,000,000; (e) engage, or permit the Borrower or any ERISA Affiliate to engage, in any prohibited transaction under Section 406 of ERISA or Section 4975 of the Code for which a civil penalty pursuant to Section 60 502(i) of ERISA a tax pursuant to Section 4975 of the Code in excess of $5,000,000 is imposed; (f) permit the establishment of any Employee Benefit Plan providing post-retirement welfare benefits (other than an Employee Benefit Plan which provides such benefits solely for a select group of present or former management employees) or establish or amend any Employee Benefit Plan which establishment or amendment could reasonably be expected to result in liability to the Borrower or any ERISA Affiliate or increase the obligation of the Borrower or any ERISA Affiliate to a Multiemployer Plan which liability or increase, individually or together with all similar liabilities and increases, is material to the Borrower or any ERISA Affiliate; or (g) fail, or permit the Borrower or any ERISA Affiliate to fail, to establish, maintain and operate each Employee Benefit Plan in compliance in all material respects with the provisions of ERISA, the Code and all other applicable laws and the regulations and interpretations thereof. SECTION 10.10 Limitations on New Equity, Dividends and Distributions. Except as provided in the Warrant Agreement and related documents, declare or pay any dividend, or make any distributions of cash or property, to holders of any shares of its capital stock on account of such shares, or, directly or indirectly, redeem or otherwise acquire any such shares or any option, warrant or right to acquire any such shares except for the reacquisition of the shares held in an escrow account in connection with the acquisition of the Goldsboro facility. SECTION 10.11 Transfers to Subsidiaries. Transfer any assets now or hereafter owned by the Borrower to any Subsidiary which is not a Borrower, except to the extent WLR may transfer funds to Rockingham Poultry, Inc. (VI) to maintain a balance in the RVI Account of no more than $15,000. SECTION 10.12 Limitations on Investments. Purchase, invest in, or make any loan in the nature of an investment in the stocks, bonds, notes or other securities or evidence of Debt of any Person, or make any loan or advance to or for the benefit of any Person except for the following (collectively, "Permitted Investments"): (i) short-term obligations of the Treasury of the United States of America; (ii) certificates of deposit issued by banks with shareholders' equity of at least $100,000,000; (iii) repurchase agreements not exceeding 29 days in duration issued by banks with shareholders' equity of at least $100,000,000; (iv) notes and other instruments generally known as "commercial paper" which arise out of current transactions, which have maturities at the time of issuance thereof not exceeding nine months and which have, at the time of such purchase, investment or other acquisition, the highest credit rating of Standard & Poor's Corporation or Moody's Investors Service, Inc.; provided that to the extent the Borrower shall seek to make any of the foregoing Permitted 61 Investments, it shall notify the Agent in writing in advance and shall comply with such steps as the Agent may require to evidence the perfected security interests of the Term Lenders therein. SECTION 10.13 Limitations on Certain Agreements. Enter into any Interest Rate Protection Agreement with any Term Lender to the extent that any liability created thereunder would be secured by any Collateral. ARTICLE XI DEFAULT AND REMEDIES SECTION 11.1 Events of Default. Each of the following shall constitute an Event of Default, whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any Governmental Authority or otherwise: (a) Default in Payment of Principal of Term Loans. The Borrower shall default in any payment of principal due under the Term Loan or any Term Note as and when due (whether at maturity, by reason of acceleration or otherwise). (b) Other Payment Default. The Borrower shall default in the payment as and when due (whether at maturity, by reason of acceleration or otherwise) of interest on the Term Loan or any Term Note or the payment of any other Obligation, and such a default shall continue unremedied for five (5)Business Days provided that if the default referenced in this paragraph (b) arises only under a Mortgage, the five (5) Business Days referenced in this paragraph (b) will commence after written notice of such default shall have been given by the Agent to the Borrower. (c) Misrepresentation. Any representation or warranty made by the Borrower or any of its Subsidiaries under this Agreement, any Loan Document or any amendment hereto or thereto, shall at any time prove to have been incorrect or misleading in any material respect when made. (d) Default in Performance of Certain Covenants. The Borrower shall default in the performance or observance of any covenant or agreement contained in Sections 7.5(e) or Articles IX or X of this Agreement. (e) Default in Performance of Other Covenants and Conditions. The Borrower or any Subsidiary thereof shall default in the Performance or observance of any term, covenant, condition or 62 agreement contained in this Agreement (other than as specifically provided for otherwise in this Section 11.1) or any other Loan Document and such default shall continue for a period of thirty (30) days after written notice thereof has been given to the Borrower by the Agent. (f) Derivative Agreement. Any termination payment shall be due by the Borrower under any Derivative Agreement and such amount is not paid within five (5) Business Days of the due date thereof. (g) Debt Cross-Default. The Borrower or any of its Subsidiaries shall (i) default in the payment of any Debt (other than Debt evidenced by the this Agreement and the Term Notes) the aggregate outstanding amount of which is equal to or in excess of $3,000,000 beyond the period of grace if any, provided in the instrument or agreement under which such Debt was created; or (ii) default in the observance or performance of any other agreement or condition relating to any Debt (other than the Term Loan and the Revolving Loan) the aggregate outstanding amount of which is equal to or in excess of $3,000,000 or contained in any instrument or agreement evidencing, securing or relating thereto or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Debt (or a trustee or agent on behalf of such holder or holders) to cause, with the giving of notice if required, any such Debt to become due prior to its stated maturity (any applicable grace period having expired). (h) Voluntary Bankruptcy Proceeding. The Borrower or any Subsidiary thereof shall (i) commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect); (ii) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition for adjustment of debts; (iii) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws; (iv) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of a substantial part of its property, domestic or foreign; (v) admit in writing its inability to pay its debts as they become due; (vi) make a general assignment for the benefit of creditors; or (vii) take any corporate action for the purpose of authorizing any of the foregoing. (i) Involuntary Bankruptcy Proceeding. A case or other proceeding shall be commenced against the Borrower or any Subsidiary thereof in any court of competent jurisdiction seeking (i) relief under the federal bankruptcy laws (as now or hereafter in effect) or 63 under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or adjustment of debts; or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like for the Borrower or any Subsidiary thereof or for all or any substantial part of their respective assets, domestic or foreign, and such case or proceeding shall continue undismissed or unstayed for a period of sixty (60) consecutive calendar days, or an order granting the relief requested in such case or proceeding (including, but not limited to, an order for relief under such federal bankruptcy laws) shall be entered. (j) Failure of Agreements. (i) any material provision of this Agreement or of any other Loan Document shall for any reason cease to be valid and binding on the Borrower or a Subsidiary party thereto or any such Person shall so state in writing; or (ii) this Agreement or any other Loan Document shall for any reason cease to create a valid and perfected first priority Lien on, or security interest in, any of the Collateral purported to be covered thereby, in each case other than in accordance with the express terms hereof or thereof, provided that no Event of Default shall have occurred pursuant to this subparagraph (j)(ii) if the Borrower, within five (5) Business Days' notice from the Agent, takes such steps as are necessary to create a valid and perfected first priority Lien in such Collateral. (k) Judgment. A judgment or order for the payment of money which exceeds $2,500,000 in amount shall be entered against the Borrower or any of its Subsidiaries by any court and such judgment or order shall continue undischarged or unstayed for a period of thirty (30) calendar days. (l) Attachment. A warrant or writ of attachment or execution or similar process shall be issued against any property of the Borrower or any of its Subsidiaries which exceeds $2,500,000 in value and such warrant or process shall continue undischarged or unstayed for a period of thirty (30) calendar days. (m) Change in Control. (a) Any person or group of persons (within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended) other than the current board of directors of the Borrower, shall obtain ownership or control in one or more series of transactions of more than fifty percent (50%) of the common stock and fifty percent (50%) of the voting power of the Borrower entitled to vote in the election of members of the board of directors of the Borrower (a "Change in Control"). (n) Revolving Credit Events of Default. Any one or more Events of Default occurs under the Revolving Credit Agreement. 64 (o) Note Agreement Default. Any one or more Events of Default occurs under the Note Agreement. SECTION 11.2 Remedies. Upon the occurrence of an Event of Default and at the request of the Required Term Lenders, the Agent shall, by notice to the Borrower: (a) Acceleration; Termination of Facilities. Declare the principal of and interest on the Term Loan and the Term Notes at the time outstanding, and all other amounts owed to the Term Lenders and to the Agent under this Agreement or any of the other Loan Documents and all other obligations, to be forthwith due and payable, whereupon the same shall immediately become due and payable without presentment, demand, protest or other notice of any kind, all of which are expressly waived, anything in this Agreement or the other Loan Documents to the contrary notwithstanding, and terminate the Term Loan and any rights of the Borrower thereunder; provided, that upon the occurrence of an Event of Default specified in Section 11.1(h) or (i), the Term Loan shall be automatically terminated and all obligations shall automatically become due and payable, without notice, declaration or demand of any kind. (b) Rights of Collection. Exercise on behalf of the Term Lenders all of its other rights and remedies under this Agreement, the other Loan Documents and Applicable Law, in order to satisfy all of the Borrower's obligations. (c) Setoff. Exercise or direct any Term Lender to exercise any and all setoff rights as described in Section 13.3 hereof or as otherwise provided under Applicable Law. SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc. The enumeration of the rights and remedies of the Agent and the Term Lenders set forth in this Agreement is not intended to be exhaustive and the exercise by the Agent and the Term Lenders of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in addition to any other right or remedy given hereunder or under the Loan Documents or that may now or hereafter exist in law or in equity or by suit or otherwise. No delay or failure to take action on the part of the Agent or any Term Lender in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude other or further exercise thereof or the exercise of any other right, power or privilege or shall be construed to be a waiver of any Event of Default. No course of dealing between the Borrower, the Agent and the Term Lenders or their respective agents or employees shall be effective to change, modify or discharge any provision of this 65 Agreement or any of the other Loan Documents or to constitute a waiver of any Event of Default. ARTICLE XII THE AGENT SECTION 12.1 Appointment. Each of the Term Lenders hereby irrevocably designates and appoints First Union as Agent of such Term Lender under this Agreement and the other Loan Documents and each such Term Lender irrevocably authorizes First Union as Agent for such Term Lender, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement and such other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement or such other Loan Documents, the Agent shall not have any duties or responsibilities, except those expressly set forth herein and therein, or any fiduciary relationship with any Term Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or the other Loan Documents or otherwise exist against the Agent. SECTION 12.2 Delegation of Duties. The Agent may execute any of its respective duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by the Agent. SECTION 12.3 Exculpatory Provisions. Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in fact, Subsidiaries or Affiliates shall be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or the other Loan Documents (except for actions occasioned solely by its or such Person's own gross negligence or willful misconduct), or (b) responsible in any manner to any of the Term Lenders for any recitals, statements, representations or warranties made by the Borrower or any of its Subsidiaries or any officer thereof contained in this Agreement or the other Loan Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or the other Loan Documents or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the other Loan Documents or for any failure of the Borrower or any of its Subsidiaries to perform its 66 obligations hereunder or thereunder. The Agent shall not be under any obligation to any Term Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of this Agreement, or to inspect the properties, books or records of the Borrower or any of its Subsidiaries. SECTION 12.4 Reliance by the Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by the Agent. The Agent may deem and treat the payee of any Term Note as the owner thereof for all purposes unless such Term Note shall have been transferred in accordance with Section 13.10 hereof. The Agent shall be fully justified in failing or refusing to take any action under this Agreement and the other Loan Documents unless it shall first receive such advice or concurrence of the Required Term Lenders (or, when expressly required hereby or by the relevant other Loan Document, all the Term Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Term Lenders against any and all liability and expenses which may be incurred by it by reason of taking or continuing to take any such action except for its own gross negligence or willful misconduct. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the Term Notes in accordance with a request of the Required Term Lenders (or, when expressly required hereby, all the Term Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Term Lenders and all future holders of the Term Notes. SECTION 12.5 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless it has received notice from a Term Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Agent receives such a notice, it shall promptly give notice thereof to the Term Lenders. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Term Lenders; provided that unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable. 67 SECTION 12.6 Non-Reliance on the Agent and other Term Lenders. Each Term Lender expressly acknowledges that neither the Agent nor any of its respective officers, directors, employees, agents, attorneys- in-fact, Subsidiaries or Affiliates has made any representations or warranties to it and that no act by the Agent hereinafter taken, including any review of the affairs of the Borrower or any of its Subsidiaries, shall be deemed to constitute any representation or warranty by the Agent to any Term Lender. Each Term Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Term Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and credit worthiness of the Borrower and its Subsidiaries and made its own decision to make its Loans and issue or participate in Letters of Credit hereunder and enter into this Agreement. Each Term Lender also represents that it will, independently and without reliance upon the Agent or any other Term Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and credit worthiness of the Borrower and its Subsidiaries. Except for notices, reports and other documents expressly required to be furnished to the Term Lenders by the Agent hereunder or by the other Loan Documents, the Agent shall not have any duty or responsibility to provide any Term Lender with any credit or other information concerning the business, operations, property, financial and other condition or credit worthiness of the Borrower or any of its Subsidiaries which may come into the possession of the Agent or any of its respective officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates. SECTION 12.7 Indemnification. The Term Lenders agree to indemnify the Agent in its capacity as such and (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to the respective amounts of their Term Loan Percentages, from and against, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Term Notes) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of this Agreement or the other Loan Documents, or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; 68 provided that no Term Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Agent's bad faith, gross negligence or willful misconduct. The agreements in this Section 12.7 shall survive the payment of the Term Notes and all other amounts payable hereunder and the termination of this Agreement. SECTION 12.8 The Agent in Its Individual Capacity. The Agent and its respective Subsidiaries and Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Agent were not an Agent hereunder. With respect to any Term Loan made or renewed by it, the Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Term Lender and may exercise the same as though it were not an Agent, and the terms "Term Lender" and "Term Lenders" shall include the Agent in its individual capacity. SECTION 12.9 Resignation of the Agent; Successor Agent. Subject to the appointment and acceptance of a successor as provided below, the Agent may resign at any time by giving notice thereof to the Term Lenders and the Borrower. Upon any such resignation, the Required Term Lenders shall have the right to appoint a successor Agent, which successor shall have minimum capital and surplus of at least $500,000,000. If no successor Agent shall have been so appointed by the Required Term Lenders and shall have accepted such appointment within thirty (30) days after the Agent's giving of notice of resignation, then the Agent may, on behalf of the Term Lenders, appoint a successor Agent, which successor shall have minimum capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 12.9 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. ARTICLE XIII MISCELLANEOUS SECTION 13.1 Notices. (a) Method of Communication. Except as otherwise provided in this Agreement, all notices and communications hereunder shall be in writing, or by telephone subsequently confirmed in writing. Any 69 notice shall be effective if delivered by hand delivery or sent via telecopy, recognized overnight courier service or certified mail, return receipt requested, and shall be presumed to be received by a party hereto (i) on the date of delivery if delivered by hand or sent by telecopy, (ii) on the next Business Day if sent by recognized overnight courier service and (iii) on the third Business Day following the date sent by certified mail, return receipt requested. (b) Addresses for Notices. Notices to any party shall be sent to it at the following addresses, or any other address as to which all the other parties are notified in writing. If to the Borrower: WLR Foods, Inc. 800 Co-op Drive Timberville, Virginia 22853 Attention: Robert Ritter, CFO Telephone No.: (540) 896-7001 Telecopy No.: (540) 896-0498 Or, if sent by mail: WLR Foods, Inc. P.O. Box 7000 Broadway, Virginia 22815 Attention: Robert Ritter, CFO If to First Union as Term Lender: First Union National Bank 301 College Street, DC-5 NC 0737 Charlotte, NC 28288-0737 Attention: Julie Bouhuys, SVP Telephone No.: (704) 383-0349 Telecopy No.: (704) 374-3300; and First Union National Bank 201 South Jefferson Street Roanoke, Virginia 24011 Attention: George Calfo Telephone No.: (540) 563-7769 Telecopy No.: (540) 561-5262 If to CoreStates Bank, N.A. as Term Lender: CoreStates Bank, N.A. FC 1-8-3-8 1345 Chestnut Street Philadelphia, Pennsylvania 19102 Attention: John D. Brady Telephone No.: (215) 786-2160 70 Telecopy No.: (215) 973-6745 If to Harris Trust and Savings Bank as Term Lender: Harris Trust and Savings Bank 111 West Monroe Chicago, Illinois 60690 Attention: Agribusiness Division Telephone No.: (312) 461-3795 Telecopy No.: (312) 765-8095 If to Crestar Bank as Term Lender: Crestar Bank 510 South Jefferson Street Roanoke, Virginia 24011 Attention: George Coleman, Jr. Telephone No.: (540) 982-3285 Telecopy No.: (540) 982-3056 If to the Agent: First Union National Bank 301 College Street, DC-5 NC 0737 Charlotte, NC 28288-0737 Attention: Julie Bouhuys, SVP Telephone No.: (704) 383-0349 Telecopy No.: (704) 374-3300; and First Union National Bank 201 South Jefferson Street Roanoke, Virginia 24011 Attention: George Calfo Telephone No.: (540) 563-7769 Telecopy No.: (540) 561-5262 SECTION 13.2 Expenses. The Borrower will pay all out-of -- pocket expenses of the Agent in connection with: (i) the preparation, execution and delivery of this Agreement and each of the other Loan Documents, whenever the same shall be executed and delivered, including all out-of-pocket syndication and due diligence expenses, appraiser's fees, search fees, title insurance premiums, recording fees, taxes and reasonable fees and disbursements of counsel for the Agent; (ii) the preparation, execution and delivery of any waiver, amendment or consent by the Agent or the Term Lenders relating to this Agreement or any of the other Loan Documents including reasonable fees and disbursements of counsel for the Agent, search fees, appraiser's fees, recording fees and taxes imposed in connection therewith; and (iii) administering, monitoring, negotiating and/or enforcing their respective rights under the Credit Facility, including consulting with one or more persons, including appraisers, accountants, engineers and 71 attorneys, concerning or related to the nature, scope or value of any right or remedy of the Agent or any Term Lender hereunder or under any of the other Loan Documents, including any review of factual matters in connection therewith, which expenses shall include the reasonable fees and disbursements of such Persons. SECTION 13.3 Set-off. In addition to any rights now or hereafter granted under Applicable Law and not by way of limitation of any such rights, upon and after the occurrence of any Event of Default and during the continuance thereof, the Term Lenders and any assignee or participant of a Term Lender in accordance with Section 13.10 are hereby authorized by the Borrower at any time or from time to time, without notice to the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, time or demand, including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured, excluding government securities required by Applicable Law to be held as security for worker's compensation and similar claims) and any other indebtedness at any time held or owing by the Term Lenders, or any such assignee or participant to or for the credit or the account of the Borrower against and on account of the Obligations irrespective of whether or not (a) the Term Lenders shall have made any demand under this Agreement or any of the other Loan Documents or (b) the Agent shall have declared any or all of the Obligations to be due and payable as permitted by Section 11.2 and although such obligations shall be contingent or unmatured. SECTION 13.4 Governing Law. This Agreement, the Term Notes and the other Loan Documents, unless otherwise expressly set forth therein, shall be governed by, construed and enforced in accordance with the laws of the State of New York, without reference to the conflicts or choice of law principles thereof. SECTION 13.5 Consent to Jurisdiction. The Borrower hereby irrevocably consents to the personal jurisdiction of the United States District Court for the Southern District of New York and the Supreme Court of the State of New York - County of New York, in any action, claim or other proceeding arising out of any dispute in connection with this Agreement, the Term Notes and the other Loan Documents, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations. The Borrower hereby irrevocably consents to the service of a summons and complaint and other process in any action, claim or proceeding brought by the Agent or any Term Lender in connection with this Agreement, the Term Notes or the other Loan Documents, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations, on behalf of itself or its property, in the manner specified in Section 13.1. Nothing in this Section 13.5 shall affect the right of the Agent or any Term Lender to 72 serve legal process in any other manner permitted by Applicable Law or affect the right of the Agent or any Term Lender to bring any action or proceeding against the Borrower or its properties in the courts of any other jurisdictions. SECTION 13.6 Waiver of Jury Trial; Waiver of Punitive Damages. (a) WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE AGENT, EACH TERM LENDER AND THE BORROWER HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING, OUT OF OR ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. (b) Waiver of Punitive Damages. The Borrower, the Agent, and the Term Lenders, agree that they shall not have a remedy of punitive or exemplary damages against the other in any Dispute and hereby waive any right or claim to punitive or exemplary damages they have now or which may arise in the future in connection with any Dispute whether the Dispute is resolved by arbitration or judicially. SECTION 13.7 Reversal of Payments. To the extent the Borrower makes a payment or payments to the Agent for the ratable benefit of the Term Lenders or the Agent receives any payment or proceeds of the Collateral which payments or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds repaid, the obligations or part thereof intended to be satisfied shall be revived and continued in full force and effect as if such payment or proceeds had not been received by the Agent. SECTION 13.8 Injunctive Relief. The Borrower recognizes that, in the event the Borrower fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, any remedy of law may prove to be inadequate relief to the Term Lenders. Therefore, the Borrower agrees that the Term Lenders, at the Term Lenders' option, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages. SECTION 13.9 Accounting Matters. All financial and accounting calculations, measurements and computations made for any purpose relating to this Agreement, including, without limitation, all computations utilized by the Borrower or any Subsidiary thereof to 73 determine compliance with any covenant contained herein, shall, except as otherwise expressly contemplated hereby or unless there is an express written direction by the Agent to the contrary agreed to by the Borrower, be performed in accordance with GAAP. In the event that changes in GAAP shall be mandated by the Financial Accounting Standards Board, or any similar accounting body of comparable standing, or shall be recommended by the Borrower's certified public accountants, to the extent that such changes would modify such accounting terms or the interpretation or computation thereof, such changes shall be followed in defining such accounting terms only from and after the date the Borrower, the Agent and the Term Lenders shall have amended this Agreement to the extent necessary to reflect any such changes in the financial covenants and other terms and conditions of this Agreement. The Borrower, the Agent, the Revolving Credit Lenders and the Term Lenders agree that, as a result of the delivery of the warrants in accordance with the terms of this Agreement, the Revolving Credit Agreement and the Warrant Agreement, any original issue discount attributable to any Revolving Credit Note and/or Term Note is less than the product of (i) one-quarter of one percent (.25%), multiplied by (ii) the product of the weighted average maturity of such Note multiplied by the stated redemption price at maturity of such Note (as determined in accordance with section 1273 of the Code). The Borrower, the Agent, the Revolving Credit Lenders and the Term Lenders agree to consistently use the foregoing assumptions as to original issue discount and redemption premium for all United States federal, state and local income tax purposes with respect to the transactions contemplated by the Loan Documents unless the IRS or a change in law requires otherwise. The Borrower, the Agent, the Revolving Credit Lenders and the Term Lenders acknowledge that the fair market value of such warrants as of the Closing Date is no greater than the amount determined by the calculations in this subsection. SECTION 13.10 Successors and Assigns; Participations. (a) Benefit of Agreement. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Agent and the Term Lenders, all future holders of the Term Notes, and their respective successors and assigns, except that the Borrower shall not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Term Lender. Nothing set forth in any guaranty shall impair, as between the Borrower, the Agent and the Term Lenders, the obligations of the Borrower hereunder and under the other Loan Documents. (b) Assignment by Term Lenders. Each Term Lender may, with the consent of the Agent, which consent shall not be unreasonably withheld, assign to one or more Eligible Assignees all or a portion of 74 its interests, rights and obligations under this Agreement (including, without limitation, all or a portion of the Obligations at the time owing to it and the Term Notes held by it); provided that: (i) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Term Lender's rights and obligations under this Agreement with respect to the Term Loan and shall be accompanied by a like assignment on a pro rata basis of any Revolving Loan attributable to such Term Lender in its capacity as a Revolving Credit Lender under the Revolving Credit Agreement; (ii) if less than all of the assigning Term Lender's Term Loan is to be assigned, the Term Loan so assigned (plus, if applicable, the amount of any Revolving Loan or any portion thereof also assigned by such Term Lender in its capacity as a Revolving Credit Lender under the Revolving Credit Agreement) shall not be less than $5,000,000; (iii) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance in the form of Exhibit "F" attached hereto (an "Assignment and Acceptance"), together with any Term Note or Term Notes subject to such assignment; (iv) such assignment shall not, without the consent of the Borrower, require the Borrower to file a registration statement with the Securities and Exchange Commission or apply to or qualify the Term Loan or any of the Term Notes under the blue sky laws of any state; and (v) the assigning Term Lender shall pay to the Agent an assignment fee of $5,000 upon the execution by such Term Lender of the Assignment and Acceptance; provided that no such fee shall be payable upon any assignment by a Term Lender to an Affiliate thereof. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five (5) Business Days after the execution thereof, (A) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereby and (B) the assigning Term Lender thereunder shall, to the extent provided in such assignment, be released from its obligations under this Agreement. (c) Rights and Duties Upon Assignment. By executing and delivering an Assignment and Acceptance, the assigning Term Lender thereunder and the assignee thereunder confirm to and agree with each 75 other and the other parties hereto as set forth in such Assignment and Acceptance. (d) Register. The Agent shall maintain a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Term Lenders and the amount of the Term Loan with respect to each Term Lender from time to time (the "Register"). The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Agent and the Term Lenders may treat each person whose name is recorded in the Register as a Term Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Term Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Issuance of New Term Notes. Upon its receipt of an Assignment and Acceptance executed by an assigning Term Lender and an Eligible Assignee together with any Term Note Term Notes subject to such assignment and the written consent to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is substantially in the form of Exhibit "F": (i) accept such Assignment and Acceptance; (ii) record the information contained therein in the Register; (iii) give prompt notice thereof to the Term Lenders and the Borrower; and (iv) promptly deliver a copy of such Assignment and Acceptance to the Borrower. Within five (5) Business Days after receipt of notice, the Borrower shall execute and deliver to the Agent, in exchange for the surrendered Term Note or Term Notes, a new Term Note or Term Notes to the order of such Eligible Assignee in amounts equal to the Term Loan assigned to it pursuant to such Assignment and Acceptance and a new Term Note or Term Notes to the order of the assigning Term Lender in an amount equal to the Term Loan retained by it hereunder. Such new Term Note or Term Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Term Note or Term Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of the assigned Term Note delivered to the assigning Term Lender. The new Term Note or Term Notes shall be in substitution for and not in cancellation of, release or satisfaction of the surrendered Term Note or Term Notes. 76 (f) Participation. Each Term Lender may, with the consent of the Agent, which consent shall not be unreasonably withheld, sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its rights under the Term Notes held by it); provided that: (i) each such participation shall be in an amount not less than $5,000,000; (ii) such Term Lender's obligations under this Agreement including, without limitation, its Term Loan, shall remain unchanged; (iii) such Term Lender shall remain solely responsible to the other parties hereto for the performance of such obligations; (iv) such Term Lender shall remain the holder of the Term Notes held by it for all purposes of this Agreement; (v) the Borrower, the Agent and the other Term Lenders shall continue to deal solely and directly with such Term Lender in connection with such Term Lender's rights and obligations under this Agreement; (vi) such Term Lender shall not permit such participant the right to approve any waivers, amendments or other modifications to this Agreement or any other Loan Document other than waivers, amendments or modifications which would reduce the principal of or the interest rate on the Term Loan, extend the term or increase the amount of the Term Loan of such participant, reduce the amount of any fees to which such participant is entitled or extend any scheduled payment date for principal; and (vii) any such disposition shall not, without the consent of the Borrower, require the Borrower to file a registration statement with the Securities and Exchange Commission or apply to qualify the Term Loan or the Term Notes under the blue sky law of any state. (g) Disclosure of Information; Confidentiality. The Agent and the Term Lenders shall hold all non-public information obtained pursuant to the Loan Documents in accordance with their customary procedures for handling confidential information. Any Term Lender may, in connection with any assignment, proposed assignment, participation or proposed participation pursuant to this Section 13.10, disclose to the assignee, participant, proposed assignee or proposed participant, any information relating to the Borrower furnished to such Term Lender by or on behalf of the Borrower; provided that prior to any such disclosure, each such assignee, 77 proposed assignee, participant or proposed participant shall agree with the Borrower or such Term Lender (which in the case of an agreement with only such Term Lender, the Borrower shall be recognized as a third party beneficiary thereof) to preserve the confidentiality of any confidential information relating to the Borrower received from such Term Lender. (h) Certain Pledges or Assignments. Nothing herein, or in any other document regarding the transaction herein, shall prohibit any Term Lender from pledging or assigning any Term Note, including collateral therefor, to any Federal Reserve Bank in accordance with Applicable Law. SECTION 13.11 Amendments, Waivers and Consents; Renewal. Except as set forth below, any term, covenant, agreement or condition of this Agreement or any of the other Loan Documents may be amended or waived by the Term Lenders, and any consent given by the Term Lenders, if, but only if, such amendment, waiver or consent is in writing signed by the Required Term Lenders (or by the Agent with the consent of the Required Term Lenders) and delivered to the Agent and, in the case of an amendment, signed by the Borrower; provided that no amendment, waiver or consent shall (a) change the amount or extend the time of the obligation of the Term Lenders to provide the Term Loan, (b) change the originally scheduled time or times of payment of the principal of the Term Loan or the time or times of payment of interest on the Term Loan, (c) decrease the rate of interest payable on the Term Loan, (d) change the amount or time of payment of any fees payable by the Borrower hereunder, (e) release the Borrower (or any of them) from all or any portion of the Obligations hereunder, (f) release any Collateral except as specifically authorized in the Loan Documents and in connection with the approved asset sales set forth in Article X hereof; (g) amend, waive or alter any provision of Article I (Definitions), Article IX (Financial Covenants), Article X (Negative Covenants), or Article XI (Defaults and Remedies) hereof; or (g) amend the provisions of this Section 13.11 or the definition of Required Term Lenders, without the prior written consent of each Term Lender. In addition, no amendment, waiver or consent to the provisions of Article XII shall be made without the written consent of the Agent. SECTION 13.12 Performance of Duties. The Borrower's obligations under this Agreement and each of the Loan Documents shall be performed by the Borrower at its sole cost and expense. SECTION 13.13 Indemnification. The Borrower agrees to reimburse the Agent and the Term Lenders for all reasonable costs and expenses, including all counsel, appraisal, or other expert or consultant fees and disbursements incurred, and to indemnify and hold the Agent and 78 the Term Lenders harmless from and against all losses suffered by the Agent and the Term Lenders in connection with (i) the exercise by the Agent or the Term Lenders of any right or remedy granted to them under this Agreement or any of the other Loan Documents, (ii) any claim, and the prosecution or defense thereof, arising out of or in any way connected with this Agreement or any of the other Loan Documents, and (iii) the collection or enforcement of the Obligations or any of them; provided that the Borrower shall not be obligated to reimburse the Agent or any Term Lender for costs and expenses, or indemnify the Agent or any Term Lender for any loss, resulting from the gross negligence or willful misconduct of the Agent or any Term Lender. SECTION 13.14 All Powers Coupled with Interest. All powers of attorney and other authorizations granted to the Term Lenders, the Agent and any Persons designated by the Agent or any Term Lender pursuant to any provisions of this Agreement or any of the other Loan Documents shall be deemed coupled with an interest and shall be irrevocable so long as any of the Obligations remain unpaid or unsatisfied or the Term Loan has not been terminated. SECTION 13.15 Survival of Indemnities. Notwithstanding any termination of this Agreement, the indemnities to which the Agent and the Term Lenders are entitled under the provisions of this Article XIII and any other provision of this Agreement and the Loan Documents shall continue in full force and effect and shall protect the Agent and the Term Lenders against events arising after such termination as well as before. SECTION 13.16 Titles and Captions. Titles and captions of Articles, Sections and subsections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement. SECTION 13.17 Severability of Provisions. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remainder of such provision or the remaining provisions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 13.18 Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and shall be binding upon all parties, their successors and assigns, and all of which taken together shall constitute one and the same agreement. 79 SECTION 13.19 Term of Agreement. This Agreement shall remain in effect from the Closing Date through and including the date upon which all Obligations shall have been indefeasibly and irrevocably paid and satisfied in full. No termination of this Agreement shall affect the rights and obligations of the parties hereto arising prior to such termination. SECTION 13.20 Adjustments. If any Term Lender (a "Benefitted Term Lender") shall at any time receive any payment of all or part of its Term Loan, or interest thereon, or if any Term Lender shall at any time receive any collateral in respect to its Term Loan (whether voluntarily or involuntarily, by setoff or otherwise) in a greater proportion than any such payment to and collateral received by any other Term Lender, if any, in respect of such other Term Lender's Term Loan, or interest thereon, such Benefitted Term Lender shall purchase for cash from the other Term Lenders such portion of each such other Term Lender's Term Loan or shall provide such other Term Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefitted Term Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Term Lenders based upon the Term Lenders' Term Loan Percentages; provided that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Term Lender, such purchase shall be rescinded, and the purchase price and benefits returned to the extent of such recovery, but without interest. The Borrower agrees that each Term Lender so purchasing a portion of another Term Lender's Term Loan may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Term Lender were the direct holder of such portion. 80 WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers, all as of the day and year first written above. WLR FOODS, INC. By: __/S/ Robert T. Ritter Robert T. Ritter Vice President WAMPLER FOODS, INC. By:__/S/ Robert T. Ritter Robert T. Ritter Treasurer CASSCO ICE & COLD STORAGE, INC. By:__/S/ Robert T. Ritter Robert T. Ritter Vice President WAMPLER SUPPLY COMPANY, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Vice President VALLEY RAIL SERVICE, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Vice President FIRST UNION NATIONAL BANK, as Agent and Term Lender By:__/S/ Julia Bouhuys__ Name: Julia Bouhuys Title: Senior Vice President Term Loan Percentage: 35% Term Loan: $38,500,000 81 CORESTATES BANK, N.A. By:__/S/ Carol A. Williams__ Name: Carol A. Williams Title:Senior vice President Term Loan Percentage: 35% Term Loan: $38,500,000 HARRIS TRUST AND SAVINGS BANK By:__/S/ Carl A. Blackham__ Name: Carl A. Blackham Title:Vice President Term Loan Percentage: 20% Term Loan: $22,000,000 CRESTAR BANK By:__/S/ George Coleman, Jr.__ Name: George Coleman, Jr. Title:Senior Vice President Term Loan Percentage: 10% Term Loan: $11,000,000 82 EX-2.4 5 FORM TERM NOTE Exhibit 2.4 TERM LOAN NOTE (First Union National Bank) $38,500,000 February 25, 1998 FOR VALUE RECEIVED, the undersigned, WLR Foods, Inc., a corporation organized under the laws of the Commonwealth of Virginia ("WLR"), Cassco Ice & Cold Storage, Inc., a corporation organized under the laws of the Commonwealth of Virginia ("Cassco"), Wampler Foods, Inc., a corporation organized under the laws of the Commonwealth of Virginia ("Wampler"), Wampler Supply Company, Inc., a corporation organized under the laws of the Commonwealth of Virginia ("Wampler Supply"), and Valley Rail Service, Inc., a corporation organized under the laws of the Commonwealth of Virginia ("Valley," and, together with WLR, Cassco, Wampler and Wampler Supply, the "Borrower"), hereby promise to pay to the order of First Union National Bank (the "Bank"), the principal sum of THIRTY-EIGHT MILLION FIVE HUNDRED THOUSAND Dollars ($38,500,000), in the installments and the place and times and in the manner provided in the Term Loan Agreement dated as of February 25, 1998, (together with all amendments and modifications, if any, from time to time hereafter made thereto, the "Term Loan Agreement"), among the Borrower, the Term Lenders (including the Bank) who are or may become parties thereto (the "Term Lenders"), and First Union National Bank, as Agent. Capitalized terms used herein and not defined herein shall have the meanings ascribed to them in the Term Loan Agreement. The Borrower further promises to pay interest at the rates as in effect from time to time with respect to each portion of the principal amount hereof, determined and payable as provided in the Term Loan Agreement. The unpaid principal amount of this Term Note is subject to mandatory repayment from time to time as provided in the Term Loan Agreement. All payments of principal of and interest on this Term Note shall be payable in lawful currency of the United States of America in immediately available funds to the account designated in the Term Loan Agreement. This Note is a Term Note referred to in, is entitled to the benefits of, and evidences the obligation to repay the Term Loan made under the Term Loan Agreement, to which reference is made for a description of the security for this Term Note, for a statement of the terms and conditions on which the Borrower is permitted and required 1 to make prepayments and repayments of principal of the Term Loan, the events on which such Term Loan may be declared to be immediately due and payable, and for all other matters involving this Term Loan. The terms of the Term Loan Agreement are incorporated herein by reference. Presentment for payment, notice of dishonor, protest and notice of protest are hereby waived. The Borrower agrees to pay on demand all costs of collection, including reasonable attorneys' fees, if any part of this Term Note, principal or interest, is collected with the aid of an attorney. THIS TERM NOTE SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES THEREOF. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 2 IN WITNESS WHEREOF, the Borrower has caused this Term Note to be executed under seal by a duly authorized officer as of the day and year first above written. WLR FOODS, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Vice President CASSCO ICE & COLD STORAGE,INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Vice President WAMPLER FOODS, INC. By:__/S/ Robert t. Ritter__ Robert T. Ritter Treasurer WAMPLER SUPPLY COMPANY, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Vice President VALLEY RAIL SERVICE, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Vice President 3 EX-2.5 6 WARRANT HOLDER RIGHTS AGREEMENT Exhibit 2.5 WARRANTHOLDERS RIGHTS AGREEMENT WARRANTHOLDERS RIGHTS AGREEMENT (the "Agreement") dated as of February 25, 1998 among WLR Foods, Inc., a Virginia corporation (together with its successors, "WLR"), and the other parties named on the signature pages hereto (such other parties and such other warrantholders of WLR as may, from time to time, become parties to this Agreement in accordance with the provisions hereof, the "Warrantholders"; any holder of Conversion Shares (as defined herein) and such other stockholders of WLR as may, from time to time, become parties to this Agreement in accordance with the provisions hereof, the "Stockholders"). WHEREAS, on the date hereof, the Warrantholders purchased and are the beneficial owners of the Warrants (as defined herein) to purchase an aggregate of 889,898 shares of Common Stock; and WHEREAS, WLR wishes to provide to the Warrantholders and the holders of the Conversion Shares the rights described herein; NOW THEREFORE the parties hereto agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions. Unless otherwise defined herein, the following terms used in this Agreement shall have the meanings specified below. "Affiliate" means, with respect to any Person, any of (i) a director or executive officer of such Person, (ii) a spouse, parent, sibling or descendant of such Person (or a spouse, parent, sibling or descendant of any director or executive officer of such Person) and (iii) any other Person that, directly or indirectly, through one or more intermediaries controls, or is controlled by or is under common control with such Person. For the purpose of this definition, "control" (including the terms "controlling", "controlled by" and "under common control with"), as used with respect to any Person, means (a) the power to vote five percent (5%) or more of the securities or other equity interests of a Person having ordinary voting power or (b) the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies 1 of such Person, whether through the ownership of voting securities or by contract or agency or otherwise. "BHC Act" means the Bank Holding Company Act of 1956, as amended. "Business Day" means for all purposes any day other than a Saturday, Sunday or legal holiday on which banks in Charlotte, North Carolina and London, England are open for the conduct of their commercial banking business. "Commission" means the Securities and Exchange Commission or any other Federal agency at the time administering the Securities Act. "Common Stock" means the Class A Common Stock, no par value, of WLR. "Conversion Shares" means (i) any shares of Common Stock or other securities issued upon the exercise of any Warrants and (ii) any securities issued with respect to any of such shares or other securities referred to in clause (i) by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise; provided that any of such securities shall cease to be Conversion Shares when such securities shall have (x) been disposed of pursuant to a Public Sale or (y) ceased to be outstanding. "Credit Agreement" means the Revolving Credit Agreement and the Term Loan Agreement, each dated as of February 25, 1998, among WLR, Wampler Foods, Inc., Cassco Ice & Cold Storage, Inc., Wampler Supply Company, Inc., Valley Rail Service, Inc., the Lenders and First Union, as Agent, as amended from time to time. "Dispute" means any dispute, claim or controversy arising out of, connected with or relating to this Agreement. "Exchange Act" means the Securities Exchange Act of 1934, or any successor Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Exchange Act of 1934 shall include a reference to the comparable section, if any, of any such successor Federal statute. "Initiating Holders" has the meaning set forth in Section 3.01 (a) hereof. "Inspector" has the meaning set forth in Section 3.03(a)(xi) hereof. 2 "Lenders" means, collectively, the Term Lenders and the Lenders, in each case as defined in the Credit Agreement. "Note Purchase Agreement" means the Note Purchase Agreement dated as of February 25, 1998 by and among WLR and the Purchasers. "Other Shares" means shares of Common Stock other than Conversion Shares. "Permitted Transferee" has the meaning set forth in Section 2.03 hereof. "Person" means any natural person, corporation, limited partnership, general partnership, joint stock company, joint venture, association, company, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any governmental agency or political subdivision thereof. "Public Sale" means any sale of Common Stock to the public pursuant to an offering registered under the Securities Act or to the public through a broker, dealer or market maker pursuant to the provisions of Rule 144 (or any successor provision then in effect) adopted under the Securities Act. "Purchasers" means the parties listed on Exhibit A attached hereto. "Records" has the meaning set forth in Section 3.03(a)(xi) hereof. "Registrable Securities" means any Conversion Shares until the date (if any) on which (i) such Conversion Shares shall have been transferred or exchanged and new certificates for them not bearing a legend restricting further transfer shall have been delivered by WLR and subsequent disposition of them shall not require registration or qualification of them under the Securities Act or any similar state law then in force or (ii) such Conversion Shares may be sold pursuant to Rule 144(k) under the Securities Act. "Registration Expenses" means all expenses incident to WLR s performance of or compliance with Sections 3.01 through 3.05 hereof, including (i) all registration, filing and NASD fees, (ii) all fees and expenses of complying with securities or blue sky laws, (iii) all word processing, duplicating and printing expenses, (iv) all messenger and delivery expenses, (v) the fees and disbursements of counsel for WLR and of its independent public accountants, including the expenses of any special audits or "cold comfort" letters required by or 3 incident to such performance and compliance, (vi) premiums and other costs of policies of insurance (if any) against liabilities arising out of the public offering of the Registrable Securities being registered if WLR desires such insurance and (vii) any fees and disbursements of underwriters customarily paid by issuers or sellers of securities, but not including underwriting discounts and commissions and transfer taxes, if any, provided that, in any case where Registration Expenses are not to be borne by WLR, such expenses shall not include (i) salaries of WLR personnel or general overhead expenses of WLR, (ii) auditing fees, (iii) premiums or other expenses relating to liability insurance required by underwriters of WLR or (iv) other expenses for the preparation of financial statements or other data, to the extent that any of the foregoing either is normally prepared by WLR in the ordinary course of its business or would have been incurred by WLR had no public offering taken place. "Regulation Y Holder" means any Warrant Securityholder that is a bank holding company within the meaning of the BHC Act, or a subsidiary thereof subject to Regulation Y under the BHC Act. "Regulatory Change" means, with respect to any Regulation Y Holder, (i) any change on or after the date hereof in United States federal or state or foreign laws or regulations (including the BHC Act and Regulation Y thereunder); (ii) the adoption on or after the date hereof of any interpretation or ruling applying to such Regulation Y Holder, individually or as a member of a class, under any United States federal or state or foreign laws or regulations by any court or governmental or regulatory authority charged with the interpretation or administration thereof; or (iii) the modification on or after the date hereof of any agreement or commitment with any such governmental or regulatory authority that is applicable to or binding upon such Regulation Y Holder. "Restricted Securities" means the Warrants, the Conversion Shares and any securities obtained upon exchange for or upon conversion or transfer of or as a distribution on the Warrants, the Conversion Shares or any such securities; provided that particular securities shall cease to be Restricted Securities when such securities shall have (x) been disposed of pursuant to a Public Sale, (y) been otherwise transferred or exchanged and new certificates for them not bearing a legend restricting further transfer shall have been delivered by WLR and subsequent disposition of them shall not require registration or qualification of them under the Securities Act or any similar state law then in force or (z) ceased to be outstanding. Whenever any particular outstanding securities cease to be Restricted Securities, the holder thereof shall be entitled to receive from the issuer thereof or its transfer agent, without expense (other than 4 transfer taxes, if any), new securities of like tenor not bearing a legend of the character set forth in Section 2.02. "Securities Act" means the Securities Act of 1933, or any similar Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Act of 1933 shall include a reference to the comparable section, if any, of any such similar Federal statute. "Stockholder" has the meaning set forth in the introductory paragraph. "Warrant Securityholder" means at any time any Warrantholder or any holder of Conversion Shares. "Warrantholders" has the meaning set forth in the introductory paragraph. "Warrants" means the Warrant or Warrants originally issued to First Union, as such Warrants may be transferred or otherwise assigned, but only to the extent not theretofore exercised, redeemed or expired in accordance with their respective terms. All references herein to "days" shall mean calendar days unless otherwise specified. ARTICLE 2 TRANSFER OF SHARES; PAYMENTS TO WARRANT SECURITYHOLDERS SECTION 2.01. General. Except as otherwise provided in this Agreement or by law, each Stockholder may transfer its shares of Common Stock at any time to any Person. SECTION 2.02. Restrictions on Transfer; Legend on Certificates. (a) Except as otherwise provided in this Agreement, Restricted Securities shall not be transferable except (i) pursuant to an effective registration statement under the Securities Act, (ii) pursuant to Rule 144 (or any successor provisions) under the Securities Act or (iii) pursuant to a transaction that is otherwise exempt from the registration requirements of the Securities Act. (b) Unless otherwise expressly provided herein, each certificate for Restricted Securities and each certificate issued in exchange for or upon transfer of any thereof shall be stamped or otherwise imprinted with a legend in substantially the following form: 5 "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OFFERED FOR SALE UNLESS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO AND THE HOLDER OF SUCH SECURITIES HAS THE BENEFIT OF A WARRANTHOLDERS RIGHTS AGREEMENT DATED AS OF FEBRUARY 25, 1998 AMONG WLR FOODS, INC. AND THE STOCKHOLDERS AND WARRANTHOLDERS PARTIES THERETO, COPIES OF WHICH ARE ON FILE WITH WLR FOODS, INC." (c) Any other provision of this Agreement to the contrary notwithstanding, no transfer of any Restricted Securities other than pursuant to a Public Sale may be made to any Person unless such Person shall have agreed in writing that such Person, as a holder of Restricted Securities, and the Restricted Securities it acquires shall be bound by and be entitled to the benefits of all the provisions of this Agreement applicable to such Restricted Securities (and upon such agreement such Person shall be entitled to such benefits). Any purported transfer of Restricted Securities without compliance with the applicable provisions of this Agreement shall be void and of no effect, and the purported transferee shall have no rights as a Warrantholder or Stockholder (as applicable) or under this Agreement. In the event of such non-complying transfer, WLR shall not transfer any such Restricted Securities on its books or recognize the purported transferee as a Stockholder or Warrantholder, as the case may be, for any purpose, until all applicable provisions of this Agreement have been complied with. SECTION 2.03. Permitted Transfers. The restrictions on transfer provided in Section 2.02(a) shall not be applicable to (i) any transfer in compliance with federal and all applicable state securities laws to an Affiliate of the holder of Restricted Securities, from an Affiliate of such holder to such holder or between Affiliates of such holder (provided that if any such Affiliate to whom shares of Restricted Securities have been transferred by a holder thereof ceases to be an Affiliate of such holder of Restricted Securities, such Restricted Securities shall immediately be transferred back to the transferor thereof) or (ii) any transfer to a Lender or a Purchaser (any transferee referred to in (i) or (ii) above being referred to herein as a "Permitted Transferee"); provided that no such transfer shall be made to any Permitted Transferee unless such Permitted Transferee shall have agreed in writing that such Permitted Transferee, as a Stockholder or Warrantholder (as the case may be), and the shares of Common Stock or Warrants it acquires, shall be bound by and be entitled to the benefits of all the provisions of this Agreement applicable to Common Stock or Warrants (as the case may be), and upon such agreement such Permitted Transferee shall be entitled to such benefits. 6 SECTION 2.04. Restrictions on Transfer by Regulation Y Holders. No Regulation Y Holder may transfer any Warrant or any Conversion Shares; provided that such Regulation Y Holder may transfer such Warrant or Conversion Shares (i) to WLR, (ii) to the public in an offering registered under the Securities Act, (iii) in a transaction pursuant to Rule 144 (or any successor provisions) under the Securities Act or otherwise exempt from the registration requirements of the Securities Act in which no single purchaser receives an interest (treating any such Warrant as exercised) equivalent to more than two percent of the outstanding Common Stock; (iv) in a single transaction to a third party who acquires at least a majority of the Common Stock without regard to the transfer of such Warrant or Conversion Shares or (v) to a Lender. In the event of a Regulatory Change, the effect of which is to permit such Regulation Y Holder to transfer such Warrant or Conversion Shares in any other manner, the foregoing proviso shall be deemed modified to permit a transfer of such Warrant or Conversion Shares in such other manner. SECTION 2.05. No Inconsistent Agreements. WLR has not entered into and will not enter into any registration rights agreement or similar arrangements the performance by WLR of the terms of which would in any manner conflict with, restrict or be inconsistent with the performance by WLR of its obligations under this Agreement. Without the prior written consent of the Warrantholders, WLR will not take or permit to be taken any action that would establish a par value per share of Common Stock in excess of $.01. ARTICLE 3 REGISTRATION RIGHTS SECTION 3.01. Registration on Request. (a) At any time on and after September 1, 1998 or from time to time thereafter, upon the written request of the holder or holders of two-thirds of all outstanding Conversion Shares and Warrants held by either the Lenders (including any transferee(s) thereof) or the Purchasers (including any transferee(s) thereof) (such majority determined, for purposes of this Section 3.01, by calculating the number of Conversion Shares for which such Warrants are then exercisable) (the "Initiating Holders"), requesting that WLR effect the registration under the Securities Act of all or part of such Initiating Holders' Registrable Securities and specifying the intended method of disposition thereof, WLR will promptly give written notice of such requested registration to all holders of Warrants and 7 Registrable Securities, and thereupon WLR will use its best efforts to effect the registration under the Securities Act of: (i) the Registrable Securities which WLR has been so requested to register by such Initiating Holders for disposition in accordance with the intended method of disposition stated in such request; (ii) all other Registrable Securities the holders of which shall have made a written request to WLR for registration thereof within 30 days after the giving of such written notice by WLR (which request shall specify the intended method of disposition of such Registrable Securities); and (iii) all shares of Common Stock which WLR may elect to register in connection with the offering of Registrable Securities pursuant to this Section 3.01, whether for its own account or for the account of a holder of Common Stock, all to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities and the additional shares of Common Stock, if any, to be so registered; provided, however, that the Lenders (including any transferee(s) thereof) and the Purchasers (including any transferee(s) thereof) shall each be entitled to request not more than two registrations pursuant to this Section 3.01. (b) Registrations under this Section 3.01 shall be on such appropriate registration form of the Commission (i) as shall be selected by WLR and (ii) as shall permit the disposition of such Registrable Securities in accordance with the intended method or methods of disposition specified in their request for such registration. WLR agrees to include in any such registration statement all information which holders of Registrable Securities being registered shall reasonably request. (c) If any of the Initiating Holders request that WLR register that Holder's Registrable Securities pursuant to an underwritten offering, the underwriting discounts and commissions and transfer taxes, if any, and the underwriter's expenses (including counsel's fees) and out of pocket charges (collectively, the "Initiating Shareholders Underwriting Expenses") shall be borne on a pro rata basis by the Initiating Holders which request WLR to register their Registrable Securities pursuant to the underwritten offering and any other person whose securities are included in such underwritten offering, and the Initiating Shareholders Underwriting Expenses will not constitute Registration Expenses for purposes of this Section 3.01. If the Initiating Shareholders which request WLR to make an underwritten offering agree to bear the Initiating Shareholders Underwriting Expenses in accordance with the foregoing, WLR will 8 register those Initiating Shareholders' Registrable Shares pursuant to an underwritten offering. (d) WLR will pay all Registration Expenses in connection with any registration requested pursuant to this Section 3.01, provided that, in addition, WLR shall pay all Registration Expenses in connection with any registration upon request pursuant to which less than 50% of the Registrable Shares requested to be registered by such Initiating Holders are registered, but no such registration shall be counted as a requested registration for purposes of this Section 3.01. The Registration Expenses (and underwriting discounts and commissions and transfer taxes, if any allocable to the Registrable Shares requested to be registered by the participating Holders) in connection with each other registration requested under this Section 3.01 shall be paid for by the participating Holders requesting to join such registration. (e) A registration requested pursuant to this Section 3.01 shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective, provided that a registration which does not become effective after WLR has filed a registration statement with respect thereto solely by reason of the refusal to proceed by any Holder taking part therein (other than a refusal to proceed based upon the advice of counsel relating to a matter with respect to WLR) shall be deemed to have been effected by WLR at the request of the Initiating Holders unless the Initiating Holders shall have elected to pay all Registration Expenses in connection with such registration, (ii) if, after it has become effective, such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason, other than by reason of some act or omission by any Warrantholder or Warrant Securityholder, or (iii) the conditions to closing specified in the purchase agreement or underwriting agreement entered into in connection with such registration are not satisfied, other than by reason of some act or omission by any Warrantholder or Warrant Securityholder. (f) If a requested registration pursuant to this Section 3.01 involves an underwritten offering, the underwriter or underwriters thereof shall be selected by WLR with the approval of the holders of at least a majority (by a number of shares) of the Registrable Securities as to which underwritten registration has been requested. (g) If a requested registration pursuant to this Section 3.01 involves an underwritten offering, and the managing underwriter shall advise WLR (with a copy of any such notice to each holder of Registrable Securities requesting an underwritten registration) that, 9 in its opinion, the number of securities requested to be included in such registration (including securities proposed to be sold for the account of WLR and any shareholder of WLR) exceeds the number which can be sold in such offering within a price range acceptable to the Initiating Holders, WLR will reduce pro rata among the holders of such securities (other than the holders of the Registrable Securities as to which the underwritten registration has been requested) and the holders of Other Shares requested to be included in such registration the number of securities to be so included to the number which, when added to the Registrable Securities as to which registration has been requested, is equal to the number which WLR is so advised can be sold in such offering. SECTION 3.02. Incidental Registration. (a) If WLR at any time proposes to register any of its securities under the Securities Act (other than (x) by a registration on Form S-4 or S-8 or any successor or similar forms or (y) pursuant to Section 3.01) whether for its own account or for the account of the holder or holders of any Other Shares, it will each such time give prompt written notice to all Warrant Securityholders of its intention to do so and of such holders' rights under this Section 3.02. Upon the written request of any such holder made within 20 days after the receipt of any such notice (which request shall specify the Registrable Securities intended to be disposed of by such holder and the intended method of disposition thereof), WLR will use its best efforts to effect the registration under the Securities Act of all Registrable Securities which WLR has been so requested to register by the holders thereof, to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered, by inclusion of such Registrable Securities in the registration statement which covers the securities which WLR proposes to register; provided that if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, WLR shall determine for any reason either not to register or to delay registration of such securities, WLR may, at its election, give written notice of such determination to each holder of Registrable Securities and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any Warrant Securityholder or Warrant Securityholders entitled to do so to request that such registration be effected as a registration under Section 3.01, and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities, for the same period as the 10 delay in registering such other securities. No registration effected under this Section 3.02 shall relieve WLR of its obligation to effect any registration upon request under Section 3.01, nor shall any such registration hereunder be deemed to have been effected pursuant to Section 3.01. WLR will pay all Registration Expenses in connection with each registration of Registrable Securities pursuant to this Section 3.02. (b) If WLR at any time proposes to register any of its securities under the Securities Act as contemplated by Section 3.02 and such securities are to be distributed by or through one or more underwriters, WLR will, if requested by any holder of Registrable Securities as provided in this Section 3.02, use its best efforts to arrange for such underwriters to include all the Registrable Securities to be offered and sold by such holder among the securities to be distributed by such underwriters, provided that if the managing underwriter of such underwritten offering shall inform WLR and holders of the Registrable Securities requesting such registration and all holders of any Other Shares requesting such registration by letter of its belief that inclusion in such distribution of all or a specified number of such securities proposed to be distributed by such underwriters would interfere with the successful marketing of the securities being distributed by such underwriters (such letter to state the basis of such belief and the approximate number of such Registrable Securities and such Other Shares proposed so to be registered which may be distributed without such effect), then WLR may, upon written notice to all holders of such Registrable Securities and holders of such Other Shares, reduce pro rata (if and to the extent stated by such managing underwriter to be necessary to eliminate such effect) the number of such Registrable Securities and Other Shares the registration of which shall have been requested by each holder thereof so that the resultant aggregate number of such Registrable Securities and Other Shares so included in such registration, together with the number of securities to be included in such registration for the account of WLR, shall be equal to the number of shares stated in such managing underwriter's letter. SECTION 3.03. Registration Procedures. (a) If and whenever WLR is required to effect the registration of any Registrable Securities under the Securities Act as provided in Sections 3.01 and 3.02, WLR shall, as expeditiously as possible: (i) prepare and (within 75 days after the end of the period within which requests for registration may be given to WLR or in any event as soon thereafter as possible; provided that, in the case of a registration pursuant to Section 3.01, such filing to be made within 75 days after the initial request of an Initiating Holder of Registrable Securities or in any event as soon thereafter as 11 possible) file with the Commission the requisite registration statement to effect such registration (including such audited financial statements as may be required by the Securities Act) and thereafter use its best efforts to cause such registration statement to become and remain effective; provided that WLR may discontinue any registration of its securities which are not Registrable Securities at any time prior to the effective date of the registration statement relating thereto; provided further that before filing such registration statement or any amendments thereto, WLR will furnish to the counsel selected by the holders of Registrable Securities which are to be included in such registration copies of all such documents proposed to be filed, which documents will be subject to the review of such counsel; (ii) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement until the earlier of (x) in the case of a registration pursuant to Section 3.01, the expiration of 180 days after such registration statement becomes effective, or (y) in the case of a registration pursuant to Section 3.02, the expiration of 120 days after such registration statement becomes effective; (iii) furnish to each seller of Registrable Securities covered by such registration statement and each underwriter, if any, of the securities being sold by such seller such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, as such seller and underwriter, if any, may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by such seller; (iv) use its best efforts to register or qualify all Registrable Securities and other securities covered by such registration statement under blue sky or similar laws of such jurisdictions as any seller thereof and any underwriter of the securities being sold by such seller shall reasonably request, to keep such registrations or qualifications in effect for so long as such registration statement remains in effect and take any other action which may be reasonably necessary or advisable to enable such seller and underwriter to consummate the disposition in such jurisdictions of the securities owned by such seller, except that WLR shall not for any 12 such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subdivision (iv) be obligated to be so qualified, to subject itself to taxation in any such jurisdiction or to consent to general service of process in any such jurisdiction; (v) use its best efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities; (vi) furnish to each seller of Registrable Securities a signed counterpart, addressed to such seller and the underwriters, if any, of (A) an opinion of counsel for WLR, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, an opinion dated the date of the closing under the underwriting agreement), reasonably satisfactory in form and substance to such seller, and (B) a "comfort" letter, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, a letter dated the date of the closing under the underwriting agreement), signed by the independent public accountants who have certified WLR s financial statements included in such registration statement; provided that no comfort letter shall be required to be delivered if such comfort letter is not, at such time, customarily delivered to shareholders registering securities under the Securities Act, covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of the accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants letters delivered to the underwriters in underwritten public offerings of securities; (vi) notify the holders of Registrable Securities and the managing underwriter or underwriters, if any, promptly and confirm such advice in writing promptly thereafter: (A) when the registration statement, the prospectus or any prospectus supplement related thereto or post- effective amendment to the registration statement has been filed, and, with respect to the registration statement or any post-effective amendment thereto, when the same has become effective; 13 (B) of any request by the Commission for amendments or supplements to the registration statement or the prospectus or for additional information; (C) of the issuance by the Commission of any stop order suspending the effectiveness of the registration or the initiation of any proceedings by any Person for that purpose; and (D) of the receipt by WLR of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or blue sky laws of any jurisdiction or the initiation or threat of any proceeding for such purpose; (viii) notify each seller of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon WLR's discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and at the request of any such seller promptly prepare and furnish to such seller and each underwriter, if any, a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (ix) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the registration statement at the earliest possible moment; 14 (x) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar quarter after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11 (a) of the Securities Act; (xi) make available for inspection by a representative of the holders of Registrable Securities participating in the offering, any underwriter participating in any disposition pursuant to 14 the registration and any attorney or accountant retained by such selling holders or underwriter (each, an "Inspector"), all financial and other records, pertinent corporate documents and properties of WLR (the "Records"), and cause WLR's officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with such registration; (xii) provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such Registration Statement; (xiii) use its best efforts to list all Registrable Securities covered by such registration statement on any securities exchange on which any of the Common Stock is then listed; and (xiv) use its best efforts to provide a CUSIP number for the Registrable Securities, not later than the effective date of the registration. WLR may require each seller of Registrable Securities as to which any registration is being effected to furnish WLR such information regarding such seller and the distribution of such securities as WLR may from time to time reasonably request in writing for purposes of preparing the relevant registration statement and amendments and supplements thereto. (b) Each holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon receipt of any notice from WLR of the occurrence of any event of the kind described in subdivision (viii) of Section 3.03(a). such holder will forthwith discontinue such holder's disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by subdivision (viii) of Section 3.03(a). In the event WLR shall give any such notice, the periods specified in subdivision (ii) of Section 3.03(a) shall be extended by the length of the period from and including the date when each seller of any Registrable Securities covered by such registration statement shall have received such notice to the date on which each such seller has received the copies of the supplemented or amended prospectus contemplated by subdivision (viii) of Section 3.03(a). (c) If any such registration or comparable statement refers to any holder of Registrable Securities by name or otherwise as the holder of any securities of WLR, then such holder shall have the right to require, in the event that such reference to such holder by name or 15 otherwise is not required by the Securities Act or any similar federal statute then in force, the deletion of the reference to such holder. SECTION 3.04. Underwritten Offerings. (a) If requested by the underwriters for any underwritten offering by holders of Registrable Securities pursuant to a registration requested under Section 3.01, WLR will enter into an underwriting agreement with such underwriters for such offering, such agreement to be satisfactory in substance and form to WLR, each such holder and the underwriters, and to contain such representations and warranties by WLR and such other terms as are generally prevailing in agreements of such type, including, without limitation, indemnities to the effect and to the extent provided in Section 3.05. The holders of the Registrable Securities will cooperate with WLR in the negotiation of the underwriting agreement. (b) Each holder of Registrable Securities agrees by acquisition of such Registrable Securities not to sell, make any short sale of, loan, grant any option for the purchase of, effect any public sale or distribution of or otherwise dispose of any equity securities of WLR, during the ten days prior to and the 90 days after the effective date of any underwritten registration pursuant to Section 3.01 or 3.02 has become effective, except as part of such underwritten registration, whether or not such holder participates in such registration, and except as otherwise permitted by the managing underwriter of such underwriting (if any). Each holder of Registrable Securities agrees that WLR may instruct its transfer agent to place stop transfer notations in its records to enforce this Section 3.04(b). (c) WLR agrees (x) not to sell, make any short sale of, loan, grant any option for the purchase of, effect any public sale or distribution of or otherwise dispose of its equity securities or securities convertible into or exchangeable or exercisable for any of such securities during the ten days prior to and the 90 days after the effective date of any registration pursuant to Section 3.01 or 3.02 has become effective, except (i) as part of such registration, (ii) pursuant to registrations on Form S-4 or S-8 or any successor or similar forms thereto or (iii) as otherwise permitted by the managing underwriter of such offering (if any), and (y) to use all reasonable efforts to cause each holder of its equity securities or any securities convertible into or exchangeable or exercisable for any of such securities, in each case purchased from WLR at any time after the date of this Agreement (other than in a public offering) to agree not to sell, make any short sale of, loan, grant any option for the purchase of, effect any public sale or distribution of or otherwise dispose of such securities during such period except as part of such underwritten registration. 16 (d) Each holder of Registrable Securities agrees not to sell, make any short sell of, loan, grant any option for the purchase of, effect any public sale or distribution of or otherwise dispose of its Registrable Securities for a period of time, not to exceed 90 days in the aggregate, after the effective date of any underwritten registration of shares of Common Stock, if such holdback shall be required by the managing underwriter of such underwritten registration (if any), except (i) as part of such registration, (ii) pursuant to registrations on Form S-4 or S-8 or any successor or similar forms thereto or (iii) as otherwise permitted by the managing underwriter of such registration (if any). (e) No Person may participate in any underwritten offering hereunder unless such Person (i) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved, subject to the terms and conditions hereof, by the Person or a majority of the Persons entitled to approve such arrangements and (ii) completes and executes all agreements, questionnaires, indemnities and other documents (other than powers of attorney) required under the terms of such underwriting arrangements. SECTION 3.05. Indemnification. (a) WLR agrees to indemnify and hold harmless each holder of Registrable Securities whose Registrable Securities are covered by any registration statement, its directors and officers and each other Person, if any, who controls such holder within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which any such indemnified party may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and WLR will reimburse each such indemnified party for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided that WLR shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or 17 supplement in reliance upon and in conformity with written information furnished to WLR by or on behalf of such holder specifically for use in the preparation thereof. In addition, WLR shall indemnify any underwriter of such offering and each other Person, if any, who controls any such underwriter within the meaning of the Securities Act in substantially the same manner and to substantially the same extent as the indemnity herein provided to each Indemnified Party. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such holder or any such director, officer, underwriter or controlling person and shall survive the transfer of such securities by such holder. (b) Each prospective seller of Registrable Securities hereunder shall indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 3.05) WLR, each director of WLR, each officer of WLR and each other person, if any, who controls WLR within the meaning of the Securities Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereof, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to WLR by or on behalf of such seller specifically for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. Any such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of WLR or any such director, officer or controlling person and shall survive the transfer of such securities by such seller. The amount payable by any prospective seller of Registrable Securities with respect to the indemnification set forth in this subsection (b) in connection with any offering of securities will not exceed the amount of net proceeds received by such prospective seller pursuant to such offering. (c) Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 3.05, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 3.05, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a 18 conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified, to the extent that the indemnifying party may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement of any such action which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. No indemnified party shall consent to entry of any judgment or enter into any settlement of any such action the defense of which has been assumed by an indemnifying party without the consent of such indemnifying party. (d) If the indemnification provided for in the preceding subdivisions of this Section 3.05 is unavailable to an indemnified party in respect of any expense, loss, claim, damage or liability referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such expense, loss, claim, damage or liability (i) in such proportion as is appropriate to reflect the relative benefits received by WLR on the one hand and the holder or underwriter, as the case may be, on the other from the distribution of the Registrable 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 WLR on the one hand and of the holder or underwriter, as the case may be, on the other in connection with the statements or omissions which resulted in such expense, loss, damage or liability, as well as any other relevant equitable considerations. The relative benefits received by WLR on the one hand and the holder or underwriter, as the case may be, on the other in connection, with the distribution of the Registrable Securities shall be deemed to be in the same proportion as the total net proceeds received by WLR from the initial sale of the Registrable Securities by WLR to the purchaser bear to the gain realized by the selling holder or the underwriting discounts and commissions received by the underwriter, as the case may be. The relative fault of WLR on the one hand and of the holder or underwriter, as the case may be, on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue 19 statement of a material fact or omission to state a material fact relates to information supplied by WLR, by the holder or by the underwriter and parties relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided that the foregoing contribution agreement shall not inure to the benefit of any indemnified party if indemnification would be unavailable to such indemnified party by reason of the proviso contained in the first sentence of subdivision (a) of this Section 3.05, and in no event shall the obligation of any indemnifying party to contribute under this subdivision (d) exceed the amount that such indemnifying party would have been obligated to pay by way of indemnification if the indemnification provided for under subdivisions (a) or (b) of this Section 3.05 had been available under the circumstances. WLR and the holders of Registrable Securities agree that it would not be just and equitable if contribution pursuant to this subdivision (d) were determined by pro rata allocation (even if the holders and any underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph and subdivision (c) of this Section 3.05. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subdivision (d), no holder of Registrable Securities or underwriter shall be required to contribute any amount in excess of the amount by which (i) in the case of any such holder, the net proceeds received by such holder from the sale of Registrable Securities or (ii) in the case of an underwriter, the total price at which the Registrable Securities purchased by it and distributed to the public were offered to the public exceeds, in any such case, the amount of any damages that such holder or underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section II(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. SECTION 3.06. Rule 144. WLR will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder and will take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration 20 under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any holder of Registrable Securities, WLR will deliver to such holder a written statement as to whether it has complied with such requirements. ARTICLE 4 MISCELLANEOUS SECTION 4.01 Notices. (a) Method of Communication. Except as otherwise provided in this Agreement, all notices and communications hereunder shall be in writing, or by telephone subsequently confirmed in writing. Any notice shall be effective if delivered by hand delivery or sent via telecopy, recognized overnight courier service or certified mail, return receipt requested, and shall be presumed to be received by a party hereto (i) on the date of delivery if delivered by hand or sent by telecopy, (ii) on the next Business Day if sent by recognized overnight courier service and (iii) on the third Business Day following the date sent by certified mail, return receipt requested. (b) Addresses for Notices. Notices to any party shall be sent to it at the following addresses, or any other address as to which all the other parties are notified in writing. If to WLR: WLR Foods, Inc. 800 Co-op Drive Timberville, Virginia 22853 Attention: Robert Ritter, CFO Telephone No.: (540) 896-7001 Telecopy No.: (540) 896-0498 Or, if sent by mail: WLR Foods, Inc. P.O. Box 7000 Broadway, Virginia 22815 Attention: Robert Ritter, CFO If to First Union: First Union National Bank 301 College Street, DC-5 NC 0737 Charlotte, NC 28288-0737 Attention: Julie Bouhuys, SVP Telephone No.: (704) 383-0349 Telecopy No.: (704) 374-3300; and 21 First Union National Bank 201 South Jefferson Street Roanoke, Virginia 24011 Attention: George Calfo Telephone No.: (540) 563-7769 Telecopy No.: (540) 561-5262 If to CoreStates: CoreStates Bank, N.A. FC 1-8-3-8 1345 Chestnut Street Philadelphia, Pennsylvania 19102 Attention: John D. Brady Telephone No.: (215) 786-2160 Telecopy No.: (215) 973-6745 If to Harris: Harris Trust and Savings Bank 111 West Monroe Chicago, Illinois 60690 Attention: Agribusiness Division Telephone No.: (312) 461-3795 Telecopy No.: (312) 765-8095 If to Crestar: Crestar Bank 510 South Jefferson Street Roanoke, Virginia 24011 Attention: George Coleman, Jr. Telephone No.: (540) 982-3285 Telecopy No.: (540) 982-3056 If to a Purchaser: At such Purchaser's respective address as set forth on Exhibit A attached hereto. SECTION 4.02. Expenses. WLR will pay all out-of -pocket expenses of the Warrantholders in connection with: (i) the preparation, execution and delivery of this Agreement and the Warrants whenever the same shall be executed and delivered, including all out- of-pocket due diligence expenses, taxes and reasonable fees and disbursements of counsel for the Warrantholders; and (ii) the preparation, execution and delivery of any waiver, amendment or consent by the Warrantholders relating to this Agreement or any of the Warrants, including reasonable fees and disbursements of counsel for the Warrantholders, and taxes imposed in connection therewith. SECTION 4.03. Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of New York, without reference to the conflicts or choice of law principles thereof. SECTION 4.04. Consent to Jurisdiction. WLR hereby irrevocably consents to the personal jurisdiction of the United States District 22 Court for the Southern District of New York and the Supreme Court of the State of New York, County of New York in any action, claim or other proceeding arising out of any dispute in connection with this Agreement and the Warrants, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations. WLR hereby irrevocably consents to the service of a summons and complaint and other process in any action, claim or proceeding brought by any Warrantholder in connection with this Agreement or the Warrants, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations, on behalf of itself or its property, in the manner specified in Section 4.01. Nothing in this Section 4.04 shall affect the right of any Warrantholder to serve legal process in any other manner permitted by Applicable Law (as defined in the Credit Agreement) or affect the right of any Warrantholders to bring any action or proceeding against WLR or its properties in the courts of any other jurisdictions. SECTION 4.05. Waiver of Jury Trial; Waiver of Punitive Damages. (a) WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH WARRANTHOLDER AND WLR HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF, OR ANY DISPUTE IN CONNECTION WITH, THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. (b) Waiver of Punitive Damages. WLR and the Warrantholders agree that they shall not have a remedy of punitive or exemplary damages against the other in any Dispute and hereby waive any right or claim to punitive or exemplary damages they have now or which may arise in the future in connection with any Dispute whether the Dispute is resolved by arbitration or judicially. SECTION 4.06. Injunctive Relief. WLR recognizes that, in the event WLR fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, any remedy of law may prove to be inadequate relief to the Warrantholders. Therefore, WLR agrees that the Warrantholders, at the Warrantholders' option, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages. SECTION 4.07. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of WLR and the Warrantholders, and their respective successors and assigns (including the holders of any Conversion Shares), except that WLR shall not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Warrantholder. 23 SECTION 4.08. Amendments, Waivers and Consents. Any term, agreement or condition of this Agreement may be amended or waived by the Warrantholders, and any consent given by the Warrantholders, if, but only if, such amendment, waiver or consent is in writing signed by each Warrantholder and, in the case of an amendment, signed by WLR. SECTION 4.09. Performance of Duties. WLR's obligations under this Agreement shall be performed by WLR at its sole cost and expense. SECTION 4.10. Indemnification. WLR agrees to reimburse the Warrantholders for all reasonable costs and expenses, including all counsel, appraisal, or other expert or consultant fees and disbursements incurred, and to indemnify and hold the Warrantholders harmless from and against all losses suffered by the Warrantholders in connection with (i) the exercise by the Warrantholders of any right or remedy granted to them under this Agreement and (ii) any claim, and the prosecution or defense thereof, arising out of or in any way connected with this Agreement; provided that WLR shall not be obligated to reimburse any Warrantholder for costs and expenses, or indemnify any Warrantholder for any loss, resulting from the gross negligence or willful misconduct of such Warrantholder. SECTION 4.11. Survival of Indemnities. Notwithstanding any termination of this Agreement, the indemnities to which the Warrantholders are entitled under the provisions of this Article 4 and any other provision of this Agreement shall continue in full force and effect and shall protect the Warrantholders against events arising after such termination as well as before. SECTION 4.12. Titles and Captions. Titles and captions of Articles, Sections and subsections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement. SECTION 4.13. Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remainder of such provision or the remaining provisions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 4.14. Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and shall be binding upon all parties, their successors and assigns, and all of which taken together shall constitute one and the same agreement. 24 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers, all as of the day and year first written above. WLR FOODS, INC. By:__/S/ Robert T. Ritter__ Name: Robert T. Ritter Title:Vice President FIRST UNION NATIONAL BANK By:__/S/ Julie Bouhuys__ Name: Julie Bouhuys Title:Senior Vice President CORESTATES BANK, N.A. By:__/S/ Carol A. Williams__ Carol A. Williams, Senior Vice President HARRIS TRUST AND SAVINGS BANK By:__/S/ Carl A. Blackham__ Carl A. Blackham, Vice President CRESTAR BANK By:__/S/ George W. Coleman, Jr.__ George W. Coleman, Jr., Senior Vice President 25 NATIONWIDE LIFE INSURANCE COMPANY By:__/S/ James W. Purden Name: James W. Purden Title:Vice President Municipal Securities NATIONWIDE LIFE INSURANCE COMPANY SEPARATE ACCOUNT OH By:__/S/ James W. Purden__ Name: James W. Purden Title:Vice President Municipal Securities SECURITY LIFE INSURANCE COMPANY By:__/S/ Joseph R. Betlej__ Name: Joseph R. Betlej Title:Vice President GREAT WESTERN INSURANCE COMPANY By:__/S/ Joseph R. Betlej__ Name:Joseph R. Betlej Title:Vice President NATIONAL TRAVELERS LIFE COMPANY By:__/S/ Joseph R. Betlej__ Name: Joseph R. Betlej Title:Vice President 26 PIONEER MUTUAL LIFE INSURANCE COMPANY By:__/S/ Joseph R. Betlej__ Name: Joseph R. Betlej Title:Vice President GUARANTEE RESERVE LIFE INSURANCE COMPANY By:__/S/ Joseph R. Betlej__ Name: Joseph R. Betlej Title:Vice President THE CATHOLIC AID ASSOCIATION By:__/S/ Joseph R. Betlej__ Name: Joseph R. Betlej Title:Vice President MUTUAL TRUST LIFE INSURANCE COMPANY By:__/S/ Joseph R. Betlej__ Name: Joseph R. Betlej Title:Vice President THE FEDERATED MUTUAL INSURANCE COMPANY By:__/S/ Joseph R. Betlej__ Name: Joseph R. Betlej Title:Vice President THE FEDERATED LIFE INSURANCE COMPANY By:__/S/ Joseph R. Betlej__ Name: Joseph R. Betlej Title:Vice President STATE MUTUAL INSURANCE COMPANY By:__/S/ Joseph R. Betlej__ Name: Joseph R. Betlej Title:Vice President 27 COLORADO BANKERS LIFE INSURANCE COMPANY By:__/S/ Joseph R. Betlej__ Name: Joseph R. Betlej Title:Vice President THE RELIABLE LIFE INSURANCE COMPANY & ASSOCIATES RETIREMENT PLAN By:__/S/ Joseph R. Betlej__ Name: Joseph R. Betlej Title:Vice President THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY By:__/S/ Joseph R. Betlej__ Name: Joseph R. Betlej Title:Vice President THE RELIABLE LIFE INSURANCE COMPANY By:__/S/ Joseph R. Betlej__ Name: Joseph R. Betlej Title:Vice President TEXAS LIFE INSURANCE COMPANY By:__/S/ Charles Scully__ Name: Charles Scully Title:Investment Officer MIMLIC FUNDING, INC. By:__/S/ Joseph R. Betlej__ Name: Joseph R. Betlej Title:Vice President EMPLOYERS LIFE INSURANCE COMPANY OF WAUSAU By:__/S/ James W. Purden__ Name: James W. Purden Title:Attorney-in-Fact 28 STAUNTON FARM CREDIT, ACA By:__/S/ Richard E. Reeves__ Name: Richard E. Reeves Title:President 29 EXHIBIT "A" LIST OF PURCHASERS NATIONWIDE LIFE INSURANCE COMPANY Nationwide Insurance Company One Nationwide Plaza (1-33-07) Columbus, Ohio 43215-2220 Attn: Corporate Fixed-Income Securities NATIONWIDE LIFE INSURANCE COMPANY SEPARATE ACCOUNT OH Nationwide Insurance Company - S/A OH One Nationwide Plaza (1-33-07) Columbus, Ohio 43215-2220 Attn: Corporate Fixed-Income Securities VAR & CO. Security Life Insurance Company c/o MIMLIC Asset Management Company 400 North Robert Street St. Paul, MN 55101 Attn: Client Administrator ZIONS FIRST NATIONAL BANK FOR GREAT WESTERN INSURANCE COMPANY Great Western Insurance Company c/o MIMLIC Asset Management Company 400 North Robert Street St. Paul, MN 55101 Attn: Client Administrator VAR & CO. National Travelers Life Company c/o MIMLIC Asset Management Company 400 North Robert Street St. Paul, MN 55101 Attn: Client Administrator POLLY & CO. Pioneer Mutual Life Insurance Company c/o MMLIC Asset Management Company 400 North Robert Street St. Paul, MN 55101 Attn: Client Administrator GANT & CO. Guarantee Reserve Life Insurance Company c/o MIMLIC Asset Management Company 400 North Robert Street St. Paul, MN 55101 Attn: Client Adminstrator 30 VAR & CO. Catholic Aid Association c/o MIMLIC Asset Management Company 400 North Robert Street St. Paul, MN 55101 Attn: Client Administrator ELL & CO. Mutual Trust Life Insurance Company c/o MIMLIC Asset Management Company 400 North Robert Street St. Paul, MN 55101 Attn: Client Administrator FEDERATED MUTUAL INSURANCE COMPANY Federated Mutual Insurance Company c/o MIMLIC Asset Management Company 400 North Robert Street St. Paul, MN 55101 Attn: Client Administrator 31 FEDERATED LIFE INSURANCE COMPANY Federated Life Insurance Company c/o MIMLIC Asset Management Company 400 North Robert Street St. Paul, MN 55101 Attn: Client Administrator FIRST UNION & CO. State Mutual Insurance Company c/o MIMLIC Asset Management Company 400 North Robert Street St. Paul, MN 55101 Attn: Client Administrator SALKELD & CO. Colorado Bankers Life Insurance Company c/o MIMLIC Asset Management Company 400 North Robert Street St. Paul, MN 55101 Attn: Client Administrator THE RELIABLE LIFE INSURANCE COMPANY The Reliable Life Insurance Company c/o MIMLIC Asset Management Company 400 Robert Street North St. Paul, MN 55101 Attn: Client Administrator THE RELIABLE LIFE INSURANCE COMPANY & ASSOCIATES RETIREMENT PLAN Reliable Life Insurance Company & Associates Retirement Plan c/o MIMLIC Asset Management Company 400 North Robert Street St. Paul, MN 55101 Attn: Client Administrator 32 THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY The Minnesota Mutual Life Insurance Company 400 North Robert Street St. Paul, MN 55101 Attn: Investment Department TEXAS LIFE INSURANCE COMPANY Metropolitan Life Insurance Company 334 Madison Avenue Convent Station, NJ 07961 Attn: Private Placement Unit and to: Texas Life Insurance Company 900 Washington Avenue Waco, TX 76701 Attn: Virginia Crunk VAR & CO. MMLIC Funding, Inc. c/o MMLIC Asset Management Company 400 North Robert Street St. Paul, MN 55101 EMPLOYERS LIFE INSURANCE COMPANY OF WAUSAU Employers Life Insurance Company of Wausau One Nationwide Plaza (1-33-07) Columbus, Ohio 43215-2220 Attn: Corporate Fixed-Income Securities STAUNTON FARM CREDIT, ACA Staunton Farm Credit, ACA 306 East Market Street Harrisonburg, Virginia 22801 33 EX-2.6 7 FORM WAR TO PURCH COM STOCK Exhibit 2.6 [FORM OF BANK WARRANT] THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OFFERED FOR SALE UNLESS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO AND THE HOLDER OF SUCH SECURITIES HAS THE BENEFIT OF A WARRANTHOLDERS RIGHTS AGREEMENT DATED AS OF FEBRUARY 25, 1998 AMONG WLR FOODS, INC. AND THE WARRANTHOLDERS PARTIES THERETO, COPIES OF WHICH ARE ON FILE WITH WLR FOODS, INC. No. 98-FIELD (No.) Dated February 25, 1998 WARRANT To purchase FIELD (Shares) Shares of Common Stock of WLR FOODS, INC. Expiring January 1, 2002 THIS IS TO CERTIFY THAT, for value received, FIELD(NAME) or registered assigns ("Holder") is entitled to purchase from WLR FOODS, INC., a Virginia corporation ("WLR"), at any time or from time to time after 9:00 a.m., Charlotte, North Carolina time, on the date hereof with respect to 30% of the shares for which this Warrant is exercisable and at any time or from time to time after 9:00 a.m. Charlotte, North Carolina time, on February 28, 1999 with respect to all shares for which this Warrant is exercisable and, in either case, prior to 5:00 p.m., Charlotte, North Carolina time, on the earlier of January 1, 2002 and the Business Day preceding the date of redemption of this Warrant, at the place where the Warrant Agency is located, at the Exercise Price, the number of shares of Class A Common Stock, no par value, of WLR (the "Common Stock") shown above, all subject to adjustment and upon the terms and conditions hereinafter provided, and is entitled also to exercise the other appurtenant rights, powers and privileges hereinafter described. This Warrant is one of one or more warrants (the "Warrants") of the same form and having the same terms as this Warrant, entitling the holders initially to purchase up to an aggregate of 889,898 shares of Common Stock. The Warrants have been issued pursuant to the Revolving Credit Agreement and the Term Loan Agreement, each dated as of February 25, 1998 (as amended from time to time, collectively, the "Credit Agreement") among WLR, Wampler Foods, Inc., Cassco Ice & Cold Storage, Inc., Wampler Supply Company, Inc., Valley Rail Service, Inc., and First Union National Bank ("First Union"), CoreStates Bank, N.A. ("CoreStates"), Harris Trust and Savings Bank ("Harris"), and Crestar Bank ("Crestar") or pursuant to the Note Purchase Agreement dated as of February 25, 1998 (the "Note Purchase Agreement") among WLR and the purchasers named on the signature page thereto (the "Purchasers"), and the Holder is entitled to certain benefits as set forth therein and to certain benefits described in the Warrantholders Rights Agreement dated as of February 25, 1998 among WLR and the Warrantholders party thereto (the "Warrantholders Rights Agreement"). WLR shall keep a copy of the Credit Agreement and the Warrantholders Rights Agreement, and any amendments thereto, at the Warrant Agency and shall furnish, without charge, copies thereof to the Holder upon request. Certain terms used in this Warrant are defined in Article 6. 1 ARTICLE 1 EXERCISE OF WARRANTS SECTION 1.01. Method of Exercise. To exercise this Warrant in whole or in part, the Holder shall deliver on any Business Day to WLR, at the Warrant Agency, (a) this Warrant, (b) a written notice of such Holder's election to exercise this Warrant, which notice shall specify the number of shares of Common Stock to be purchased (which shall be a whole number of shares if for less than all the shares then issuable hereunder), the denominations of the share certificate or certificates desired and the name or names in which such certificates are to be registered, and (c) payment of the Exercise Price with respect to such shares. Such payment may be made, at the option of the Holder, by any of the following methods: (a) by cash, certified or bank cashier's check or wire transfer in an amount equal to the product of (i) the Exercise Price times (ii) the number of Warrant Shares as to which this Warrant is being exercised; or (b) by receiving from WLR the number of Warrant Shares equal to (i) the number of Warrant Shares as to which this Warrant is being exercised minus (ii) the number of Warrant Shares having a value, based on the Closing Price on the trading day immediately prior to the date of such exercise, equal to the product of (x) the Exercise Price times (y) the number of Warrant Shares as to which this Warrant is being exercised; or (c) by cancellation of an amount of principal or interest owing under the Credit Agreement or the Note Agreement, as the case may be, in an amount equal to the product of (i) the Exercise Price times (ii) the number of Warrant Shares as to which this Warrant is being executed. WLR shall, as promptly as practicable and in any event within seven days after receipt of such notice and payment, execute and deliver or cause to be executed and delivered, in accordance with such notice, a certificate or certificates representing the aggregate number of shares of Common Stock specified in said notice together with cash in lieu of any fractions of a shares as providtificate or certificates so delivered shall be in such denominations as may be specified in such notice, and shall be issued in the name of the Holder or such other name as shall be designated in such notice. This Warrant shall be deemed to have been exercised, and such Holder or any other Person so designated to be named therein shall be deemed for all purposes to have become a holder of record of shares, as of the date the aforementioned notice and payment is received by WLR. If this Warrant shall have been exercised only in part, WLR shall, at the time of delivery of such certificate or certificates, deliver to the Holder a new Warrant evidencing the rights to purchase the remaining shares of Common Stock called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant, or, at the request of the Holder, appropriate notation may be made on this Warrant which shall then be returned to the Holder. WLR shall pay all expenses, taxes and other charges payable in connection with the preparation, issuance and delivery of share certificates and new Warrants, except that, if share certificates or new Warrants shall be registered in a name or names other than the name of the Holder, funds sufficient to pay all transfer taxes payable as a result of such transfer shall be paid by the Holder at the time of delivery of the aforementioned notice of exercise or promptly upon receipt of a written request of WLR for payment. SECTION 1.02. Shares to Be Fully Paid and Nonassessable. All shares of Common Stock issued upon the exercise of this Warrant shall be validly issued, fully paid and nonassessable and, if such class of Common Stock is then listed on any national securities exchange (as defined in the Exchange Act) or quoted on NASDAQ, shall be duly listed or quoted thereon, as the case may be. SECTION 1.03. No Fractional Shares Required to Be Issued. WLR shall not be required to issue fractions of shares of Common Stock upon exercise of this Warrant. If any fraction of a share would, but for this Section, be issuable upon partial exercise, such fraction of a share shall be carried over until the final exercise of this Warrant, at which time in lieu of such fractional share WLR shall pay 2 to the Holder, in cash, an amount equal to the same fraction of the Fair Market Value of WLR per share of outstanding Common Stock on the Business Day immediately prior to the date of such exercise. SECTION 1.04. Share Legend. Each certificate for shares of Common Stock issued upon exercise of this Warrant, unless at the time of exercise such shares are registered under the Securities Act, shall bear the following legend: "The securities represented by this certificates have not been registered under the Securities Act of 1933, as amended, and may not be sold or offered for sale unless an exemption from such registration is available. The securities represented by this certificate are also subject to and the holder of such securities has the benefit of a Warrantholders Rights Agreement dated as of February 25, 1998 among WLR Foods, Inc. and the Warrantholders parties thereto, copies of which are on file with WLR Foods, Inc." Any certificate issued at any time in exchange or substitution for any certificate bearing such legend (except a new certificate issued upon completion of a public offering pursuant to a registration statement under the Securities Act) shall also bear such legend unless, in the opinion of counsel selected by the holder of such certificate (who may be an employee of such holder) and reasonably acceptable to WLR, the securities represented thereby need no longer be subject to restrictions on resale under the Securities Act. SECTION 1.05. Reservation. WLR has duly reserved and will keep available for issuance upon exercise of the Warrants the total number of Warrant Shares deliverable from time to time upon exercise of all Warrants from time to time outstanding. ARTICLE 2 WARRANT AGENCY; TRANSFER, EXCHANGE AND REPLACEMENT OF WARRANTS SECTION 2.01. Warrant Agency. As long as any of the Warrants remain outstanding, WLR shall perform the obligations of and be the warrant agency with respect to the Warrants (the "Warrant Agency") at its address set forth in Section 7.01 hereof or at such other address as WLR shall specify by notice to all Warrantholders. SECTION 2.02. Ownership of Warrant. WLR may deem and treat the person in whose name this Warrant is registered as the holder and owner hereof (notwithstanding any notations of ownership or writing hereon made by any person other than WLR) for all purposes and shall not be affected by any notice to the contrary, until due presentment of this Warrant for registration of transfer as provided in this Article 2. SECTION 2.03. Transfer of Warrant. WLR agrees to maintain at the Warrant Agency books for the registration of transfers of the Warrants, and transfer of this Warrant and all rights hereunder shall be registered, in whole or in part, on such books, upon surrender of this Warrant at the Warrant Agency, together with a written assignment of this Warrant duly executed by the Holder or its duly authorized agent or attorney, with (if the Holder is a natural person) signatures guaranteed by a bank or trust company or a broker or dealer registered with the NASD, and funds sufficient to pay any transfer taxes payable upon such transfer. Upon surrender and, if required, such payment, WLR shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in the instrument of assignment (which shall be whole numbers of shares only) and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be canceled. 3 SECTION 2.04. Division or Combination of Warrants. This Warrant may be divided or combined with other Warrants upon presentment hereof and of any Warrant or Warrants with which this Warrant is to be combined at the Warrant Agency, together with a written notice specifying the names and denominations (which shall be whole numbers of shares only) in which the new Warrant or Warrants are to be issued, signed by the holders hereof and thereof or their respective duly authorized agents or attorneys. Subject to compliance with Section 2.03 as to any transfer or assignment which may be involved in the division or combination, WLR shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. SECTION 2.05. Loss, Theft, Destruction of Warrant Certificates. Upon receipt of evidence satisfactory to WLR of the ownership of and the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security satisfactory to WLR (it being understood and agreed that if the holder of such Warrant is First Union, CoreStates, Harris, Crestar or a Purchaser, then a written agreement of indemnity given by such holder alone shall be satisfactory to WLR and no further security shall be required) or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, WLR will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same aggregate number of shares of Common Stock. SECTION 2.06. Expenses of Delivery of Warrants. WLR shall pay all expenses, taxes (other than transfer taxes) and other charges payable in connection with the preparation, issuance and delivery of Warrants hereunder. ARTICLE 3 CERTAIN RIGHTS SECTION 3.01. Right and Obligations under the Warrantholders Rights Agreement. The holder of this Warrant is entitled to the benefits and subject to the terms of the Warrantholders Rights Agreement dated as of February 25, 1998 among WLR and the Warrantholders listed on the signature pages thereof (as amended from time to time, the "Warrantholders Rights Agreement"). WLR shall keep or cause to be kept a copy of the Warrantholders Rights Agreement, and any amendments thereto, at the Warrant Agency and shall furnish, without charge, copies thereof to the Holder upon request. SECTION 3.02. Determination of Fair Market Value. Subject to Section 3.03 hereof, each determination of Fair Market Value hereunder shall be made in good faith by WLR. Upon each determination of Fair Market Value by WLR hereunder WLR shall promptly give notice thereof to all Warrantholders, setting forth in reasonable detail the calculation of such Fair Market Value and the method and basis of determination thereof (the "WLR Determination"). SECTION 3.03. Contest and Appraisal Rights. (a) If the holders of Warrants entitling such holders to purchase a majority of the Common Stock subject to purchase upon exercise of Warrant at the time outstanding (exclusive of Warrants then owned by WLR or any Subsidiary or Affiliate thereof) (the "Required Interest") shall disagree with the WLR Determination and shall by notice to WLR given within ten Business Days after WLR's notice of the WLR Determination (an "Appraisal Notice") elect to dispute the WLR's Determination, such dispute shall be resolved as set forth in subsection (b) of this Section. (b) WLR shall within 30 days after an Appraisal Notice shall have been given pursuant to subsection (a) of this Section engage an investment bank or other qualified appraisal firm acceptable to the Required Interest (the "Appraiser") to make an independent determination of Fair Market Value (the "Appraiser Determination"). The Appraiser Determination shall be final and binding on WLR and all 4 Warrantholders. If the WLR Determination and the Appraiser Determination differ by an amount of 10% or less of the WLR Determination, then the costs of conducting the appraisal shall be borne equally by WLR and the Warrantholders; if the WLR Determination is greater than the Appraiser Determination by more than 10% of the WLR Determination, then the costs of conducting the appraisal shall be borne entirely by the Warrantholders; and if the Appraiser Determination is greater than the WLR Determination by more than 10% of the WLR Determination, then the costs of conducting the appraisal shall be borne entirely by WLR; provided that in each case costs separately incurred by WLR and any Warrantholders shall be separately borne by them. ARTICLE 4 ANTIDULUTION PROVISIONS SECTION 4.01. Adjustment Generally. The number of shares of Common Stock (or other securities or property) issuable upon exercise of this Warrant shall be subject to adjustment from time to time upon the occurrence of certain events as provided in this Article 4. SECTION 4.02. Common Stock Reorganization. If WLR shall subdivide its outstanding shares of Common Stock (or any class thereof) into a greater number of shares or consolidate its outstanding shares of Common Stock (or any class thereof) into a smaller number of shares or make any other distribution upon any capital stock of WLR payable in Common Stock, Options or Convertible Securities (any such event being called a "Common Stock Reorganization"), then the number of shares of Common Stock subject to purchase upon exercise of this Warrant shall be adjusted, effective at such time, to a number determined by multiplying the number of shares of Common Stock subject to purchase immediately before such Common Stock Reorganization by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding after giving effect to such Common Stock Reorganization and the denominator of which shall be the number of shares of Common Stock outstanding immediately before such Common Stock Reorganization. SECTION 4.03. Common Stock Distribution. (a) If WLR shall issue, sell or otherwise distribute any shares of Common Stock, other than pursuant to a Common Stock Reorganization (which is governed by Section 4.02 hereof) (any such event, including any event described in paragraphs (b) and (c) below, being herein called a "Common Stock Distribution"), for a consideration per share less than the Exercise Price then in effect or less than the Fair Market Value of WLR per share of outstanding Common Stock on a Fully Diluted Basis on the date of such Common Stock Distribution (before giving effect to such Common Stock Distribution), then, effective upon such Common Stock Distribution, the number of shares of Common Stock subject to purchase upon exercise of this Warrant shall be increased to a number determined by multiplying the number of shares of Common Stock subject to purchase immediately before such Common Stock Distribution by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately after giving effect to such Common Stock Distribution and the denominator of which shall be the sum of the number of shares outstanding immediately before giving effect to such Common Stock Distribution (both calculated on a Fully Diluted Basis) plus the number of shares of Common Stock which the aggregate consideration received by WLR with respect to such Common Stock Distribution would purchase at the Fair Market Value of WLR per share of outstanding Common Stock on a Fully Diluted Basis on the date of such Common Stock Distribution before giving effect to such Common Stock Distribution. In computing adjustments under this paragraph, fractional interests in Common Stock shall be taken into account to the nearest one-thousandth of a share. The provisions of this paragraph (a), including by operation of paragraph (b) or (c) below, shall not operate to reduce the number of shares of Common Stock subject to purchase upon exercise of this Warrant. 5 (b) If WLR shall issue, sell, distribute or otherwise grant in any manner (including by assumption) any rights to subscribe for or to purchase, or any warrants or options for the purchase of Common Stock ("Options") or any stock or securities convertible into or exchangeable for Common Stock (such rights, warrants or options being herein called "Convertible Securities"), whether or not such Options or the rights to convert or exchange any such Convertible Securities in respect of such Option are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such Options or upon conversion or exchange of such Convertible Securities in respect of such Options (determined by dividing (i) the aggregate amount, if any, received or receivable by WLR as consideration for the granting of such Options, plus the minimum aggregate amount of additional consideration payable to WLR upon the exercise of all such Options, plus, in the case of Options to acquire Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issuance or sale of such Convertible Securities and upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options) shall be less than the Exercise Price then in effect or less than the Fair Market Value of WLR per share of outstanding Common Stock on a Fully Diluted Basis on the date of granting such Options (before giving effect to such grant), then, for purposes of paragraph (a) above, the total maximum number of shares of Common Stock issuable upon the exercise oxchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued as of the date of granting of such Options and thereafter shall be deemed to be outstanding and WLR shall be deemed to have received as consideration such price per share, determined as provided above, therefor. Except as otherwise provided in paragraph (d) below, no additional adjustment of the number of shares subject to purchase upon exercise of this Warrant shall be made upon the actual exercise of such Options or upon conversion or exchange of such Convertible Securities. (c) If WLR shall issue, sell or otherwise distribute (including by assumption) any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (i) the aggregate amount received or receivable by WLR as consideration for the issuance, sale or distribution of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to WLR upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Exercise Price then in effect or less than the Fair Market Value of WLR per share of outstanding Common Stock on a Fully Diluted Basis on the date of such issuance, sale or distribution (before giving effect to such issuance, sale or distribution), then, for purposes of paragraph (a) above, the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall be deemed to have been issued as of the date of the issuance, sale or distribution of such Convertible Securities and thereafter shall be deemed to be outstanding and WLR shall be deemed to have received as consideration such pricas provided above, therefor. Except as otherwise provided in paragraph (d) below, no additional adjustment of the number of shares subject to purchase upon exercise of this Warrant shall be made upon the actual conversion or exchange of such Convertible Securities. (d) If (i) the purchase price provided for in any Option referred to in paragraph (b) above or the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in paragraph (b) or (c) above or the rate at which any Convertible Securities referred to in paragraph (b) or (c) above are convertible into or exchangeable for Common Stock shall change at any time (other than under or by reason of provisions designed to protect against dilution upon an event which results in a related adjustment pursuant to this Article 4), (ii) any of such Options or Convertible 6 Securities shall have terminated, lapsed or expired, or (iii) any Options or Convertible Securities outstanding on February 25, 1998 shall have terminated, lapsed or expired, then the number of shares which are then subject to purchase upon exercise of this Warrant shall forthwith be readjusted (effective only with respect to any exercise of this Warrant after such readjustment) to the number of shares which would have been subject to purchase upon exercise of this Warrant (A) had the adjustment made upon the issuance, sale, distribution or grant of such Options or Convertible Securities been made based upon such changed purchase price, additional consideration or conversion rate, as the case may be (in the case of any event referred to in clause (i) of this paragraph (d)) or (B) had such adjustment not been made (in the case of any event referred to in clause (ii) of this paragraph (d)) or (C) had the shares of Common Stock issuable upon the exercise or conversion of such Options or Convertible Securities not been deemed outstanding for purposes of calculating the number of shares for which the Warrants originally issuwere exercisable (in the case of any event referred to in clause (iii) of this paragraph (d)). (e) If any shares of Common Stock, Options or Convertible Securities shall be issued, sold or distributed for cash, the consideration received therefor shall be deemed to be the amount received by WLR therefor, after deduction therefrom of any expenses incurred in connection therewith. If any shares of Common Stock, Options or Convertible Securities shall be issued, sold or distributed for a consideration other than cash, the amount of the consideration other than cash received by WLR shall be deemed to be the Fair Market Value of such consideration, after deduction of any expenses incurred in connection therewith. If any shares of Common Stock, Options or Convertible Securities shall be issued in connection with any merger in which WLR is the surviving corporation, the amount of consideration therefor shall be deemed to be the Fair Market Value of such portion of the assets and business of the non-surviving corporation as shall be attributable to such Common Stock, Options or Convertible Securities, as the case may be. If any Options shall be issued in connection with the issuance and sale of other securities of WLR, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued without consideration. SECTION 4.04. Special Dividends. If WLR shall issue or distribute to any holder or holders of shares of Common Stock evidence of indebtedness, any other securities of WLR or any cash, property, or other assets (excluding a Common Stock Reorganization or a Common Stock Distribution), whether or not accompanied by a purchase, redemption or other acquisition of shares of Common Stock (any such nonexcluded event being herein called a "Special Dividend"), the number of shares of Common Stock subject to purchase upon exercise of this Warrant shall be increased to a number determined by multiplying the number of shares of Common Stock subject to purchase immediately before such Special Dividend by a fraction, the numerator of which shall be the Fair Market Value of WLR per share of outstanding Common Stock as of the effective date of such Special Dividend and the denominator of which shall be such Fair Market Value per share less any cash and the then Fair Market Value of any evidence of indebtedness, securities or property or other assets issued or distributed in such Special Dividend with respect to one share of Common Stock. A reclassification of Common Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by WLR to holders of such Common Stock of such shares of such other class of stock and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as part of such reclassification, a Common Stock Reorganization. SECTION 4.05. Capital Reorganizations. If there shall be any consolidation or merger to which WLR is a party, other than a consolidation or a merger of which WLR is the continuing corporation and which does not result in any reclassification of, or change (other than a Common Stock Reorganization) in, outstanding shares of Common 7 Stock, or any sale or conveyance of the property of WLR as an entirety or substantially as an entirety, or any recapitalization of WLR (any such event being called a "Capital Reorganization"), then, effective upon the effective date of such Capital Reorganization, the Holder shall no longer have the right to purchase Common Stock, but shall have instead the right to purchase, upon exercise of this Warrant, the kind and amount of shares of stock and other securities and property (including cash) which the Holder would have owned or have been entitled to receive pursuant to such Capital Reorganization if this Warrant had been exercised immediately prior to the effective date of such Capital Reorganization. As a condition to effecting any Capital Reorganization, WLR or the successor or surviving corporation, as the case may be, shall (a) execute and deliver to each Warrantholder and to the Warrant Agency an agreement as to the Warrantholders' rights in accordance with this Section 4.05, providing, to the extent of any right to purchase equity securities hereunder, for subsequent adjustments as nearly equivalent as may be practicable to the adjustments provided for in this Article 4 and (b) provide each Regulation Y Holder with an opinion of counsel reasonably satisfactory to such Regulation Y Holder and such other assurances as any Regulation Y Holder may reasonably request to the effect that the ownership and exercise by any Regulation Y Holder of this Warrant after giving effect to such Capital Reorganization shall not be prohibited by the BHC Act or the regulations thereunder. The provisions of this Section 4.05 shall similarly apply to successive Capital Reorganizations. SECTION 4.06. Adjustment Rules. Any adjustments pursuant to this Article 4 shall be made successively whenever an event referred to herein shall occur, except that, notwithstanding any other provision of this Article 4, no adjustment shall be made to the number of shares of Common Stock to be delivered to each Holder (or to the Exercise Price) if such adjustment represents less that 1% of the number of shares previously required to be so delivered, but any lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which together with any adjustments so carried forward shall amount to 1% or more of the number of shares to be so delivered. No adjustment shall be made pursuant to this Article 4 in respect of the issuance from time to time of shares of Common Stock upon the exercise of any of the Warrants or any Options listed in Schedule 6.1(z) to the Credit Agreement or upon the conversion or exchange of any Convertible Securities listed in such Schedule 6.1(z), in each case in accordance with the terms of such Options or Convertible Securities as in effect on the date of the Warrantholders' Rights Agreement. If WLR shall take a record of the holders of its Common Stock for any purpose referred to in this Article 4, then (i) such record date shall be deemed to be the date of issuance, sale, distribution or grant in question and (ii) if WLR shall legally abandon such action prior to effecting such action, no adjustment shall be made pursuant to this Section 4 in respect of such action. SECTION 4.07. Proceedings Prior to Any Action Requiring Adjustment. As a condition precedent to the taking of any action which would require an adjustment pursuant to this Article 4, WLR shall take any action which may be necessary, including obtaining regulatory approvals or exemptions, in order that (a) WLR may thereafter validly and legally issue as fully paid and nonassessable all shares of Common Stock which the holders of Warrants are entitled to receive upon exercise thereof and (b) the ownership and exercise of any Warrant by any Regulation Y Holder shall not be prohibited by the BHC Act or the regulations thereunder. SECTION 4.08. Notice of Adjustment. Not less than 10 nor more than 30 days prior to the record date or effective date, as the case may be, of any action which requires or might require an adjustment or readjustment pursuant to this Article 4, WLR shall give notice to each Warrantholder of such event, describing such event in reasonable detail and specifying the record date or effective date, as the case may be, and, if determinable, the required adjustment and the computation thereof. If the required adjustment is not determinable 8 at the time of such notice, WLR shall give notice to each Warrantholder of such adjustment and computation promptly after such adjustment becomes determinable. ARTICLE 5 PURCHASE, REDEMPTION, GIVEB ACK AND CANCELLATION OF WARRANTS SECTION 5.01. Purchases of Warrants by WLR. WLR shall have the obligation to purchase or otherwise acquire Warrants at such times, in such manner and for such consideration as set forth below. SECTION 5.02. Optional Redemption of Warrants. The Holder may, by notice to WLR, demand a determination of the Redemption Price (a "Determination Notice") for purposes of this Section 5.02: (a) at any time and from time to time on or after the repayment in full of all principal of and premium and interest on the Notes (as defined in the Credit Agreement) and the Insurance Company Notes and the termination of the Commitment under the Credit Agreement and (b) on or within 30 days after the date on which WLR shall have delivered a Refinancing Notice (any such redemption pursuant to this clause (b), a "Refinancing Redemption"). Within 30 days (or, in the case of a Refinancing Redemption, five Business Days) after the receipt of any Determination Notice from the Holder, WLR shall give to the Holder notice of the Redemption Price, including a reasonably detailed description of the method of calculation thereof, determined as of the day preceding such notice of the Redemption Price. At any time within ten Business Days after receipt of notice of the Redemption Price and the resolution of any dispute with respect thereto pursuant to Section 3.03 hereof, WLR may redeem this Warrant, in whole or in part, after giving effect to any giveback of this Warrant pursuant to Section 5.03 hereof that has occurred or that would result from the consummation of the refinancing described in any Refinancing Notice on the proposed closing date set forth in such Refinancing Notice, at the Redemption Price by notice to the Holder, payable on the third Business Day after notice of such exercise (or, in the case of a Refinancing Redemption, on the closing date of such refinancing) (any such date, the "Redemption Due Date") in immediately available funds to the Holder upon surrender of this Warrant at the Warrant Agency or, if requested by the Holder, by wire transfer to any account in the United States of America specified by such Holder by notice to WLR. Thereupon, the right to purchase shares of Common Storant as to which WLR has exercised its right of redemption shall terminate, and this Warrant shall represent the right of the Holder to receive the full Redemption Price from WLR in accordance with this Section. WLR's right to redeem this Warrant pursuant to this Section 5.02 shall be referred to hereinafter as the WLR's "Optional Redemption Right." SECTION 5.03. Warrant Giveback. In the event that WLR repays in full all principal of and premium and interest on the Term Loan Notes (as defined in the Credit Agreement) and the Insurance Company Notes, on or before any of the dates set forth below, then the number of Warrant Shares for which this Warrant is exercisable shall be automatically reduced, without any other action by WLR or the Holder and without any change in the Exercise Price, by the number of Warrant Shares equal to the product of (i) the number of Warrant Shares for which this Warrant is then exercisable multiplied by (ii) the percentage set forth opposite the applicable date below: Date Percentage August 31, 1998 70% January 31, 1999 50% May 31, 1999 25% SECTION 5.04. Cancellation of Warrants. All warrants purchased, redeemed or otherwise acquired by WLR shall thereupon be canceled and 9 retired. The Warrant Agency shall cancel any Warrant surrendered for exercise or registration of transfer or exchange and deliver such canceled Warrants to WLR. ARTICLE 6 DEFINITIONS The following terms, as used in this Warrant, have the following meanings: "Affiliate" means, with respect to any Person, any of (i) a director or executive officer of such Person, (ii) a spouse, parent, sibling or descendant of such Person (or a spouse, parent, sibling or descendant of any director or executive officer of such Person) and (iii) any other Person that, directly or indirectly, through one or more intermediaries controls, or is controlled by or is under common control with such Person. For the purpose of this definition, "control" (including the terms "controlling", "controlled by" and "under common control with"), as used with respect to any Person, means (a) the power to vote five percent (5%) or more of the securities or other equity interests of a Person having ordinary voting power or (b) the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities or by contract or agency or otherwise. "Appraisal Notice" has the meaning set forth in Section 3.03(a). "Appraiser" has the meaning set forth in Section 3.03(b). "Appraiser Determination" has the meaning set forth in Section 3.03(b). "BHC Act" means the Bank Holding Company Act of 1956, as amended. "Business Day" means (a) if Common Stock is listed or admitted to trading on a national securities exchange or quoted on NASDAQ, a day on which the principal national securities exchange on which the Common Stock is listed or admitted to trading or NASDAQ is open for business or (b) if Common Stock is not so listed or admitted to trading or quoted, a day on which the New York Stock Exchange is open for business. "Capital Reorganization" has the meaning set forth in Section 4.05. "Closing Price" on any day means (a) if Common Stock is listed or admitted for trading on a national securities exchange or quoted on NASDAQ, the reported last sales price or, if no such reported sale occurs on such day, the reported last sales price on the most recent day on which any reported sale has occurred, in each case on the principal national securities exchange on which Common Stock is listed or admitted to trading or on NASDAQ, or (b) if Common Stock is not listed or admitted to trading on any national securities exchange or quoted on NASDAQ, the average of the closing bid and asked prices in the over-the-counter market on such day as reported by the NASD or any comparable system or, if not so reported, as reported by any New York Stock Exchange member firm selected by WLR for such purpose. "Common Stock" means the Class A Common Stock, no par value, of WLR. "Common Stock Distribution" has the meaning set forth in Section 4.03(a). "Common Stock Reorganization" has the meaning set forth in Section 4.02. "Convertible Securities" has the meaning set forth in Section 4.03(b). 10 "Credit Agreement" has the meaning set forth in the second paragraph of this Warrant. "Determination Notice" has the meaning set forth in Section 5.02. "Dispute" means any dispute, claim or controversy arising out of, connected with or relating to this Warrant. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and any successor Federal statute, and the rules and regulations of the Securities and Exchange Commission (or its successor) thereunder, all as the same shall be in effect at the time. "Exercise Price" means $.01 per Warrant Share. "Fair Market Value" as at any date of determination means the fair market value of the business or property or services in question as of such date, as determined in good faith by the Board of Directors of WLR or otherwise in accordance with Section 3.03 hereof. Notwithstanding the foregoing, if, at any date of determination of the Fair Market Value of WLR, the Common Stock shall then be publicly traded, the Fair Market Value of WLR on such date shall be the Market Price on such date multiplied by the number of shares of Common Stock then outstanding on a Fully Diluted Basis. Determination of the Fair Market Value of WLR per share of Common Stock, shall be made without giving effect to any discount for (i) minority interest or (ii) any lack of liquidity of the Common Stock due to the fact that there may be no or a limited public market for the Common Stock. "Fully Diluted Basis" means, with respect to any determination or calculation, that such determination or calculation is performed on a fully diluted basis determined in accordance with generally accepted accounting principles as in effect from time to time. "Holder" has the meaning set forth in the first paragraph of this Warrant. "Insurance Company Notes" mean the notes issued by WLR pursuant to the Note Purchase Agreement. "Market Price" as at any date of determination means the average of the daily Closing Prices of a share of Common Stock for the shorter of (i) the 20 consecutive Business Days ending on the most recent Business Day prior to the Time of Determination and (ii) the period commencing on the date next succeeding the first public announcement of the issuance, sale, distribution, grant or exercise in question through such most recent Business Day prior to the Time of Determination. "Time of Determination" means the time and date of the earliest of (x) the determination of the stockholdders to exercise their rights set forth in Section 5.02 hereof and (z) the commencement of "ex-dividend" trading in respect thereof. "NASD" means The National Association of Securities Dealers, Inc. "NASDAQ" means The NASDAQ Stock Market. "Note Purchase Agreement" has the meaning set forth in the second paragraph of this Warrant. "Optional Redemption Right" has the meaning set forth in Section 5.02. "Options" has the meaning set forth in Section 4.03(b). "Person" means any natural person, corporation, limited partnership, general partnership, joint stock company, joint venture, association, company, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any 11 governmental agency or political subdivision thereof. "Purchasers" has the meaning set forth in the second paragraph of this Warrant. "Redemption Due Date" has the meaning set forth in Section 5.02 hereof. "Redemption Price" means, as of any date of determination, a price equal to the excess of (a) the Fair Market Value per share of Common Stock of WLR over (b) the Exercise Price then in effect. "Refinancing Notice" has the meaning set forth in Section 5.05 hereof. "Regulation Y Holder" means the Holder or a holder of Warrant Shares, if such Holder or holder of Warrant Shares is a bank holding company within the meaning of the BHC Act or a subsidiary thereof subject to Regulation Y under the BHC Act. "Required Interest" has the meaning set forth in Section 3.03(a). "Securities Act" means the Securities Act of 1933, as amended, and rules and regulations of the Securities Exchange Commission thereunder. "Special Dividend" has the meaning set forth in Section 4.04. "Subsidiary" of any Person means any corporation, partnership, joint venture, association or other business entity of which more than 50% of the total voting power of shares of stock or other interests therein entitled to vote in the election of members of the board of directors, partnership committee, board of managers or trustees or other managerial body thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or a combination thereof. Unless otherwise specified, "Subsidiary" means a Subsidiary of WLR and "Subsidiaries" means all Subsidiaries of WLR. "Warrant Agency" has the meaning set forth in section 2.01. "Warrant Shares" means the shares of Common Stock issuable upon the exercise of the Warrants. "Warrantholder" means a holder of a Warrant. "Warrantholders Rights Agreement" has the meaning set forth in Section 3.01. "Warrants" has the meaning set forth in the second paragraph of this Warrant. "WLR" has the meaning set forth in the first paragraph of this Warrant. "WLR Determination" has the meaning set forth in Section 3.02(a). All references herein to "days" shall mean calendar days unless otherwise specified. ARTICLE 7 MISCELLANEOUS SECTION 7.01. Notices. (a) Method of Communication. Except as otherwise provided in this Warrant, all notices and communications hereunder shall be in writing, or by telephone subsequently confirmed in writing. Any 12 notice shall be effective if delivered by hand delivery or sent via telecopy, recognized overnight courier service or certified mail, return receipt requested, and shall be presumed to be received by a party hereto (i) on the date of delivery if delivered by hand or sent by telecopy, (ii) on the next Business Day if sent by recognized overnight courier service and (iii) on the third Business Day following the date sent by certified mail, return receipt requested. (b) Addresses for Notices. Notices to any party shall be sent to it at the following addresses, or any other address as to which all the other parties are notified in writing. If to WLR: WLR Foods, Inc. 800 Co-op Drive Timberville, Virginia 22853 Attention: Robert Ritter, CFO Telephone No.: (540) 896-7001 Telecopy No.: (540) 896-0498 Or, if sent by mail: WLR Foods, Inc. P.O. Box 7000 Broadway, Virginia 22815 Attention: Robert Ritter, CFO If to the Holder: (FIELD)Address SECTION 7.02. Expenses. WLR will pay all out-of-pocket expenses of the Holder in connection with: (i) the preparation, execution and delivery of this Warrant, including all out-of-pocket due diligence expenses, taxes and reasonable fees and disbursements of counsel for the Holder; and (ii) the preparation, execution and delivery of any waiver, amendment or consent by the Holder relating to this Warrant, including reasonable fees and disbursements of counsel for the Holder and taxes imposed in connection therewith. SECTION 7.03. Governing Law. This Warrant shall be governed by, construed and enforced in accordance with the laws of the State of New York, without reference to the conflicts or choice of law principles thereof. SECTION 7.04. Consent to Jurisdiction. WLR hereby irrevocably consents to the personal jurisdiction of the United States District Court for the Southern District of New York and the Supreme Court of the State of New York, County of New York in any action, claim or other proceeding arising out of any dispute in connection with this Warrant, any rights or obligations hereunder, or the performance of such rights and obligations. WLR hereby irrevocably consents to the service of a summons and complaint and other process in any action, claim or proceeding brought by the Holder in connection with this Warrant, any rights or obligations hereunder, or the performance of such rights and obligations, on behalf of itself or its property, in the manner specified in Section 7.01. Nothing in this Section 7.04 shall affect the right of Holder to serve legal process in any other manner permitted by Applicable Law (as defined in the Credit Agreement) or affect the right of the Holder to bring any action or proceeding against WLR or its properties in the courts of any other jurisdictions. SECTION 7.05. Waiver of Jury Trial; Waiver of Punitive Damages. (a) WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE HOLDER AND WLR HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF, OR ANY DISPUTE IN CONNECTION WITH, THIS WARRANT, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. 13 (b) Waiver of Punitive Damages. The Holder and WLR agree that they shall not have a remedy of punitive or exemplary damages against the other in any Dispute and hereby waive any right or claim to punitive or exemplary damages they have now or which may arise in the future in connection with any Dispute whether the Dispute is resolved by arbitration or judicially. SECTION 7.06. Injunctive Relief. WLR recognizes that, in the event WLR fails to perform, observe or discharge any of its obligations or liabilities under this Warrant, any remedy of law may prove to be inadequate relief to the Holder. Therefore, WLR agrees that the Holder, at the Holder's option, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages. SECTION 7.07 Successors and Assigns. This Warrant shall be binding upon and inure to the benefit of WLR and the Holder, and their respective successors and assigns, except that WLR shall not assign or transfer any of its rights or obligations under this Warrant without the prior written consent of the Holder. SECTION 7.08. Amendments, Waivers and Consents; Renewal. Any term, covenant, agreement or condition of this Warrant may be amended or waived by the Holder, and any consent given by the Holder, if, but only if, such amendment, waiver or consent is in writing signed by the Holder and, in the case of an amendment, signed by WLR. SECTION 7.09. Performance of Duties. WLR's obligations under this Warrant shall be performed by WLR at its sole cost and expense, except as otherwise expressly provided herein. SECTION 7.10. Indemnification. WLR agrees to reimburse the Holder for all reasonable costs and expenses, including all counsel or other expert or consultant fees and disbursements incurred, and to indemnify and hold the Holder harmless from and against all losses suffered by the Holder in connection with (i) the exercise by the Holder of any right or remedy granted to it under this Warrant and (ii) any claim, and the prosecution or defense thereof, arising out of or in any way connected with this Warrant; provided that WLR shall not be obligated to reimburse the Holder for costs and expenses, or indemnify the Holder for any loss, resulting from the gross negligence or willful misconduct of the Holder. SECTION 7.11. Survival of Indemnities. Notwithstanding any exercise or expiration of this Warrant, the indemnities to which the Holder is entitled under the provisions of this Article 7 and any other provision of this Warrant shall continue in full force and effect and shall protect the Holder against events arising after such termination as well as before. SECTION 7.12. Titles and Captions. Titles and captions of Articles, Sections and subsections in this Warrant are for convenience only, and neither limit nor amplify the provisions of this Warrant. SECTION 7.13. Severability of Provisions. Any provision of this Warrant which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remainder of such provision or the remaining provisions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction. 14 IN WITNESS WHEREOF, WLR has caused this Warrant to be executed by its duly authorized officers, all as of the day and year first written above. WLR FOODS, INC. By:____________ Name:__________ Title:_________ [CORPORATE SEAL] Attest:__________ Name:____________ Title:___________ 15 EX-2.7 8 SECURITY AGREEMENT Exhibit 2.7 SECURITY AGREEMENT THIS SECURITY AGREEMENT (as amended, restated, modified or otherwise supplemented, the "Agreement"), dated as of February 25, 1998, is made and entered into by and among WLR FOODS, INC., CASSCO ICE & COLD STORAGE, INC., WAMPLER FOODS, INC., WAMPLER SUPPLY COMPANY, INC. AND VALLEY RAIL SERVICE, INC. (collectively, the "Grantors;" individually, a "Grantor"), and FIRST UNION NATIONAL BANK, successor to First Union National Bank of Virginia, a national banking association, as Collateral Agent (the "Collateral Agent"), for the ratable benefit of itself and the financial institutions (collectively, the "Secured Parties") as are, or may from time to time become, parties to one or more of the Credit Agreements and the Intercreditor Agreement (as defined below). BACKGROUND STATEMENT A. Pursuant to the terms of the Revolving Credit Agreement and the Term Loan Agreement each dated as of February 25, 1998 (as amended, restated, modified or otherwise supplemented, the "Bank Credit Agreements"), by and among the Grantors, the Bank Lenders, and and the Collateral Agent, the Bank Lenders have agreed to extend and/or restructure certain loans to the Grantors as more particularly described therein. B. Pursuant to the terms of a Note Purchase Agreement dated as of February 25, 1998 (as amended, restated, modified or otherwise supplemented, the "Note Agreement," and, together with the Bank Credit Agreements, the "Credit Agreements") by and among WLR, as borrower, and the remaining Grantors, as guarantors, the Note Lenders (as defined in the Intercreditor Agreement) have agreed to extend and/or restructure certain credit accommodations to the Grantors as more particularly described therein. C. As of the date hereof, the Secured Parties and the Grantors have entered into that certain Collateral Agency and Intercreditor Agreement (the "Intercreditor Agreement") to, among other things, set forth the relative rights of the Secured Parties with respect to the Collateral. D. The Grantors comprise one integrated financial enterprise, and any loans made to any of them individually will inure, directly or indirectly, to the benefit of all of them. E. To induce the Secured Parties and the Collateral Agent to provide and to continue to provide financial accommodations under the Credit Agreements, and as a condition to the making of future loans thereunder, the Secured Parties require that the Grantors each grant a continuing security interest in and to the "Collateral" (as 1 hereinafter defined) to secure the "Secured Obligations" (as hereinafter defined). NOW, THEREFORE, in consideration of the foregoing Background Statement, and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Definitions. Terms defined in the Intercreditor Agreement or the Credit Agreements and not otherwise defined herein, when used in this Agreement including its preamble and recitals, shall have the respective meanings provided for in the Intercreditor Agreement or if not defined in the Intercreditor Agreement, the Credit Agreements. The following additional terms, when used in this Agreement, shall have the following meanings: "Account Debtor" means any Person who is or may become obligated to any Grantor under, with respect to, or on account of, an Account. "Accounts" means all "accounts" (as defined in the UCC) now or hereafter owned or acquired by any Grantor or in which any Grantor now or hereafter has or acquires any right or interest, and, in any event, shall also include, without limitation, all accounts receivable, contract rights, notes, drafts and other obligations or indebtedness owing to any Grantor arising from the sale or lease of goods or other property by it or the performance of services by it, or to be performed, and all of any Grantor's rights to any goods, services or other property represented by any of the foregoing and all monies due to or to become due to any Grantor under all contracts for the sale, lease, consignment or exchange of goods or other property or the performance of services by it (whether or not yet earned by performance on the part of such Grantor), in each case whether now in existence or hereafter arising or acquired, including, without limitation, the right to receive the proceeds of such contracts and all collateral security and guarantees of any kind given by any Person with respect to any of the foregoing. "Affiliate" means any direct and indirect affiliates and subsidiaries of the Collateral Agent or any of the Secured Parties. "Approved Contract Growers" shall have the meaning ascribed in the Credit Agreements. "Collateral" means the collective reference to: (a) Accounts; (b) Inventory; 2 (c) Documents; (d) Equipment; (e) Farm Products; (f) Fixtures; (g) Instruments; (h) Intellectual Property; (i) General Intangibles; (j) Vehicles; (k) Rights Against Growers; (l) Monies and property of any kind of any Grantor in the possession or under the control of the Collateral Agent or any Secured Party; (m) All books and records (including, without limitation, customer lists, credit files, computer programs, printouts and other computer materials and records) of any Grantor pertaining to any of the Collateral; (n) Investment Property; (o) All other goods and personal property of any Grantor, whether tangible or intangible; and (p) All products and Proceeds of all or any of the Collateral described in clauses (a) through (o) hereof. "Documents" means all "documents" (as defined in the UCC) or other receipts covering, evidencing or representing goods or services, now or hereafter owned or acquired by any Grantor or in which any Grantor now or hereafter has or acquires any right or interest. "Equipment" means all "equipment" (as defined in the UCC) of any Grantor, wherever located, and all other machinery, equipment and goods (other than Inventory) of any Grantor used or bought for use primarily in the business of such Grantor, including all accessions, additions, attachments, improvements, substitutions and replacements thereto and therefor, in all such cases whether now owned or hereafter acquired by any Grantor or in which any Grantor now has or hereafter acquires any right or interest. 3 "Event of Default" shall have the meaning set forth in the Intercreditor Agreement. "Farm Products" shall mean all crops or seed of any Grantor now or hereafter growing or grown and all other personal property of any Grantor used or for use in farming or related business operations including, without limitation, native grass, grain, fertilizer, hay, silage, livestock (including, without limitation, any and all turkeys, chickens, and other poultry or farm animals as well as the offspring of the same), and supplies now or hereafter owned by any Grantor or now or hereafter purchased by or for the benefit of any Grantor. Farm Products shall also include, but shall not be limited to, all now owned or hereafter acquired feed additives, feed supplements, veterinary supplies, and related products of any Grantor whether purchased by or for the benefit of such Grantor, and any other "farm products" as defined in the UCC. "Financing Statements" means the Uniform Commercial Code Form UCC-1 Financing Statements executed by each Grantor with respect to the Collateral and to be filed in the jurisdictions set forth in the Perfection Certificate or otherwise in the discretion of the Collateral Agent. "Fixtures" means all "fixtures" (as defined in the UCC) of any Grantor, whether now owned or hereafter acquired, or in which any Grantor now has or hereafter acquires any right or interest. "General Intangibles" means all "general intangibles" (as defined in the UCC) now or hereafter owned or acquired by any Grantor or in which any Grantor now or hereafter has or acquires any right or interest, and, in any event, shall mean and include, without limitation, all rights to indemnification, and all rights, title and interest which any Grantor may now or hereafter have in or under all contracts (excluding contracts described in the definition of Accounts), agreements, permits, licenses (which contracts, agreements, permits and licenses may be pledged pursuant to the terms thereof and Applicable Law), causes of action, franchises, tax refund claims, insurance policies, customer lists, Intellectual Property, license royalties, goodwill trade secrets, data bases, business records and all other intangible property of every kind and nature. "Instruments" means all "instruments," "chattel paper," or "letters of credit" (each as defined in the UCC), including, without limitation, instruments, chattel paper and letters of credit evidencing, representing, arising from or existing in respect of, relating to, securing or otherwise supporting the payment of, any of the Accounts, including (but not limited to) promissory notes, drafts, bills of exchange and trade acceptances, now or hereafter owned or 4 acquired by any Grantor or in which any Grantor now or hereafter has or acquires any right or interest. "Intellectual Property" means, collectively, (a) all systems software and applications software, including, but not limited to, screen displays and formats, program structures, sequence and organization, all documentation for such software, including, but not limited to, user manuals, flowcharts, programmer's notes, functional specifications, and operations manuals, all formulas, processes, ideas and know-how embodied in any of the foregoing, and all program materials, flowcharts, notes and outlines created in connection with any of the foregoing, whether or not patentable or copyrightable, (b) concepts, discoveries, improvements and ideas, (c) any useful information relating to the items described in clause (a) or (b), including know-how, technology, engineering drawings, reports, design information, trade secrets, practices, laboratory notebooks, specifications, test procedures, maintenance manuals, research, development, manufacturing, marketing, merchandising, selling, purchasing and accounting, (d) trademark applications, trademarks (whether registered, unregistered or for which any application to register has been filed), service mark applications, service marks (whether registered, unregistered or for which any application to register has been filed) and trade names, including, without limitation, all renewals thereof and all proceeds thereof (such as, by way of example, license royalties and proceeds of infringement suits), the right to sue for past, present and future infringements, all rights owned by any Grantor corresponding thereto throughout the world (all of the foregoing are collectively called the "Marks"), together with the goodwill of the business symbolized by each of the Marks and the registrations (if any) thereof and (e) all licenses to use any of the items described in the foregoing clauses (a), (b), (c) and (d) or any other similar items of any Grantor necessary for the conduct of its business. "Inventory" means all "inventory" (as defined in the UCC) now or hereafter owned or acquired by any Grantor or in which any Grantor now or hereafter has or acquires any right or interest, wherever located and, in any event, shall mean and include, without limitation, all raw materials, inventory and other materials and supplies, work-in- process, finished goods, all accessions thereto, documents therefor and any products made or processed therefrom, all substances, if any, commingled therewith or added thereto (including, without limitation, any of the foregoing in which the Grantor has an interest as a consignor). "Investment Property" means all "Investment Property" (as defined in the UCC) now or hereafter owned or acquired by any Grantor or in which any Grantor now or hereafter has or acquires any right or 5 interest, wherever located and, in any event, shall mean and include, any and all of the following: (a) securities, whether certificated or uncertificated; (b) security entitlements; (c) securities accounts; (d) commodity contracts; and (e) commodity accounts. "Perfection Certificate" means a certificate dated as of even date herewith and attached hereto as Exhibit "A", setting forth the corporate names, chief executive office or principal place of business in each state and other current locations of Collateral of each Grantor and such other information as the Collateral Agent deems pertinent to the perfection of security interests, completed and supplemented with the schedules and attachments contemplated thereby to the satisfaction of the Collateral Agent, and duly certified by the chief executive or chief financial officer of each Grantor so authorized to act. "Permitted Liens" shall have the meaning ascribed in the Credit Agreements. "Proceeds" means all proceeds of, and all other profits, rentals or receipts, in whatever form, arising from the collection, sale, lease, exchange, assignment, licensing or other disposition of, or realization upon, the Collateral, including, without limitation, all claims of any Grantor against third parties for loss of, damage to or destruction of, or for proceeds payable under, or unearned premiums with respect to, policies of insurance in respect of, any Collateral, and any condemnation or requisition payments with respect to any Collateral and all Collateral acquired with the cash proceeds of any other Collateral. "Rights Against Growers" means all claims and rights of the Grantor, whether now existing or hereafter arising, under any contract or agreement with any other person, firm, corporation or other entity providing for the care and maintenance of any live poultry (including chickens and/or turkeys), other livestock and eggs now or at any time hereafter owned by the Grantor, and all claims or rights now existing or hereafter arising, against other persons, firms, corporations or other entities in connection with the care, custody and maintenance of any live poultry (including chickens and/or turkeys), other livestock 6 and eggs now owned or hereafter acquired by the Grantor, whether such rights and claims are based upon contract, tort or otherwise. "Schedule of Inventory" means a schedule of Inventory based upon each Grantor's most recent physical inventory and its perpetual inventory records, showing each Grantor's cost of all such Inventory with a monthly reconciliation to the general ledger inventory account of each Grantor, as may be requested by the Collateral Agent pursuant to Section 4(c)(i) hereof. "Schedule of Vehicles" means a schedule of Vehicles as may be requested by the Collateral Agent pursuant to Section 4(e) hereof. "Secured Obligations" means the "Secured Obligations" as defined under the Intercreditor Agreement and any renewals or extensions of any of the Secured Obligations. "Security Interests" means the security interests granted pursuant to Section 2, as well as all other security interests created or assigned as additional security for the Secured Obligations pursuant to the provisions of this Agreement. "Transaction Documents" shall have the meaning set forth in the Intercreditor Agreement. "UCC" means the Uniform Commercial Code as in effect in the State of New York; provided, that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the Security Interests in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York. "UCC" means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection. "Vehicles" means all cars, trucks, trailers, construction and earth moving equipment of any Grantor and other vehicles covered by a certificate of title law of any state, and all tires, accessions, additions, attachments, substitutions, replacements and other appurtenances to any of the foregoing. SECTION 2. The Security Interests. (a) To secure the payment and performance of all of the Secured Obligations, each Grantor hereby grants to the Collateral Agent, for the ratable benefit of the Collateral Agent and the Secured Parties, a continuing security interest in and to all of such Grantor's estate, right, title and interest in and to all Collateral whether now or hereafter owned or acquired by such Grantor or in which such Grantor 7 now has or hereafter has or acquires any rights, and wherever located, and in all cases, to the extent that the grant of a security interest therein is permitted pursuant to Applicable Law. (b) The Security Interests are granted as security only and shall not subject the Collateral Agent or any Secured Party to, or transfer to the Collateral Agent or any Secured Party, or in any way affect or modify, any obligation or liability of any Grantor with respect to any of the Collateral or any transaction in connection therewith. SECTION 3. Representations and Warranties. Each Grantor represents and warrants as follows: (a) Such Grantor has the corporate power and authority and the legal right to execute and deliver, to perform its obligations under, and to grant the Security Interests in the Collateral pursuant to, this Agreement and has taken all necessary corporate action to authorize its execution, delivery and performance of, and grant of the Security Interests in the Collateral pursuant to, this Agreement. (b) This Agreement constitutes a legal, valid and binding obligation of such Grantor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally. (c) The execution, delivery and performance of this Agreement will not violate any provision of any Applicable Law or Material Contract of such Grantor and will not result in the creation or imposition of any Lien on any of the properties or revenues of such Grantor pursuant to any Applicable Law or Material Contract of such Grantor, except as contemplated hereby. (d) No consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any stockholder or creditor of such Grantor), is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement, except for the filing of Financing Statements and, except to the extent applicable to any Collateral, filings with the United States Copyright Office or the United States Patent and Trademark Office, filings with state transportation authorities with respect to liens on Vehicles, and any filing or action in compliance with the Federal Assignment of Claims Act. (e) Except as otherwise disclosed in or permitted under the Credit Agreements, no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the 8 knowledge of such Grantor after due inquiry, threatened by or against such Grantor or against any of its properties or revenues with respect to this Agreement or any of the transactions contemplated hereby. (f) Except for Permitted Liens, such Grantor has good and marketable title to all of its respective Collateral, free and clear of any Liens other than in favor of the Collateral Agent and the Secured Parties as conveyed herein. (g) Such Grantor has not performed or failed to perform any acts that would prevent or hinder the Collateral Agent from enforcing any of the terms of this Agreement. Other than financing statements or other similar or equivalent documents or instruments with respect to Liens in favor of the Collateral Agent or the Secured Parties as provided herein, no financing statement, mortgage, security agreement or similar or equivalent document or instrument covering all or any part of the Collateral of such Grantor is on file or of record in any jurisdiction except as disclosed on the schedule of liens attached hereto as Schedule 3(g). No Collateral of such Grantor is in the possession of any Person (other than such Grantor) asserting any claim thereto or security interest therein, except that the Collateral Agent or its designee may have possession of the Collateral as contemplated hereby and a bailee may have possession of the Collateral as contemplated by, and so long as, the Grantor has complied with Section 4(a)(iv) and 4(a)(v) hereof. (h) All of the information set forth in the Perfection Certificate with respect to such Grantor is true and correct as of the date hereof. (i) Such Grantor has, contemporaneously herewith, delivered to the Collateral Agent possession of all originals of all negotiable instruments, documents and chattel paper constituting Collateral with an aggregate face amount in excess of $2,000,000, on an individual basis currently owned or held by such Grantor, if any (duly endorsed in blank, if requested by the Collateral Agent). (j) With respect to any Inventory of such Grantor: (i) except for ice merchandisers owned by Cassco located in the states listed on schedule 3(j) attached hereto, all Inventory is, and shall be at all times, located at places of business listed in the Perfection Certificate or as to which such Grantor has complied with the provisions of Section 4(a)(i) hereof, except Inventory in transit from one such location to another such location; (ii) except for Permitted Liens, no Inventory is, nor shall at any time or times be, subject to any Lien whatsoever other than in favor of the Collateral Agent and 9 the Secured Parties as conveyed herein; (iii) except to the extent live inventory may be held with one or more Approved Contract Growers, no Inventory in aggregate value exceeding $100,000 at any time is, nor shall at any time or times be, kept, stored or maintained with a bailee, warehouseman, carrier or similar party (other than a carrier delivering Inventory to a purchaser in the ordinary course of such Grantor's business) unless the Collateral Agent shall have received prior written notice of such storage and such Grantor has complied with the provisions of Section 4(a)(iv) hereof; (iv) no Inventory is, nor shall at any time or times be, in transit for more than 90 days; (v) all Inventory (except for Inventory otherwise described in subsection (iii) above) shall at any time or times be delivered to a location owned or leased by any Grantors as set forth in the Perfection Certificate where the Collateral Agent has previously filed Financing Statements against such Grantor; and (vi) no Inventory in aggregate value exceeding $100,000 at any time is, nor shall at any time or times be, kept, stored or maintained with a consignee unless the Collateral Agent shall have received prior written notice of such consignment and such Grantor has complied with the provisions of Section 4(a)(v) hereof. (k) The Financing Statements executed by such Grantor are in appropriate form and when filed in the appropriate filing offices, the Security Interests will constitute valid and perfected security interests in the Collateral of such Grantor, prior to all other Liens (except for Permitted Liens) and rights of others therein (to the extent that a security interest therein may be perfected by filing pursuant to the UCC) and all filings and other actions necessary or desirable to perfect and protect such Security Interests have been duly taken. (l) The Inventory, Fixtures, Equipment and Vehicles of such Grantor are insured in accordance with the requirements of Section 4(a)(vi) hereof and of the Bank Credit Agreements. (m) Wampler Foods, Inc. is the only Grantor which owns Farm Products. SECTION 4. Further Assurances; Covenants. (a) General. (i) Each Grantor agrees not to change the location of its chief executive office or principal place of business in any state unless it shall have given the Collateral Agent thirty (30) days prior written notice thereof, executed and delivered to the Collateral Agent all financing statements and financing statement amendments which the Collateral Agent may request in connection therewith and, if requested by the Collateral Agent, delivered an opinion of counsel with respect 10 thereto in accordance with Section 4(a)(viii) hereof. Each Grantor agrees not to change the locations where it keeps or holds any Collateral or any records relating thereto from the applicable location described in the Perfection Certificate unless such Grantor shall have given the Collateral Agent thirty (30) days prior written notice of such change of location, executed and delivered to the Collateral Agent all financing statements and financing statement amendments which the Collateral Agent may request in connection therewith and, if requested by the Collateral Agent, delivered an opinion of counsel with respect thereto in accordance with Section 4(a)(viii) hereof; provided, however, that such Grantor may keep Inventory at, or in transit to, any location described in the Perfection Certificate. Each Grantor agrees not to, in any event, change the location of any Collateral if such change would cause the Security Interests in such Collateral to lapse or cease to be perfected. (ii) Each Grantor agrees not to change its name, identity or corporate or partnership structure in any manner unless it shall have given the Collateral Agent thirty (30) days prior written notice thereof, executed and delivered to the Collateral Agent all financing statements and financing statement amendments which the Collateral Agent may request in connection therewith and, if requested by the Collateral Agent, delivered an opinion of counsel with respect thereto in accordance with Section 4(a)(viii) hereof. (iii) Each Grantor will, from time to time, at its expense, execute, deliver, file and record any statement, assignment, instrument, document, agreement or other paper and take any other action that from time to time may be necessary, or that the Collateral Agent may reasonably request, in order to create, preserve, upgrade in rank (to the extent required hereby), perfect, confirm or validate the Security Interests or to enable the Collateral Agent and the Secured Parties to obtain the full benefits of this Agreement, or to enable the Collateral Agent to exercise and enforce any of its rights, powers and remedies hereunder with respect to any of the Collateral. Prior to the irrevocable payment in full of the Secured Obligations, each Grantor hereby authorizes the Collateral Agent to execute and file financing statements, financing statement amendments or continuation statements without such Grantor's signature appearing thereon. Each Grantor agrees that a photographic, photostatic or other reproduction of this Agreement or of a financing statement is sufficient as a financing statement. Each Grantor shall pay the costs of, or incidental to, any recording or filing of the Financing Statements and any other financing statements, financing statement amendments or continuation statements concerning the Collateral. 11 (iv) If any Collateral exceeding in value $100,000 in the aggregate is at any time in the possession or control of any warehouseman, bailee, or any Grantor's agents or processors, such Grantor shall notify in writing such warehouseman, bailee, agent or processor of the Security Interests created hereby, shall use its best efforts to obtain such warehouseman's, bailee's, agent's or processor's agreement in writing to hold all such Collateral for the Collateral Agent's account subject to the Collateral Agent's instructions, and shall use its best efforts to cause such warehouseman, bailee, agent or processor to issue and deliver to the Collateral Agent warehouse receipts, bills of lading or any similar documents relating to such Collateral in the Collateral Agent's name and in form and substance reasonably acceptable to the Collateral Agent; provided that this subparagraph shall not apply to live chicken or live turkey Inventory located with Approved Contract Growers. (v) If any Collateral exceeding in value $50,000 in the aggregate is at any time in the possession or control of any consignee (other than another Grantor), such Grantor shall notify in writing such consignee of the Security Interests created hereby, shall use its best efforts to obtain such consignee's agreement in writing to hold all such Collateral for the Collateral Agent's account subject to the Collateral Agent's instructions, and shall use its best efforts to cause such consignee to issue and deliver to the Collateral Agent warehouse receipts, bills of lading or any similar documents relating to such Collateral in the Collateral Agent's name and in form and substance reasonably acceptable to the Collateral Agent. Further, such Grantor shall perfect and protect such Grantor's ownership interests in all Inventory stored with a consignee (other than another Grantor) against creditors of the consignee by filing and maintaining financing statements against the consignee reflecting the consignment arrangement filed in all appropriate filing offices, providing any written notices required to notify any prior creditors of the consignee of the consignment arrangement, and taking such other actions as may be appropriate to perfect and protect the Grantor's interests in such inventory under Section 2-326, Section 9-114 and Section 9-408 of the UCC or otherwise. All such financing statements filed pursuant to this Section 4(a)(v) shall be assigned, on the face thereof, to the Collateral Agent, for the ratable benefit of itself and the Secured Parties. (vi) Each Grantor shall bear the full risk of any loss of any nature whatsoever with respect to its respective Collateral. At such Grantor's own cost and expense in amounts and with carriers reasonably acceptable to the Collateral Agent, each Grantor shall (a) keep all its insurable properties and properties in which such Grantor has an interest insured against the hazards of fire, flood, those 12 hazards covered by extended coverage insurance and such other hazards, and for such amounts, as is customary in the case of companies engaged in businesses similar to such Grantor including, without limitation, business interruption insurance; (b) maintain a bond in such amounts as is customary in the case of companies engaged in businesses similar to such Grantor insuring against larceny, embezzlement or other criminal misappropriation of insured's officers and employees who may either singly or jointly with others at any time have access to the assets or funds of such Grantor either directly or through authority to draw upon such funds or to direct generally the disposition of such assets; (c) maintain public and product liability insurance against claims for personal injury, death or property damage suffered by others; (d) maintain all such worker's compensation or similar insurance as may be required under the laws of any state or jurisdiction in which such Grantor is engaged in business; (e) furnish the Collateral Agent with (i) copies of all policies (or binders) and evidence of the maintenance of such policies by the renewal thereof at least thirty (30) days before any expiration date, and (ii) appropriate loss payable endorsements in form and substance satisfactory to the Collateral Agent, naming the Collateral Agent as a co-insured and loss payee, as applicable, on behalf of itself and the Secured Parties with respect to all insurance coverage referred to in clauses (a) and (b) above, and providing (A) that all proceeds thereunder shall be payable to the Collateral Agent, on behalf of itself and the Secured Parties, (B) no such insurance shall be affected by any act or neglect of the insured or owner of the property described in such policy absent the Collateral Agent receiving sixty (60) days prior written notice of such act or neglect from such Grantor's insurance company, and (C) that such policy and loss payable clauses may not be canceled, amended or terminated unless at least thirty (30) days' prior written notice is sent to the Collateral Agent. In the event of any loss thereunder, the carriers named therein hereby are directed by the Collateral Agent and such Grantor to make payment for such loss under clauses (a) and (b) above to the Collateral Agent, on behalf of itself and the Secured Parties, and not to such Grantor and the Collateral Agent jointly. If any insurance losses are paid by check, draft or other instrument payable to such Grantor and the Collateral Agent jointly, the Collateral Agent may endorse such Grantor's name thereon and do such other things as the Collateral Agent may deem advisable to reduce the same to cash. At any time following the occurrence of an Event of Default, the Collateral Agent is hereby authorized in its good faith discretion to adjust and compromise claims under insurance coverage referred to in clauses (a) and (b). Any insurance proceeds shall be applied first to the payment of all costs and expenses incurred by the Collateral Agent, if any, in obtaining such proceeds. The balance of the proceeds, if any, shall be applied (1) if the Collateral Agent determines in its reasonable judgment that (A) the proceeds together 13 with such other sums as the applicable Grantor shall deposit with the Collateral Agent to pay the costs of restoration, repair or replacement of the applicable Collateral or such portion thereof which may have been altered, damaged or destroyed, are sufficient to pay such costs in full, (B) no Event of Default shall have occurred and be continuing under the Credit Agreements or any of them, (C) following completion of such restoration, repair or replacement, the applicable Collateral will be equal in value and economic viability to its status prior to such casualty, (D) such restoration, repair or replacement can be completed on or prior to the maturity of the Secured Obligations or any portion thereof, and (E) the applicable Grantor will have sufficient income pending the completion of such restoration, repair or replacement to pay all debt service due the Collateral Agent and the Secured Parties with respect to the Secured Obligations, toward restoring, repairing or replacing the applicable Collateral or such portion thereof which may have been altered, damaged or destroyed, on the same or similar conditions and requirements as are customarily required for construction loans made by the Collateral Agent, or (2) otherwise, to the repayment of the Secured Obligations to be applied in the order and manner set forth in section 7 of the Intercreditor Agreement. Notwithstanding anything to the contrary contained in this subparagraph (vi), provided that no Event of Default shall have occurred, the Collateral Agent shall not restrict the Borrower's use of insurance proceeds related to any single loss which, in any individual instance does not exceed $250,000 (the "De Minimis Proceeds"), and such De Minimis Proceeds shall be made available to the Borrower in the same way as other cash collections upon receipt thereof by the Collateral Agent. (vii) Each Grantor will, promptly upon request, provide to the Collateral Agent all information and evidence the Collateral Agent may reasonably request concerning the Collateral, and in particular the Accounts, to enable the Collateral Agent to enforce the provisions of this Agreement. (viii) If requested by the Collateral Agent or the Required Secured Parties, prior to each date on which any Grantor proposes to take any action contemplated by Section 4(a)(i) or Section 4(a)(ii) hereof, such Grantor shall, at its cost and expense, cause to be delivered to the Collateral Agent and the Secured Parties an opinion of counsel, in form and content reasonably satisfactory to the Collateral Agent. (ix) Each Grantor will comply with all Applicable Laws applicable to the Collateral or any part thereof or to the operation of such Grantor's business, except where such non-compliance could not reasonably be expected to have a Material Adverse Effect. 14 (x) Each Grantor will pay promptly when due all taxes, assessments and governmental charges or levies imposed upon the Collateral or in respect of its income or profits therefrom, as well as all claims of any kind (including, without limitation, claims for labor, materials and supplies) against or with respect to the Collateral, except that no such charge need be paid if (A) the validity thereof is being contested in good faith by appropriate proceedings, (B) such proceedings have resulted in the stay or prohibition of the enforcement of any sale, forfeiture or Lien on any of the Collateral or any interest therein and such stay or prohibition is currently in effect and such charge is adequately reserved against on such Grantor's books in accordance with GAAP. (xi) Except as authorized in the Credit Agreements, no Grantor shall: (A) sell, assign (by operation of law or otherwise) or otherwise dispose of any of the Collateral, except in the ordinary course of its business; or (B) create or suffer to exist any Lien or other charge or encumbrance upon or with respect to any of the Collateral to secure indebtedness of any Person or entity. (b) Accounts, Etc. (i) Each Grantor shall use all reasonable efforts to cause to be collected from its Account Debtors, as and when due, any and all amounts owing under or on account of each Account (including, without limitation, Accounts which are delinquent, such Accounts to be collected in accordance with lawful collection procedures) and to apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Account. The costs and expenses (including, without limitation, attorney's fees), of collection of Accounts incurred by such Grantor or, if applicable, the Collateral Agent shall be borne by such Grantor. (ii) Upon the occurrence and during the continuance of any Event of Default, the Collateral Agent may notify (and each Grantor hereby authorizes the Collateral Agent so to notify) each Account Debtor in respect of any Account that such Account has been assigned to the Collateral Agent hereunder and that any payments due or to become due in respect of such Account are to be made directly to the Collateral Agent or its designee. Each Grantor hereby appoints the Collateral Agent as its lawful attorney-in-fact to do, at the Collateral Agent's option and at the Grantor's expense and liability, all acts and things which the Collateral Agent may deem necessary or desirable to effectuate its rights under this Security Agreement, 15 including without limitation, upon the occurrence of an Event of Default, to communicate with Account Debtors and other third parties for the purpose of collecting, protecting, or preserving any Account or any other Collateral and, in the Grantor's or the Collateral Agent's name, to receive and endorse any checks or other items to be presented for payment with respect to any Account. (iii) Each Grantor will perform and comply in all material respects with all of its obligations in respect of Accounts and General Intangibles and the exercise by the Collateral Agent of any of its rights hereunder shall not release any Grantor from any of its duties or obligations. (iv) No Grantor will (A) amend, modify, terminate or waive any material provision of any agreement giving rise to an Account in any manner which could reasonably be expected to materially adversely affect the value of such Account as Collateral, except with respect to such Accounts with any single Account debtor which, in the aggregate, do not exceed $25,000 in any Fiscal Year, (B) fail to exercise promptly and diligently each and every material right which it may have under each agreement giving rise to an Account (other than any right of termination), except with respect to such Accounts with any single Account debtor which, in the aggregate, do not exceed $15,000 in any Fiscal Year, (the Aggregate Amount of the Accounts excepted from Section 4(b)(iv)(A) and (B) shall not exceed $100,000 in any Fiscal Year), or (C) fail to deliver to the Collateral Agent a copy of each material demand, notice or document received by it relating in any way to any agreement giving rise to an Account with a face amount in excess of $100,000. (v) Each Grantor agrees that the Collateral Agent, at any time and from time to time, may confirm orders or verify any and all of such Grantor's Accounts in the Collateral Agent's name, or in any fictitious name used by the Collateral Agent for verifications, or through any public accountants. (vi) At such intervals as the Collateral Agent shall require, the Grantor shall deliver to the Secured Party copies of purchase orders, invoices, contracts, shipping and delivery receipts and any other documents or instrument which evidence or give rise to an Account. (c) Inventory, Etc. (i) At the request of the Collateral Agent, each Grantor shall deliver to the Collateral Agent a Schedule of Inventory. Unless otherwise indicated in writing by such Grantor or as otherwise disclosed in the Credit Agreements, each Schedule of Inventory delivered by any Grantor to the Collateral Agent shall constitute a 16 representation with respect to the Inventory listed thereon or referred to therein that: (A) all such Inventory is located at places of business listed in the Perfection Certificate or as to which the applicable Grantor has complied with the provisions of Section 4(a)(i) hereof or on the premises identified on the then current Schedule of Inventory or is Inventory in transit from one such location to another such location and the period of transit is less than 10 days; (B) no such Inventory is subject to any Lien whatsoever other than in favor of the Collateral Agent and the Secured Parties as conveyed herein; (C) except for Inventory located with Approved Contract Growers, no such Inventory in aggregate value exceeding $50,000 at any time is, nor shall at any time or times be, kept, stored or maintained with a bailee, warehouseman, carrier or similar party (other than a carrier delivering Inventory to a purchaser in the ordinary course of such Grantor's business) unless the Required Secured Parties have given their prior written consent and such Grantor has complied with the provisions of Section 4(a)(iv) hereof. (ii) If at any time during the term of this Agreement, any Inventory is placed by any Grantor on consignment with any consignee, such Grantor shall, prior to the delivery of any such consigned Inventory: (A) provide the Collateral Agent with all consignment agreements and other instruments and documentation to be used in connection with such consignment, all of which agreements, instruments and documentation shall be reasonably acceptable in form and substance to the Collateral Agent; (B) prepare, execute and file appropriate financing statements with respect to any consigned Inventory showing the consignee as debtor, the Grantor as secured party and the Collateral Agent as assignee of secured party; (C) prepare, execute and file appropriate financing statements with respect to any consigned Inventory showing the Grantor as debtor and the Collateral Agent as secured party; (D) after all financing statements referred to in clauses (B) and (C) above shall have been filed, conduct a search of all filings made against the consignee in all jurisdictions in which the Inventory to be consigned is to be located while on consignment, and deliver to the Collateral Agent copies of the results of all such searches; (E) notify, in writing, all creditors of the consignee which would be holders of security interests in the Inventory to be consigned that the Grantor expects to deliver certain Inventory to the consignee, all of which Inventory shall be described in such notice by item or type, and (F) if requested by the Collateral Agent, deliver an opinion of counsel to the effect that all financing statements and amendments or supplements thereto, continuation statements and other documents required to be recorded or filed in order to perfect and protect the Security Interests and priority thereof against all creditors of and purchasers of the Grantor and such consignee have been filed in each filing office necessary or 17 desirable for such purposes and that all filing fees and taxes, if any, payable in connection with such filings have been paid in full. (d) Equipment, Etc. Except as otherwise provided in the Credit Agreements, each Grantor will maintain each item of Equipment in the same condition, repair and working order as when acquired, ordinary wear and tear and immaterial impairments of value and damage by the elements excepted, and will as quickly as practicable provide all maintenance, service and repairs necessary for such purpose and will promptly furnish to the Collateral Agent a statement respecting any material loss or damage to any of the Equipment, to the extent such loss or damage constitutes a Material Adverse Change (as defined in the Credit Agreements) in the Borrower, taken as a whole. (e) Vehicles. As of the Closing Date, each Grantor shall deliver to the Collateral Agent with a copy for each Secured Party a Schedule of Vehicles together with the original certificate of title for each Vehicle. Each Grantor will maintain each Vehicle in good operating condition ordinary wear and tear excepted, and will provide all maintenance, service and repairs necessary for such purpose. As of the Closing Date, all applications for certificates of title or ownership indicating the Collateral Agent's first priority Lien on the Vehicle covered by such certificate, and any other necessary documentation, shall be filed in each office in each jurisdiction where necessary to perfect the Collateral Agent's Liens on the Vehicles. Each certificate of title or ownership relating to each Vehicle shall be maintained by the applicable Grantor in accordance with Applicable Law to reflect the ownership interest of such Grantor. (f) Farm Products. Except as promptly disclosed to the Collateral Agent from time to time in writing, the Grantors shall maintain all Farm Products in good and merchantable quality, free from any diseases and other defects which would render such Farm Products unmerchantable. The Grantors will keep correct and accurate records itemizing and describing the kind, type, quality, quantity, and location of Farm Products, the Grantor's cost therefor, the selling price thereof, daily withdrawals therefrom, and additions thereto. (g) Indemnification. Each Grantor agrees to pay, and to save the Collateral Agent and the Secured Parties, harmless from, any and all liabilities, costs and expenses (including, without limitation, legal fees and expenses) (i) with respect to, or resulting from any and all excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral, (ii) with respect to, or resulting from, complying with any Applicable Law applicable to any of the Collateral or (iii) in connection with any of 18 the transactions contemplated by this Agreement (except to the extent any such liabilities, costs and expenses result from the gross negligence or willful misconduct of the Collateral Agent or Secured Parties). In any suit, proceeding or action brought by the Collateral Agent under any Account for any sum owing thereunder, or to enforce any provisions of any Account, each Grantor will save, indemnify and keep the Collateral Agent and the Secured Parties harmless from and against all expense, loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction or liability whatsoever of the Account Debtor or any other obligor thereunder, arising out of a breach by such Grantor of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such Account Debtor or obligor or its successors from such Grantor (except to the extent any such expense, loss or damage results from the gross negligence or willful misconduct of the Collateral Agent or Secured Parties). The obligations of each Grantor under this Section 4(g) shall survive the termination of the other provisions of this Agreement. (h) Grower Inventory. To the extent that the Grantor maintains Inventory with any Approved Contract Grower, grower, or any other Person pursuant to a grower contract or otherwise, the Grantor will take all steps necessary to preserve and maintain the security interests of the Secured Parties in such Inventory, and to preserve and maintain the ownership interest of the Grantor in such Inventory. SECTION 5. Reporting and Record Keeping. Each Grantor respectively covenants and agrees with the Collateral Agent and the Secured Parties that from and after the date of this Agreement and until all Secured Obligations have been fully satisfied: (a) Maintenance of Records Generally. Such Grantor will keep and maintain at its own cost and expense complete and accurate records of the Collateral, including, without limitation, record of all payments received and all credits granted with respect to the Collateral and all other dealings with the Collateral. All chattel paper given to such Grantor with respect to any Accounts will be marked with the following legend: "This writing and the obligations evidenced or secured hereby are subject to the security interest of First Union National Bank, as Collateral Agent." (b) Further Identification of Collateral. Such Grantor will, if so requested by the Collateral Agent, furnish to the Collateral Agent statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Agent may reasonably request, all in reasonable detail. 19 (c) Notices. Such Grantor will advise the Collateral Agent promptly, in reasonable detail, (i) of any Lien or claim made or asserted against any material portion of the Collateral, (ii) of any material adverse change in the composition of the Collateral, and (iii) of the occurrence of any other event which could reasonably be expected to have a material adverse effect on the Collateral or on the validity, perfection or priority of the Security Interests. SECTION 6. General Authority. (a) Each Grantor hereby irrevocably appoints the Collateral Agent its true and lawful attorney, with full power of substitution, in the name of such Grantor, the Collateral Agent, the Secured Parties or otherwise, for the sole use and benefit of the Collateral Agent and the Secured Parties, but at such Grantor's expense, to exercise, at any time from time to time all or any of the following powers: (i) to file the Financing Statements and any financing statements, financing statement amendments and continuation statements necessary, appropriate or convenient to maintain the rights and benefits of the Collateral Agent and/or the Secured Parties under this Agreement and/or the Credit Agreements including, without limitation, the benefits of Sections 4(a)(i), 4(a)(ii) and 4(a)(iii) of this Agreement, (ii) at any time following the occurrence of an Event of Default, to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due with respect to any Collateral or by virtue thereof, (iii) at any time following the occurrence of an Event of Default, to settle, compromise, compound, prosecute or defend any action or proceeding with respect to any Collateral, (iv) at any time following the occurrence of an Event of Default, to sell, transfer, assign or otherwise deal in or with the Collateral and the Proceeds thereof, as fully and effectually as if the Collateral Agent were the absolute owner thereof, and (v) at any time following the occurrence of an Event of Default, to extend the time of payment and to make any allowance and other adjustments with reference to the Collateral. (b) Each Grantor hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable. 20 (c) Each Grantor also authorizes the Collateral Agent at any time and from time to time, to execute, in connection with the sale provided for in Section 7 hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral. SECTION 7. Remedies Upon Event of Default. If any Event of Default has occurred and is continuing, the Collateral Agent may exercise on behalf of itself and the Secured Parties all rights of a secured party under the UCC (whether or not in effect in the jurisdiction where such rights are exercised) and, in addition, without limitation, the Collateral Agent may exercise the following rights and remedies, which rights and remedies are cumulative and are in addition to any rights and remedies available to the Collateral Agent under the Credit Agreements or any other Transaction Document. (a) The Collateral Agent may sell the Collateral or any part thereof at public or private sale, for cash, upon credit or for future delivery, and at such price or prices as the Collateral Agent may deem satisfactory. The Collateral Agent or any Secured Party may be the purchaser of any or all of the Collateral so sold at any public sale (or, if the Collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations or if otherwise permitted under applicable law, at any private sale) and thereafter hold the same, absolutely, free from any right or claim of whatsoever kind. Each Grantor will execute and deliver such documents and take such other action as the Collateral Agent deems reasonably necessary or advisable in order that any such sale may be made in compliance with law. Upon any such sale the Collateral Agent shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral so sold (without warranty). Each purchaser at any such sale shall hold the Collateral so sold to it absolutely, free from any claim or right of whatsoever kind, including any equity or right of redemption of any Grantor. To the extent permitted by law, each Grantor hereby specifically waives all rights of redemption, stay or appraisal which it has or may have under any law now existing or hereafter adopted. The notice of such sale shall be given to the applicable Grantor ten (10) Business Days prior to such sale (or one (1) day notice by telephone with respect to Collateral that is perishable or threatens to decline rapidly in value and for Collateral which is marketable securities) and (A) in case of a public sale, state the time and place fixed for such sale, and (B) in the case of a private sale, state the day after which sale may be consummated. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the 21 Collateral Agent may fix in the notice of such sale. At any such sale the Collateral may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may determine. The Collateral Agent shall not be obligated to make any such sale pursuant to any such notice. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the sale to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned. In case of any sale of all or any part of the Collateral on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the selling price is paid by the purchaser thereof, but the Collateral Agent shall not incur any liability in case of the failure of such purchaser to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may again be sold upon like notice. The Collateral Agent, instead of exercising the power of sale herein conferred upon it, may proceed by a suit or suits at law or in equity to foreclose the Security Interests and sell the Collateral, or any portion thereof, under a judgment or decree of a court or courts of competent jurisdiction. The Grantors shall, under all circumstances, remain liable for any deficiency. (b) The Collateral Agent may, without notice to any of the Grantors, and is specifically authorized hereby to set off against and apply to the then unpaid balance of the Secured Obligations any items or funds of any of the Grantors held by the Collateral Agent, any of the Secured Parties or any Affiliate, any and all deposits (whether general or special, time or demand, matured or unmatured) or any other property of any Grantor, including, without limitation, securities and/or certificates of deposit, now or hereafter maintained by any Grantor for its or their own account with the Collateral Agent, any of the Secured Parties or any Affiliate, and any other indebtedness at any time held or owing by the Collateral Agent, any of the Secured Parties or any Affiliate to or for the credit or the account of any Grantor, even if effecting such setoff results in a loss or reduction of interest or the imposition of a penalty applicable to the early withdrawal of time deposits. For such purpose, the Collateral Agent shall have, and each of the Grantors hereby grants to the Collateral Agent, for the ratable benefit of itself and the Secured Parties, a first lien on and continuing security interest in such deposits, property, funds, and accounts, and the proceeds thereof. Each of the Grantors further authorizes any Affiliate, upon and following the occurrence of an Event of Default, at the request of the Collateral Agent, and without notice to the Grantors, to turn over to the Collateral Agent any property of any of the Grantors, including, without limitation, funds and securities held by the Affiliate for the account of any of the Grantors, and to debit any deposit account maintained by any of the Grantors with such Affiliate (even if such 22 deposit account is not then due or there results a loss or reduction of interest or the imposition of a penalty in accordance with law applicable to the early withdrawal of time deposits), in the amount requested by the Collateral Agent up to the amount of the Secured Obligations, and to pay or transfer such amount or property to the Collateral Agent for application to the Secured Obligations. (c) The Collateral Agent may retain the Collateral in full or partial satisfaction of the Secured Obligations, as permitted by applicable law. (d) For the purpose of enforcing any and all rights and remedies under this Agreement, the Collateral Agent may (i) require each Grantor to, and each Grantor agrees that it will, at its expense and upon the request of the Collateral Agent, forthwith assemble all or any part of the Collateral as directed by the Collateral Agent and make it available at a place designated by the Collateral Agent which is, in the Collateral Agent's opinion, reasonably convenient to the Collateral Agent and such Grantor, whether at the premises of such Grantor or otherwise, (ii) to the extent permitted by applicable law, enter, with or without process of law and without breach of the peace, any premises where any of the Collateral is or may be located and, without charge or liability to the Collateral Agent, seize and remove such Collateral from such premises, (iii) have access to and use such Grantor's books and records relating to the Collateral and (iv) prior to the disposition of the Collateral, store or transfer such Collateral without charge in or by means of any storage or transportation facility owned or leased by such Grantor, process, repair or recondition such Collateral or otherwise prepare it for disposition in any manner and to the extent the Collateral Agent deems appropriate and, in connection with such preparation and disposition, use without charge any trade name or technical process used by such Grantor. SECTION 8. Limitation on Duty of Collateral Agent in Respect of Collateral. Beyond reasonable care in the custody thereof, the Collateral Agent shall have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto. The Collateral Agent shall be deemed to have exercised reasonable care in the custody of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Collateral Agent accords its own property, and the Collateral Agent shall not be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of the act or omission of any warehouseman, carrier, forwarding agency, consignee or other agent or bailee selected by the Collateral Agent in good faith. 23 SECTION 9. Application of Proceeds. Upon the occurrence and during the continuance of an Event of Default, the proceeds of any sale of, or other realization upon, all or any part of the Collateral shall be applied by the Collateral Agent in accordance with the Intercreditor Agreement. SECTION 10. Expenses. In the event that any Grantor fails to comply with the provisions of the this Agreement or any other Transaction Document, such that the value of any Collateral or the validity, perfection, rank or value of the Security Interests are thereby diminished or potentially diminished or put at risk, the Collateral Agent may, but shall not be required to, upon reasonable prior notice to such Grantor, effect such compliance on behalf of such Grantor, and such Grantor shall reimburse the Collateral Agent for the costs thereof on demand. All insurance expenses and all reasonable expenses of protecting, storing, warehousing, insuring, handling, maintaining and shipping the Collateral, any and all excise, stamp, intangibles, transfer, property, sales, and use taxes imposed by any state, federal, or local authority or any other Governmental Authority on any of the Collateral, or in respect of the sale or other disposition thereof, shall be borne and paid by the Grantors; and if any Grantor fails promptly to pay any portion thereof when due, the Collateral Agent or any Secured Party may, at its option, but shall not be required to, pay the same and charge such Grantor's account therefor, and such Grantor agrees to reimburse, the Collateral Agent or such Secured Party therefor on demand. All sums so paid or incurred by the Collateral Agent or any Secured Party for any of the foregoing and any and all other sums for which any Grantor may become liable hereunder and all costs and expenses (including reasonable attorneys' fees, legal expenses and court costs) incurred by the Collateral Agent or any Secured Party in enforcing or protecting the Security Interests or any of their rights or remedies thereon shall be payable by the Grantors on demand and shall bear interest (after as well as before judgment) until paid at the rate then applicable to Base Rate Loans under the Bank Credit Agreements or the applicable interest rate under the Note Agreement, as the case may be, and shall be additional Secured Obligations hereunder. SECTION 11. Concerning the Collateral Agent. The provisions of Article XII of each of the Bank Credit Agreements shall inure to the benefit of the Collateral Agent in respect of this Agreement and shall be binding upon the parties to the Bank Credit Agreements in such respect. In furtherance and not in derogation of the rights, privileges and immunities of the Collateral Agent therein set forth: (a) The Collateral Agent is authorized to take all such action as is provided to be taken by it as Collateral Agent hereunder and all other action incidental thereto. As to any matters not expressly 24 provided for herein, the Collateral Agent may request instructions from the Secured Parties and shall act or refrain from acting in accordance with written instructions from the Required Secured Parties (or, when expressly required by this Agreement or the Intercreditor Agreement, all the Secured Parties) or, in the absence of such instructions, in accordance with its discretion. (b) The Collateral Agent shall not be responsible for the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority or enforceability of the Security Interests, whether impaired by operation of law or by reason of any action or omission to act on its part (other than any such action or inaction constituting gross negligence or willful misconduct). The Collateral Agent shall have no duty to ascertain or inquire as to the performance or observance of any of the terms of this Agreement by any Grantor. SECTION 12. Appointment of Collateral Agents. At any time or times, in order to comply with any legal requirement in any jurisdiction or in order to effectuate any provision of the Transaction Documents, the Collateral Agent may appoint another bank or trust company or one or more other Persons, either to act as collateral agent or agents, jointly with the Collateral Agent or separately, on behalf of the Collateral Agent and the Secured Parties with such power and authority as may be necessary for the effectual operation of the provisions hereof and specified in the instrument of appointment (which may, in the discretion of the Collateral Agent, include provisions for the protection of such collateral agent similar to the provisions of Section 11 hereof). SECTION 13. Notices. All notices, communications and distributions hereunder shall be given or made in accordance with the Intercreditor Agreement. SECTION 14. Waivers, Non-Exclusive Remedies. No failure on the part of the Collateral Agent or any Secured Party to exercise, and no delay in exercising and no course of dealing with respect to any right under the Credit Agreements, this Agreement or any other Transaction Document shall operate as a waiver thereof or hereof; nor shall any single or partial exercise by the Collateral Agent or any Secured Party of any right under the Credit Agreement, this Agreement or any other Transaction Document preclude any other or further exercise thereof, and the exercise of any rights in this Agreement, the Credit Agreements and the other Transaction Documents are cumulative and are not exclusive of any other remedies provided by law. This Agreement is both a Loan Document executed pursuant to the Bank Credit Agreements and a Transaction Document under the Intercreditor Agreement. 25 SECTION 15. Successors and Assigns. This Agreement is for the benefit of the Collateral Agent and the Secured Parties and their successors and assigns, and in the event of an assignment of all or any of the Secured Obligations, the rights hereunder, to the extent applicable to the indebtedness so assigned, may be transferred with such indebtedness. This Agreement shall be binding on each Grantor and its successor and assigns; provided, however, that such Grantor may not assign any of its rights or obligations hereunder without the prior written consent of the Collateral Agent. SECTION 16. Changes in Writing. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only in writing signed by each Grantor and the Collateral Agent with the consent of the Required Secured Parties (or, when expressly required by this Agreement, the Intercreditor Agreement, or the Credit Agreements, all of the Secured Parties). SECTION 17. Powers Coupled with an Interest. All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest. SECTION 18. Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the internal laws of the State of New York, without reference to the conflicts or choice of law principles thereof, except that matters involving perfection of security interests in the Collateral shall be governed by the applicable provisions of the UCC depending upon the location of the Collateral. SECTION 19. Consent to Jurisdiction. Each Grantor hereby irrevocably consents to the personal jurisdiction of the United States District Court for the Southern District of New York and the Supreme Court of the State of New York - County of New York, in any action, claim or other proceeding arising out of or any dispute in connection with this Agreement, any rights or obligations hereunder, or the performance of such rights and obligations. Each Grantor hereby irrevocably consents to the service of a summons and complaint and other process in any action, claim or proceeding brought by the Collateral Agent or any Secured Party in connection with this Agreement, any rights or obligations hereunder, or the performance of such rights and obligations, on behalf of itself or its property, with respect to the Bank Lenders, in the manner provided in Sections 13.1 of the Bank Credit Agreements, and with respect to the Note Lenders, in the manner provided in the Note Agreement, as applicable. Nothing in this Section 19 shall affect the right of the Collateral Agent or any Secured Party to serve legal process in any other manner permitted by Applicable Law or affect the right of the Collateral Agent or any 26 Secured Party to bring any action or proceeding against any Grantor or its properties in the courts of any other jurisdictions. SECTION 20. Waiver of Jury Trial; Waiver of Certain Damages. (a) WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE COLLATERAL AGENT, EACH SECURED PARTY AND EACH GRANTOR HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING, OUT OF OR ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. (b) Waiver of Certain Damages. The Grantors and the Collateral Agent on behalf of itself and the Secured Parties agree that they shall not have a remedy of punitive or exemplary damages against the other in any judicial proceeding, any dispute, claim or controversy arising out of, connected with or relating to this Agreement ("Dispute") and hereby waive any right or claim to punitive or exemplary damages they have now or which may arise in the future in connection with any Dispute whether the Dispute is resolved by arbitration or judicially. SECTION 21. Severability. If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (a) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of he Collateral Agent and the Secured Parties in order to carry out the intentions of the parties hereto as nearly as may be possible; and (b) the invalidity or unenforceability of any provisions hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. SECTION 22. Headings. The various headings of this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provisions hereof. SECTION 23. Counterparts. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together one and the same agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 27 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed under seal by their duly authorized officers, all as of the day and year first written above. WLR FOODS, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Vice President CASSCO ICE & COLD STORAGE, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Vice President WAMPLER FOODS, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Treasurer WAMPLER SUPPLY COMPANY, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Vice President 28 VALLEY RAIL SERVICE, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Vice President FIRST UNION NATIONAL BANK, as Collateral Agent for itself and the Secured Parties By:__/S/ Julie Bouhuys__ Julie Bouhuys Senior Vice President 29 EXHIBIT "A" Perfection Certificate The undersigned, WLR Roods, Inc., a Virginia corporation (the "Company"), hereby represents and warrants to First Union National Bank, successor to First Union National Bank of Virginia, a national banking association, as Collateral Agent (the "Collateral Agent"), for the ratable benefit of itself and the financial institutions (collectively, the "Secured Parties") as are, or may from time to time become, parties to the Credit Agreements (as defined in the attached Security Agreement), and its successors and assigns that the following information is true, accurate and complete: (i) Names. a) The exact corporate name of the Company as it appears in its Certificate or Articles of Incorporation is as follows: WLR Foods, Inc. b) The following is a list of all other names (including trade names or similar appellations) used by the Company or any of its divisions or other unincorporated business unites during the past five (5) years:__None________________________________________________ ________________________________________________________________. (c) The following are the names of all corporations which have been merged into the Company during the past five (5) years:__None___________________________________________________ _______________________________________________________________. (d) The following are the names and addresses of all entities from whom the Company has acquired any personal property during the past five (5) years, other than entities that in the ordinary course of business sell the type of personal property acquired from such entity, together with the date of such acquisition and the type of personal property acquired (e.g., equipment, inventory, etc.) Date of Type of Name Address Acquisition Property None (ii) Current Locations. 30 (a) The chief executive office of the Company is located at the following address: Name of City or Mailing Location Address County State Timberville PO Box 7000 Rockingham Virginia Broadway, VA 22815-7000 (b) The following are the locations in the United States of America where the Company maintains any books or records relating to any of its accounts receivable: Name of City or Mailing Location Address County State None (c) The following are all of the locations in the United States of America where the Company maintains any equipment, fixtures or inventory: Name of City or Mailing Record Owner Location Address County State of Real Estate None (d) The following are all the locations in the United States of American where the Company owns, leases, or occupies any realty: Name of City or Mailing Record Owner Location Address County State of Real Estate None (e) The following are the names and address of all consignees of the Company: Name Street Address County State None 31 (f) The following are the names and addresses of all warehouseman or bailees who have possession of any of the Company's inventory: Are Documents If So, Street of Title Are They Name Address County State Issued? Negotiable? None (iii) Special Types of Collateral. (a) The following are all of the trademarks or trademark applications of the Company, together with the trademark numbers and dates of registration with the U.S. Patent and Trademark Office, if applicable: If Foreign Trademark - Trademark Number Date What Country? None (b) The following are all of the patents or patent applications of the Company, together with the patent numbers, names of inventors and dates of registration with the U.S. Patent and Trademark Office, if applicable: If Foreign Patent - Patents Number Date What Country? None (c) The following are all of the copyrights or copyright applications of the Company, together with the patent numbers, names of inventors and dates of registration with the U.S. Copyright Office, if applicable: If Foreign Copyright - Copyright Number Date What Country? None 32 (d) The Company owns the following kinds of assets: Motor Vehicles - Yes __X__ No _____ Aircraft - Yes _____ No __X__ Vessels, Boats or Ships - Yes _____ No __X__ Railroad Rolling Stock - Yes _____ No __X__ WLR Foods, Inc. Dated as of: February 25, 1998 By:__/S/ Robert T. Ritter__ Name: Robert T. Ritter Title: Vice President 33 SCHEDULE 3(g)-Disclosure of Liens Original Current Company Debt Amount Maturity Balance1 Security A. Wampler Foods, Inc. Pennsylvania Industrial Real Development Authority 995,000 2005 574,917 Estate and Equipment at New Oxford, Pa Farmers Bank and Trust Co. of Hanover 1,300,000 2004 900,678 Real Estate and Equipment at New Oxford, Pa Bank of Hanover & Trust Company (2 notes) $1.5M + $0.3M 1,800,000 2002 441,667 Real Estate at New Oxford, Pa Huffman's Old Car Farm 200,000 2000 77,510 Real Estate at Rockingham County, Va B. Cassco Ice & Cold Storage, Inc. Crestar Mortgage Harrisonburg Revenue Bond 1,200,000 2001 451,777 Real Estate and Equipment at Harrisonburg, Inc. Receivables NationsBank of South Carolina, N.A. 3,400,000 2003 2,202,920 Real Estate and Equipment at Marshville, NC 34 Harry Anderson 255,000 2004 104,000 Real Estate at City of Radford, Va C. Wampler Supply Company, Inc. None D. WLR Foods, Inc. None E. Valley Rail Service, Inc. None F. All those liens evidenced by UCC-1 financing statements, as the same may be amended from time to time, filed at such times and in such jurisdictions as fully set forth in Exhibit "A" to Schedules 10.3(f) of the Credit Agreements, which is attached thereto and incorporated therein by reference, which is to be attached post-closing. G. All those liens evidenced by those certain Title Commitments as set forth in Exhibit "B" to Schedules 10.3(f) of the Credit Agreements, which is attached thereto and incorporated therein by reference, which is to be attached post-closing. 1 As of December 27, 1997. 35 SCHEDULE 4(c)(i)-Schedule of Inventory To be delivered by the Borrower post-closing. 36 SCHEDULE 4(e) - Schedule of Vehicles Schedule 4(e) begins on the following page. 37 EX-2.8 9 PLEDGE AGREEMENT (WLR) Exhibit 2.8 PLEDGE AGREEMENT THIS PLEDGE AGREEMENT (the "Pledge Agreement"), dated as of February 25, 1998, is made by WLR FOODS, INC., a corporation organized under the laws of the Commonwealth of Virginia (the "Pledgor"), in favor of FIRST UNION NATIONAL BANK, a national banking association, as Collateral Agent (the "Collateral Agent") for the ratable benefit of itself and the financial institutions (the "Secured Parties") as are, or may from time to time become, parties to one or more of the Intercreditor Agreement and the Credit Agreements (as hereinafter defined). BACKGROUND STATEMENT A. Pursuant to the terms of the Revolving Credit Agreement and the Term Loan Agreement each dated as of February 25, 1998 (as amended, restated, modified or otherwise supplemented, the "Bank Credit Agreements"), by and among the Pledgor, Cassco Ice & Cold Storage, Inc., Wampler Foods, Inc., Wampler Supply Company, Inc. and Valley Rail Service, as borrowers (collectively, the "Obligors," and each of the Obligors individually, an "Obligor"), the Bank Lenders and the Collateral Agent, the Bank Lenders have agreed to extend and/or restructure certain loans to the Obligors as more fully described therein. B. Pursuant to the terms of a Note Purchase Agreement dated as of February 25, 1998 (as amended, restated, modified or otherwise supplemented, the "Note Agreement," and, together with the Bank Credit Agreements, the "Credit Agreements") by and among WLR Foods, Inc., as borrower, and the remaining Obligors, as guarantors, the Note Lenders (as defined in the Intercreditor Agreement) have agreed to extend and/or restructure certain credit accommodations to the Obligors as more particularly described therein. C. As of the date hereof, the Secured Parties and the Obligors have entered into that certain Collateral Agency and Intercreditor Agreement (the "Intercreditor Agreement") to, among other things, set forth the relative rights of the Secured Parties with respect to the Pledged Stock (hereinafter defined) and the other Collateral described therein. D. The Obligors comprise one integrated financial enterprise, and any loans made to any of them individually will inure, directly or indirectly, to the benefit of all of them. E. The Pledgor is the legal and beneficial owner of the shares of Pledged Stock (as hereinafter defined) issued by the certain Subsidiaries as specified on Schedule I attached hereto and incorporated herein by reference (singly, the "Issuer," and, collectively, the "Issuers"). F. To induce the Secured Parties and the Collateral Agent to provide and to continue to provide financial accommodations under the 1 Credit Agreements, and as a condition to the making of future loans thereunder, the Secured Parties require that the Pledgor execute and deliver this Pledge Agreement with the Pledged Stock to the Collateral Agent to secure the "Secured Obligations" (as hereinafter defined). Now, THEREFORE, in consideration of the foregoing Background Statement, and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Defined Terms. Terms defined in the Security Agreement and not otherwise defined herein, when used in this Pledge Agreement including its preamble and recitals, shall have the respective meanings provided for in the Security Agreement. The following additional terms, when used in this Pledge Agreement, shall have the following meanings: "Code" means the Uniform Commercial Code from time to time in effect in the State of New York. "Collateral" means the Stock Collateral. "Lien" shall have the meaning assigned thereto in Credit Agreements. "Material Adverse Effect" shall have the meaning assigned thereto in Credit Agreements. "Material Contract" shall have the meaning assigned thereto in Credit Agreements. "Pledge Agreement" means this Pledge Agreement, as amended or modified. "Pledged Stock" means the shares of capital stock of each Issuer listed on Schedule I hereto, together with all stock certificates, options or rights of any nature whatsoever that may be issued or granted by such Issuer to the Pledgor while this Pledge Agreement is in effect. "Proceeds" means all "proceeds" as such term is defined in Section 9-306(l) of the Code on the date hereof and, in any event, shall include, without limitation, all dividends or other income from the Pledged Stock, collections thereon, proceeds of sale thereof or distributions with respect thereto. "Secured Obligations" means the Secured Obligations as defined in the Intercreditor Agreement, and any renewals or extensions of the Secured Obligations. "Stock Collateral" means the Pledged Stock and all Proceeds therefrom. 2 "Subsidiary" means as to any Person, any corporation, partnership or other entity of which more than fifty percent (50%) of the outstanding capital stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or other managers of such corporation, partnership or other entity is at the time, directly or indirectly, owned by or the management is otherwise controlled by such Person (irrespective of whether, at the time, capital stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency). Unless otherwise qualified, references to "Subsidiary" or "Subsidiaries" herein shall refer to those of the Pledgor. 2. Pledge and Grant of Security Interest. The Pledgor hereby delivers to the Collateral Agent, for the ratable benefit of the Collateral Agent and the Secured Parties, all the Pledged Stock and hereby grants to the Collateral Agent, for the ratable benefit of the Collateral Agent and the Secured Parties, a security interest in the Collateral, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Secured Obligations. 3. Powers; Register of Pledge. Concurrently with the delivery to the Collateral Agent of any certificate representing any Pledged Stock, the Pledgor shall deliver an undated power covering such certificate, duly executed in blank by the Pledgor with, if the Collateral Agent so requests, signatures guaranteed. 4. Representations and Warranties. To induce the Collateral Agent and the Secured Parties to execute the Credit Agreements and make any Loans and to accept the security contemplated hereby, the Pledgor hereby, represents and warrants that: (a) the Pledgor has the corporate power, authority and legal right to execute and deliver, to perform its obligations under, and to grant the Lien on the Collateral pursuant to, this Pledge Agreement and has taken all necessary corporate action to authorize its execution, delivery and performance of, and grant of the Lien on the Collateral pursuant to, this Pledge Agreement; (b) this Pledge Agreement constitutes a legal, valid and binding obligation of the Pledgor enforceable against the Pledgor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement cf creditors' rights generally and by the availability of equitable remedies; (c) the execution, delivery and performance of this Pledge Agreement will not violate any provision of any 3 Applicable Law or contractual obligation of the Pledgor and will not result in the creation or imposition of any Lien on any of the properties or revenues of the Pledgor pursuant to any Applicable Law or contractual obligation, except as contemplated hereby; (d) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any stockholder or creditor of the Pledgor or any Issuer), is required in connection with the execution, delivery, performance, validity or enforceability against the Pledgor of this Pledge Agreement, except (i) consents which have been obtained and which remain in full force and effect, (ii) as may be required in connection with the disposition of the Pledged Stock by laws affecting the offering and sale of securities generally, and (iii) filings under the Code; (e) no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Pledgor, threatened by or against the Pledgor or against any of its properties or revenues (i) with respect to this Pledge Agreement or any of the transactions contemplated hereby or (ii) which could reasonably be expected to have a Material Adverse Effect; (f) the shares of Pledged Stock listed on Schedule I constitute all the issued and outstanding shares owned by the Pledgor of all classes of the capital stock of each of the Issuers; (g) all the shares of the Pledged Stock have been duly and validly issued and are fully paid; (h) the Pledgor is the record and beneficial owner of, and has good and marketable title to, the Pledged Stock listed on Schedule I, free of any and all Liens or options in favor of, or claims of, any other person, except the Lien created by this Pledge Agreement; and (i) upon (i) delivery to the Collateral Agent of the stock certificates evidencing the Pledged Stock, and (ii) filing of UCC-1 financing statements in the appropriate filing offices, the Lien granted pursuant to this Pledge Agreement will constitute a valid Lien on the collateral, enforceable as such against all creditors of the Pledgor and any Persons purporting to purchase any of the Collateral from the Pledgor. 5. Certain Covenants. The Pledgor covenants and agrees with the Collateral Agent for the ratable benefit of itself and the Secured Parties that, from and after the date of this Pledge Agreement until 4 the Secured Obligations are paid in full and the Commitments are terminated: (a) If the Pledgor shall, as a result of its ownership of the Collateral, become entitled to receive or shall receive any certificate (including, without limitation, any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights, whether in addition to, in substitution of, as a conversion of, or in exchange for any shares of the Collateral, or otherwise in respect thereof, the Pledgor shall accept the same as the agent of the Collateral Agent, hold the same in trust for the Collateral Agent and deliver the same forthwith to the Collateral Agent in the exact form received, duly indorsed by the Pledgor to the Collateral Agent, if required, together with an undated power covering such certificate duly executed in blank by the Pledgor and with, if the Collateral Agent so requests, signature guaranteed, to be held by the Collateral Agent, subject to the terms hereof, as additional collateral security for the Secured Obligations. In addition, any sums paid upon or in respect of the Collateral upon the liquidation or dissolution of any Issuer shall be held by the Collateral Agent as additional collateral security for the Secured Obligations. (b) Without the prior written consent of the Collateral Agent, the Pledgor will not (i) vote to enable, or take any other action to permit, any Issuer to issue any stock or other equity securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any stock or other equity securities of any nature of such Issuer, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Collateral, or (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Collateral, or any interest therein, except for the Lien provided for by this Pledge Agreement. The Pledgor will defend the right, title and interest of the Collateral Agent in and to the Collateral against the claims and demands of all Persons whomsoever. (c) At any time and from time to time, upon the written request of the Collateral Agent, and at the sole expense of the Pledgor, the Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Collateral Agent may reasonably request for the purposes of obtaining or preserving the full benefits of this Pledge Agreement and of the rights and powers herein granted. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note, 5 other instrument or chattel paper, such note, instrument or chattel paper shall be immediately delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent, to be held as Collateral pursuant to this Pledge Agreement. (d) The Pledgor agrees to pay, and to save the Collateral Agent and the Secured Parties harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other similar taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Pledge Agreement. (e) On or prior to the formation or acquisition of any Subsidiary of the Pledgor, the Pledgor agrees to execute such amendments and supplements to this Pledge Agreement, including, without limitation, the Pledge Agreement Supplement attached hereto, and such other documents and instruments and to take any and all actions, all as shall be necessary, in the reasonable judgment of the Collateral Agent, to pledge the Pledgor's interest therein to the Collateral Agent for the ratable benefit of itself and the Secured Parties. 6. Cash Dividends and Distributions; Voting Rights. Unless an Event of Default shall have occurred and the Collateral Agent shall have given notice to the Pledgor of the Collateral Agent's intent to exercise its rights pursuant to Paragraph 8 below, the Pledgor shall be permitted to receive all cash dividends and shareholder distributions paid in accordance with the terms of the Credit Agreements in respect of the Collateral and to exercise all voting and corporate rights, as applicable, with respect to the Collateral; provided, that no vote shall be cast or corporate right exercised or other action taken which, in the Collateral Agent's reasonable judgment, would impair the Collateral or which would be inconsistent with or result in any violation of any provision of the Credit Agreements, the Notes, any other Transaction Documents or this Pledge Agreement. 7. Rights of the Collateral Agent. (a) If an Event of Default shall occur and the Collateral Agent shall give notice of its intent to exercise such right to the Pledgor, (i) the Collateral Agent shall have the right to receive any and all cash dividends paid in respect of the Pledged Stock and make application thereof to the Secured Obligations in the order set forth in Section 7 of the Intercreditor Agreement and (ii) all shares of the Pledged Stock shall be registered in the name of the Collateral Agent or its nominee, and the Collateral Agent or its nominee may thereafter exercise (A) all voting, corporate and other rights pertaining to such shares of the Pledged Stock at any meeting of shareholders of the applicable Issuer, and (B) any and all rights of conversion, exchange, 6 subscription and any other rights, privileges or options pertaining to such shares of the Pledged Stock as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Stock interests upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of the applicable Issuer or, or upon the exercise by the Pledgor or the Collateral Agent of any right, privilege or option pertaining to such shares of the Pledged Stock, and in connection therewith, the right to deposit and deliver any and all of the Pledged Stock with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine), all without liability except to account for property actually received by it, but the Collateral Agent shall have no duty to the Pledgor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. (b) The rights of the Collateral Agent and the Secured Parties hereunder shall not be conditioned or contingent upon the pursuit by the Collateral Agent or any Secured Party of any right or remedy against the Pledgor or against any other Person which may be or become liable in respect of all or any part of the Secured Obligations or against any collateral security therefor, guarantee therefor or right of offset with respect thereto. Neither the Collateral Agent nor any Secured Party shall be liable for any failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so, nor shall the Collateral Agent be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. 8. Remedies. If an Event of Default shall occur and be continuing, the Collateral Agent may, and upon the request of the Required Secured Parties, the Collateral Agent shall, exercise on behalf of itself and the Secured Parties, all rights and remedies granted in this Pledge Agreement and in any other instrument or agreement securing, evidencing or relating to the Secured Obligations, and in addition thereto, all rights and remedies of a secured party under the Code. Without limiting the generality of the foregoing with regard to the scope of the Collateral Agent's remedies, the Collateral Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon the Pledgor, any Issuer or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange, broker's board 7 or office of the Collateral Agent or any Secured Party or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Collateral Agent or any Secured Party shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in the Pledgor, which right or equity is hereby waived or released. The Collateral Agent shall apply any Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale to the payment in whole or in part of the Secured Obligations, in the order set forth in the Intercreditor Agreement, and only after such application and after the payment by the Collateral Agent of any other amount required by any provision of law, including, without limitation, Section 9-504(l)(c) of the Code, need the Collateral Agent account for the surplus, if any, to the Pledgor. To the extent permitted by Applicable Law, the Pledgor waives all claims, damages and demands it may acquire against the Collateral Agent or any Secured Party arising out of the exercise by them of any rights hereunder. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least (10) Business Days prior to such sale or other disposition (or one (1) day notice by telephone with respect to Collateral that is perishable or threatens to decline rapidly in value and for Collateral which is marketable securities). To the extent permitted by Applicable Law, the Pledgor further waives and agrees not to assert any rights or privileges which it may acquire under Section 9-112 of the Code. 9. Registration Rights; Private Sales. (a) If the Collateral Agent shall determine to exercise its right to sell any or all of the Pledged Stock pursuant to Paragraph 9 hereof, and if in the opinion of the Collateral Agent it is necessary or advisable to have the Pledged Stock, or that portion thereof to be sold, registered under the provisions of the Securities Act of 1933, as amended (the "Securities Act"), the Pledgor will, to the extent the Issuer is a Subsidiary of the Pledgor, cause and, to the extent the Issuer is not a Subsidiary of the Pledgor, use its best efforts to cause, the applicable Issuer to (i) execute and deliver, and cause the directors and officers of the applicable Issuer, to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the reasonable opinion of the Collateral Agent, necessary or advisable to register the Pledged Stock, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) to use its best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of one year from the date of the first public offering of 8 the Pledged Stock, or that portion thereof to be sold, and (iii) to make all amendments thereto and/or to the related prospectus which, in the reasonable opinion of the Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Pledgor agrees to cause the applicable Issuer to comply with the provisions of the securities or "Blue Sky" laws of any and all jurisdictions which the Collateral Agent shall designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 11(a) of the Securities Act; provided, that such Issuer shall not for any such purpose be required (A) to qualify as a dealer in securities, (B) to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this Section 9(a) be obligated to be so qualified, (C) to consent to general service of process in any such jurisdiction or (D) to subject itself to taxation in any such jurisdiction. (b) The Pledgor recognizes that the Collateral Agent may be unable to effect a public sale of any or all the Collateral, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and agrees that a determination of whether any such private sale shall be deemed to have been made in a commercially reasonable manner shall not in any event be based on such circumstances. The Collateral Agent shall be under no obligation to delay a sale of any of the Collateral for the period of time necessary to permit the applicable Issuer to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if the applicable Issuer would agree to do so. (c) The Pledgor further agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of the Collateral pursuant to this Paragraph 9 valid and binding and in compliance with any and all other Applicable Laws. The Pledgor further agrees that a breach of any of the covenants contained in this Paragraph 9 will cause irreparable injury to the Collateral Agent and the Secured Parties not compensable in damages, that the Collateral Agent and the Secured Parties have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Paragraph 9 shall be specifically enforceable against the Pledgor, and the Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense 9 that no Event of Default has occurred under the Credit Agreements. 10. Amendments, etc. With Respect to the Secured Obligations. The Pledgor shall remain obligated hereunder, and the Collateral shall remain subject to the Lien granted hereby, notwithstanding that, without any reservation of rights against the Pledgor, and without notice to or further assent by the Pledgor, any demand for payment of any of the Secured Obligations made by the Collateral Agent or any Secured Party, may be rescinded by the Collateral Agent, and any of the Secured Obligations continued, and the Secured Obligations, or the liability of the Pledgor or any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered, or released by the Collateral Agent, and the Credit Agreements, the Notes, any other Transaction Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or part, as the Secured Parties (or the Required Secured Parties, as the case may be) may deem advisable from time to time, and any guarantee, right of offset or other collateral security at any time held by the Collateral Agent for the payment of the Secured Obligations may be sold, exchanged, waived, surrendered or released. Neither the Collateral Agent nor any Secured Party shall have any obligation to protect, secure, perfect or insure any other Lien at any time held by it as security for the Secured Obligations or any property subject thereto. The Pledgor waives any and all notice of the creation, renewal, extension or accrual of any of the Secured Obligations and notice of or proof of reliance by the Collateral Agent or any Secured Party upon this Pledge Agreement; the Secured Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Pledge Agreement; and all dealings between the Pledgor, on the one hand, and the Collateral Agent and the Secured Parties, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Pledge Agreement. The Pledgor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Pledgor with respect to the Secured Obligations. 11. Limitation on Duties Regarding Collateral. The Collateral Agent's sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the Code or otherwise, shall be to deal with it in the same manner as the Collateral Agent deals with similar securities and property for its own account. Neither the Collateral Agent, any Secured Party nor any of their respective directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or 10 shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgor or otherwise. 12. Powers Coupled with an Interest. All authorizations and agencies herein contained with respect to the Collateral constitute irrevocable powers coupled with an interest. 13. Severability. Any provision of this Pledge Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 14. Paragraph Headings. The paragraph headings used in this Pledge Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 15. No Waiver; Cumulative Remedies. Neither the Collateral Agent nor any Secured Party shall by any act (except by a written instrument pursuant to Paragraph 17 hereof) be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Collateral Agent or any Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Collateral Agent or any Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Collateral Agent or such Secured Party would otherwise have on any future occasion. The rights and remedies herein provided are cumula- tive, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 16. Waivers. Except as otherwise expressly provided herein, Pledgor, on its behalf and on behalf of its respective successors and assigns, hereby waives presentment, demand, notice, protest and all other demands and notices in connection with this Agreement, with the enforcement of Collateral Agent's rights hereunder or with any of the Secured Obligations or the Collateral; waives all rights to require a marshalling of assets by Collateral Agent; and consents to and waives notice of (i) the granting of renewals, extensions of time for payment or other indulgences to the Borrower or the Pledgor, (ii) substitution, release or surrender of the Collateral, (iii) the addition or release of persons primarily or secondarily liable on any of the Secured Obligations, (iv) the acceptance of partial payments on any of the Secured Obligations or the Collateral and/or the settlement or compromise thereof. The rights of Collateral Agent hereunder shall 11 not be affected by (i) any extension, renewal, acceleration, indulgence, settlement, compromise or any other change in the time of payment or the terms of any of the Secured Obligations or any part thereof; (ii) the release or substitution of any party primarily or secondarily liable respecting any of the Secured Obligations or any part thereof; (iii) the taking and holding of additional security, other than the Collateral, for the Secured Obligations or any part thereof, or the exchange, enforcement, waiver or release of the Collateral or any part thereof or any other security for the Secured Obligations. Except as otherwise expressly provided herein, Pledgor hereby further waives any right it may have under the constitution of the State of New York (or under the constitution of any other state in which the Collateral may be located), or under the Constitution of the United States of America, to notice or to a judicial hearing prior to the exercise of any right or remedy provided by this Pledge Agreement by Collateral Agent and waives its rights, if any, to set aside or invalidate any sale duly consummated in accordance with the foregoing provisions hereof on the grounds (if such be the case) that the sale was consummated without a prior judicial hearing. Pledgor's waivers under this Section have been made voluntarily, intelligently and knowingly and after Pledgor has been apprised and counseled by its attorneys as to the nature thereof and their possible alternative rights. No delay or omission on the part of Collateral Agent in exercising any right hereunder shall operate as a waiver of such right or of any other right hereunder. Any waiver of any such right on any one occasion shall not be construed as a bar to or waiver of any such right on any such future occasion. No course of dealing between Pledgor and Collateral Agent nor any failure to exercise, nor any delay in exercising, on the part of Collateral Agent, any right, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 17. Waivers and Amendments; Successors and Assigns; Governing Law. None of the terms or provisions of this Pledge Agreement may be amended, supplemented or otherwise modified except by a written instrument executed by the Pledgor and the Collateral Agent; provided that any consent by the Collateral Agent to any waiver, amendment, supplement or modification hereto shall be subject to Section 18 of the Intercreditor Agreement. This Pledge Agreement shall be binding upon the successors and assigns of the Pledgor and shall inure to the benefit of the Collateral Agent and the Secured Parties and their respective successors and assigns. This Pledge Agreement shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of New York without regard to conflict of laws principles. 12 18. Notices. All notices and communications hereunder shall be given in writing to the addresses and otherwise in accordance with the Credit Agreements. 19. Irrevocable Authorization and Instruction to Issuers. The Pledgor hereby authorizes and instructs each Issuer to comply with any instruction received by it from the Collateral Agent in writing that (a) states that an Event of Default has occurred and (b) is otherwise in accordance with the terms of this Pledge Agreement, without any other or further instructions from the Pledgor, and the Pledgor agrees that such Issuer shall be fully protected in so complying. 20. Authority of Collateral Agent. The Pledgor acknowledges that the rights and responsibilities of the Collateral Agent under this Pledge Agreement with respect to any action taken by the Collateral Agent or the exercise or non-exercise by the Collateral Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Pledge Agreement shall, as between the Collateral Agent and the Secured Parties, be governed by the Intercreditor Agreement but, as between the Collateral Agent and the Pledgor, the Collateral Agent shall be conclusively presumed to be acting as agent for itself and the Secured Parties with full and valid authority so to act or refrain from acting, and neither the Pledgor nor any Issuer shall be under obligation, or entitlement, to make any inquiry respecting such authority. 21. Consent to Jurisdiction. The Pledgor hereby irrevocably consents to the personal jurisdiction of the United States District Court for the Southern District of New York and the Supreme Court of the State of New York - County of New York, in any action, claim or other proceeding arising out of or any dispute in connection with this Pledge Agreement, any rights or obligations hereunder, or the performance of such rights and obligations. The Pledgor hereby irrevocably consents to the service of a summons and complaint and other process in any action, claim or proceeding brought by the Collateral Agent or any Secured Party in connection with this Pledge Agreement, any rights or obligations hereunder, or the performance of such rights and obligations, on behalf of itself or its property, in the manner provided in the Credit Agreements. Nothing in this Paragraph 21 shall affect the right of the Collateral Agent or any Secured Party to serve legal process in any other manner permitted by Applicable Law or affect the right of the Collateral Agent or any Secured Party to bring any action or proceeding against the Pledgor or its properties in the courts of any other jurisdictions. 22. Termination. This Agreement shall terminate and be of no further force and effect from and after repayment of the Secured Obligations and the permanent termination of the Commitments. 13 23. Waiver of Jury Trial. NOTWITHSTANDING ANY OTHER PROVISION CONTAINED HEREIN, IN THE EVENT ANY JUDICIAL PROCEEDING IS INSTITUTED IN CONNECTION WITH THIS PLEDGE AGREEMENT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE COLLATERAL AGENT AND EACH SECURED PARTY BY THEIR ACCEPTANCE OF THIS PLEDGE AGREEMENT OR THE BENEFITS HEREOF AND THE PLEDGOR EACH HEREBY IRREVOCABLY WAIVES ITS RESPECTIVE RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF OR ANY DISPUTE IN CONNECTION WITH THIS PLEDGE AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. 24. Counterparts. This Pledge Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together one and the same agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 14 IN WITNESS WHEREOF, the undersigned has caused this Pledge Agreement to be duly executed and delivered as of the date first above written. (CORPORATE SEAL) WLR FOODS, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Vice President 15 ACKNOWLEDGMENT AND CONSENT Each Issuer of Pledged Stock referred to in the foregoing Pledge Agreement hereby acknowledges receipt of a copy thereof and agrees to be bound thereby and to comply with the terms thereof insofar as such terms are applicable to it. Each Issuer agrees to notify the Collateral Agent promptly in writing of the occurrence of any of the events described in Paragraph 5(c) of the Pledge Agreement. Each Subsidiary further agrees that the terms of Paragraph 9 of the Pledge Agreement shall apply to it with respect to all actions that may be required of it under or pursuant to or arising out of Paragraph 9 of the Pledge Agreement. CASSCO ICE & COLD STORAGE, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Vice President WAMPLER FOODS, INC. By:__/S/ Robert T. Ritter Robert T. Ritter Treasurer WAMPLER SUPPLY COMPANY, INC. By:__Robert T. Ritter__ Robert T. Ritter Vice President VALLEY RAIL SERVICE, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Vice President 16 SCHEDULE I To Pledge Agreement DESCRIPTION OF PLEDGED STOCK Subsidiaries Issuer Class of Certificate No. No. of Stock Shares Cassco Ice & Common 1 1000 Cold Storage Wampler Foods, Common 1 1000 Inc. Wampler Supply Common 1-9 6500 company, Inc. Valley Rail Common 1 1000 Services, Inc. 17 PLEDGE AGREEMENT SUPPLEMENT PLEDGE AGREEMENT SUPPLEMENT, dated as of_____________,(the "Supplement"), made by WLR FOODS, INC., a corporation organized under the laws of the State of Virginia (the "Pledgor"), in favor of FIRST UNION NATIONAL BANK, a national banking association, as Collateral Agent (in such capacity, the "Collateral Agent"), under the Credit Agreements (as defined in the Pledge Agreement referred to below) for the benefit of itself and the Secured Parties (as so defined). 1. Reference is hereby made to that Pledge Agreement, dated as of _________, 1998, made by the Pledgor in favor of the Collateral Agent (as amended, supplemented or otherwise modified as of the date hereof, the "Pledge Agreement"). This Supplement supplements the Pledge Agreement, forms a part thereof and is subject to the terms thereof. Terms defined in the Pledge Agreement are used herein as therein defined. 2. The Pledgor hereby confirms and reaffirms the security interest in the Collateral granted to the Collateral Agent for the ratable benefit of itself and the Secured Parties under the Pledge Agreement, and, as additional collateral security for the prompt and complete payment when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations and in order to induce the Secured Parties to make their Loans under the Credit Agreements, the Pledgor hereby delivers to the Collateral Agent, for the ratable benefit of itself and the Secured Parties, all of the issued and outstanding shares of capital stock of [INSERT NAME OF NEW SUBSIDIARY] (the "New Issuer") listed below, which stock, together with all stock certificates, options, or rights of any nature whatsoever which may be issued or granted by the New Issuer, is subject to the terms and conditions of the Pledge Agreement, as supplemented hereby, (the "Additional Pledged Stock"; as used in the Pledge Agreement as supplemented by this Supplement, "Pledged Stock" shall be deemed to include the Additional Pledged Stock) and hereby grants to the Collateral Agent, for the ratable benefit of itself and the Secured Parties, a security interest in the Additional Pledged Stock and all Proceeds thereof. 3. The Pledgor hereby represents and warrants that the representations and warranties contained in Paragraph 4 of the Pledge Agreement are true and correct on the date of this Supplement with references therein to the "Pledged Stock" to include the Additional Pledged Stock, with references therein to the "Issuer" to include the New Issuer, and with references to the "Pledge Agreement" to mean the Pledge Agreement as supplemented by this Supplement. 4. The Pledgor shall deliver to the Collateral Agent the Acknowledgment and Consent attached hereto duly executed by the New Issuer. The Additional Pledged Stock pledged hereby is as follows which Pledged Stock shall be deemed part of Schedule I thereto: 18 DESCRIPTION OF PLEDGED STOCK Issuer Class of Certificate No. No. of Stock Shares New Issuer 5. The Pledgor hereby agrees to deliver to the Collateral Agent such certificates and other documents and take such other action as shall be reasonably requested by the Collateral Agent in order to effectuate the terms hereof and the Pledge Agreement. IN WITNESS WHEREOF, the undersigned has caused this Supplement to be duly executed under seal and delivered as of the date first above written. (CORPORATE SEAL) [NAME OF NEW ISSUER] By:__________________ Name:________________ Title:_______________ 19 ACKNOWLEDGMENT AND CONSENT OF NEW ISSUER The undersigned hereby acknowledges receipt of a copy of the foregoing Supplement and the Pledge Agreement referred to therein (the "Pledge Agreement"). The undersigned agrees for the benefit of the Collateral Agent and the Secured Parties as follows: 1. The undersigned will be bound by the terms of the Pledge Agreement and will comply with such terms insofar as such terms are applicable to the undersigned. 2. The undersigned will notify the Collateral Agent promptly in writing of the occurrence of any of the events described in Paragraph 5(c) of the Pledge Agreement. 3. The Issuer further agrees that the terms of Paragraph 9 of the Pledge Agreement shall apply to it with respect to all actions that may be required of it under or pursuant to or arising out of Paragraph 9 of the Pledge Agreement. (CORPORATE SEAL) [NAME OF NEW ISSUER] By:__________________ Name:________________ Title:_______________ 20 EX-2.9 10 PLEDGE AGREEMENT (WAMPLER) Exhibit 2.9 PLEDGE AGREEMENT THIS PLEDGE AGREEMENT (the "Pledge Agreement"), dated as of February 25, 1998, is made by WAMPLER FOODS, INC., a corporation organized under the laws of the Commonwealth of Virginia (the "Pledgor"), in favor of FIRST UNION NATIONAL BANK, a national banking association, as Collateral Agent (the "Collateral Agent") for the ratable benefit of itself and the financial institutions (the "Secured Parties") as are, or may from time to time become, parties to the Intercreditor Agreement and the Credit Agreements (as hereinafter defined). BACKGROUND STATEMENT A. Pursuant to the terms of the Revolving Credit Agreement and the Term Loan Agreement each dated as of February 25, 1998 (as amended, restated, modified or otherwise supplemented, the "Bank Credit Agreements"), by and among the Pledgor, WLR Foods, Inc., Cassco Ice & Cold Storage, Inc., Wampler Supply Company, Inc., and Valley Rail Service, as borrowers (collectively, the "Obligors," and each of the Obligors individually, an "Obligor"), the Bank Lenders and the Collateral Agent, the Bank Lenders have agreed to extend and/or restructure certain loans to the Obligors as more fully described therein. B. Pursuant to the terms of a Note Purchase Agreement dated as of February 25, 1998 (as amended, restated, modified or otherwise supplemented, the "Note Agreement," and, together with the Bank Credit Agreements, the "Credit Agreements") by and among WLR Foods, Inc., as borrower, and the remaining Obligors, as guarantors, the Note Lenders (as defined in the Intercreditor Agreement) have agreed to extend and/or restructure certain credit accommodations to the Obligors as more particularly described therein. C. As of the date hereof, the Secured Parties and the Obligors have entered into that certain Collateral Agency and Intercreditor Agreement (the "Intercreditor Agreement") to, among other things, set forth the relative rights of the Secured Parties with respect to the Pledged Stock (hereinafter defined) and the other Collateral described therein. D. The Obligors comprise one integrated financial enterprise, and any loans made to any of them individually will inure, directly or indirectly, to the benefit of all of them. E. The Pledgor is the legal and beneficial owner of the shares of Pledged Stock (as hereinafter defined) issued by the certain 1 Subsidiaries as specified on Schedule I attached hereto and incorporated herein by reference (singly, the "Issuer," and, collectively, the "Issuers"). F. To induce the Secured Parties and the Collateral Agent to provide and to continue to provide financial accommodations under the Credit Agreements, and as a condition to the making of future loans thereunder, the Secured Parties require that the Pledgor execute and deliver this Pledge Agreement with the Pledged Stock to the Collateral Agent to secure the "Secured Obligations" (as hereinafter defined). Now, THEREFORE, in consideration of the foregoing Background Statement, and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Defined Terms. Terms defined in the Security Agreement and not otherwise defined herein, when used in this Pledge Agreement including its preamble and recitals, shall have the respective meanings provided for in the Security Agreement. The following additional terms, when used in this Pledge Agreement, shall have the following meanings: "Code" means the Uniform Commercial Code from time to time in effect in the State of New York. "Collateral" means the Stock Collateral. "Governmental Authority" means any nation, province, state or political subdivision thereof, and any government or any Person exercising executive, legislative, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Lien" shall have the meaning assigned thereto in the Credit Agreements. "Material Adverse Effect" shall have the meaning assigned thereto in the Credit Agreements. "Material Contract" shall have the meaning assigned thereto in the Credit Agreements. "Pledge Agreement" means this Pledge Agreement, as amended or modified. "Pledged Stock" means the shares of capital stock of each Issuer listed on Schedule I hereto, together with all stock certificates, options or rights of any nature whatsoever that may be issued or 2 granted by such Issuer to the Pledgor while this Pledge Agreement is in effect. "Proceeds" means all "proceeds" as such term is defined in Section 9-306(l) of the Code on the date hereof and, in any event, shall include, without limitation, all dividends or other income from the Pledged Stock, collections thereon, proceeds of sale thereof or distributions with respect thereto. "Secured Obligations" means the Secured Obligations as defined in the Intercreditor Agreement and any renewals or extensions of the Secured Obligations. "Stock Collateral" means the Pledged Stock and all Proceeds therefrom. "Subsidiary" means as to any Person, any corporation, partnership or other entity of which more than fifty percent (50%) of the outstanding capital stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or other managers of such corporation, partnership or other entity is at the time, directly or indirectly, owned by or the management is otherwise controlled by such Person (irrespective of whether, at the time, capital stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency). Unless otherwise qualified, references to "Subsidiary" or "Subsidiaries" herein shall refer to those of the Pledgor. 2. Pledge and Grant of Security Interest. The Pledgor hereby delivers to the Collateral Agent, for the ratable benefit of the Collateral Agent and the Secured Parties all the Pledged Stock and hereby grants to the Collateral Agent, for the ratable benefit of the Collateral Agent and the Secured Parties, a security interest in the Collateral, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Secured Obligations. 3. Powers; Register of Pledge. Concurrently with the delivery to the Collateral Agent of any certificate representing any Pledged Stock, the Pledgor shall deliver an undated power covering such certificate, duly executed in blank by the Pledgor with, if the Collateral Agent so requests, signature guaranteed. 4. Representations and Warranties. To induce the Collateral Agent and the Secured Parties to execute the Credit Agreements and make any Loans and to accept the security contemplated hereby, the Pledgor hereby, represents and warrants that: 3 (a) the Pledgor has the corporate power, authority and legal right to execute and deliver, to perform its obligations under, and to grant the Lien on the Collateral pursuant to, this Pledge Agreement and has taken all necessary corporate action to authorize its execution, delivery and performance of, and grant of the Lien on the Collateral pursuant to, this Pledge Agreement; (b) this Pledge Agreement constitutes a legal, valid and binding obligation of the Pledgor enforceable against the Pledgor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement cf creditors' rights generally and by the availability of equitable remedies; (c) the execution, delivery and performance of this Pledge Agreement will not violate any provision of any Applicable Law or contractual obligation of the Pledgor and will not result in the creation or imposition of any Lien on any of the properties or revenues of the Pledgor pursuant to any Applicable Law or contractual obligation, except as contemplated hereby; (d) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any stockholder or creditor of the Pledgor or any Issuer), is required in connection with the execution, delivery, performance, validity or enforceability against the Pledgor of this Pledge Agreement, except (i) consents which have been obtained and which remain in full force and effect, (ii) as may be required in connection with the disposition of the Pledged Stock by laws affecting the offering and sale of securities generally, and (iii) filings under the Code; (e) no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Pledgor, threatened by or against the Pledgor or against any of its properties or revenues (i) with respect to this Pledge Agreement or any of the transactions contemplated hereby or (ii) which could reasonably be expected to have a Material Adverse Effect; (f) the shares of Pledged Stock listed on Schedule I constitute all the issued and outstanding shares owned by the Pledgor of all classes of the capital stock of each of the Issuers; (g) all the shares of the Pledged Stock have been duly and validly issued and are fully paid; 4 (h) the Pledgor is the record and beneficial owner of, and has good and marketable title to, the Pledged Stock listed on Schedule I, free of any and all Liens or options in favor of, or claims of, any other person, except the Lien created by this Pledge Agreement; and (i) upon (i) delivery to the Collateral Agent of the stock certificates evidencing the Pledged Stock, and (ii) filing of UCC-1 financing statements in the appropriate filing offices, the Lien granted pursuant to this Pledge Agreement will constitute a valid Lien on the collateral, enforceable as such against all creditors of the Pledgor and any Persons purporting to purchase any of the Collateral from the Pledgor; 5. Certain Covenants. The Pledgor covenants and agrees with the Collateral Agent for the ratable benefit of itself and the Secured Parties that, from and after the date of this Pledge Agreement until the Secured Obligations are paid in full and the Commitments are terminated: (a) If the Pledgor shall, as a result of its ownership of the Collateral, become entitled to receive or shall receive any certificate (including, without limitation, any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights, whether in addition to, in substitution of, as a conversion of, or in exchange for any shares of the Collateral, or otherwise in respect thereof, the Pledgor shall accept the same as the agent of the Collateral Agent, hold the same in trust for the Collateral Agent and deliver the same forthwith to the Collateral Agent in the exact form received, duly indorsed by the Pledgor to the Collateral Agent, if required, together with an undated power covering such certificate duly executed in blank by the Pledgor and with, if the Collateral Agent so requests, signature guaranteed, to be held by the Collateral Agent, subject to the terms hereof, as additional collateral security for the Secured Obligations. In addition, any sums paid upon or in respect of the Collateral upon the liquidation or dissolution of any Issuer shall be held by the Collateral Agent as additional collateral security for the Secured Obligations. (b) Without the prior written consent of the Collateral Agent, the Pledgor will not (i) vote to enable, or take any other action to permit, any Issuer to issue any stock or other equity securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any stock or other equity securities of any nature of such Issuer, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Collateral, or (iii) create, incur or 5 permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Collateral, or any interest therein. The Pledgor will defend the right, title and interest of the Collateral Agent in and to the Collateral against the claims and demands of all Persons whomsoever. (c) At any time and from time to time, upon the written request of the Collateral Agent, and at the sole expense of the Pledgor, the Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Collateral Agent may reasonably request for the purposes of obtaining or preserving the full benefits of this Pledge Agreement and of the rights and powers herein granted. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note, other instrument or chattel paper, such note, instrument or chattel paper shall be immediately delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent, to be held as Collateral pursuant to this Pledge Agreement. (d) The Pledgor agrees to pay, and to save the Collateral Agent and the Secured Parties harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other similar taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Pledge Agreement. (e) On or prior to the formation or acquisition of any Subsidiary of the Pledgor, the Pledgor agrees to execute such amendments and supplements to this Pledge Agreement, including, without limitation, the Pledge Agreement Supplement attached hereto, and such other documents and instruments and to take any and all actions, all as shall be necessary, in the reasonable judgment of the Collateral Agent, to pledge the Pledgor's interest therein to the Collateral Agent for the ratable benefit of itself and the Secured Parties. 6. Cash Dividends and Distributions; Voting Rights. Unless an Event of Default shall have occurred and the Collateral Agent shall have given notice to the Pledgor of the Collateral Agent's intent to exercise its rights pursuant to Paragraph 8 below, the Pledgor shall be permitted to receive all cash dividends and shareholder distributions paid in accordance with the terms of the Credit Agreements in respect of the Collateral and to exercise all voting and corporate rights, as applicable, with respect to the Collateral; provided, that no vote shall be cast or corporate right exercised or other action taken which, in the Collateral Agent's reasonable judgment, would impair the Collateral or which would be inconsistent 6 with or result in any violation of any provision of the Credit Agreements, the Notes, any other Transaction Documents or this Pledge Agreement. 7. Rights of the Collateral Agent. (a) If an Event of Default shall occur and the Collateral Agent shall give notice of its intent to exercise such right to the Pledgor, (i) the Collateral Agent shall have the right to receive any and all cash dividends paid in respect of the Pledged Stock and make application thereof to the Secured Obligations in the order set forth in Section 7 of the Intercreditor Agreement and (ii) all shares of the Pledged Stock shall be registered in the name of the Collateral Agent or its nominee, and the Collateral Agent or its nominee may thereafter exercise (A) all voting, corporate and other rights pertaining to such shares of the Pledged Stock at any meeting of shareholders of the applicable Issuer, and (B) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to such shares of the Pledged Stock as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Stock interests upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of the applicable Issuer or, or upon the exercise by the Pledgor or the Collateral Agent of any right, privilege or option pertaining to such shares of the Pledged Stock, and in connection therewith, the right to deposit and deliver any and all of the Pledged Stock with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine), all without liability except to account for property actually received by it, but the Collateral Agent shall have no duty to the Pledgor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. (b) The rights of the Collateral Agent and the Secured Parties hereunder shall not be conditioned or contingent upon the pursuit by the Collateral Agent or any Secured Party of any right or remedy against the Pledgor or against any other Person which may be or become liable in respect of all or any part of the Secured Obligations or against any collateral security therefor, guarantee therefor or right of offset with respect thereto. Neither the Collateral Agent nor any Secured Party shall be liable for any failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so, nor shall the Collateral Agent be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. 7 8. Remedies. If an Event of Default shall occur, the Collateral Agent may, and upon the request of the Required Secured Parties, the Collateral Agent shall, exercise on behalf of itself and the Secured Parties, all rights and remedies granted in this Pledge Agreement and in any other instrument or agreement securing, evidencing or relating to the Secured Obligations, and in addition thereto, all rights and remedies of a secured party under the Code. Without limiting the generality of the foregoing with regard to the scope of the Collateral Agent's remedies, the Collateral Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon the Pledgor, any Issuer or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the- counter market, at any exchange, broker's board or office of the Collateral Agent or any Secured Party or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Collateral Agent or any Secured Party shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in the Pledgor, which right or equity is hereby waived or released. The Collateral Agent shall apply any Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale to the payment in whole or in part of the Secured Obligations, in the order set forth in the Intercreditor Agreement, and only after such application and after the payment by the Collateral Agent of any other amount required by any provision of law, including, without limitation, Section 9-504(l)(c) of the Code, need the Collateral Agent account for the surplus, if any, to the Pledgor. To the extent permitted by Applicable Law, the Pledgor waives all claims, damages and demands it may acquire against the Collateral Agent or any Secured Party arising out of the exercise by them of any rights hereunder. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least (10) Business Days prior to such sale or other disposition (or one (1) day notice by telephone with respect to Collateral that is perishable or threatens to decline rapidly in value and for Collateral which is marketable securities). To the extent permitted by Applicable Law, the Pledgor further waives and agrees not 8 to assert any rights or privileges which it may acquire under Section 9-112 of the Code. 9. Registration Rights; Private Sales. (a) If the Collateral Agent shall determine to exercise its right to sell any or all of the Pledged Stock pursuant to Paragraph 9 hereof, and if in the opinion of the Collateral Agent it is necessary or advisable to have the Pledged Stock, or that portion thereof to be sold, registered under the provisions of the Securities Act of 1933, as amended (the "Securities Act"), the Pledgor will, to the extent the Issuer is a Subsidiary of the Pledgor, cause and, to the extent the Issuer is not a Subsidiary of the Pledgor, use its best efforts to cause, the applicable Issuer to (i) execute and deliver, and cause the directors and officers of the applicable Issuer, to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the reasonable opinion of the Collateral Agent, necessary or advisable to register the Pledged Stock, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) to use its best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of one year from the date of the first public offering of the Pledged Stock, or that portion thereof to be sold, and (iii) to make all amendments thereto and/or to the related prospectus which, in the reasonable opinion of the Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Pledgor agrees to cause the applicable Issuer to comply with the provisions of the securities or "Blue Sky" laws of any and all jurisdictions which the Collateral Agent shall designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 11(a) of the Securities Act; provided, that such Issuer shall not for any such purpose be required (A) to qualify as a dealer in securities, (B) to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this Section 9(a) be obligated to be so qualified, (C) to consent to general service of process in any such jurisdiction or (D) to subject itself to taxation in any such jurisdiction. (b) The Pledgor recognizes that the Collateral Agent may be unable to effect a public sale of any or all the Collateral, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such 9 securities for their own account for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and agrees that a determination of whether any such private sale shall be deemed to have been made in a commercially reasonable manner shall not in any event be based on such circumstances. The Collateral Agent shall be under no obligation to delay a sale of any of the Collateral for the period of time necessary to permit the applicable Issuer to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if the applicable Issuer would agree to do so. (c) The Pledgor further agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of the Collateral pursuant to this Paragraph 9 valid and binding and in compliance with any and all other Applicable Laws. The Pledgor further agrees that a breach of any of the covenants contained in this Paragraph 9 will cause irreparable injury to the Collateral Agent and the Secured Parties not compensable in damages, that the Collateral Agent and the Secured Parties have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Paragraph 9 shall be specifically enforceable against the Pledgor, and the Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred under the Credit Agreements. 10. Amendments, etc. With Respect to the Secured Obligations. The Pledgor shall remain obligated hereunder, and the Collateral shall remain subject to the Lien granted hereby, notwithstanding that, without any reservation of rights against the Pledgor, and without notice to or further assent by the Pledgor, any demand for payment of any of the Secured Obligations made by the Collateral Agent or any Secured Party, may be rescinded by the Collateral Agent, and any of the Secured Obligations continued, and the Secured Obligations, or the liability of the Pledgor or any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered, or released by the Collateral Agent, and the Credit Agreements, the Notes, any other Transaction Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or part, as the Secured Parties (or the Required Secured Parties, as the case may be) may deem advisable from time to time, and any guarantee, right of offset or other collateral security at any time held by the 10 Collateral Agent for the payment of the Secured Obligations may be sold, exchanged, waived, surrendered or released. Neither the Collateral Agent nor any Secured Party shall have any obligation to protect, secure, perfect or insure any other Lien at any time held by it as security for the Secured Obligations or any property subject thereto. The Pledgor waives any and all notice of the creation, renewal, extension or accrual of any of the Secured Obligations and notice of or proof of reliance by the Collateral Agent or any Secured Party upon this Pledge Agreement; the Secured Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Pledge Agreement; and all dealings between the Pledgor, on the one hand, and the Collateral Agent and the Secured Parties, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Pledge Agreement. The Pledgor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Pledgor with respect to the Secured Obligations. 11. Limitation on Duties Regarding Collateral. The Collateral Agent's sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the Code or otherwise, shall be to deal with it in the same manner as the Collateral Agent deals with similar securities and property for its own account. Neither the Collateral Agent, any Secured Party nor any of their respective directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgor or otherwise. 12. Powers Coupled with an Interest. All authorizations and agencies herein contained with respect to the Collateral constitute irrevocable powers coupled with an interest. 13. Severability. Any provision of this Pledge Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 14. Paragraph Headings. The paragraph headings used in this Pledge Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 15. No Waiver; Cumulative Remedies. Neither the Collateral Agent nor any Secured Party shall by any act (except by a written 11 instrument pursuant to Paragraph 17 hereof) be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Collateral Agent or any Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Collateral Agent or any Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Collateral Agent or such Secured Party would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 16. Waivers. Except as otherwise expressly provided herein, Pledgor, on its behalf and on behalf of its respective successors and assigns, hereby waives presentment, demand, notice, protest and all other demands and notices in connection with this Pledge Agreement, with the enforcement of Collateral Agent's rights hereunder or with any of the Secured Obligations or the Collateral; waives all rights to require a marshalling of assets by Collateral Agent; and consents to and waives notice of (i) the granting of renewals, extensions of time for payment or other indulgences to the Borrower or the Pledgor, (ii) substitution, release or surrender of the Collateral, (iii) the addition or release of persons primarily or secondarily liable on any of the Secured Obligations, (iv) the acceptance of partial payments on any of the Secured Obligations or the Collateral and/or the settlement or compromise thereof. The rights of Collateral Agent hereunder shall not be affected by (i) any extension, renewal, acceleration, indulgence, settlement, compromise or any other change in the time of payment or the terms of any of the Secured Obligations or any part thereof; (ii) the release or substitution of any party primarily or secondarily liable respecting any of the Secured Obligations or any part thereof; (iii) the taking and holding of additional security, other than the Collateral, for the Secured Obligations or any part thereof, or the exchange, enforcement, waiver or release of the Collateral or any part thereof or any other security for the Secured Obligations. Except as otherwise expressly provided herein, Pledgor hereby further waives any right it may have under the constitution of the State of New York (or under the constitution of any other state in which the Collateral may be located), or under the Constitution of the United States of America, to notice or to a judicial hearing prior to the exercise of any right or remedy provided by this Assignment by Collateral Agent and waives its rights, if any, to set aside or invalidate any sale duly consummated in accordance with the foregoing 12 provisions hereof on the grounds (if such be the case) that the sale was consummated without a prior judicial hearing. Pledgor's waivers under this Section have been made voluntarily, intelligently and knowingly and after Pledgor has been apprised and counseled by its attorneys as to the nature thereof and their possible alternative rights. No delay or omission on the part of Collateral Agent in exercising any right hereunder shall operate as a waiver of such right or of any other right hereunder. Any waiver of any such right on any one occasion shall not be construed as a bar to or waiver of any such right on any such future occasion. No course of dealing between Pledgor and Collateral Agent nor any failure to exercise, nor any delay in exercising, on the part of Collateral Agent, any right, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 17. Waivers and Amendments; Successors and Assigns; Governing Law. None of the terms or provisions of this Pledge Agreement may be amended, supplemented or otherwise modified except by a written instrument executed by the Pledgor and the Collateral Agent; provided that any consent by the Collateral Agent to any waiver, amendment, supplement or modification hereto shall be subject to Section 18 of the Intercreditor Agreement. This Pledge Agreement shall be binding upon the successors and assigns of the Pledgor and shall inure to the benefit of the Collateral Agent and the Secured Parties and their respective successors and assigns. This Pledge Agreement shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of New York without regard to conflict of laws principles. 18. Notices. Unless specified otherwise, all notices and communications hereunder shall be given in writing to the addresses and otherwise in accordance with the Credit Agreements. 19. Irrevocable Authorization and Instruction to Issuers. The Pledgor hereby authorizes and instructs each Issuer to comply with any instruction received by it from the Collateral Agent in writing that (a) states that an Event of Default has occurred and (b) is otherwise in accordance with the terms of this Pledge Agreement, without any other or further instructions from the Pledgor, and the Pledgor agrees that such Issuer shall be fully protected in so complying. 20. Authority of Collateral Agent. The Pledgor acknowledges that the rights and responsibilities of the Collateral Agent under this Pledge Agreement with respect to any action taken by the Collateral Agent or the exercise or non-exercise by the Collateral Agent of any option, voting right, request, judgment or other right or 13 remedy provided for herein or resulting or arising out of this Pledge Agreement shall, as between the Collateral Agent and the Secured Parties, be governed by the Intercreditor Agreement but, as between the Collateral Agent and the Pledgor, the Collateral Agent shall be conclusively presumed to be acting as agent for itself and the Secured Parties with full and valid authority so to act or refrain from acting, and neither the Pledgor nor any Issuer shall be under obligation, or entitlement, to make any inquiry respecting such authority. 21. Consent to Jurisdiction. The Pledgor hereby irrevocably consents to the personal jurisdiction of the United States District Court for the Southern District of New York and the Supreme Court of the State of New York - County of New York, in any action, claim or other proceeding arising out of or any dispute in connection with this Pledge Agreement, any rights or obligations hereunder, or the performance of such rights and obligations. The Pledgor hereby irrevocably consents to the service of a summons and complaint and other process in any action, claim or proceeding brought by the Collateral Agent or any Secured Party in connection with this Pledge Agreement, any rights or obligations hereunder, or the performance of such rights and obligations, on behalf of itself or its property, in the manner provided in the Credit Agreements. Nothing in this Paragraph 21 shall affect the right of the Collateral Agent or any Secured Party to serve legal process in any other manner permitted by Applicable Law or affect the right of the Collateral Agent or any Secured Party to bring any action or proceeding against the Pledgor or its properties in the courts of any other jurisdictions. 22. Termination. This Pledge Agreement shall terminate and be of no further force and effect from and after repayment of the Secured Obligations and the permanent termination of the Commitments. 23. Waiver of Jury Trial. NOTWITHSTANDING ANY OTHER PROVISION CONTAINED HEREIN, IN THE EVENT ANY JUDICIAL PROCEEDING IS INSTITUTED IN CONNECTION WITH THIS PLEDGE AGREEMENT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE COLLATERAL AGENT AND EACH SECURED PARTY BY THEIR ACCEPTANCE OF THIS PLEDGE AGREEMENT OR THE BENEFITS HEREOF AND THE PLEDGOR EACH HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF OR ANY DISPUTE IN CONNECTION WITH THIS PLEDGE AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. 14 24. Counterparts. This Pledge Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together one and the same agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 15 IN WITNESS WHEREOF, the undersigned has caused this Pledge Agreement to be duly executed and delivered as of the date first above written. (CORPORATE SEAL) WAMPLER FOODS, INC. By:__/S/ Robert T. Ritter__ Robert T. Ritter Treasurer 16 ACKNOWLEDGMENT AND CONSENT Each Issuer of Pledged Stock referred to in the foregoing Pledge Agreement hereby acknowledges receipt of a copy thereof and agrees to be bound thereby and to comply with the terms thereof insofar as such terms are applicable to it. Each Issuer agrees to notify the Collateral Agent promptly in writing of the occurrence of any of the events described in Paragraph 5(c) of the Pledge Agreement. Each Subsidiary further agrees that the terms of Paragraph 9 of the Pledge Agreement shall apply to it with respect to all actions that may be required of it under or pursuant to or arising out of Paragraph 9 of the Pledge Agreement. ROCKINGHAM POULTRY, INC., a Virginia corporation By:__/S/ Robert T. Ritter__ Robert T. Ritter Vice President ROCKINGHAM POULTRY, INC., a Virgin Islands corporation (F.S.C.) By:__/S/ Ruth J. Mack Ruth J. Mack Vice President 17 SCHEDULE I To Pledge Agreement DESCRIPTION OF PLEDGED STOCK Subsidiaries Issuer Class of Stock Certificate No. No. of Shares Rockingham Common 1 1000 Poultry, Inc. (VA) Rockingham Common 1 100 Poultry, Inc. (VI) 18 PLEDGE AGREEMENT SUPPLEMENT PLEDGE AGREEMENT SUPPLEMENT, dated as of_________________,__ (the "Supplement"), made by WAMPLER FOODS, INC., a corporation organized under the laws of the State of Virginia (the "Pledgor"), in favor of FIRST UNION NATIONAL BANK, a national banking association, as Collateral Agent (in such capacity, the "Collateral Agent"), under the Credit Agreements (as defined in the Pledge Agreement referred to below) for the benefit of itself and the Secured Parties (as so defined). 1. Reference is hereby made to that Pledge Agreement, dated as of February ____ , 1998, made by the Pledgor in favor of the Collateral Agent (as amended, supplemented or otherwise modified as of the date hereof, the "Pledge Agreement"). This Supplement supplements the Pledge Agreement, forms a part thereof and is subject to the terms thereof. Terms defined in the Pledge Agreement are used herein as therein defined. 2. The Pledgor hereby confirms and reaffirms the security interest in the Collateral granted to the Collateral Agent for the ratable benefit of itself and the Secured Parties under the Pledge Agreement, and, as additional collateral security for the prompt and complete payment when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations and in order to induce the Secured Parties to make their Loans under the Credit Agreements, the Pledgor hereby delivers to the Collateral Agent, for the ratable benefit of itself and the Secured Parties, all of the issued and outstanding shares of capital stock of [INSERT NAME OF NEW SUBSIDIARY] (the "New Issuer") listed below, which stock, together with all stock certificates, options, or rights of any nature whatsoever which may be issued or granted by the New Issuer, is subject to the terms and conditions of the Pledge Agreement, as supplemented hereby, (the "Additional Pledged Stock"; as used in the Pledge Agreement as supplemented by this Supplement, "Pledged Stock" shall be deemed to include the Additional Pledged Stock) and hereby grants to the Collateral Agent, for the ratable benefit of itself and the Secured Parties, a security interest in the Additional Pledged Stock and all Proceeds thereof. 3. The Pledgor hereby represents and warrants that the representations and warranties contained in Paragraph 4 of the Pledge Agreement are true and correct on the date of this Supplement with references therein to the "Pledged Stock" to include the Additional Pledged Stock, with references therein to the "Issuer" to include the New Issuer, and with references to the "Pledge Agreement" to mean the Pledge Agreement as supplemented by this Supplement. 19 4. The Pledgor shall deliver to the Collateral Agent the Acknowledgment and Consent attached hereto duly executed by the New Issuer. The Additional Pledged Stock pledged hereby is as follows which Pledged Stock shall be deemed part of Schedule I thereto: 20 DESCRIPTION OF PLEDGED STOCK Issuer Class of Stock Certificate No. No. of Shares New Issuer 5. The Pledgor hereby agrees to deliver to the Collateral Agent such certificates and other documents and take such other action as shall be reasonably requested by the Collateral Agent in order to effectuate the terms hereof and the Pledge Agreement. IN WITNESS WHEREOF, the undersigned has caused this Supplement to be duly executed under seal and delivered as of the date first above written. (CORPORATE SEAL) [NAME OF NEW ISSUER] By:_________________ Name:_______________ Title:______________ 21 ACKNOWLEDGMENT AND CONSENT OF NEW ISSUER The undersigned hereby acknowledges receipt of a copy of the foregoing Supplement and the Pledge Agreement referred to therein (the "Pledge Agreement"). The undersigned agrees for the benefit of the Collateral Agent and the Secured Parties as follows: 1. The undersigned will be bound by the terms of the Pledge Agreement and will comply with such terms insofar as such terms are applicable to the undersigned. 2. The undersigned will notify the Collateral Agent promptly in writing of the occurrence of any of the events described in Paragraph 5(c) of the Pledge Agreement. 3. The Issuer further agrees that the terms of Paragraph 9 of the Pledge Agreement shall apply to it with respect to all actions that may be required of it under or pursuant to or arising out of Paragraph 9 of the Pledge Agreement. (CORPORATE SEAL) [NAME OF NEW ISSUER] By:________________ Name:______________ Title:_____________ 22 EX-2.10 11 NOTE PURCHASE AGREEMENT Exhihit 2.10 WLR FOODS, INC. Dated as of February 25, 1998 Note Purchase Agreement $42,040,162.73 Variable Rate Senior Notes Due December 31, 1999 177,980 Warrants to Acquire Common Stock 1 TABLE OF CONTENTS PAGE 1. BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . 1 2. AUTHORIZATION OF NOTES . . . . . . . . . . . . . . . . . 2 3. EXCHANGE OF EXISTING NOTES . . . . . . . . . . . . . . . 2 3.1 The Closing . . . . . . . . . . . . . . . . . . 2 4. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . 4 4.1 Representations and Warranties . . . . . . . . 4 4.2 Performance; No Default . . . . . . . . . . . . 4 4.3 Compliance Certificates . . . . . . . . . . . . 4 4.4 Opinions of Counsel . . . . . . . . . . . . . . 4 4.5 Exchange Permitted By Applicable Law, etc . . . 5 4.6 Exchange of Notes and Issuance of Warrants . . 5 4.7 Payment of Fees and Expenses . . . . . . . . . 5 4.8 Private Placement Number . . . . . . . . . . . 5 4.9 Changes in Corporate Structure . . . . . . . . 5 4.10 Payment of Fees . . . . . . . . . . . . . . . . 5 4.11 Subsidiary Guarantees . . . . . . . . . . . . . 6 4.12 Payment of Interest on Existing Notes . . . . . 6 4.13 Security Documents . . . . . . . . . . . . . . 6 4.14 Perfection of Liens . . . . . . . . . . . . . . 6 4.15 Bank Credit Agreements . . . . . . . . . . . . 6 4.16 Warrantholders Rights Agreement . . . . . . . . 7 4.17 Proceedings and Documents . . . . . . . . . . . 7 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . 7 5.1 Organization; Power and Authority . . . . . . . 7 5.2 Authorization, etc . . . . . . . . . . . . . . 7 5.3 Disclosure . . . . . . . . . . . . . . . . . . 8 5.4 Organization and Ownership of Shares of Subsidiaries; Affiliates . . . . . . . . . . . 8 5.5 Financial Statements . . . . . . . . . . . . . 9 5.6 Compliance with Laws, Other Instruments, etc . 9 5.7 Governmental Authorizations, etc . . . . . . . 9 5.8 Litigation; Observance of Agreements, Statutes and Orders . . . . . . . . . . . . . . . . . . 10 5.9 Taxes . . . . . . . . . . . . . . . . . . . . . 10 5.10 Title to Property; Leases . . . . . . . . . . . 10 5.11 Licenses, Permits, etc . . . . . . . . . . . . 11 5.12 Compliance with ERISA . . . . . . . . . . . . . 11 5.13 Private Offering by the Company . . . . . . . . 12 5.14 Use of Proceeds; Margin Regulations . . . . . . 12 5.15 Existing Indebtedness; Future Liens . . . . . . 13 5.16 Foreign Assets Control Regulations, etc . . . . 13 5.17 Status under Certain Statutes . . . . . . . . . 13 5.18 Environmental Matters . . . . . . . . . . . . . 13 2 5.19 No Defaults . . . . . . . . . . . . . . . . . . 14 5.20 Company and Subsidiary Guarantors . . . . . . . 14 5.21 Solvency . . . . . . . . . . . . . . . . . . . 14 5.22 Inactive Subsidiaries . . . . . . . . . . . . . 15 5.23 WLR Common Stock . . . . . . . . . . . . . . . 15 6. REPRESENTATIONS OF THE PURCHASER . . . . . . . . . . . . 15 6.1 Acquisition for Investment . . . . . . . . . . 15 6.2 Source of Funds . . . . . . . . . . . . . . . . 15 7. INFORMATION AS TO COMPANY . . . . . . . . . . . . . . . . 17 7.1 Financial and Business Information . . . . . . 17 7.2 Officer's Certificate . . . . . . . . . . . . . 20 7.3 Inspection . . . . . . . . . . . . . . . . . . 20 8. PAYMENT OF THE NOTES . . . . . . . . . . . . . . . . . . 20 8.1 Required Prepayments; Payment at Maturity; Extension of Maturity . . . . . . . . . . . . . 20 8.2 Optional Prepayments . . . . . . . . . . . . . 22 8.3 Allocation of Partial Prepayments . . . . . . . 22 8.4 Maturity; Surrender, etc . . . . . . . . . . . 23 8.5 No Other Optional Prepayments or Purchase of Notes . . . . . . . . . . . . . . . . . . . . . 23 8.6 Interest on Notes . . . . . . . . . . . . . . . 23 9. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . 24 9.1 Compliance with Law . . . . . . . . . . . . . . 24 9.2 Insurance . . . . . . . . . . . . . . . . . . . 25 9.3 Maintenance of Properties . . . . . . . . . . . 25 9.4 Payment of Taxes and Claims . . . . . . . . . . 25 9.5 Corporate Existence, etc . . . . . . . . . . . 25 9.6 Subsidiaries as Guarantors . . . . . . . . . . 26 9.7 Current Public Information . . . . . . . . . . 26 10. NEGATIVE AND FINANCIAL COVENANTS . . . . . . . . . . . . 26 10.1 Negative Covenants . . . . . . . . . . . . . . 26 10.2 Financial Covenants . . . . . . . . . . . . . . 27 10.3 Transactions with Affiliates . . . . . . . . . 27 10.4 Inactive Subsidiaries . . . . . . . . . . . . . 27 11. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . 27 12. REMEDIES ON DEFAULT, ETC . . . . . . . . . . . 30 12.1 Acceleration . . . . . . . . . . . . . . . . . 30 12.2 Other Remedies . . . . . . . . . . . . . . . . 31 12.3 Rescission . . . . . . . . . . . . . . . . . . 31 12.4 No Waivers or Election of Remedies, Expenses, etc . . . . . . . . . . . . . . . . . . . . . . 31 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES . . . . . . 32 13.1 Registration of Notes . . . . . . . . . . . . . 32 3 13.2 Transfer and Exchange of Notes . . . . . . . . 32 13.3 Replacement of Notes . . . . . . . . . . . . . 32 14. PAYMENTS ON NOTES . . . . . . . . . . . . . . . . . . . . 33 14.1 Place of Payment . . . . . . . . . . . . . . . 33 14.2 Home Office Payment . . . . . . . . . . . . . . 33 15. EXPENSES, ETC . . . . . . . . . . . . . . . . . . . . . . 33 15.1 Transaction Expenses . . . . . . . . . . . . . 33 15.2 Survival . . . . . . . . . . . . . . . . . . . 34 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 34 17. AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . 34 17.1 Requirements . . . . . . . . . . . . . . . . . 34 17.2 Solicitation of Holders of Notes . . . . . . . 35 17.3 Binding Effect, etc . . . . . . . . . . . . . . 35 17.4 Notes held by Company, etc . . . . . . . . . . 35 18. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . 35 19. REPRODUCTION OF DOCUMENTS . . . . . . . . . . . . . . . . 36 20. SUBSTITUTION OF PURCHASER . . . . . . . . . . . . . . . . 36 21. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 37 21.1 Successors and Assigns . . . . . . . . . . . . . . . . . 37 21.2 Payments Due on Non-Business Days; When Payments Deemed Received . . . . . . . . . . . . . . . . . . . . . 37 21.3 Severability . . . . . . . . . . . . . . . . . 37 21.4 Construction . . . . . . . . . . . . . . . . . 37 21.5 Counterparts . . . . . . . . . . . . . . . . . 37 21.6 Governing Law . . . . . . . . . . . . . . . . . 38 SCHEDULE A -- Information Relating to Purchasers SCHEDULE B -- Defined Terms SCHEDULE 4.9 -- Changes in Corporate Structure SCHEDULE 5.3 -- Disclosure Materials SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of Subsidiary Stock SCHEDULE 5.5 -- Financial Statements SCHEDULE 5.8 -- Certain Litigation 4 SCHEDULE 5.11 -- Patents, etc. SCHEDULE 5.12 -- ERISA Affiliates SCHEDULE 5.14 -- Use of Proceeds SCHEDULE 5.15 -- Existing Indebtedness and Liens SCHEDULE 5.23 -- WLR Common Stock SCHEDULE 8.1(d)-- Existing Stock Incentive Program SCHEDULE 10.1 -- Negative Covenants SCHEDULE 10.2 -- Financial Covenants EXHIBIT 2(a) -- Form of Variable Rate Senior Note due December 31, 1999 EXHIBIT 2(b) -- Form of Warrant Certificate EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel for the Company EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for the Purchasers EXHIBIT 4.11(a) -- Form of Guaranty Agreement EXHIBIT 4.11(b) -- Form of Certificate of Vice President/Treasurer of Subsidiary Guarantor EXHIBIT 4.13(b) -- Form of Collateral Agency and Intercreditor Agreement EXHIBIT 4.16 -- Form of Warrantholders Rights Agreement 5 WLR FOODS, INC. 800 Co-op Drive Timberville, Virginia 22853 $42,040,162.73 Variable Rate Senior Notes Due December 31, 1999 177,980 Warrants to Acquire Common Stock Dated as of February 25, 1998 To each of the Purchasers Named on the Signature Page Hereto Ladies and Gentlemen: WLR FOODS, INC. , a Virginia corporation (together with its successors and assigns, the "Company"), agrees with you as follows: 1. BACKGROUND. The Company has heretofore issued its (a) 9.41% Senior Notes due May 1, 2001 (collectively, as in effect immediately prior to the Closing Date, the "Existing 1991 Notes") in the aggregate original principal amount of Thirty Million Dollars ($30,000,000) pursuant to that certain Note Agreement (as amended and in effect immediately prior to the Closing Date, the "Existing 1991 Note Agreement"), dated as of May 1, 1991, between the Company and the purchasers identified on Schedule 1 thereto (the "Existing 1991 Purchasers"), the aggregate outstanding principal amount of the Existing 1991 Notes on the Closing Date is Eighteen Million Dollars ($18,000,000), and (b) 7.47% Senior Notes, Series B, due June 1, 2007 (collectively, as in effect immediately prior to the Closing Date, the "Existing 1995 Notes"; and together with the Existing 1991 Notes, the "Existing Notes") in the aggregate original principal amount of Twenty-Two Million Dollars ($22,000,000) pursuant to that certain Note Agreement (as amended and in effect immediately prior to the Closing Date, the "Existing 1995 Note Agreement"; and together with the Existing 1991 Note Agreement, the "Existing Note Agreements"), dated as of June 1, 1995, between the Company and the purchasers identified on Schedule 1 thereto (the "Existing 1995 Purchasers"; and together with the Existing 1991 Purchasers and their respective transferees, the "Purchasers"), all of the principal 6 amount of the Existing 1995 Notes being outstanding on the Closing Date. The Purchasers own 100% of the Existing Notes outstanding on the Closing Date. The Company wishes to exchange the Existing Notes for new senior notes and, in connection therewith, issue to the Purchasers Warrants (as defined herein), in each case, on the terms and conditions contained herein. References to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement; and references to a "Section" are, unless otherwise specified, to a Section of this Agreement. Certain capitalized terms used in this Agreement (including Schedule 10.1 and Schedule 10.2) are defined in Schedule B. 2. AUTHORIZATION OF NOTES AND WARRANTS. The Company will authorize the issuance and sale of (a) $42,040,162.73 in aggregate principal amount of its Variable Rate Senior Notes Due December 31, 1999 (all such notes, whether initially issued, or issued in exchange or substitution for, any such note, in each case in accordance with this Agreement, and as amended from time to time, the "Notes"), which notes shall be substantially in the form of Exhibit 2(a) and shall have the terms as herein and therein provided, and (b) An aggregate of 177,980 warrants (the "Warrants") to purchase shares of Common Stock, which Warrants shall be issued pursuant to a warrant certificate (as may be amended, restated or otherwise modified from time to time, the "Warrant Certificate") in the form of Exhibit-2(b). The Warrant Certificates provide that a holder thereof may tender Notes to the Company in partial or complete payment of the purchase price for the shares of Common Stock issued upon exercise. Promptly following the receipt of any Note so tendered, the Company shall immediately cancel and retire the same (and no such Note shall be reissued), and shall issue to the holder thereof a new Note in the principal amount of the tendered Note remaining after deduction of the principal amount thereof applied to payment of the exercise price. For purposes of Rule 144 under the Securities Act, 17 C.F.R. Section 230.144, the Company and you agree that a tender of Notes in payment of the exercise price in respect of the Warrant Certificates shall not be deemed a prepayment of the Notes, but rather a conversion of such Notes, pursuant to the terms of the Warrant Certificates, into Common Stock. 7 3. EXCHANGE OF EXISTING NOTES. 3.1 The Closing. (a) Exchange of Existing Notes. The Company hereby agrees to deliver to you and you hereby agree to accept from the Company, in accordance with the provisions hereof, the aggregate principal amount of Notes indicated below your name on Schedule A in exchange for one or more Existing Notes having an aggregate outstanding principal balance, at the time of such exchange, equal to the principal amount of Existing Notes indicated below your name in Schedule A. The Company hereby further agrees to issue in consideration of your exchange of Existing Notes, in accordance with the provisions hereof, the aggregate number of Warrants set forth below your name on Schedule A. The Company acknowledges and agrees that the aggregate principal amount of the Notes on the Closing Date represents a restructuring of amounts owed to the Purchasers pursuant to the Existing Note Agreements. No Purchasers shall be required to make any advance of funds to the Company on account of the Notes. (b) The Closing. The closing (the "Closing") of the exchange described in Section 3.1(a) will be held on February 25, 1998 (the "Closing Date") at 10:00 a.m., local time, at the offices of Duane, Morris & Heckscher LLP, One Liberty Place, Philadelphia, PA 19103. At the Closing, the Company will deliver to you (i) one or more Notes (as indicated below your name on Schedule A) in the denominations indicated on Schedule A, registered in your name or the name of your nominee (as indicated below your name on Schedule A), in the aggregate principal amount set forth on Schedule A, each dated the Closing Date, and (ii) one or more Warrant Certificates (as set forth below your name on Schedule A), representing the number of Warrants indicated on such Schedule A and registered in the name of the holder indicated on Schedule A, against your delivery to the Company of Existing Notes having an aggregate outstanding principal balance equal to the aggregate principal amount of Existing Notes indicated below your name on Schedule A. If at the Closing the Company shall fail to tender such Notes and Warrants to you as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to your satisfaction, you shall, at your election, be relieved of all further obligations under this 8 Agreement, without thereby waiving any rights you may have by reason of such failure or such nonfulfillment, and the Existing Note Agreements shall remain in full force and effect. (c) Original Issue Discount. You and the Company agree that, as a result of the delivery of the Warrants in accordance with the terms of this Agreement, any original issue discount attributable to any Note is less than the product of (i) one- quarter of one percent (.25%), multiplied by (ii) the product of the weighted average maturity of such Note multiplied by the stated redemption price at maturity of such Note (as determined in accordance with section 1273 of the Code). You and the Company agree to consistently use the foregoing assumptions as to original issue discount and redemption premium for all United States federal, state and local income tax purposes with respect to the transactions contemplated by this Agreement and the Warrant Certificates held by you unless the IRS or a change in law requires otherwise. You and the Company acknowledge that the Fair Market Value of such Warrants as of the Closing Date is no greater than the amount determined by the calculations in the first sentence of this subsection. (d) Other Purchasers. The obligations of the Purchasers and the Company hereunder are subject to the execution and delivery of this Agreement by each of the Persons set forth on the signature pages hereto. The obligations of each Purchaser shall be several and not joint and no Purchaser shall be liable or responsible for the act of any other Purchaser. (e) Effect of Exchange. Upon the issuance by the Company of the Notes and delivery thereof to the Purchaser as provided for in this Section 3, the Existing Notes shall be deemed cancelled and the obligations of the Company under the Existing Note Agreements (except those which expressly survive the payment of the Existing Notes) shall be terminated and of no further force and effect. 4. CONDITIONS TO CLOSING. Your obligation to exchange your Existing Notes for the Notes and Warrants set forth below your name on Schedule A at the Closing is subject to the conditions precedent set forth in this Section 4. The failure of the Company to satisfy such conditions shall not operate to waive any of your rights against the Company. 9 4.1 Representations and Warranties. The representations and warranties of the Company in this Agreement shall be correct when made and at the time of the Closing. 4.2 Performance; No Default. The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing, and after giving effect to the issue of the Notes and Warrants no Default or Event of Default shall have occurred and be continuing. 4.3 Compliance Certificates. (a) Officer's Certificate. The Company shall have delivered to you an Officer's Certificate, dated the Closing Date, certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled. (b) Secretary's Certificate. The Company shall have delivered to you a certificate of its Secretary or one of its Assistant Secretaries, dated the Closing Date, certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Financing Documents to which it is a party. 4.4 Opinions of Counsel. You shall have received opinions in form and substance satisfactory to you, dated the Closing Date, from (a) Wharton, Aldhizer & Weaver, P.L.C., counsel for the Company, substantially in the form set out in Exhibit 4.4(a) and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Company hereby instructs such counsel to deliver such opinion to you), and (b) Hebb & Gitlin, your special counsel in connection with such transactions, substantially in the form set out in Exhibit 4.4(b) and covering such other matters incident to such transactions as you may reasonably request. 4.5 Exchange Permitted By Applicable Law, etc. On the Closing Date your acquisition of the Notes and Warrants shall (a) be permitted by the laws and regulations of each 10 jurisdiction to which you are subject, without recourse to provisions (such as section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (b) not violate any applicable law or regulation (including, without limitation, Regulation G, T or X of the Board of Governors of the Federal Reserve System) and (c) not subject you to any tax, penalty or liability under or pursuant to any applicable law or regulation. If requested by you, you shall have received an Officer's Certificate certifying as to such matters of fact as you may reasonably specify to enable you to determine whether such purchase is so permitted. 4.6 Exchange of Notes and Issuance of Warrants. The Company shall have delivered all Notes and Warrants scheduled to be issued to the Purchasers and the Purchasers shall have delivered their Existing Notes to the Company at the Closing as specified in Schedule A. 4.7 Payment of Fees and Expenses. In addition, without limiting the provisions of Section 15.1, the Company shall have paid on or before the Closing the fees, charges and disbursements of your special counsel referred to in Section 4.4(b) to the extent reflected in a statement of such counsel rendered to the Company at least one Business Day prior to the Closing Date. 4.8 Private Placement Number. Private Placement Numbers issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for the Notes and the Warrants. 4.9 Changes in Corporate Structure. Except as specified in Schedule 4.9, the Company shall not have changed its jurisdiction of incorporation or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5. 4.10 Payment of Fees. The Company shall have paid to each Purchaser, as consideration of its consent to the exchange of Notes as provided herein, a fee (the "Restructure Fee") equal to the amount equal to the product of (a) the aggregate principal amount of Existing Notes held by such Purchaser 11 and being exchanged herein multiplied by (b) one percent (1.00%). The Restructure Fee shall have been paid to each Purchaser in immediately available funds to the account of such Purchaser designated for payments on Schedule A. 4.11 Subsidiary Guarantees. You shall have received (a) a guaranty agreement (as amended from time to time, a "Subsidiary Guaranty") substantially in the form of Exhibit 4.11(a), executed and delivered by each Subsidiary Guarantor, (b) a certificate dated the Closing Date and signed by a Vice President or Treasurer of each Subsidiary Guarantor, substantially in the form of Exhibit 4.11(b), and (c) a certificate dated the Closing Date and signed by the Secretary or an Assistant Secretary of each Subsidiary Guarantor, certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Financing Documents to which such Subsidiary Guarantor is a party. 4.12 Payment of Interest on Existing Notes. The Company shall have paid to each Purchaser all interest accrued and unpaid on its Existing Notes as of the Closing Date. 4.13 Security Documents. (a) The Company and each of the Subsidiary Guarantors shall have executed and delivered to the Collateral Agent each of the Security Documents, the forms of which must be acceptable to you. (b) The Company, the Subsidiary Guarantors, the Purchasers, the Lenders, the Bank Agent and the Collateral Agent shall have executed and delivered a collateral agency and intercreditor agreement (as amended from time to time, the "Intercreditor Agreement") substantially in the form of Exhibit 4.13(b). 4.14 Perfection of Liens. Confirmation that (i) all actions necessary to perfect the Liens of the Collateral Agent in the Collateral, including, without limitation, the filing of all appropriate Uniform Commercial Code financing statements, the recording of all appropriate documents with 12 public officials and the delivery of any appropriate items of Collateral to the Collateral Agent shall have been taken in accordance with the provisions of the relevant Security Documents, and (ii) the Liens of the Collateral Agent in the Collateral shall be valid, enforceable and perfected and such Collateral shall be subject to no other Liens not otherwise permitted under this Agreement. 4.15 Bank Credit Agreements. (a) Bank Credit Agreements. The Company, the Bank Agent and the Lenders shall have entered into the Bank Credit Agreements, which agreements, and all documents and instruments executed and delivered in connection therewith, shall be in form and substance satisfactory to you. The Company shall deliver to you a copy of a fully executed counterpart of the Bank Credit Agreements and each such document and instrument executed therewith, certified as true and correct by an officer of the Company. (b) No Defaults; Satisfaction of Conditions Precedent. No event shall have occurred and no condition shall exist that shall prohibit the Company from borrowing under the Bank Credit Agreements, and all conditions precedent to closing specified in the Bank Credit Agreements shall have been satisfied on or prior to the Closing Date, and you shall have received such evidence of the satisfaction of such conditions precedent as you shall deem appropriate. 4.16 Warrantholders Rights Agreement. The Company, the Purchasers, the Bank Agent and the Stockholders (as defined therein) shall have entered into a warrantholders rights agreement (as amended from time to time, the "Warrantholders Rights Agreement") substantially in the form of Exhibit 4.16. 4.17 Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request. 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to you, as of the Closing Date, that: 13 5.1 Organization; Power and Authority. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement, the Notes and each Warrant Certificate and to perform the provisions hereof and thereof. 5.2 Authorization, etc. This Agreement, the Notes and the Warrants have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement constitutes, and upon execution and delivery thereof each Note and each Warrant Certificate will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 5.3 Disclosure. The Company has delivered to you a copy of WLR Foods, Inc. Financial Plan -- Management's Assumptions, dated January 28, 1998 and the WLR Foods, Inc. Marshville Conversion, dated February 4, 1998 (collectively, the "Memorandum"), relating to the transactions contemplated hereby. The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Company and its Subsidiaries. Except as disclosed in Schedule 5.3, this Agreement, the Memorandum, the documents, certificates or other writings delivered to you by or on behalf of the Company in connection with the transactions contemplated hereby and the financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Except as disclosed in the Memorandum or as expressly described in Schedule 5.3, or in one 14 of the documents, certificates or other writings identified therein, or in the financial statements listed in Schedule 5.5, since June 28, 1997, there has been no change in the financial condition, operations, business, properties or prospects of the Company or any Subsidiary except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. There is no fact known to the Company that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Memorandum or in the other documents, certificates and other writings delivered to you by or on behalf of the Company specifically for use in connection with the transactions contemplated hereby. 5.4 Organization and Ownership of Shares of Subsidiaries; Affiliates. (a) Schedule 5.4 contains (except as noted therein) complete and correct lists of (i) the Company's Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary and (ii) the Company's Affiliates, other than Subsidiaries. (b) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 5.4). (c) Each Subsidiary identified in Schedule 5.4 is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact. (d) No Subsidiary is a party to, or otherwise subject to any legal restriction or any agreement (other than this Agreement, the Bank Credit Agreements, the agreements listed 15 in Schedule 5.4 and customary limitations imposed by corporate law statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary. 5.5 Financial Statements. The Company has delivered to you copies of the financial statements of the Company and its Subsidiaries listed in Schedule 5.5. All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments). 5.6 Compliance with Laws, Other Instruments, etc. The execution, delivery and performance by the Company of the Financing Documents to which it is a party will not (a) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument to which the Company or any Subsidiary is bound or by which the Company or any Subsidiary or any of their respective properties may be bound or affected, (b) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Subsidiary, or (c) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Subsidiary. 5.7 Governmental Authorizations, etc. No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by the Company 16 of the Financing Documents to which it is a party except for the filing of financing statements in favor of the Collateral Agent and, to the extent applicable to any Collateral, filings with the United States Copyright Office or the United States Patent and Trademark Office, filings with state transportation authorities with respect to liens on motor vehicles and any filing or action in compliance with the Federal Assignment of Claims Act. 5.8 Litigation; Observance of Agreements, Statutes and Orders. (a) Except as disclosed in Schedule 5.8, there are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (b) Except with respect to the 1997 Credit Agreement (as defined in the Bank Credit Agreements) and the Existing Note Agreements, neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including, without limitation, Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 5.9 Taxes. The Company and its Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (a) the amount of which is not individually or in the aggregate Material or (b) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Company knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company and its 17 Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate. The Federal income tax liabilities of the Company and its Subsidiaries have been paid for all fiscal years up to and including the fiscal year ended June 28, 1997. 5.10 Title to Property; Leases. The Company and its Subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects. 5.11 Licenses, Permits, etc. Except as disclosed in Schedule 5.11, (a) the Company and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material, without known conflict with the rights of others; (b) to the best knowledge of the Company, no product or practice of the Company or any Subsidiary infringes in any material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person; and (c) to the best knowledge of the Company, there is no Material violation by any Person of any right of the Company or any of its Subsidiaries with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by the Company or any of its Subsidiaries. 5.12 Compliance with ERISA. (a) The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of 18 ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to section 401(a)(29) or 412 of the Code, other than such liabilities or Liens as would not be individually or in the aggregate Material. (b) The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan's most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities. The term "benefit liabilities" has the meaning specified in section 4001 of ERISA and the terms "current value" and "present value" have the meaning specified in section 3 of ERISA. (c) The Company and the ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material. (d) The expected postretirement benefit obligation (determined as of the last day of the Company's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Subsidiaries is not Material. (e) The execution and delivery of this Agreement and the issuance of the Notes and the Warrant Certificates hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Company in the first sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy of your representation in Section 6.2 as to the Sources used to pay the purchase price of the Notes to be purchased by you. 19 (f) Schedule 5.12 sets forth all ERISA Affiliates and all "employee benefit plans" maintained by the Company (or any "affiliate" thereof) or in respect of which the Notes could constitute an "employer security" ("employee benefit plan" has the meaning specified in section 3 of ERISA, "affiliate" has the meaning specified in section 407(d) of ERISA and section V of the Department of Labor Prohibited Transaction Exemption 95-60 (60 FR 35925, July 12, 1995) and "employer security" has the meaning specified in section 407(d) of ERISA). 5.13 Private Offering by the Company. Neither the Company nor anyone acting on its behalf has offered the Notes, the Warrants or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any Person other than each Purchaser and the Lenders. Neither the Company nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes or Warrants to the registration requirements of section 5 of the Securities Act. 5.14 Use of Proceeds; Margin Regulations. The Company will apply the proceeds of the Notes as set forth in Schedule 5.14. No additional proceeds are being funded by the exchange of Existing Notes for Notes hereunder. The proceeds of the Existing Notes were not used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation G of the Board of Governors of the Federal Reserve System (12 CFR 207), or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not constitute more than 1% of the value of the consolidated assets of the Company and its Subsidiaries and the Company does not have any present intention that margin stock will constitute more than 1% of the value of such assets. As used in this Section, the terms "margin stock" and "purpose of buying or carrying" shall have the meanings assigned to them in said Regulation G. 5.15 Existing Indebtedness; Future Liens. (a) Except as described therein, Schedule 5.15 sets forth a complete and correct list of all outstanding Indebtedness of the Company and its Subsidiaries as of December 27, 1997 (and specifying, as to each such Indebtedness, the collateral, if any, 20 securing such Indebtedness), since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness of the Company or its Subsidiaries. Neither the Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Indebtedness of the Company or such Subsidiary and no event or condition exists with respect to any Indebtedness of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment. (b) Except as disclosed in Schedule 5.15, neither the Company nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by paragraph C of Schedule 10.1. 5.16 Foreign Assets Control Regulations, etc. Neither the issuance of the Notes and Warrants by the Company hereunder nor its use of the proceeds from the Existing Notes has or will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. 5.17 Status under Certain Statutes. Neither the Company nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Transportation Acts (49 U.S.C.), as amended, or the Federal Power Act, as amended. 5.18 Environmental Matters. Neither the Company nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Company or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect. Except as otherwise disclosed to you in writing, 21 (a) neither the Company nor any Subsidiary has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect; (b) neither the Company nor any of its Subsidiaries has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them and has not disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and (c) all buildings on all real properties now owned, leased or operated by the Company or any of its Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect. 5.19 No Defaults. No event has occurred and no condition exists that, upon the execution and delivery of the Financing Documents and the Bank Credit Agreements by the Company and the Subsidiary Guarantors and the issuance of the Notes by the Company and the Subsidiary Guarantors of the Guaranty, would constitute a Default or an Event of Default. 5.20 Company and Subsidiary Guarantors. The Company and the Subsidiary Guarantors are operated as part of one consolidated business entity. The Subsidiary Guarantors are directly dependent upon the Company for and in connection with their respective business activities and their respective financial resources. The Company and the Subsidiary Guarantors each will receive a direct economic and financial benefit from the Indebtedness incurred under this Agreement, the Notes and the Bank Credit Agreements by the Company and under the Subsidiary Guaranty by the Subsidiary Guarantors, and the incurrence of such Indebtedness is in the best interests of the Company and each of the Subsidiary Guarantors. The Subsidiary Guaranty is a valid and binding obligation of each of the Subsidiary Guarantors enforceable against each Subsidiary Guarantor in accordance with its terms. 22 5.21 Solvency. The fair value of the business and assets of the Company and each Subsidiary Guarantor is in excess of the amount that will be required to pay its liabilities (including, without limitation, contingent, subordinated, unmatured and unliquidated liabilities on existing debts, as such liabilities may become absolute and matured), in each case both prior to and after giving effect to the transactions contemplated by the Financing Documents and the Bank Credit Agreements. After giving effect to the transactions contemplated by the Financing Documents and the Bank Credit Agreements, neither the Company nor any of the Subsidiary Guarantors will be engaged in any business or transaction, or about to engage in any business or transaction, for which such Person has unreasonably small capital, and none of such Persons has or had any intent to hinder, delay or defraud any entity to which it is, or will become, on or after the Closing Date, indebted or to incur debts that would be beyond its ability to pay as such debts mature. 5.22 Inactive Subsidiaries. Rockingham Poultry, Inc., a Virginia corporation, conducts no business and has no assets. Rockingham Poultry, Inc. (VI) conducts a foreign sales business and maintains a bank account with not more than $15,000 on deposit therein. 5.23 WLR Common Stock. As of the date hereof, there are 16,335,058 shares of Common Stock issued and outstanding. Except as set forth on Schedule 5.23: (a) there are no outstanding options, warrants or other rights to acquire shares of Common Stock, whether or not presently exercisable; (b) there are no outstanding securities convertible into shares of Common Stock, whether or not presently convertible; and (c) there are no understandings, agreements or commitments with respect to the issuance of any such Securities. 6. REPRESENTATIONS OF THE PURCHASERS. 6.1 Acquisition for Investment. You represent that you are acquiring the Notes for your own account or for one or more separate accounts maintained by you or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of your or their property shall at all times be within your or their control. You understand that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such 23 registration nor such an exemption is required by law, and that the Company is not required to register the Notes. 6.2 Source of Funds. You represent that at least one of the following statements is an accurate representation as to each source of funds (a "Source") used by you to pay the purchase price of the Existing Notes purchased by you under the Existing Note Agreements (and that each of such statements is accurate with respect to the account (it being deemed for the purposes herein as being a Source) which now holds such Existing Note): (a) the Source is an "insurance company general account" as defined in United States Department of Labor Prohibited Transaction Exemption ("PTE") 95-60 (60 FR 35925, July 12, 1995) and in respect thereof you represent that there is no "employee benefit plan" (as defined in section 3(3) of ERISA and section 4975(e)(1) of the Code, treating as a single plan all plans maintained by the same employer or employee organization or affiliate thereof) with respect to which the amount of the general account reserves and liabilities of all contracts held by or on behalf of such plan exceeds 10% of the total reserves and liabilities of such general account (exclusive of separate account liabilities) plus surplus, as set forth in the National Association of Insurance Commissioners' Annual Statement filed with your state of domicile and that such acquisition is eligible for and satisfies the other requirements of such exemption; or (b) if you are an insurance company, the Source does not include assets allocated to any separate account maintained by you in which any employee benefit plan (or its related trust) has any interest, other than a separate account that is maintained solely in connection with your fixed contractual obligations under which the amounts payable, or credited, to such plan and to any participant or beneficiary of such plan (including any annuitant) are not affected in any manner by the investment performance of the separate account; or (c) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and, except as you have disclosed to the Company in writing pursuant to this paragraph (c), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such 24 pooled separate account or collective investment fund; or (d) the Source constitutes assets of an "investment fund" (within the meaning of part V of PTE 84-14 (the "QPAM Exemption")) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in section V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this paragraph (d); or (e) the Source is a governmental plan; or (f) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this paragraph (f) or pursuant to the Existing Note Agreements; or (g) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA. As used in this Section 6.2, the terms "employee benefit plan", "governmental plan" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 7. INFORMATION AS TO COMPANY. 7.1 Financial and Business Information. The Company shall deliver to each holder of Notes that is an Institutional Investor: 25 (a) Monthly Statements -- as soon as practicable and in any event within thirty days after the end of each calendar month, such financial information as may be required to be delivered to the Lenders pursuant to Section 7.1(c) of the Bank Credit Agreements; (b) Quarterly Statements -- within 45 days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of, (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter, and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the consolidated financial position of the companies being reported on and their consolidated results of operations and cash flows, subject to changes resulting from year-end adjustments; (c) Annual Statements -- within 90 days after the end of each fiscal year of the Company, duplicate copies of, (i) a consolidated balance sheet of the Company and its Subsidiaries, as at the end of such year, and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries, for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by (A) an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the consolidated financial position of the companies being reported upon and their consolidated results of operations and cash 26 flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, and (B) a certificate of such accountants stating that they have reviewed this Agreement and stating further whether, in making their audit, they have become aware of any condition or event that then constitutes a Default or an Event of Default, and, if they are aware that any such condition or event then exists, specifying the nature and period of the existence thereof (it being understood that such accountants shall not be liable, directly or indirectly, for any failure to obtain knowledge of any Default or Event of Default unless such accountants should have obtained knowledge thereof in making an audit in accordance with generally accepted auditing standards or did not make such an audit); (d) SEC and Other Reports -- promptly upon their becoming available, one copy of (i) each financial statement, report (including, without limitation, the Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act), notice or proxy statement sent by the Company or any Subsidiary to public securities holders generally, and (ii) each regular or periodic report, each registration statement (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company or any Subsidiary with the Securities and Exchange Commission; (e) Notice of Default or Event of Default -- promptly, and in any event within five days after a Responsible Officer becoming aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 11(f), a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto; (f) ERISA Matters -- promptly, and in any event within five days after a Responsible Officer becoming aware of any 27 of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto: (i) with respect to any Plan, any reportable event, as defined in section 4043(b) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the Closing Date; or (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or (iii) any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect; (g) Notices from Governmental Authority -- promptly, and in any event within 30 days of receipt thereof, copies of any notice to the Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; (h) Actions, Proceedings -- promptly after a Responsible Officer becomes aware of the commencement thereof, notice of any action or proceeding relating to the Company or any Subsidiary in any court or before any Governmental Authority or arbitration board or tribunal as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected to have a Material Adverse Effect; (i) Financial Projections -- within thirty (30) days after each such request, such financial projections for the Company and 28 the Subsidiaries as the Required Holders may from time to time reasonably request; (j) Three Year Business Plan -- on or before June 1, 1998, a copy of the Company's three year business plan (the "Three Year Business Plan") in form and substance satisfactory to the Required Holders; (k) Bank Credit Agreements and Security Documents -- to the extent not otherwise required herein, promptly upon the receipt or delivery thereof, a copy of each notice or other communication received by the Company from the Bank Agent or Collateral Agent, or delivered to the Bank Agent or Collateral Agent by the Company, in connection with a "Default" or "Event of Default" under the Bank Credit Agreements or the enforcement of any remedies under the Bank Credit Agreements or any of the Security Documents; and (l) Requested Informationwith reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of its Subsidiaries or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such holder of Notes, or such information regarding the Company required to satisfy the requirements of 17 C.F.R. Section 230.144A, as amended from time to time, in connection with any contemplated transfer of the Notes. 7.2 Officer's Certificate. Each set of financial statements delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of a Senior Financial Officer setting forth: (a) Covenant Compliance -- the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of the covenants set forth on Schedule 10.1 and Schedule 10.2 and, during the quarterly or annual period covered by the statements then being furnished (including with respect to each such , where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and (b) Event of Default -- a statement that such officer has reviewed the relevant terms hereof and has made, or 29 caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and its Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review has not disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of the Company or any Subsidiaryto comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto. 7.3 Inspection. The Company shall permit the representatives of each holder of Notes that is an Institutional Investor, at the expense of the Company, to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times as the Required Holders may reasonably request not more often than twice during any calendar year. 8. PAYMENT OF THE NOTES. 8.1 Required Prepayments; Payment at Maturity; Extension of Maturity. (a) Required Quarterly Prepayments. The Company shall prepay, and there shall become due and payable, on March 31, June 30, September 30 and December 31 in each year until the Notes have been paid in full, commencing on March 31, 1999, $260,098 principal amount (or such lesser principal amount as shall then be outstanding) of the Notes, at par. Each partial prepayment of the Notes pursuant to Section 8.1(b), Section 8.1(c), Section 8.1(d) or Section 8.2 will be applied to the mandatory prepayments applicable to the Notes set forth in this Section 8.1 in the order of the maturity thereof. (b) Required Prepayments upon Asset Sales. Within two (2) Business Days (except as set forth below) after the consummation by the Company or any Subsidiary of any Asset Sale (including, without limitation, any Approved Miscellaneous Asset Sale), the Company shall apply 90% of the Net Proceeds in respect 30 of such Asset Sale to permanently reduce the Term Loan Obligations, the Revolving Credit Obligations and the obligations outstanding under the Notes and this Agreement by forwarding such Net Proceeds (the "Asset Sale Proceeds") to the Agent and the holders of the Notes in the respective percentages set forth in Section 7(e) of the Intercreditor Agreement; provided that if no Event of Default has occurred under this Agreement as of the date such Net Proceeds are made available, the Company may apply the first $12,000,000 of such Net Proceeds to either (i) its bona fide costs and expenses (collectively, the "Marshville Conversion Expenses") associated with the Marshville Facility Conversion, or (ii) if, at any time on or before November 30, 1998, no such expenses have been incurred or are outstanding and no Event of Default has occurred, then to a reserve for the projected Marshville Conversion Expenses pursuant to the financial projections supplied by the Company on February 4, 1998, provided further that, if on November 30, 1998, any funds are held in reserve pursuant to this subsection (ii), such funds will be released immediately to the Agent and the holders of the Notes in the respective percentages set forth in Section 7(e) the Intercreditor Agreement. The Company shall provide to each holder of Notes an accounting of the Marshville Conversion Expenses at the time of such application certified as true and correct by the Chief Financial Officer of the Company. With respect to a sale yielding Asset Sale Proceeds aggregating less than $1,000,000, the Company may delay distribution to the holders of Notes until the later of (i) the thirtieth (30th) day following such sale, or (ii) the date on which the aggregate amount of undistributed proceeds owed to the holders of Notes pursuant to this Section 8.1(b) equals or exceeds $250,000. (c) Required Prepayments upon Issuance of Subordinated Debt. Within two (2) Business Days after the consummation of the issuance of any Subordinated Debt by the Company or any Subsidiary, the Company shall apply an amount equal to 100% of the Net Proceeds of such Subordinated Debt to permanently reduce the Term Loan Obligations, the Revolving Credit Obligations and the obligations outstanding under the Notes and this Agreement by forwarding such Net Proceeds to the Agent and the holders of the Notes in the respective percentages set forth in Section 7(e) of the Intercreditor Agreement. (d) Required Prepayments upon Issuance of Company Securities. Within two (2) Business Days after the consummation of any issuance of Company Securities by the Company or any Subsidiary, the Company shall apply an amount equal to 50% of the Net Proceeds of such Company Securities to 31 permanently reduce the Term Loan Obligations, the Revolving Credit Obligations and the obligations outstanding under the Notes and this Agreement by forwarding such Net Proceeds to the Agent and the holders of the Notes in the respective percentages set forth in Section 7(e) of the Intercreditor Agreement; provided that the Company's existing stock incentive programs, as more fully described in Schedule 8.1(d) hereof, to the extent limited to aggregate equity values of $2,000,000 or less on an annual basis, shall not constitute new equity for purposes hereof. (e) Maturity of the Notes. The Company shall pay all of the principal amount of the Notes remaining outstanding, if any, on December 31, 1999; provided that the Company shall be permitted to elect to extend the maturity of the Notes until December 31, 2000 if the Company gives written notice of such election to each holder of Notes at any time before June 30, 1999, and provided further that (i) on the date of such notice and on December 31, 1999, there exists no Default or Event of Default; (ii) at all times prior to December 31, 1999 there has not occurred any Default or Event of Default which has not been cured or been waived in writing by the Required Holders during the applicable cure period, if any; (iii) the Company shall have paid the Extension Fee to each holder of Notes; and (iv) the Company shall have simultaneously extended the "Non-Default Maturity Date" under each of the Bank Credit Agreements in accordance with their respective terms. If the Company shall elect to extend the maturity of the Notes pursuant to this Section 8.1(e) and such extension shall be permitted hereunder, the principal amount of the Notes outstanding on December 31, 2000, together with interest accrued thereon shall become due and payable on December 31, 2000 and Section 8.1 shall continue to apply in all respects. 8.2 Optional Prepayments. The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes (but if in part, in an amount not less than Two Hundred Thousand Dollars ($200,000) or such lesser amount as shall then be outstanding), at 100% of the principal amount so prepaid. The Company 32 will give each holder of Notes written notice of each optional prepayment under this Section 8.2 not less than 30 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify such prepayment date, the aggregate principal amount of the Notes to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.3), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid. 8.3 Allocation of Partial Prepayments. In the case of each partial prepayment of the Notes, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment. 8.4 Maturity; Surrender, etc. In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest thereon, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note. 8.5 No Other Optional Prepayments or Purchase of Notes. The Company will not prepay (whether directly or indirectly by purchase, redemption or other acquisition) any of the outstanding Notes except upon the payment or prepayment of the Notes in accordance with the terms of this Section 8. The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Section 8 and no Notes may be issued in substitution or exchange for any such Notes. 8.6 Interest on Notes. (a) Interest Rate on Notes. Each Note shall bear interest on the outstanding principal amount thereof at a rate per annum equal to the Base Rate plus two and twenty-five one- hundredths percent (2.25%). Such interest shall be payable in arrears on the last day of each calendar quarter, commencing with March 31, 1998. The Base Rate shall be determined by the Bank 33 Agent and the Company shall cause the Bank Agent to notify, in writing, each holder of Notes, at the address set forth on Schedule A (or at such other address that any such holder shall give the Company and the Bank Agent in writing) of any change in the Base Rate within two (2) Business Days of any change thereof. (b) Overdue Sums. Any overdue principal of, or interest on, any Note shall bear interest, payable on demand, for each day from and including the date payment thereof was due to, but excluding, the date of actual payment, at a rate per annum (the "Default Rate") equal to the lesser of (A) the Maximum Legal Rate of Interest, or (B) the then applicable Base Rate with respect to such Note plus four and twenty-five one-hundredths percent (4.25%). (c) Basis of Computation. Interest on the Notes shall be computed on the basis of a 365/366 day year and paid for the actual number of days elapsed. Interest determined at the Maximum Legal Rate of Interest shall be determined in accordance with Applicable Interest Law. (d) Maximum Rate of Interest. It is the intention of the Company and the holders of the Notes to conform strictly to the Applicable Interest Law. Accordingly, notwithstanding any provisions to the contrary in this Agreement or in any Note, the aggregate of all interest, and any other charges or consideration constituting interest under Applicable Interest Law, that is taken, reserved, contracted for, charged or received pursuant to this Agreement or any Notes shall under no circumstances exceed the maximum amount of interest allowed by the Applicable Interest Law. If any interest in excess of such amount is provided for in this Agreement or in any Note, then in such event (i) the provisions of this Section 8.6(d) shall govern and control, (ii) the Company shall not be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest allowed by the Applicable Interest Law, (iii) any interest paid on any Notes which is in excess of what is allowed by the Applicable Interest Law shall be deemed a mistake and cancelled 34 automatically and, if theretofore paid, shall be credited to the outstanding principal amount of such Notes, pro rata, by each holder of such Notes, and (iv) the effective rate of interest on the Notes shall be automatically subject to reduction to the Maximum Legal Rate of Interest. If at any time thereafter, the Maximum Legal Rate of Interest is increased, then, to the extent that it shall be permissible under Applicable Interest Law, the Company shall forthwith pay to the holders of the Notes subject to a prior reduction, all amounts (or the permissible part thereof) of such excess interest that the holders of such Notes would have been entitled to receive pursuant to the terms of this Agreement and such Notes had such increased Maximum Legal Rate of Interest been in effect at all times when such excess interest accrued. To the extent permitted by the Applicable Interest Law, all sums paid or agreed to be paid to the holders of any Notes for the use, forbearance or detention of the indebtedness evidenced by the Notes shall be amortized, prorated, allocated and spread throughout the full term of such Notes. 9. AFFIRMATIVE COVENANTS. The Company covenants that so long as any of the Notes are outstanding: 9.1 Compliance with Law. The Company will and will cause each of its Subsidiaries to comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non- compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 9.2 Insurance. The Company will maintain, and will cause each Subsidiary to maintain, insurance coverage in such forms and amounts and against such risks, including without limitation insurance with respect to its property, the operation thereof and its business against casualties, 35 contingencies and risks and insurance against loss or damage from such hazard and risks to the Person or property of others, as are customary for corporations similarly situated and engaged in the same or a similar business and owning and operating similar properties. All such insurance shall be carried with (i) CIGNA or an affiliate thereof, or (ii) financially sound and reputable insurers rated A or better by A.M. Best Company, Inc. 9.3 Maintenance of Properties. The Company will and will cause each of its Subsidiaries to maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent the Company or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 9.4 Payment of Taxes and Claims. The Company will and will cause each of its Subsidiaries to file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes, assessments, charges or levies have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax or assessment or claims if (a) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (b) the nonpayment of all such taxes, assessments, charges and levies in the aggregate could not reasonably be expected to have a Material Adverse Effect. 9.5 Corporate Existence, etc. The Company will at all times preserve and keep in full force and effect its corporate existence. Subject to paragraphs E and F of Schedule 10.1, the Company will at all times preserve and keep in full 36 force and effect the corporate existence of each of its Subsidiaries (unless merged into the Company or a Subsidiary) and all rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect. 9.6 Subsidiaries as Guarantors. The Company will, not later than three (3) Business Days after any Person becomes a Subsidiary after the Closing Date or any Subsidiary becomes an obligor under either of the Bank Credit Agreements or an obligor with respect to any other Indebtedness, cause such Person to execute and deliver: (a) to each holder of Notes, manually signed originals of an acknowledgment and agreement in respect of the Subsidiary Guaranty in the form of Exhibit A thereto, and (b) to the Collateral Agent, manually signed originals (with copies thereof to any holder of Notes upon such holder's request) of all Security Documents and such Uniform Commercial Code financing statements and other instruments and documents as shall be necessary to perfect the Liens against Property of such Person which is Collateral. The foregoing items shall be accompanied by (i) a written notice, signed by a Senior Financial Officer of the Company, making reference to this Section of this Agreement, stating that such Person is required to become a Subsidiary Guarantor and specifying the manner in which such Person shall have become a Subsidiary Guarantor, the jurisdiction of incorporation of such Person and the percentage of its capital stock owned by the Company and the other Subsidiaries, (ii) copies of the corporate charter and bylaws of such Person and resolutions of the board of directors of such Person authorizing its execution and delivery of the foregoing agreements and the transactions contemplated thereby (in each case, certified as correct and complete copies by the secretary or an assistant secretary of such Person) and (iii) a legal opinion, satisfactory in form, scope and substance to the Required Holders, of independent counsel to the effect (A) that the Financing Documents to which such Person is then becoming a party are enforceable in accordance with their terms and (B) that the Liens against Property which is Collateral shall have been created and perfected in accordance with the requirements of the Security Documents. 37 9.7 Current Public Information. The Company will at all times have on file with the Securities and Exchange Commission "current public information" of the type required in order to make Rule 144 under the Securities Act available to the holders of its Common Stock. 10. NEGATIVE AND FINANCIAL COVENANTS. 10.1 Negative Covenants. The Company covenants that so long as any of the Notes are outstanding that it shall comply with each of the negative covenants set forth in Schedule 10.1 which covenants are incorporated herein by this reference. 10.2 Financial Covenants. The Company covenants that at all times after June 30, 1998 and so long as any of the Notes are outstanding that it shall comply with each of the financial covenants set forth in Schedule 10.2 which covenants are incorporated herein by this reference. 10.3 Transactions with Affiliates. The Company will not, and will not permit any Subsidiary to, enter into directly or indirectly any transaction or group of related transactions (including, without limitation, the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the Company or another Subsidiary), except in the ordinary course and pursuant to the reasonable requirements of the Company's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would be obtainable in a comparable arm's-length transaction with a Person not an Affiliate. 10.4 Inactive Subsidiaries. The Company will not, at any time, permit any Inactive Subsidiary to (a) own any Property, (b) conduct any business or business operations, or (c) be or become obligated in respect of any liabilities or other obligations; provided; that Rockingham Poultry, Inc (VI) may maintain a bank account, so long as the maximum amount on deposit therein does not at 38 any time exceed $15,000, and conduct its foreign sales operations. 11. EVENTS OF DEFAULT. An "Event of Default" shall exist if any of the following conditions or events shall occur and be continuing: (a) the Company defaults in the payment of any principal on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or (b) the Company defaults in the payment of any interest on any Note for more than five (5) Business Days after the same becomes due and payable; or (c) the Company defaults in the performance of or compliance with any term contained in any of Section 7.1(e), Section 7.1(i), Section 7.1(j), Schedule 10.1 or Schedule 10.2, inclusive; or (d) the Company defaults in the performance of or compliance with any term contained herein (other than those referred to in paragraphs (a), (b) and (c) of this Section 11) and such default is not remedied within 30 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder of a Note; or (e) any representation or warranty made in writing by or on behalf of the Company or any Subsidiary Guarantor, or by any officer of the Company or any Subsidiary Guarantor, in this Agreement, any other Financing Document or in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made; or (f) (i) the Company or any Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Indebtedness (other than Indebtedness under this Agreement and the Notes) beyond any period of grace provided with respect thereto, that individually or together with such other Indebtedness as to which any such failure exists has an aggregate outstanding principal amount of at least Three Million Dollars ($3,000,000), or (ii) the Company or any Subsidiary is in default in the performance of or compliance with any term of 39 any Indebtedness (other than Indebtedness under this Agreement and the Notes), that individually or together with such other Indebtedness as to which any such failure exists has an aggregate outstanding principal amount of at least Three Million Dollars ($3,000,000), or of any mortgage, indenture or other agreement relating thereto, or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been declared (or one or more Persons are entitled to declare such Indebtedness to be), due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Indebtedness to convert such Indebtedness into equity interests), (A) the Company or any Subsidiary has become obligated to purchase or repay Indebtedness before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least Three Million Dollars ($3,000,000), or (B) one or more Persons have the right to require the Company or any Subsidiary so to purchase or repay such Indebtedness; or (g) the Company or any Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or (h) a court or Governmental Authority of competent jurisdiction enters an order appointing, without consent by the Company or any Subsidiary, a custodian, receiver, trustee or other officer with similar powers with respect to the Company or any Subsidiary or with respect to any substantial part of the 40 property of the Company or any Subsidiary, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any Subsidiary, or any such petition shall be filed against the Company or any Subsidiary and such petition shall not be dismissed within 60 days; or (i) a final judgment or judgments for the payment of money aggregating in excess of Two Million Five Hundred Thousand Dollars ($2,500,000) are rendered against one or more of the Company and its Subsidiaries and which judgments are not, within 30 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 30 days after the expiration of such stay; or (i) the Subsidiary Guaranty shall cease to be in full force and effect or shall be declared by a court or Governmental Authority of competent jurisdiction to be void, voidable or unenforceable against any Subsidiary Guarantor; (ii) the validity or enforceability of the Subsidiary Guaranty against any Subsidiary Guarantor shall be contested by any such Subsidiary Guarantor, or any Subsidiary or Affiliate thereof; or (iii) any Subsidiary Guarantor, or any Subsidiary or Affiliate thereof, shall deny that such Subsidiary Guarantor has any further liability or obligation under the Subsidiary Guaranty; or (k) any person or group of persons (within the meaning of Section 13(d) of the Exchange Act) other than the current board of directors of the Company, shall obtain ownership or control in one or more series of transactions of more than fifty percent (50%) of the Common Stock and fifty percent (50%) of the voting power of the Company entitled to vote in the election of members of the board of directors of the Company; or (l) any security interest or Lien granted to the Collateral Agent pursuant to the Security Documents shall fail at any time to constitute a perfected first priority security interest in or Lien on any material portion of the Collateral subject only to Liens permitted thereunder, or any of the Security Documents shall cease to be in full force and effect in whole or in part for any reason whatsoever except as specified 41 therein, provided that no Event of Default shall have occurred pursuant to this subparagraph (l) if the Company, within five (5) Business Days of receiving notice from the Collateral Agent, takes such steps as are necessary to create a valid and perfected first priority Lien in such Collateral in favor of the Collateral Agent; or (m)if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under section 4042 of ERISA to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate amount of "unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, shall exceed Five Million Dollars ($5,000,000), (iv) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in section 3 of ERISA), (v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any Subsidiary establishes or amends any employee welfare benefit plan (as defined in section 3 of ERISA) that provides post-employment welfare benefits in a manner that would increase the liability of the Company or any Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect. 42 12. REMEDIES ON DEFAULT, ETC. 12.1 Acceleration. (a) If an Event of Default with respect to the Company described in paragraph (g) or paragraph (h) of Section 11 (other than an Event of Default described in clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable. (b) If any other Event of Default has occurred and is continuing, any holder or holders of more than 35% in principal amount of the Notes at the time outstanding may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable. (c) If any Event of Default described in paragraph (a) or (b) of Section 11 has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable. Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus all accrued and unpaid interest thereon, shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. 12.2 Other Remedies. If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. 43 12.3 Rescission. At any time after any Notes have been declared due and payable pursuant to clause (b) or clause (c) of Section 12.1, the holders of not less than 67% in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of, and all interest on such overdue principal, and (to the extent permitted by applicable law), except as otherwise provided in Section 8.6(b), any overdue interest in respect of the Notes, at the Default Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon. 12.4 No Waivers or Election of Remedies, Expenses, etc. No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 15, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys' fees, expenses and disbursements. 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES. 13.1 Registration of Notes. The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company 44 shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes. 13.2 Transfer and Exchange of Notes. Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or his attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), the Company shall execute and deliver, at the Company's expense (except as provided below), one or more new Notes (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit 1. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than One Hundred Thousand Dollars ($100,000), provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than One Hundred Thousand Dollars ($100,000). Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in Section 6.2. 13.3 Replacement of Notes. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original purchaser or a Qualified Institutional Buyer, such Person's own unsecured agreement of indemnity shall be deemed to be satisfactory), or 45 (b) in the case of mutilation, upon surrender and cancellation thereof, the Company at its own expense shall execute and deliver, in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon. 14. PAYMENTS ON NOTES. 14.1 Place of Payment. Subject to Section 14.2, payments of principal, and interest becoming due and payable on the Notes shall be made in New York, New York at the principal office of The Chase Manhattan Bank in such jurisdiction. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction. 14.2 Home Office Payment. So long as you or your nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal and interest by the method and at the address specified for such purpose below your name in Schedule A, or by such other method or at such other address as you shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, you shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1. Prior to any sale or other disposition of any Note held by you or your nominee you will, at your election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to Section 13.2. The Company will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by you under this Agreement and that has made the same agreement relating to such Note as you have made in this Section 14.2. 46 15. EXPENSES, ETC. 15.1 Transaction Expenses. Whether or not the transactions contemplated hereby are consummated, the Company will pay all costs and expenses (including reasonable attorneys' fees of a special counsel and, if reasonably required, local or other counsel) incurred by you and each other Purchaser or holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement or the Notes (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement, the Notes or any other Financing Document or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement, the Notes or any other Financing Document, or by reason of being a holder of any Note, (b) the costs and expenses, including attorney's and financial advisors' fees and costs and expenses, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes and (c) the costs and expenses (including travel expenses) incurred in connection with the review, evaluation, negotiation, analysis, due diligence investigation or other activity related to any of the Financing Documents and the holders' and the Collateral Agent's rights and remedies thereunder (including any such activity occurring during any work-out or restructuring of the transactions contemplated hereby and by the Notes or during a bankruptcy, insolvency, reorganization or similar proceeding). The Company will pay, and will save you and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses if any, of brokers and finders (other than those retained by you). 15.2 Survival. The obligations of the Company under this Section 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or the Notes, and the termination of this Agreement. 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or transfer by you of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any 47 subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of you or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement shall be deemed representations and warranties of the Company under this Agreement. 17. AMENDMENT AND WAIVER. 17.1 Requirements. This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Required Holders, except that (a) no amendment or waiver of any of the provisions of any of Sections 1, 2, 3, 4, 5, 6 and 21, or any defined term (as it is used therein), will be effective as to you unless consented to by you in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest on the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 and 20. 17.2 Solicitation of Holders of Notes. (a) Solicitation. The Company will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 17 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes. (b) Payment. The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes of any 48 waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment. 17.3 Binding Effect, etc. Any amendment or waiver consented to as provided in this Section 17 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term "this Agreement" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. 17.4 Notes held by Company, etc. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding. 18. NOTICES. All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (i) if to you or your nominee, to you or it at the address specified for such communications in Schedule A, or at such other address as you or it shall have specified to the Company in writing, 49 (ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, or (iii) if to the Company, to the Company at its address set forth at the beginning hereof (or if by United States Postal Service to P.O. Box 7000, Broadway, Virginia 22815) to the attention of Robert Ritter, telecopier: (540) 896-0498, or at such other address as the Company shall have specified to the holder of each Note in writing. Notices under this Section 18 will be deemed given only when actually received. 19. REPRODUCTION OF DOCUMENTS. This Agreement and all documents relating hereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the Closing (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original document so reproduced. The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 19 shall not prohibit the Company or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction. 20. SUBSTITUTION OF PURCHASER. You shall have the right to substitute any one of your Affiliates as the purchaser of the Notes that you have agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both you and such Affiliate, shall contain such Affiliate's agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, wherever the word "you" is used in this Agreement (other than in this Section 20), such word shall be deemed to refer to such Affiliate in lieu of you. In the event that such Affiliate is so substituted as a purchaser hereunder and such Affiliate thereafter 50 transfers to you all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, wherever the word "you" is used in this Agreement (other than in this Section 20), such word shall no longer be deemed to refer to such Affiliate, but shall refer to you, and you shall have all the rights of an original holder of the Notes under this Agreement. 21. MISCELLANEOUS. 21.1 Successors and Assigns. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not. 21.2 Payments Due on Non-Business Days; When Payments Deemed Received. (a)Payments Due on Non-Business DaysAnything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day. (b) Payments, When ReceivedAny payment to be made to the holders of Notes hereunder or under the Notes shall be deemed to have been made on the Business Day such payment actually becomes available to such holder at such holder's bank prior to 12:00 noon (local time of such bank). 21.3 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction. 21.4 Construction. Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse 51 compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. 21.5 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. 21.6 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. [Remainder of page intentionally blank. Next page is signature page.] 52 If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterpart of this Agreement and return it to the Company, whereupon the foregoing shall become a binding agreement between you and the Company. Very truly yours, WLR FOODS, INC By:__/s/ Robert T. Ritter__ Name: Robert T. Ritter Title:Vice President The foregoing is hereby agreed to as of the date thereof. NATIONWIDE LIFE INSURANCE COMPANY By:__/s/ James W. Pruden__ Name: James W. Pruden Title:Vice President Municipal Securities NATIONWIDE LIFE INSURANCE COMPANY SEPARATE ACCOUNT OH By:__/s/ James W. Pruden__ Name: James W. Pruden Title:Vice President Municipal Securities EMPLOYERS LIFE INSURANCE COMPANY OF WAUSAU By:__/s/ James W. Pruden__ Name: James W. Pruden Title:Attorney-In-Fact 53 SECURITY LIFE INSURANCE COMPANY By: MIMLIC Asset Management Company By:__/s/ Joseph R. Betlej__ Name: Joseph R. Betlej Title:Vice President GREAT WESTERN INSURANCE COMPANY By: MIMLIC Asset Management Company By:__/s/ Joseph R. Betlej__ Name: Joseph R. Betlej Title:Vice President NATIONAL TRAVELERS LIFE COMPANY By: MIMLIC Asset Management Company By:__/s/ Joseph R. Betlej__ Name: Joseph R. Betlej Title:Vice President PIONEER MUTUAL LIFE INSURANCE COMPANY By: MIMLIC Asset Management Company By:__/s/ Joseph R. Betlej__ Name: Joseph R. Betlej Title:Vice President GUARANTEE RESERVE LIFE INSURANCE COMPANY By: MIMLIC Asset Management Company By:__/s/ R. Worthing__ Name: R. Worthing Title:Vice President 54 THE CATHOLIC AID ASSOCIATION By: MIMLIC Asset Management Company By:__/s/ R. Worthing__ Name: R. Worthing Title:Vice President MUTUAL TRUST LIFE INSURANCE COMPANY By: MIMLIC Asset Management Company By:__/s/ R. Worthing__ Name: R. Worthing Title:Vice President FEDERATED MUTUAL INSURANCE COMPANY By: MIMLIC Asset Management Company By:__/s/ R. Worthing__ Name: R. Worthing Title:Vice President FEDERATED LIFE INSURANCE COMPANY By: MIMLIC Asset Management Company By:__/s/ Loren Haugland__ Name: Loren Haugland Title:Vice President STATE MUTUAL INSURANCE COMPANY By: MIMLIC Asset Management Company By:__/s/ Loren Haugland__ Name: Loren Haugland Title:Vice President 55 COLORADO BANKERS LIFE INSURANCE COMPANY By: MIMLIC Asset Management Company By:__/s/ Loren Haugland__ Name: Loren Haugland Title:Vice President THE RELIABLE LIFE INSURANCE COMPANY & ASSOCIATES RETIREMENT PLAN By: MIMLIC Asset Management Company By:__/s/ Loren Haugland__ Name: Loren Haugland Title:Vice President THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY By: MIMLIC Asset Management Company By:__/s/ Steven M. Laude__ Name: Steven Laude Title:Vice President MIMLIC FUNDING, INC. By: MIMLIC Asset Management Company By:__/s/ Steven M. Laude__ Name: Steven Laude Title:Vice President TEXAS LIFE INSURANCE COMPANY By:__/s/ Charles Scully__ Name: Charles Scully Title:Investment Officer 56 STAUNTON FARM CREDIT, ACA By:__/s/ Richard E. Reeves__ Name: Richard E. Reeves Title:President THE RELIABLE LIFE INSURANCE COMPANY By: MIMLIC Asset Management Company By:__/s/ Dianne Orbison__ Name: Dianne Orbison Title:Vice President 57 EX-2.11 12 FORM VARIABLE RATE NOTE Exhihit 2.11 EXHIBIT 2(a) FORM OF SENIOR NOTE WLR FOODS, INC. VARIABLE RATE SENIOR NOTE DUE DECEMBER 31, 1999 No. R- February ___, 1998 $ PPN: 929286 B* 2 FOR VALUE RECEIVED, the undersigned, WLR FOODS, INC. (herein called the "Company"), a corporation organized and existing under the laws of the Commonwealth of Virginia, hereby promises to pay to _____________________, or registered assigns, the principal sum of ___________ DOLLARS ($__________) on December 31, 1999 unless extended pursuant to Section 8.1(e) of the Note Purchase Agreement (defined below), with interest (computed on the basis of a 365/366 day year and paid for the actual number of days elapsed) on the unpaid balance from the date hereof at an annual rate equal to the Base Rate as provided in the Note Purchase Agreement plus two and twenty-five one-hundredths percent (2.25%), payable in arrears on the last Business Day of each calendar quarter, commencing on the later of March 31, 1998 or the last Business Day of the calendar quarter in which this Note is issued, until the principal hereof shall have become due and payable, and to the extent permitted by law on any overdue payment of principal or interest at a rate per annum equal to the lesser of (i) the Maximum Legal Rate of Interest, or (ii) the then applicable Base Rate with respect to this Note plus four and twenty-five one-hundredths percent (4.25%). Payments of principal of and interest on this Note are to be made in lawful money of the United States of America at the address shown in the register maintained by the Company for such purpose or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreements referred to below. This Note is one of a series of Senior Notes issued pursuant to that certain Note Purchase Agreement, dated as of February 25, 1998 (as from time to time amended, the "Note Purchase Agreement"), between the 1 Company and the purchasers named therein and is entitled to the benefits thereof. Capitalized terms used herein and not defined herein shall have the respective meanings ascribed to them in the Note Purchase Agreement. This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default exists, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price and with the effect provided in the Note Purchase Agreement. THIS NOTE AND THE NOTE PURCHASE AGREEMENT ARE GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. WLR FOODS, INC. By:___________________ Name: Title: 2 EX-2.12 13 FORM SUB GUARANTY AGREEMENT Exhiit 2.12 Exhibit 4.11 (a) Wampler Foods, Inc. Cassco Ice & Cold Storage, Inc. Wampler Supply Company, Inc. Valley Rail Service, Inc. GUARANTY AGREEMENT Dated as of February 25, 1998 In Respect of: WLR FOODS, INC. $42,040,162.73 Variable Rate Senior Notes due December 31, 1999 1 GUARANTY AGREEMENT GUARANTY AGREEMENT (as amended, supplemented, restated or otherwise modified from time to time, this "Guaranty Agreement"), dated as of February 25, 1998, by WAMPLER FOODS, INC., a Virginia corporation, CASSCO ICE & COLD STORAGE, INC., a Virginia corporation, WAMPLER SUPPLY COMPANY, INC., a Virginia corporation, and VALLEY RAIL SERVICE, INC., a Virginia corporation (all of the foregoing, together with their respective successors and assigns, referred to herein, individually, as a "Guarantor," and, collectively, as the "Guarantors"), in favor of each of the Noteholders (as hereinafter defined). PRELIMINARY STATEMENTS: A. Certain capitalized terms used in this Guaranty Agreement shall have the meanings ascribed to them in Section 2.1 hereof. B. WLR Foods, Inc. (together, with its successors and assigns, the "Company"), a Virginia corporation, has heretofore issued its (c) 9.41% Senior Notes due May 1, 2001 (collectively, as in effect immediately prior to the Closing Date, the "Existing 1991 Notes") in the aggregate original principal amount of Thirty Million Dollars ($30,000,000) pursuant to that certain Note Agreement (as amended and in effect immediately prior to the Closing Date, the "Existing 1991 Note Agreement"), dated as of May 1, 1991, between the Company and the purchasers identified on Schedule 1 thereto (the "Existing 1991 Purchasers"), and (d) 7.47% Senior Notes, Series B, due June 1, 2007 (collectively, as in effect immediately prior to the Closing Date, the "Existing 1995 Notes") in the aggregate original principal amount of Twenty-Two Million Dollars ($22,000,000) pursuant to that certain Note Agreement (as amended and in effect immediately prior to the Closing Date, the "Existing 1995 Note Agreement"; and together with Existing 1991 Note Agreement, the "Existing Note Agreements"), dated as of June 1, 1995, between the Company and the purchasers identified on Schedule 1 thereto (the "Existing 1995 Purchasers"; and together with the Existing 1991 Purchasers, the "Purchasers"). The Company wishes to exchange the Existing Notes for new senior notes to be issued to the Noteholders on the terms and conditions contained in the Note Purchase Agreement. 2 C. The Company, pursuant to that certain Note Purchase Agreement (as amended from time to time, the "Note Purchase Agreement"), dated as of February 25, 1998, with the Purchasers, has authorized the issuance and sale of Forty Million Dollars ($40,000,000) in aggregate principal amount of its Variable Rate Senior Notes Due December 31, 1999 (all such notes, whether initially issued, or issued in exchange or substitution for, any such note, in each case in accordance with this Agreement, and as amended from time to time, the "Notes"). C. In order to induce the Purchasers to acquire the Notes, each of the Guarantors has agreed to unconditionally guaranty all of the obligations of the Company under and in respect of the Notes, the Note Purchase Agreement and each of the other Financing Documents pursuant to the terms and provisions hereof. D. To secure their respective obligations hereunder, under the Financing Documents and under the Bank Credit Agreements (as defined in the Note Purchase Agreement) the Guarantors have granted and shall grant, as the case may be, to the Collateral Agent, for the equal and ratable benefit of the Noteholders and the other holders, from time to time of the Notes, a security interest in, and Lien on, all of the right, title and interest of the Guarantors in the collateral more particularly described in the Security Documents. E. All acts and proceedings required by law and by the certificate or articles of incorporation and by-laws of each of the Guarantors, necessary to constitute this Guaranty Agreement a valid and binding agreement for the uses and purposes set forth herein, in accordance with its terms, have been done and taken, and the execution and delivery hereof has been in all respects duly authorized. F. The Guarantors and the Company are operated as part of one consolidated business entity. The Guarantors are directly dependent upon the Company for and in connection with their respective business activities and their respective financial resources. Each of the Guarantors will receive a direct economic and financial benefit from the Debt incurred under the Note Purchase Agreement and the Notes by the Company and under this Guaranty Agreement by the Guarantors, and the incurrence of such Debt is in the best interests of the Guarantors. G. The Company provides financial assistance to each of the Guarantors as needed from time to time and is responsible for supplying the recurring working capital needs and other financial support of the Guarantors on an ongoing basis. H. By agreeing to enter into this Guaranty Agreement and the Security Documents, each of the Guarantors will gain substantial 3 financial and other benefits, both direct and indirect. NOW THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt of which is hereby acknowledged, each Guarantor does hereby covenant and agree, for the benefit of all present and future Noteholders, as follows: AGREEMENT: 1. GUARANTY AND OTHER RIGHTS AND UNDERTAKINGS 1.1 Guarantied Obligations. Each of the Guarantors hereby irrevocably, unconditionally, absolutely, jointly and severally guarantees to each Noteholder, as and for each such Guarantor's own debt, until final and indefeasible payment has been made: (a) the due and punctual payment of the principal of and interest on the Notes at any time outstanding and the due and punctual payment of all other amounts payable, and all other indebtedness owing, by the Company to any Noteholder under the Note Purchase Agreement, the Notes and the other Financing Documents (all such obligations so guarantied are herein collectively referred to as the "Guarantied Obligations"), in each case when and as the same shall become due and payable, whether at maturity, pursuant to mandatory or optional prepayment, by acceleration or otherwise, all in accordance with the terms and provisions thereof; it being the intent of each of the Guarantors that the guaranty set forth in this Section 1 shall be a guaranty of payment and not a guaranty of collection; and (b) the punctual and faithful performance, keeping, observance, and fulfillment by the Company of all duties, agreements, covenants and obligations of the Company contained in the Notes, the Note Purchase Agreement and the other Financing Documents. 1.2 Payments and Performance. In the event that the Company fails to make, on or before the due date thereof, any payment to be made of any principal amount of, or interest on, or in respect of, the Notes or of any other amounts due to any Noteholder under the Notes, the Note Purchase Agreement or any other Financing Document or if the Company shall fail to perform, keep, observe, or fulfill any other obligation referred to in clause (a) or clause (b) of Section 1.1 in the manner provided in the Notes, the Note Purchase Agreement or the other Financing Documents after in 4 each case giving effect to any applicable grace periods or cure provisions or waivers or amendments, each of the Guarantors shall cause forthwith to be paid the moneys, or to be performed, kept, observed, or fulfilled each of such obligations, in respect of which such failure has occurred in accordance with the terms and provisions of the Note Purchase Agreement, the Notes and the other Financing Documents. In furtherance of the foregoing, if an Event of Default shall exist, all of the Guarantied Obligations shall, in the manner and subject to the limitations provided in the Note Purchase Agreement for the acceleration of the Notes (including, without limitation, the provisions related to the annulment thereof), forthwith become due and payable without notice, regardless of whether the acceleration of the Notes shall be stayed, enjoined, delayed or otherwise prevented. Nothing shall discharge or satisfy the obligations of any Guarantor hereunder except the full and final performance and indefeasible payment of the Guarantied Obligations. 1.3 Joint and Several Liability. Each of the Guarantors acknowledges and agrees that the liabilities of each of the Guarantors under this Guaranty Agreement for the due and punctual payment of the Guarantied Obligations and the performance of the other obligations specified in Section 1.1 shall be joint and several. 1.4 Waivers. To the fullest extent permitted by law, each Guarantor does hereby waive: (a) notice of acceptance of this Guaranty Agreement; (b) notice of any purchase or acceptance of the Notes under the Note Purchase Agreement, or the creation, existence or acquisition of any of the Guarantied Obligations, subject to such Guarantor's right to make inquiry of each Noteholder to ascertain the amount of the Guarantied Obligations at any reasonable time; (c) notice of the amount of the Guarantied Obligations, subject to such Guarantor's right to make inquiry of each Noteholder to ascertain the amount of the Guarantied Obligations at any reasonable time; (d) notice of adverse change in the financial condition of the Company, any of the Guarantors or any other guarantor or any other fact that might increase such Guarantor's risk hereunder; 5 (e) notice of presentment for payment, demand, protest, and notice thereof as to the Notes or any other instrument; (f) notice of any Default or Event of Default except such notice as may be specifically required by any one or more of the Financing Documents; (g) all other notices and demands to which such Guarantor might otherwise be entitled (except if such notice or demand is specifically otherwise required to be given to such Guarantor under this Guaranty Agreement or any other Financing Document); (h) the right by statute or otherwise to require any or each Noteholder to institute suit against the Company, the Guarantors or any other guarantor or to exhaust the rights and remedies of any or each Noteholder against the Company, the Guarantors or any other guarantor, such Guarantor being bound to the payment of each and all Guarantied Obligations, whether now existing or hereafter accruing, as fully as if such Guarantied Obligations were directly owing to each Noteholder by such Guarantor; (i) any defense arising by reason of any disability or other defense (other than the defense that the Guarantied Obligations shall have been fully and finally performed and indefeasibly paid) of the Company or by reason of the cessation from any cause whatsoever of the liability of the Company in respect thereof; (j) any stay (except in connection with a pending appeal), valuation, appraisal, redemption or extension law now or at any time hereafter in force that, but for this waiver, might be applicable to any sale of Property of such Guarantor made under any judgment, order or decree based on this Guaranty Agreement, and such Guarantor covenants that it will not at any time insist upon or plead, or in any manner claim or take the benefit or advantage of any such law; and (k) at all times prior to the full and final performance and indefeasible payment of the Guarantied Obligations, any claim of any nature arising out of any right of indemnity, contribution, reimbursement, indemnification or any similar right or any claim of subrogation (whether such right or claim arises under contract, state or federal common law or state or federal statutory law (including, without limitation, Section 509 of the United States Bankruptcy Code)) arising in respect of any payment made under this Guaranty Agreement or in connection with this 6 Guaranty Agreement, against the Company or the estate of the Company (including Liens on the Property of the Company or the estate of the Company), in each case whether or not the Company at any time shall be the subject of any proceeding brought under any bankruptcy, reorganization, compromise, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law, whether now or hereafter in effect, and such Guarantor further agrees that it will not file any claims against the Company or the estate of the Company in the course of any such proceeding or otherwise, and further agrees that each Noteholder may specifically enforce the provisions of this clause (k). 1.5 Releases. Each Guarantor hereby consents and agrees that, without notice to or by such Guarantor and without affecting or impairing the obligations of such Guarantor under this Guaranty Agreement, each Noteholder, by action or inaction, may: (a) compromise or settle, in whole or in part, renew or extend the period of duration or the time for the payment, or discharge the performance of, or may refuse to, or otherwise not, enforce, or may, by action or inaction, release all or any one or more parties to, any one or more of the Notes, this Guaranty Agreement or any of the other Financing Documents; (b) assign, sell or transfer, or otherwise dispose of, any one or more of the Notes; (C) grant waivers, extensions, consents and other indulgences to the Company or any other Guarantor in respect of any one or more of the Notes, the Note Purchase Agreement or any of the other Financing Documents; (d) amend, modify or supplement in any manner and at any time (or from time to time) any one or more of the Notes, this Guaranty Agreement or the other Financing Documents; (e) release or substitute any one or more of the endorsers or guarantors of the Guarantied Obligations whether parties hereto or not; (f) sell, exchange, release or surrender any Property at any time pledged or granted as security in respect of the Guarantied Obligations, whether so pledged or granted by such Guarantor or another guarantor of the obligations of the Company 7 under the Note Purchase Agreement, the Notes and the other Financing Documents, and (g) exchange, enforce, waive, or release, by action or inaction, any security for the Guarantied Obligations or any other guaranty of any of the Notes. 1.6 Marshaling. Each Guarantor consents and agrees: (a) that each Noteholder, and each Person acting for the benefit of the Noteholders, shall be under no obligation to marshal any assets in favor of such Guarantor or against or in payment of any or all of the Guarantied Obligations; and (b) that, to the extent that the Company makes a payment or payments to any Noteholder, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required, for any of the foregoing reasons or for any other reason, to be repaid or paid over to a custodian, trustee, receiver or any other party under any bankruptcy law, common law, or equitable cause, then, to the extent of such payment or repayment, the obligation or part thereof intended to be satisfied thereby shall be revived and continued in full force and effect as if such payment or payments had not been made and such Guarantor shall be primarily liable for such obligation. 1.7 Immediate Liability. Each Guarantor agrees that the liability of such Guarantor in respect of this Section 1 shall be immediate and shall not be contingent upon the exercise or enforcement by any Noteholder or any other Person of whatever remedies such Noteholder or other Person may have against the Company or any other guarantor or the enforcement of any Lien or realization upon any security such Noteholder or other Person may at any time possess. 1.8 Primary Obligations. The guaranty set forth in this Section 1 is a primary and original obligation of each Guarantor and is an absolute, unconditional, continuing and irrevocable guaranty of payment and performance and shall remain in full force and effect without respect to future changes in conditions, including, without limitation, change of law or any invalidity or irregularity with respect to the issuance or assumption of any obligations (including, without limitation, the 8 Notes) of or by the Company or any other guarantor, or with respect to the execution and delivery of any agreement (including, without limitation, the Notes, the Note Purchase Agreement and the other Financing Documents) of the Company or any other Person. 1.9 No Election. Each Noteholder shall, individually or collectively, have the right to seek recourse against each Guarantor to the fullest extent provided for herein for its obligations under this Guaranty Agreement. No election to proceed in one form of action or proceeding, or against any party, or on any obligation, shall constitute a waiver of such Noteholder's right to proceed in any other form of action or proceeding or against other parties unless such Noteholder has expressly waived such right in writing. Specifically, but without limiting the generality of the foregoing, no action or proceeding by or on behalf of any Noteholder against the Company or any other Person under any document or instrument evidencing obligations of the Company or such other Person to or for the benefit of such Noteholder shall serve to diminish the liability of any of the Guarantors under this Guaranty Agreement except to the extent that such Noteholder unconditionally shall have realized payment by such action or proceeding. 1.10 Severability. Each of the rights and remedies granted under this Section 1 to each Noteholder in respect of the Notes held by such Noteholder may be exercised by such Noteholder without notice to, or the consent of or any other action by, any other Noteholder. 1.11 Other Enforcement Rights. Each Noteholder may proceed to protect and enforce this Guaranty Agreement by suit or suits or proceedings in equity, at law or in bankruptcy, and whether for the specific performance of any covenant or agreement contained herein or in execution or aid of any power herein granted; or for the recovery of judgment for the obligations hereby guarantied or for the enforcement of any other proper, legal or equitable remedy available under applicable law. 1.12 Delay or Omission; No Waiver. No course of dealing on the part of any Noteholder or any other Person and no delay or failure on the part of any Noteholder or such other Person to exercise any right under this Guaranty Agreement shall impair such right or operate as a waiver of such right or otherwise prejudice any Noteholder's rights, powers and remedies hereunder or under any other Financing Document. Every right and remedy given by 9 this Guaranty Agreement or by law to any Noteholder or any other Person may be exercised from time to time as often as may be deemed expedient by such Noteholder or other Person. 1.13 Restoration of Rights and Remedies. If any Noteholder shall have instituted any proceeding to enforce any right or remedy under this Guaranty Agreement or under any Note held by such Noteholder and such proceeding shall have been discontinued or abandoned for any reason, or shall have been determined adversely to such Noteholder, then and in every such case each such Noteholder, the Company and the Guarantors shall, except as may be limited or affected by any determination in such proceeding, be restored severally and respectively to its respective former position hereunder and thereunder, and thereafter the rights and remedies of such Noteholders shall continue as though no such proceeding had been instituted. 1.14 Cumulative Remedies. No remedy under this Guaranty Agreement or any other Financing Document is intended to be exclusive of any other remedy, but each and every remedy shall be cumulative and in addition to any and every other remedy given under this Guaranty Agreement or under any other Financing Document. 1.15 Limitation on Guarantied Obligations. It is the intention of the Guarantors and each Noteholder that the maximum amount of the obligations of each such Guarantor hereunder shall be equal to, but not in excess of, the amount equal to the lesser of (a) its Guarantied Obligations, and (b) the maximum amount permitted by applicable law. To that end, with respect to the determination of the "maximum amount permitted by applicable law," but only to the extent such obligations would otherwise be avoidable, the obligations of the Guarantors hereunder shall be limited to the maximum amount that, after giving effect to the incurrence thereof, would not render any such Guarantor insolvent or unable to pay its debts (within the meaning of Title 11 of the United States Code or as defined in the analogous applicable law) as they mature or leave such Guarantor with an unreasonably small capital. The need for any such limitation shall be determined, and any such needed limitation shall be effective, at the time or times that such Guarantor is deemed, under applicable law, to incur obligations hereunder. Any such limitation shall be apportioned 10 amongst the Guarantied Obligations owed to the Noteholders pro rata. This Section 1.15 is intended solely to preserve the rights of each Noteholder hereunder to the maximum extent permitted by applicable law, and neither the Guarantors nor any other Person shall have any rights under this Section 1.15 that it would not otherwise have under applicable law. For the purposes of this Section 1.15, "insolvency", "unreasonably small capital" and "inability to pay debts (as so defined) as they mature" shall be determined in accordance with applicable law. 1.16 Survival. So long as the Guarantied Obligations shall not have been fully and finally performed and indefeasibly paid, the obligations of each Guarantor under this Section 1 shall survive the transfer and payment of any Note and the payment in full of all the Notes. 1.17 No Setoff, Counterclaim or Withholding; Gross-Up. Except as otherwise required by law, each payment by each Guarantor shall be made without setoff or counterclaim and without withholding for or on account of any present or future taxes imposed by or within the United States of America, or by or within any other jurisdiction, or any political subdivision or taxing authority thereof or therein. If any such withholding is so required, such Guarantor will make the withholding, pay the amount withheld to the appropriate Governmental Authority before penalties attach thereto or interest accrues thereon and pay each Noteholder the same amount that such Noteholder would be entitled to receive from such Guarantor hereunder if such withholding had not been required. 1.18 Maintenance of Office. Each Guarantor will maintain an office at the address of such Guarantor referred to in Section 3.3 hereof, or in any Acknowledgment and Agreement delivered in respect of this Guaranty Agreement, as the case may be, where notices, presentations and demands in respect hereof or the Guarantied Obligations may be made upon such Guarantor. Such office will be maintained at such address until such time as such Guarantor shall notify each Noteholder of any change of location of such office, which will in any event be located in the United States of America. 1.19 Representations and Warranties; Covenants Contained in Note Purchase Agreement. Without in any way limiting the generality of the warranties and representations contained in Section 5 of the Note Purchase Agreement, 11 each of such warranties and representations is, insofar as it refers to a Guarantor specifically or to the Obligors or any Subsidiary generally, true and correct with respect to each Guarantor. 2. INTERPRETATION OF THIS GUARANTY AGREEMENT. 2.1 Terms Defined. As used in this Guaranty Agreement, the following terms have the respective meanings specified below or set forth in the section of this Guaranty Agreement referred to immediately following such term (such definitions, unless otherwise expressly provided, to be equally applicable to both the singular and plural forms of the terms defined): Closing Date -- has the meaning assigned to such term in the Note Purchase Agreement. Collateral Agent -- has the meaning assigned to such term in the Note Purchase Agreement. Company -- has the meaning assigned to such term in Preliminary Statement B. Debt -- has the meaning assigned to such term in the Note Purchase Agreement. Default -- has the meaning assigned to such term in the Note Purchase Agreement. Event of Default -- has the meaning assigned to such term in the Note Purchase Agreement. Existing 1991 Noteshas the meaning assigned to such term in Preliminary Statement B. Existing 1991 Note Purchase Agreementhas the meaning assigned to such term in Preliminary Statement B. Existing 1991 Purchasershas the meaning assigned to such term in Preliminary Statement B. Existing 1995 Noteshas the meaning assigned to such term in Preliminary Statement B. Existing 1995 Note Purchase Agreementhas the meaning assigned to such term in Preliminary Statement B. 12 Existing 1995 Purchasershas the meaning assigned to such term in Preliminary Statement B. Financing Documents -- has the meaning assigned to such term in the Note Purchase Agreement. Governmental Authority -- has the meaning assigned to such term in the Note Purchase Agreement. Guarantied Obligations -- has the meaning assigned to such term in Section 1.1. Guarantor; Guarantors -- has the meaning assigned to such term in the introductory paragraph hereof. Guaranty Agreement, this -- has the meaning assigned to such term in the introductory paragraph hereof. Lien -- has the meaning assigned to such term in the Note Purchase Agreement. Note Purchase Agreement -- has the meaning assigned to such term in Preliminary Statement C. Noteholder -- means, at any time, each Person that is the holder of any Note at such time. Notes -- has the meaning assigned to such term in Preliminary Statement C. Obligors -- means any one or all of the Company and the Guarantors, as the context may require. Person -- has the meaning assigned to such term in the Note Purchase Agreement. Property -- has the meaning assigned to such term in the Note Purchase Agreement. Purchasers -- has the meaning assigned to such term in Recital B. Security Documents -- has the meaning assigned to such term in the Note Purchase Agreement. Subsidiary has the meaning assigned to such term in the Note Purchase Agreement. 13 2.2 Directly or Indirectly. Where any provision herein refers to action to be taken by any Person, or that such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person, including, without limitation, actions taken by or on behalf of any partnership in which such Person is a general partner. 2.3 Section Headings and Construction. (a) Section Headings, etc. The titles of the Sections appear as a matter of convenience only, do not constitute a part hereof and shall not affect the construction hereof. The words "herein," "hereof," "hereunder" and "hereto" refer to this Guaranty Agreement as a whole and not to any particular Section or other subdivision. (b) Construction. Each covenant contained herein shall be construed (absent an express contrary provision herein) as being independent of each other covenant contained herein, and compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with one or more other covenants. 2.4 Separate Instruments. Notwithstanding that each of the Guarantors is a party to this Guaranty Agreement, each of the Guarantied Obligations of each Guarantor hereunder shall be deemed to be contained in a separate instrument and any invalidity or unenforceability of this Guaranty Agreement in respect of any Guarantor shall have no effect on the validity or enforceability of this Guaranty Agreement in respect of the other Guarantors. 3. MISCELLANEOUS. 3.1 Successors and Assigns. Whenever any Guarantor or any of the parties to any of the other Financing Documents is referred to, such reference shall be deemed to include the successors and assigns of such party, and all the covenants, promises and agreements contained in this Guaranty Agreement by or on behalf of each Guarantor shall bind the successors and assigns of such Guarantor and shall inure to the benefit of each of the Noteholders from time to time whether so expressed or not and whether or not an assignment of the rights hereunder shall have been delivered in connection with any assignment or other transfer of Notes. 14 3.2 Partial Invalidity. The unenforceability or invalidity of any provision or provisions hereof shall not render any other provision or provisions contained herein unenforceable or invalid. 3.3 Communications. All communications provided for hereunder to any Guarantor or any Noteholder shall be in writing and to the applicable address or addresses, and with the effect, provided for in Annex 1 hereto or in any Acknowledgment and Agreement delivered in respect of this Guaranty Agreement, as the case may be. 3.4 Governing Law. THIS GUARANTY AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO ANY CONFLICTS-OF-LAW PRINCIPLES). 3.5 Amendment. This Guaranty Agreement may only be amended by written instrument executed and delivered by all of the Guarantors and all of the Noteholders. 3.6 Counterparts. This Guaranty Agreement may be executed and delivered in any number of counterparts, each of such counterparts constituting an original but altogether only one Guaranty Agreement. 3.7 Benefits of Guaranty Agreement Restricted to Noteholders. Nothing express or implied in this Guaranty Agreement is intended or shall be construed to give to any Person other than the Guarantors and the Noteholders any legal or equitable right, remedy or claim under or in respect hereof or any covenant, condition or provision contained herein; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Guarantors and the Noteholders. 3.8 Survival of Representations and Warranties; Entire Agreement. All representations and warranties contained herein or made in writing by the Guarantors in connection herewith shall survive the execution and delivery hereof and of each other Financing Document. This Guaranty Agreement constitutes the final written expression of all of the terms hereof and is a complete and exclusive statement of those terms. 15 3.9 Additional Parties. Any Person which becomes a Subsidiary after the Closing Date and which is required, pursuant to Section 9.6 of the Note Purchase Agreement, to become a party to this Guaranty Agreement shall execute and deliver an acknowledgement and agreement in the form of Exhibit A hereto and, upon delivery thereof, such Subsidiary shall become a "Guarantor" under this Guaranty Agreement for all purposes and shall be deemed to have made the covenants and agreements of each Guarantor set forth herein as of the date of the execution and delivery of such acknowledgment and agreement and shall comply with all other obligations to be performed by a Guarantor party hereto. 16 IN WITNESS WHEREOF, each Guarantor has caused this Guaranty Agreement to be executed on its behalf by one of its duly authorized officers as of the date first set forth above. WAMPLER FOODS, INC. By:_______________ Name: Title: CASSCO ICE & COLD STORAGE, INC. By:________________ Name: Title: WAMPLER SUPPLY COMPANY, INC. By:_________________ Name: Title: VALLEY RAIL SERVICE, INC. By:___________________ Name: Title: 17 EXHIBIT A FORM OF ACKNOWLEDGMENT AND AGREEMENT Guaranty Agreement, dated as of February 25, 1998, delivered by each of the Guarantors of the Variable Rate Senior Notes due December 31, 1999 issued by WLR Foods, Inc. (as amended from time to time, the "Guaranty Agreement") [DATE] Reference is made to Section 3.9 of the Guaranty Agreement as defined above; capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in, or by reference in, the Guaranty Agreement. The undersigned is a Subsidiary and, in accordance with the terms of the Note Purchase Agreement, is required to become a party to the Guaranty Agreement. By execution and delivery of this acknowledgment and agreement the undersigned hereby becomes a party to the Guaranty Agreement for all purposes, makes the covenants and agreements of each Guarantor set forth in the Guaranty Agreement as of the date hereof and agrees to comply with all other obligations to be performed by a Guarantor under the Guaranty Agreement. This acknowledgment and agreement hereby incorporates by reference the provisions of the Guaranty Agreement, which are deemed to be a part hereof, and this acknowledgment and agreement shall also be deemed to be a part of the Guaranty Agreement. [NAME OF GUARANTOR] By:______________________ Name: Title: [Address of Guarantor] Tel.: [ ] Fax.: [ ] 18 ANNEX 1 As to each Guarantor: Wampler Foods, Inc. [Address] Tel.: [ ] Fax.: [ ] Cassco Ice & Cold Storage, Inc. [Address] Tel.: [ ] Fax.: [ ] Wampler Supply Company, Inc. [Address] Tel.: [ ] Fax.: [ ] Valley Rail Service, Inc. [Address] Tel.: [ ] Fax.: [ ] 19 EXHIBIT 4.11(b) [FORM OF SUBSIDIARY VICE PRESIDENT/TREASURER CERTIFICATE] [Name of Subsidiary Guarantor] CERTIFICATE OF VICE PRESIDENT/TREASURER I, ______ hereby certify that I am the [Vice President/Treasurer of [NAME OF SUBSIDIARY GUARANTOR] (the "Guarantor"), a Virginia corporation, and that, as such, I have responsibility for the management of the financial affairs of the Guarantor and the preparation of the financial statements of the Guarantor and its subsidiaries, am familiar with the matters herein certified, and I am authorized to execute and deliver this Certificate in the name and on behalf of the Guarantor, and that: 4. This certificate is being delivered pursuant to Section 4.11(b) of the Note Purchase Agreement (the "Note Purchase Agreement"), dated as of February 25, 1998, among WLR Foods, Inc. (the "Company") and each of the purchasers listed on Schedule A thereto (collectively, the "Purchasers"). The terms used in this Certificate and not defined herein have the respective meanings specified in the Note Purchase Agreement. Pursuant to the Note Purchase Agreement, the Company will issue (a) Forty-Two Million Forty Thousand One Hundred Sixty-Two and 73/00 Dollars ($42,040,162.73) in aggregate principal amount of its Variable Rate Senior Notes Due December 31, 1999 (all such notes, whether initially issued, or issued in exchange or substitution for, any such note, in each case in accordance with this Agreement, and as amended from time to time, the "Notes"), and (b) the Guarantor will enter into a certain Guaranty Agreement, dated as of February 25, 1998 (the "Guaranty Agreement"), to unconditionally guaranty the obligations evidenced by the Notes. 5. I have reviewed the most current financial statements of the Guarantor and I have prepared a pro forma balance sheet (the "Balance Sheet") of the Guarantor, which Balance Sheet gives effect to the transactions contemplated by the Guaranty Agreement and the Note Purchase Agreement. 6. In connection with the preparation of the Balance Sheet, I have made such investigation and inquiries as I deem necessary and prudent therefor. The assumptions upon which the Balance Sheet is based are stated therein, which assumptions are reasonable. 20 Based on the foregoing, I have reached the following conclusions: The execution and delivery of the Guaranty Agreement by the Guarantor and the guaranty of the obligations of the Guarantor therein pursuant to the terms and provisions of the Guaranty Agreement will not render the Guarantor "insolvent," nor will the value of the liabilities of the Guarantor, determined in accordance with generally accepted accounting principles, immediately thereafter exceed the value of the assets of the Guarantor, determined in accordance with generally accepted accounting principles, in each case after given effect to the transactions contemplated by the Guaranty Agreement and the Note Purchase Agreement. In this context, "insolvent" means that (a) the present fair salable value of assets of the Guarantor is less than the amount that will be required to pay the probable liability on existing debts of the Guarantor as they become absolute and matured, or (b) the Guarantor will not otherwise be able to pay its debts as they become absolute and matured. I also understand that the term "debts" includes any legal liability, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent. IN WITNESS WHEREOF, I have executed this Certificate in the name and on behalf of the Guarantor on February ___, 1998. [SUBSIDIARY GUARANTOR] By:_______________ Name: Title: 21 EX-27 14 FINANCIAL DATA SCHEDULE
5 3-MOS JUN-27-1998 MAR-28-1998 284 0 60,584 1,234 142,357 206,564 361,464 206,967 386,226 77,629 201,484 0 0 67,658 37,796 386,226 215,133 215,133 203,151 203,151 23,522 57 6,262 (17,600) (6,336) (11,264) 0 0 0 (11,264) (.69) (.69)
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