-----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, QZXTjNdznv5G64eXRt7ZYSxiHk+ARwdzdHC50xo8LXxBqgPg91ms1YQx1Z25ezZZ Vda2Dg2NV0wEzV9wYC/0gQ== /in/edgar/work/20000728/0000916641-00-001017/0000916641-00-001017.txt : 20000921 0000916641-00-001017.hdr.sgml : 20000921 ACCESSION NUMBER: 0000916641-00-001017 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20000430 FILED AS OF DATE: 20000728 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SMITHFIELD FOODS INC CENTRAL INDEX KEY: 0000091388 STANDARD INDUSTRIAL CLASSIFICATION: [2011 ] IRS NUMBER: 520845861 STATE OF INCORPORATION: VA FISCAL YEAR END: 0427 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-15321 FILM NUMBER: 681324 BUSINESS ADDRESS: STREET 1: 200 COMMERCE STREET STREET 2: 999 WATERSIDE DRIVE CITY: SMITHFIELD STATE: VA ZIP: 23430 BUSINESS PHONE: 7573653000 MAIL ADDRESS: STREET 1: 900 DOMINION TOWER STREET 2: 999 WATERSIDE DRIVE CITY: NORFOLK STATE: VA ZIP: 23510 FORMER COMPANY: FORMER CONFORMED NAME: LIBERTY EQUITIES CORP DATE OF NAME CHANGE: 19710221 FORMER COMPANY: FORMER CONFORMED NAME: LIBERTY REAL ESTATE TRUST DATE OF NAME CHANGE: 19661113 10-K405 1 0001.txt FORM 10-K405 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________ FORM 10-K _______________________ (Mark One) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended April 30, 2000 [_] 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: 0-2258 SMITHFIELD FOODS, INC. (Exact name of registrant as specified in its charter) Virginia 52-0845861 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 200 Commerce Street 23430 Smithfield, Virginia (Zip Code) (Address of principal executive offices) (757) 365-3000 (Registrant's telephone number, including area code) __________________________ Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, $.50 par value per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None (Title of Class) Indicate by check 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 aggregate market value of the shares of Registrant's Common Stock held by non-affiliates as of July 12, 2000 was approximately $1,123,815,666. This figure was calculated by multiplying (i) the $27.19 last sales price of Registrant's Common Stock as reported on the New York Stock Exchange on July 12, 2000 by (ii) the number of shares of Registrant's Common Stock not held by any officer or director of the Registrant or any person known to the Registrant to own more than five percent of the outstanding Common Stock of the Registrant. Such calculation does not constitute an admission or determination that any such officer, director or holder of more than five percent of the outstanding shares of Common Stock of the Registrant is in fact an affiliate of the Registrant. At July 12, 2000, 54,731,570 shares of the Registrant's Common Stock were outstanding (including for this purpose 691,636 Exchangeable Shares issued by the Registrant's subsidiary Smithfield Canada Limited). Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference is Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] DOCUMENTS INCORPORATED BY REFERENCE Part III incorporates certain information by reference from the Registrant's definitive proxy statement to be filed with respect to its Annual Meeting of Shareholders to be held on August 29, 2000. TABLE OF CONTENTS
Item Number Page Part I ITEM 1. BUSINESS.............................................................................. 1 General........................................................................................ 1 Business Strategy.............................................................................. 2 Historical Expansion and Acquisitions.......................................................... 2 Meat Processing Group.......................................................................... 3 Hog Production Group........................................................................... 7 Environmental Stewardship...................................................................... 8 Regulation..................................................................................... 8 Employees...................................................................................... 9 ITEM 2. PROPERTIES............................................................................ 10 ITEM 3. LEGAL PROCEEDINGS..................................................................... 10 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................... 11 ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY..................................................... 11 Part II ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.................... 12 ITEM 6. SELECTED FINANCIAL DATA............................................................... 12 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 12 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK............................ 20 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................................... 20 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.. 20 Part III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY....................................... 21 ITEM 11. EXECUTIVE COMPENSATION................................................................ 21 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........................ 21 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................................ 21 Part IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K...................... 21 SIGNATURES...................................................................................... 26 INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE.................................. 27
PART I Item 1. Business General Smithfield Foods, Inc. is the world's largest pork processor and hog producer. As a holding company, Smithfield Foods conducts its business through two groups, the Meat Processing Group and the Hog Production Group, each comprised of a number of subsidiaries. In this discussion, the terms "Smithfield Foods" and "the Company" include subsidiaries, unless otherwise indicated. Meat Processing Group The Meat Processing Group produces domestically and internationally a wide variety of fresh pork and processed meat products and markets them nationwide and to over 25 foreign markets, including Canada, Poland, France, Japan and Mexico. The Meat Processing Group consists primarily of six domestic processing subsidiaries and four international pork processing entities. All these subsidiaries are wholly-owned except as indicated below. Collectively, these subsidiaries currently operate 48 slaughtering and further processing plants. Meat Processing Group
Subsidiary Headquarters Fiscal 2000 Sales - ---------- ------------ ----------------- John Morrell & Co. Cincinnati, Ohio $1.5 billion The Smithfield Packing Company, Incorporated Smithfield, Virginia $1.5 billion Schneider Corporation (63%-owned) Kitchener, Ontario, Canada $640 million Gwaltney of Smithfield, Ltd. Smithfield, Virginia $540 million Animex (85%-owned) Warsaw, Poland $345 million Lykes Meat Group, Inc. Plant City, Florida $183 million Patrick Cudahy Incorporated Cudahy, Wisconsin $179 million Societe Bretonne de Salaisons Lampaul Guimiliau, France $87 million North Side Foods Corp. Arnold, Pennsylvania $71 million Societe Financiere de Gestion et de Participation Quimper and Lyon, France $70 million*
_____________________ *Estimated annualized sales Hog Production Group To complement its processing operations, the Company has vertically integrated into hog production through its Hog Production Group, which currently provides the Meat Processing Group with approximately 50% of its live hog requirements. The Hog Production Group operates numerous production facilities through three wholly-owned subsidiaries headquartered in North Carolina as indicated below. Hog Production Group
Annualized Market Hog Subsidiary Principal Locations Number of Sows Production - ---------- ------------------- -------------- ---------- Carroll's Foods, Inc. North Carolina and Virginia 180,000 2.9 million Brown's of Carolina, North Carolina, Utah, Colorado and 170,000 2.7 million Inc.* South Carolina Murphy Farms, Inc. North Carolina, Missouri, Oklahoma, 345,000 6.0 million Illinois, South Dakota and Texas
* Numbers include 100% of the sows and market hogs produced by Circle Four Farms, LLC, a wholly-owned subsidiary of Smithfield Foods. 1 ================================================================================ The discussion below of the Company's business first summarizes the Company's strategic initiatives and its historical expansion through a combination of internal growth and acquisitions. We will next discuss the Meat Processing Group's United States processing operations and international processing operations, then the Hog Production Group. Business Strategy The Company's business is based around four strategic initiatives: . vertical integration into hog production through Company-owned hog production operations and long-term partnerships and alliances with other large and efficient hog producers; . use of genetics which produce hogs that are among the leanest commercially available to enable the Company to market highly differentiated pork products; . continued growth through opportunistic strategic acquisitions, both domestically and internationally; and . balancing fresh pork and processed meats to maximize the value from all fresh pork cuts. Historical Expansion and Acquisitions Since 1975, when current management assumed control, Smithfield Foods has expanded both its production capacity and its markets through a combination of strong internal growth and the acquisition of regional and multi-regional companies with well-recognized brand identities. Beginning in fiscal 1999, the Company also expanded its operations internationally through acquisitions in France, Canada and Poland. In fiscal 2000, the Company made another acquisition in France and entered into a joint venture in Mexico. United States Meat Processing Acquisitions In fiscal 1982, the Company acquired Gwaltney, then Smithfield Packing's principal Mid-Atlantic competitor. This acquisition doubled the Company's sale and slaughter capacity and added several popular lines of branded products along with a highly efficient hot dog and luncheon meats production facility. The proximity of Gwaltney to Smithfield Packing allowed for synergies and cost savings in manufacturing, purchasing, engineering and transportation. This combination set the stage for a series of acquisitions of smaller regional processors with widely recognized brands, including Patrick Cudahy, Esskay, Mash's and Valleydale. In December 1995, the Company acquired John Morrell, a major Midwestern pork processor with primary markets in the Midwest, Northeast and Western United States. This acquisition changed the Company's character from a large multi- regional pork processor to one with national distribution. It also doubled the Company's sales and slaughter capacity, added several popular lines of branded processed meat products along with four efficient processing facilities and more than doubled the Company's international sales. The Company believes that John Morrell's strength in smoked sausage, hot dogs, luncheon meats, bacon and smoked hams complements the strong smoked meats, hot dog and bacon business of the Company's Eastern operations. The acquisition of John Morrell also presented substantial opportunities for cost savings in the areas of processing, marketing, purchasing and distribution. In November 1996, the Company acquired the assets and businesses of Lykes. Lykes is a pork processor with primary markets in the South and Southeast. Lykes produces branded processed meats, including bacon, hot dogs and breakfast and dinner sausages under the Lykes and Sunnyland brands. In October 1998, the Company acquired all of the assets and business of North Side, a major domestic supplier of precooked sausage to McDonald's Corporation. 2 International Meat Processing Acquisitions In September 1998, the Company acquired all of the capital stock of Societe Bretonne de Salaisons, one of the largest private label manufacturers of ham, pork shoulder and bacon products in France. In November 1998, the Company acquired a 63% stake in Schneider Corporation of Canada. The Schneiders brand is the number one Canadian brand in hot dogs, luncheon meats and premium hams. Between September 1998 and June 1999, the Company acquired an 85% stake in Animex, the largest meat and poultry processing company in Poland. Animex produces a very broad line of fresh and processed meats and poultry. In August 1999, the Company acquired the capital stock of Societe Financiere de Gestion et de Participation, a private label processed meats manufacturer in France. In September 1999, the Company acquired a 50% stake in Agroindustrial del Noroeste, a Mexican meat processing and hog production venture. Hog Production Acquisitions In January 1999, Brown's acquired a 12,000 sow operation in Colorado to supply hogs to John Morrell. In May 1999, the Company acquired Carroll's Foods and related companies and assets, including approximately 180,000 sows. Carroll's Foods was a longtime hog production partner of the Company. Through a 49%-owned joint venture, Carroll's Foods is also among the nation's largest turkey processors. In January 2000, the Company acquired Murphy Family Farms and certain related companies and assets, including approximately 345,000 sows. Murphy Farms was a longtime hog production partner of the Company. Meat Processing Group This discussion of the Meat Processing Group first provides an overview of the Group's proportionate revenues from fresh pork, processed meats and other items. Next, the discussion describes the Meat Processing Group's United States processing operations and then its international processing operations. Revenues by Source The following table shows for the fiscal periods indicated the percentages of Meat Processing Group revenues derived from fresh pork, processed meats and other products. The meat industry is generally characterized by narrow margins; however, profit margins on processed meats are greater than profit margins on fresh pork and on other products. 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- Processed Meats 50% 46% 40% 37% 37% Fresh Pork 44% 49% 56% 59% 59% Other Products 6% 5% 4% 4% 4% ---- ---- ---- ---- ---- 100% 100% 100% 100% 100% ==== ==== ==== ==== ==== The increase for processed meats since fiscal 1997 reflect s the Company's acquisitions of processing operations and, prior to fiscal 2000, the impact of lower fresh pork prices. United States Processing Operations Fresh Pork Products. The Company is the largest fresh pork processor in the world, producing in fiscal 2000 approximately 2.8 billion pounds of which 2.4 billion pounds were produced in the United States. The Meat Processing Group's domestic operations slaughter hogs at five plants (three in the Southeast and two in the 3 Midwest), with a current aggregate slaughter capacity of 78,300 hogs per day. A substantial portion of the Meat Processing Group's fresh pork is sold to retail customers as unprocessed, trimmed cuts such as loins (including roasts and chops), butts, picnics and ribs. The Meat Processing Group also sells hams, bellies and trimmings to other further processors. The Meat Processing Group is putting greater emphasis on the sale of value-added, higher margin fresh pork products, such as boneless loins, hams, butts and picnics. In addition, the Company's Hog Production Group provides the Meat Processing Group with raw material of much higher quality than that generally available through open market purchases. The Company is marketing on a national basis an extensive product line of NPD fresh pork cuts (including boneless loins, shoulder cuts, chops, ribs and processed and cubed pork) under the Smithfield Lean Generation Pork brand to selected retail chains and institutional foodservice customers. Several of the subsidiaries have also developed a case-ready pork program designed to supply supermarket chains with pre-packaged, weighed, labeled and pre-priced fresh pork ready for immediate sale to the consumer. Management believes that these initiatives, over time, will result in greater brand identification and higher margins for the Company's fresh pork products. In fiscal 2000, case-ready volumes reached 23 million pounds which is up 139% from fiscal 1999. Management expects case-ready volumes to reach 75 million pounds in fiscal 2001. The Company has prepared to increase case-ready volumes by opening four new case- ready facilities in fiscal 2000, one located in the North, two in the South and another in the Midwest. For more on NPD pork, see "Business--Hog Production Group" below. Processed Meats Products. The Company manufactures a wide variety of processed meats, including smoked and boiled hams, bacon, sausage, hot dogs (pork, beef and chicken), deli and luncheon meats and specialty products such as pepperoni and dry salami. In fiscal 2000, the Company's U.S. operations produced 1.6 billion pounds of processed meat products. The Company markets its domestic processed meat products under labels that include Smithfield Premium, Gwaltney, Patrick Cudahy and John Morrell, as well as Dinner Bell, Ember Farms, Esskay, Great, Kretschmar, Lykes, Patrick's Pride, Rath and Valleydale. The Company also sells a substantial quantity of processed meats as private label products. The Company believes it is one of the largest producers of smoked hams and picnics in the United States. In recent years, as consumers have become more health conscious, the Company has broadened its product line to include leaner fresh pork products as well as fat-free, lower fat and lower salt processed meats. The Company also markets a lower-fat line of value-priced luncheon meats, smoked sausage and hot dogs, as well as fat-free hot dogs, fat-free deli hams and 40-percent-lower-fat bacon. Management believes that leaner pork products combined with the industry's efforts to heighten public awareness of pork as an attractive protein source have led to increased consumer demand. Raw Materials. The Meat Processing Group's primary raw material is live hogs. Historically, hog prices have been subject to substantial fluctuations. In addition, hog prices tend to rise seasonally as hog supplies decrease during the hot summer months and tend to decline as supplies increase during the fall. This is due to lower farrowing performance during the winter months and slower animal growth rates during the hot summer months. Hog supplies, and consequently prices, are also affected by factors such as corn and soybean meal prices, weather and farmers' access to capital. The Meat Processing Group purchases approximately 50% of its live hog requirements from the Hog Production Group. In addition, the Company has established multi-year agreements with Maxwell Foods, Inc. and Prestage Farms, Inc. which provide the Company with a stable supply of high-quality hogs at market-indexed prices. These producers supply approximately 14% of the hogs currently processed by the Company. The Meat Processing Group also purchases hogs on a daily basis at Southeastern and Midwestern slaughter plants, at Company-owned buying stations in three Southeastern and five Midwestern states and from certain Canadian sources. The Company also purchases fresh pork from other meat processors to supplement its processing requirements. Additional purchases include raw beef, poultry and other meat products to add to the Company's sausage, hot dogs and luncheon meats. Such meat products and other materials and supplies, including seasonings, smoking and curing agents, sausage casings and packaging materials are readily available from numerous sources at competitive prices. 4 Customers and Marketing. The Meat Processing Group has significant market presence nationwide, and strong market positions in the Mid-Atlantic, Southeast, South and Midwest. The Company's fundamental marketing strategy is to sell large quantities of value-priced processed meat products as well as fresh pork to national and regional supermarket chains, wholesale distributors, the foodservice industry (fast food, restaurant and hotel chains, hospitals and other institutional customers) and export markets. Management believes that this marketing approach reaches the largest number of value-conscious consumers without requiring large advertising and promotional campaigns. The Company uses both in-house salespersons as well as independent commission brokers to sell its products. In fiscal 2000, the Company sold its products to more than 3,500 customers, none of whom accounted for as much as 10% of the Company's revenues. The Company has no significant or seasonally variable backlog because most customers prefer to order products shortly before shipment, and therefore, do not enter into formal long-term contracts. Management believes that its registered trademarks have been important to the success of its branded fresh pork processed meats products. In a number of markets, the Company's brands are among the leaders in selected product categories. The Meat Processing Group in recent years has emphasized growth in export sales. In fiscal 2000, export sales comprised approximately 5% of the Company's total sales. The Company provides Japanese markets with a line of unique, branded fresh pork products, as well as other chilled and frozen unbranded fresh pork products. In connection with export sales to Japan, the Company maintains a distributorship arrangement with Sumitomo Corporation of America. The Company also had export sales to Mexico and to more than two dozen other foreign countries in fiscal 2000. The Company expects continued growth in its export sales for the foreseeable future. Export sales are subject to factors beyond the Company's control, such as tariffs, exchange rate fluctuations and changes in governmental policies. The Company conducts all of its export sales in U.S. dollars and therefore bears no currency exchange risk. The Company's processed meats business is somewhat seasonal in that, traditionally, the periods of higher sales for hams are the holiday seasons such as Thanksgiving, Christmas and Easter, and the periods of higher sales of smoked sausage, hot dogs and luncheon meats are the summer months. The Company typically builds substantial inventories of hams in anticipation of its seasonal holiday business. The Company uses recognized price risk management and hedging techniques to enhance sales and to reduce the effect of adverse price changes on the Company's profitability. The Company's price risk management and hedging activities currently are utilized in the areas of forward sales, hog production margin management, procurement of raw materials (ham and bacon) for seasonal demand peaks, inventory hedging, hog contracting and truck fleet fuel purchases. For further information see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Risk Management." In April 2000, the Company announced a plan to form a joint venture with IBP, inc., Cargill, Incorporated and its red meat business Excel, Tyson Foods, Inc., GoldKist, Inc. and Farmland Industries Inc.'s red meat business (Farmland National Beef and Farmland Foods) to establish an online business-to-business marketplace for meat and poultry products and related services and information. The marketplace will be a neutral web-based exchange providing a single, convenient place for buyers and sellers of meat and poultry products to connect with one another. The exchange is expected to promote efficiencies in the market by facilitating faster and more direct product comparison and price negotiation, reducing paperwork and other duplicative work. Trademarks. The Company owns and uses numerous marks. These marks are registered trademarks of the Company or are otherwise subject to protection under applicable intellectual property laws. The Company considers these marks and the accompanying goodwill and customer recognition valuable and material to its business. Distribution. The Meat Processing Group uses a private fleet of leased tractors and trailers and independent common carriers to distribute both fresh pork and processed meats to its customers, as well as to move raw material between plants for further processing. The Company coordinates deliveries and uses backhauling to reduce overall transportation costs. The Company distributes its products directly from certain of its plants and from leased distribution centers in California, Connecticut, Indiana, Kansas, Missouri, North Carolina and Texas. The Company also operates distribution centers adjacent to its plants in Bladen County, North Carolina, and Sioux Falls, South Dakota. 5 Competition. The protein industry generally, and the pork processing industry in particular, are highly competitive. The Company's products compete with a large number of other protein sources, including beef, chicken, turkey and seafood, but the Company's principal competition comes from other pork processors. Management believes that the principal competitive factors in the pork processing industry are price, quality, product distribution and brand loyalty. Some of the Company's competitors are larger, have correspondingly greater financial and other resources and enjoy wider recognition for their branded products. Some of these competitors are also more diverse than the Company. To the extent that their other operations generate profits, such companies may be able to subsidize their pork processing operations for a time. International Processing Operations In fiscal 1999, the Meat Processing Group made its first international acquisitions by acquiring operations in Canada, Poland and France. In fiscal 2000, the Company made another acquisition in France and entered into a joint venture in Mexico. Such acquisitions reflect the Company's heightened emphasis on expansion into international markets. Schneider. In November 1998, Smithfield Foods acquired a 63% stake in Schneider Corporation of Canada. Schneider, based in Kitchener, Ontario, is one of Canada's largest producers of premium quality food products, with brands including Schneiders and Fleetwood. Schneider has annual production volume of approximately 475 million pounds and manages its various subsidiaries and joint ventures through two operating groups, consumer foods and agribusiness. The consumer foods group, comprised of the processed meat and grocery operations, produces more than 1,000 products, including hams, sausage, wieners, bacon, luncheon meats, specialty meats and savory bakery products for sale through traditional grocery stores, delicatessens and foodservice establishments. Schneider has consumer foods operations in Kitchener, Ayr, St. Mary's, Guelph, Port Perry and Mississauga, Ontario; Winnipeg, Manitoba; Surry, British Columbia; and St.-Anselme, Quebec. In addition, Schneider participates in the consumer foods sector through joint ventures with the Prince Group of Drummondville, Quebec; Cappola Food of Toronto, Ontario; National Meats of Toronto; and Luigino's of Duluth, Minnesota. The agribusiness group, comprised of the fresh pork and live poultry operations, focuses on identifying and meeting the needs of retail, foodservice and export customers. Its plants in Winnipeg produce fresh pork products for sale in Canada, the United States, Japan and other international markets. Schneider markets its products in the poultry sector under the Schneiders brand and private labels to retail and foodservice customers. In March 1999, Schneider acquired a 32% stake in Mitchell's Gourmet Foods, a Western Canadian pork processor which will grow to a majority stake in fiscal 2001 as a result of additional capital contributions. Animex. Between September 1998 and June 1999, Smithfield Foods acquired an 85% stake in Animex, the largest meat and poultry processing company in Poland. Animex produces a very broad line of fresh and processed meats and poultry products, with approximately 400 million pounds of annual volume. Animex's brands include Krakus and Pek. Animex has 10 plants, six for red meat and four for poultry, located across Poland. Three of such plants are being closed. The Company plans to expand Animex's network of distributions centers to include several additional areas in Poland. Societe Bretonne de Salaisons. In September 1998, the Company acquired Societe Bretonne de Salaisons, one of the largest private label manufacturers of ham, pork shoulder and bacon products in France. SBS has annual production volume of approximately 70 million pounds. Societe Financiere de Gestion et de Participation. In August 1999, the Company acquired the capital stock of Societe Financiere de Gestion et de Participation, a private label processed meats manufacturer in France. SFGP has annual production volume of approximately 60 million pounds. Agroindustrial del Noroeste. In September 1999, the Company and two Mexican partners formed a joint venture, Agroindustrial del Noroeste. The Company has a 50% interest in this joint venture, which for the 1999 calendar year had approximately $100 million in sales. 6 Hog Production Group General As a complement to the Company's hog processing operations, the Company has vertically integrated into highly efficient hog production through Brown's, Carroll's Foods and Murphy Farms, which operate numerous hog production facilities with approximately 695,000 sows producing about 11.6 million market hogs annually. The Company obtains approximately 50% of the live hogs it currently processes from the Hog Production Group. Including adjusting for sales to unrelated parties, the Company believes it is 60% vertically integrated. The profitability of hog production is directly related to the market price of live hogs and the cost of corn and soybean meal. The Hog Production Group generates higher profits when hog prices are high and corn and soybean meal prices are low, and lower profits (or losses) when hog prices are low and corn and soybean meal prices are high. Management believes that the Hog Production Group furthers the Company's strategic initiative of vertical integration and reduces the Company's exposure to fluctuations in profitability historically experienced by the pork processing industry. In May 1991, the Company acquired from National Pig Development Company ("NPD"), a British firm, the exclusive United States franchise rights for genetic lines of specialized breeding stock. The Hog Production Group makes extensive use of these genetic lines, with approximately 320,000 NPD breeding sows. In addition, the Company has sub-licensed some of these rights to certain of the Company's strategic hog production partners. All NPD hogs produced under these sub-licenses are supplied to the Company. The Company believes the hogs produced by these genetic lines are the leanest hogs commercially available and enable the Company to market highly differentiated pork products. Management believes that the leanness and increased meat yields of these hogs will, over time, improve the Company's profitability with respect to both fresh pork and processed meat. In fiscal 2000, the Company processed 3.7 million NPD hogs. Hog Production Operations The Hog Production Group is the world's largest hog producer. The Group uses advanced management techniques to produce premium quality hogs on a large scale as a low cost producer. The Company develops breeding stock, optimizes diets for its hogs at each stage of the growth process, processes feed for its hogs and designs and builds hog confinement facilities. The Company believes its economies of scale and production methods, together with its use of the advanced NPD genetics in approximately 47% of its breeding sows, make it a uniquely integrated low cost producer. The Hog Production Group uses a three-site production process consisting of sow, nursery and finishing sites. Production of market hogs begins in a facility known as a sow site. The Group's average commercial sow site is designed to house approximately 2,400 sows. The sow's purpose is to conceive, give birth to and nurse piglets which will be raised to become market hogs. Approximately 18 days after birth, the piglets are separated from the sows and transported to a separate nursery site. At each nursery site, the piglets are fed a closely monitored diet and grow to approximately 45 pounds, a process which takes approximately seven weeks. Once the hogs reach the desired weight, the Hog Production Group transports them to a finishing site where they are maintained and fed until reaching a market weight of approximately 250 pounds, a process which takes approximately 20 weeks. When the hogs reach market weight, they are transported to the Meat Processing Group's plants, principally those in Virginia and North Carolina (or, in the case of market hogs produced in Utah, sold to an unrelated third party). The Hog Production Group also utilizes independent farmers and their facilities to raise hogs produced from the Group's breeding stock. Under multi- year contracts, the farmer provides the initial facility investment, labor and front line management in exchange for a service fee. This contract farming is utilized primarily in the nursery and finishing stages where animal growth, feed and survival rates are most critical and are easily adapted to an incentive- based contract payment. Currently, approximately 76% of the Hog Production Group's market hogs come from contract farms. As of July 2000, the Hog Production Group operated farm sites in North Carolina, Virginia, Utah, South Carolina and Colorado. Except for some start-up activity in Utah and Colorado, the Hog Production Group's farm sites are mature operations with static production volume. 7 Nutrient Management and Other Environmental Issues All of the Hog Production Group's hog production facilities have been designed to meet or exceed all applicable zoning and other government regulations. These requirements include the maintenance of certain separation distances between farms and nearby residences, schools, churches, public use areas and businesses, the maintenance of certain separation distances from rivers, streams and wells and adherence to certain required construction standards. Hog production facilities generate significant quantities of manure, which must be managed properly to protect public health and the environment. Currently, the best available technology for the management of swine manure is the lagoon and sprayfield system. This system utilizes earthen lagoons to treat the waste before it is applied to agricultural fields by spray application. The nitrogen and phosphorus in the treated manure serves as a crop fertilizer. These systems require permits under state, and in some instances federal, law. The permits impose standards and conditions on the design and operation of these systems to ensure that they protect public health and the environment. The Hog Production Group follows a number of other protocols to minimize impact to the environment, including: ongoing employee training regarding environmental controls; walk-around inspections at all sites by trained personnel; a formal emergency response plan that is regularly updated; and a collaboration with manufacturers regarding testing and developing new equipment. Environmental Stewardship During the past year, the Company undertook several significant initiatives in furtherance of its continued commitment to responsible environmental stewardship throughout the Company and each operating subsidiary, with an emphasis on the operations of its pork production subsidiaries in the state of North Carolina, particularly areas devastated by recent hurricanes. One such initiative is identification of those farms owned by, or under contract to, operating subsidiaries with buildings or lagoons located in the flood plain and implementation of measures to protect water quality should these structures experience flooding in the future. This initiative is well underway and should be completed by the fall of 2000. Longer term, the Company is working with its operating subsidiaries to develop and implement an Environmental Management System ("EMS"). The Company intends to expand the EMS program throughout its operating subsidiaries over the next three years, with initial focus on North Carolina pork production operations. Once it is fully implemented, the EMS will be a model program, not only in the pork production industry, but among agribusinesses nationally. The Company has also assumed a leadership role in the development of environmentally superior swine waste management technologies by committing up to $15 million toward an intensive technology development program. An initiative by the Company and its North Carolina pork production subsidiaries to identify and preserve large areas of wetlands and natural areas in eastern North Carolina is also in furtherance of the Company's commitment to environmental stewardship. In this regard, the Company has recently committed up to $2 million a year for 25 years to the State of North Carolina to advance this initiative. These initiatives are proceeding under the direction and oversight of the Company's Environmental Compliance Committee, which was established by the Board of Directors in January 2000. Members of the Committee include the Company's General Counsel, Vice President Engineering, and the presidents of the pork production subsidiaries. Regulation Regulation Generally Like other participants in the meat processing industry, the Company is subject to various laws and regulations administered by federal, state and other government entities, including the Environmental Protection Agency ("EPA") and corresponding state agencies as well as the United States Department of Agriculture, the United States Food and Drug Administration and the United States Occupational Safety and Health Administration. Management believes that Smithfield Foods presently is in compliance with all such laws and regulations in all material respects, and that continued compliance with these standards will not have a material adverse effect on the Company's financial position or results of operations. Furthermore, with respect to the suits discussed below, the Company believes that their ultimate resolution will not have a material adverse effect on the Company's financial position or annual results of operations. 8 EPA Suit In United States of America v. Smithfield Foods, Inc. et al., the United States District Court for the Eastern District of Virginia imposed a $12.6 million civil penalty on the Company and its Smithfield Packing and Gwaltney subsidiaries for Clean Water Act violations at the Company's Smithfield, Virginia processing plants. The Company recorded a nonrecurring charge of $12.6 million during fiscal 1998 with respect to this penalty. In September 1999, the United States Court of Appeals for the Fourth Circuit affirmed the District Court's determination of liability but remanded the penalty determination to the District Court with instructions to recalculate the civil penalty solely to correct a 4% error made by the government's expert. In May 2000, the Company filed a certiorari petition seeking review of the Fourth Circuit's ruling by the United States Supreme Court. There can be no assurance as to the outcome of such petition or any subsequent proceedings regarding this matter. Suit by the Commonwealth of Virginia In 1998, the Commonwealth of Virginia filed a civil suit against the Company in the Circuit Court of the County of Isle of Wight, Virginia under Virginia's water pollution control laws. Virginia alleges that 22,517 wastewater discharge permit violations occurred at the Company's Smithfield, Virginia processing plants between 1986 and 1997. Most of these alleged violations were also presented in the federal EPA suit described above. In October 1999, the Circuit Court dismissed the Commonwealth's case against the Company, ruling under the doctrine of res judicata that the subject matter of the case had already been finally adjudicated against the Company in the EPA suit. The Commonwealth has appealed the decision of the Circuit Court to the Supreme Court of Virginia. There can be no assurance as to the outcome of the Commonwealth's appeal or any subsequent proceedings regarding this matter. Riverkeeper Litigation In June 2000, Neuse River Foundation, Inc., Richard J. Dove, d/b/a The Neuse Riverkeeper, D. Boulton Baldridge, d/b/a The Cape Fear Riverkeeper, New River Foundation, Inc., Tom Mattison, d/b/a The New Riverkeeper, and The Water Keeper Alliance filed a lawsuit in the General Court of Justice, Superior Court Division, of the State of North Carolina against the Company, Carroll's Foods, Inc., Brown's of Carolina, Inc., Murphy Farms, Inc., Wendell H. Murphy, Sr., Wendell H. Murphy, Jr., and Joseph W. Luter, III. The lawsuit alleges, among other things, claims based on negligence, trespass, strict liability and unfair trade practices related to the operation of swine waste disposal lagoons in North Carolina. The lawsuit seeks numerous and costly remedies, including injunctive relief to end all use of hog waste disposal lagoons in North Carolina, unspecified but costly remediation efforts and other damages. The Company believes that none of the plaintiffs' claims has merit and furthermore that the plaintiffs lack standing to bring such a suit. The Company intends to defend this action vigorously. Employees As of April 30, 2000, the Meat Processing Group had approximately 32,500 employees, approximately 15,500 of whom are covered by collective bargaining agreements expiring between September 30, 2000 and June 30, 2005, and the Hog Production Group had approximately 4,000 employees, none of whom are covered by collective bargaining agreements. The Company believes that its relationship with its employees is good. 9 Item 2. Properties The following table lists the Company's material plants and other physical properties. These properties are suitable for the Company's needs.
Location Operation -------- --------- Smithfield Packing Plant* Slaughtering and cutting hogs; manufacture of bacon Smithfield, Virginia products, smoked meats, and dry salt meats; production of hams and picnics Smithfield Packing Plant* Slaughtering and cutting hogs; production of boneless Bladen County, North Carolina hams and loins Gwaltney Plant* Slaughtering and cutting hogs; production of boneless Smithfield, Virginia loins, bacon, sausage, bone-in and boneless cooked and smoked hams and picnics John Morrell Plant* Slaughtering and cutting hogs; production of boneless Sioux Falls, South Dakota loins, bacon, hot dogs, luncheon meats, smoked and canned hams, and packaged lard Lykes Meat Group Plant* Production of hot dogs, luncheon meats and sausage Plant City, Florida products Patrick Cudahy Plant Manufacture of bacon, dry sausage, boneless cooked Cudahy, Wisconsin hams and refinery products Schneider Plant Production of processed and prepared meats, including Kitchener, Ontario, Canada wieners, luncheon meats, hams and specialty and dry sausages John Morrell Plant* Slaughtering and cutting hogs; production of boneless Sioux City, Iowa loins =============================================================================================
* Pledged as collateral under various loan agreements. The Hog Production Group owns and leases numerous hog production facilities, primarily in North Carolina, Utah and Virginia, with additional hog production facilities in Colorado, South Carolina, Illinois, Texas and Oklahoma. A substantial number of these owned facilities are pledged under related loan agreements. Item 3. Legal Proceedings Smithfield Foods and certain of its subsidiaries are parties to several environmental litigation matters discussed under "Business ---Regulation" above. Apart from those matters, Smithfield Foods and its subsidiaries and affiliates are parties in various lawsuits arising in the ordinary course of business. In the opinion of management, any ultimate liability with respect to these ordinary course matters will not have a material adverse effect on the Company's financial position or results of operations. In April 2000, the Company and its subsidiary Smithfield Packing were named as defendants, along with IBP, inc., in a civil action filed in the United States District Court for the Middle District of Georgia. The case was filed by four named plaintiffs on behalf of a putative nationwide class of hog producers who from 1994 to the present produced and sold finished hogs to defendants on a spot, auction or cash market basis. The plaintiffs contend that the defendants violated the Packers and Stockyards Act of 1921 (the "PSA") by reason of the defendants' engaging in various captive supply arrangements for the procurement of hogs for slaughter. The 10 Company believes that it has valid defenses to this action, that it has acted properly in its dealings with hog producers and that it has not violated the PSA or any other applicable law. The Company further believes that the action does not qualify for certification as a class action. Accordingly, the Company intends to defend this action vigorously, and the Company believes that its ultimate resolution will not have a material adverse effect on the Company's financial position or results of operations. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders, through the solicitation of proxies or otherwise. Item 4A. Executive Officers of the Company The following table sets forth the name and age, position with the Company and business experience during the past five years of each of the executive officers of the Company. The Board of Directors elects executive officers to hold office until the next annual meeting of the Board of Directors or until their successors are elected, or until their resignation or removal.
Name and Age Position with the Company Business Experience During Past Five Years ------------ ------------------------- ------------------------------------------ Joseph W. Luter, III (61) Chairman of the Board, President Mr. Luter has served as Chairman of the Board and and Chief Executive Officer of the Chief Executive Officer since 1975. Prior to May Company 1995, and since June, 2000, he has also served as President of the Company. Lewis R. Little (56) President and Chief Operating Mr. Little was elected President and Chief Officer of Smithfield Packing and Operating Officer of the Company and Smithfield Lykes Packing in November 1996 and President and Chief Operating Officer of Lykes in June 1998. Mr. Little served as Chief Operating Officer of the Company until June, 2000. From May 1993 until November 1996, he was President and Chief Operating Officer of Gwaltney. Joseph B. Sebring (53) President and Chief Operating Mr. Sebring has served as President and Chief Officer of John Morrell Operating Officer of John Morrell since May 1994. C. Larry Pope (45) Vice President and Chief Financial Mr. Pope served as Vice President, Finance of the Officer Company from July 1998 until September 1999. He served as Vice President and Controller from August 1995 to July 1998, and prior to that time as Controller. Richard J. M. Poulson (61) Vice President, General Counsel Mr. Poulson joined the Company as Vice President and Senior Advisor to the Chairman and Senior Advisor to the Chairman in July 1998. Between 1994 and 1998, he was a senior managing director of the Appian Group, a private merchant bank with offices in Washington, D.C. and Paris. Prior to 1994, Mr. Poulson was a senior corporate partner with the law firm Hogan & Hartson in Washington, D.C. and London.
11 PART II Item 5. Market for Company's Common Equity and Related Stockholder Matters Market Information The Common Stock of the Company has traded on The New York Stock Exchange under the symbol "SFD" since September 28, 1999. Prior to that the Common Stock traded on The Nasdaq National Market under the symbol "SFDS." The following table shows the high and low sales price of the Common Stock of the Company for each quarter of fiscal 2000 and 1999.
Range of Sales Price --------------------------------------- High Low ------------------- ------------------ Fiscal year ended May 2, 1999 First quarter 31.00 22.62 Second quarter 27.00 14.69 Third quarter 36.12 19.62 Fourth quarter 30.00 20.00 Fiscal year ended April 30, 2000 First quarter 34.06 23.50 Second quarter 31.88 21.38 Third quarter 26.00 16.69 Fourth quarter 22.75 14.88
Holders As of July 12, 2000, there were 1,253 record holders of the Common Stock. In addition, there were on such date 244 record holders of the Exchangeable Shares issued by Smithfield Foods' subsidiary Smithfield Canada Limited, an Ontario corporation. The terms of such Exchangeable Shares are incorporated by reference as an exhibit to this Annual Report on Form 10-K. Dividends The Company has never paid a cash dividend on its Common Stock and does not anticipate paying cash dividends on its Common Stock in the foreseeable future. In addition, the terms of certain of the Company's debt agreements prohibit the payment of cash dividends on the Common Stock. The payment of cash dividends, if any, would be made only from assets legally available for that purpose and would depend on the Company's financial condition, results of operations, current and anticipated capital requirements, restrictions under then existing debt instruments and other factors then deemed relevant by the board of directors. Item 6. Selected Financial Data The selected consolidated financial data set forth below for the fiscal years indicated were derived from the Company's audited consolidated financial statements. The information should be read in conjunction with the Company's consolidated financial statements (including the notes thereto) and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere in, or incorporated by reference into this report.
FISCAL YEAR ENDED April 30, May 2, May 3, April 27, April 28, 2000 1999 1998 1997 1996 ----------- ----------- ----------- ----------- ----------- (In thousands, except per share data) INCOME STATEMENT DATA: Sales $5,150,469 $3,774,989 $3,867,442 $3,870,611 $2,383,893 Costs of sales 4,456,403 3,235,414 3,479,629 3,546,816 2,202,112 ----------- ----------- ----------- ----------- ----------- Gross profit 694,066 539,575 387,813 323,795 181,781 Selling, general and administrative expenses 390,634 295,610 219,861 191,225 103,095 Depreciation expense 109,893 63,524 42,300 35,825 25,979 Interest expense 71,944 40,521 31,891 26,211 20,942 Minority interests 1,608 (3,518) 199 2,857 1,514 Nonrecurring charge - - 12,600 - - ----------- ----------- ----------- ----------- ----------- Income from continuing operations before income taxes 119,987 143,438 80,962 67,677 30,251 Income taxes 44,875 48,554 27,562 22,740 10,465 ----------- ----------- ----------- ----------- ----------- Income from continuing operations 75,112 94,884 53,400 44,937 19,786 Income (loss) from discontinued operations - - - - (3,900) ----------- ----------- ----------- ----------- ----------- Net Income $ 75,112 $ 94,884 $ 53,400 $ 44,937 $ 15,886 =========== =========== =========== =========== =========== DILUTED INCOME (LOSS) PER SHARE: Continuing operations $ 1.52 $ 2.32 $ 1.34 $ 1.17 $ 0.53 Discontinued operations - - - (0.11) ----------- ----------- ----------- ----------- ----------- Net income $ 1.52 $ 2.32 $ 1.34 $ 1.17 $ 0.42 =========== =========== =========== =========== =========== Average diluted shares outstanding 49,386 40,962 39,732 38,558 35,000 BALANCE SHEET DATA: Working capital $ 609,857 $ 215,865 $ 259,188 $ 164,312 $ 88,026 Total assets 3,129,613 1,771,614 1,083,645 995,254 857,619 Long term debt and capital lease obligations 1,187,770 594,241 407,272 288,486 188,618 Shareholders' equity 902,909 542,246 361,010 307,486 242,516 OPERATING DATA: Fresh pork sales (pounds) 2,786,400 2,687,412 2,539,221 2,320,477 1,635,300 Processed meats sales (pounds) 2,192,100 1,606,021 1,370,232 1,218,835 839,341 Total hogs purchased 19,358 19,093 17,952 16,869 12,211
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 This discussion of management's views on the financial condition and results of operations of the Company should be read in conjunction with the consolidated financial statements and the notes to the consolidated financial statements appearing elsewhere in this Form 10-K. Introduction Smithfield Foods, Inc. (the "Company") is comprised of a Meat Processing Group ("MPG") and a Hog Production Group ("HPG"). The MPG consists primarily of six wholly owned domestic pork processing subsidiaries and four international pork processing entities. The HPG consists primarily of three hog production operations located in the United States and certain joint venture investments outside the United States. Acquisitions Several acquisitions affect the comparability of the results of operations for fiscal year 2000, 1999 and 1998 including the following: In January of fiscal 2000, the Company completed the acquisition of Murphy Farms, Inc. ("MFI") and its affiliated companies for 11.1 million shares of the Company's common stock (subject to post-closing adjustments) and the assumption of approximately $203.0 million in debt, plus other liabilities. MFI is a hog producer that has approximately 345,000 sows which produce approximately 6.0 million market hogs annually. MFI had sales of $453.9 million in the fiscal year ended October 1999. A significant portion of these sales were to the Company's MPG. In May of fiscal 2000, the Company completed the acquisition of Carroll's Foods, Inc. ("CFI") and its affiliated companies and partnership interests for 4.3 million shares of the Company's common stock and the assumption of approximately $231.0 million in debt, plus other liabilities. CFI's U.S. hog production operation includes approximately 180,000 sows which produce approximately 2.9 million market hogs annually. The acquisition included 100% of the capital stock of CFI, CFI's 50% interest in Smithfield-Carroll's, CFI's 16% interest in Circle Four, CFI's 50% interest in Tar Heel Turkey Hatchery, 100% of CFI's turkey grow-out operations, CFI's 49% interest in Carolina Turkeys and certain hog production interests in Brazil and Mexico. CFI had sales of $348.0 million in calendar year 1998. A significant portion of these sales were to the Company's MPG. In August of fiscal 2000, the Company acquired the capital stock of Societe Financiere de Gestion et de Participation S.A. ("SFGP"), a private-label processed meats manufacturer in France. SFGP had sales of approximately $100.0 million in calendar year 1998. In November of fiscal 1999, the Company acquired 63% of the total equity of Schneider Corporation ("Schneider"), in exchange for approximately 2.5 million Exchangeable Shares of Smithfield Canada Limited, a wholly owned subsidiary of the Company. Schneider produces and markets fresh pork and a full line of processed meats and is the second largest meat processing company in Canada. Schneider had sales in its fiscal year ended October 1998 of $548.1 million. In April of fiscal 1999, the Company acquired a 67% interest in Animex S.A. ("Animex"), a major meat and poultry processing company in Poland. During fiscal 2000, the Company increased its ownership in Animex to 85% of total equity. Animex had calendar year 1998 sales of approximately $400.0 million. In September of fiscal 1999, the Company acquired all of the capital stock of Societe Bretonne de Salaisons ("SBS"), the largest private-label manufacturer of ham, pork shoulder and bacon products in France. SBS had calendar year 1998 sales of approximately $100.0 million. 13 In June of fiscal 1999, the Company increased its ownership in the Circle Four hog production operation from 37% to 84%, requiring the Company to consolidate the accounts of Circle Four and to discontinue using the equity method of accounting. Prior to fiscal 1999, the investment in Circle Four was accounted for using the equity method of accounting. As a result of the acquisition of CFI in May of fiscal 2000, Circle Four became a wholly owned subsidiary of the Company. In October of fiscal 1999, the Company acquired all of the assets and business of North Side Foods Corp. ("North Side"), a major domestic supplier of precooked sausage to McDonald's Corporation. North Side had calendar year 1998 sales of approximately $58.0 million. Each of these acquisitions was accounted for using the purchase method of accounting and, accordingly, the accompanying financial statements include the financial position and results of operations from the dates of acquisition. Results of Operations Fiscal 2000 and 1999 included 52 weeks of operations compared to fiscal 1998, which included 53 weeks of operations. Accordingly, sales and all expense categories in fiscal 2000 and 1999 reflect the impact of one less week of operations compared to fiscal 1998. Consolidated Fiscal 2000 Compared To Fiscal 1999 Sales in fiscal 2000 increased $1.4 billion, or 36.4%, from fiscal 1999. The increase in sales was primarily attributable to a full year of sales from businesses acquired in fiscal 1999 as well as acquisitions in the current year and an increase in both average unit selling prices and processed meats volume in the base business. See the following sections for comments on sales changes by business segment. Gross profit in fiscal 2000 increased $154.5 million, or 28.6%, primarily on the inclusion of acquired businesses in the HPG where margins improved sharply due to higher live hog prices which were partially offset by expenses related to the implementation of food safety programs at Company facilities in the MPG and lost production due to the aftereffects of Hurricane Floyd. Fiscal 2000 margins were also favorably impacted by commodity hedging gains in the HPG. Excluding acquisitions, gross profit in the base business, which was more heavily weighted to the MPG, declined as a result of the same higher live hog prices which reduced fresh pork and processed meats margins. Selling, general and administrative expenses increased $95.0 million, or 32.1%, primarily on the inclusion of selling, general and administrative expenses of acquired businesses. In the base business, costs increased primarily due to higher advertising and promotion expenses to market branded fresh pork and processed meats. Depreciation expense increased $46.4 million, or 73.0% in fiscal 2000 compared to fiscal 1999, primarily related to the inclusion of the depreciation expense of acquired businesses and increased depreciation expense in the base business on processed meats expansion and information systems projects. Interest expense increased $31.4 million, or 77.5%, in fiscal 2000 compared to fiscal 1999, reflecting the inclusion of the interest expense of the acquired businesses, the cost of borrowings to finance additional investments and higher interest rates. The effective income tax rate for fiscal 2000 increased to 37.4% compared to 33.9% in fiscal 1999, primarily on the inclusion of foreign earnings which are taxed at higher rates. The Company had a valuation allowance of $5.3 million related to income tax assets as of April 30, 2000 primarily related to losses in foreign jurisdictions for which no tax benefit was recognized. At May 2, 1999, the Company had no valuation allowances for deferred tax assets. 14 Reflecting the factors previously discussed, net income decreased to $75.1 million, or $1.52 per diluted share, in fiscal 2000 down from $94.9 million, or $2.32 per diluted share, in fiscal 1999. Earnings per diluted share was also effected by an increase in average shares outstanding due to shares issued in connection with business acquisitions in fiscal 2000. Fiscal 1999 Compared to Fiscal 1998 Sales in fiscal 1999 decreased $92.5 million, or 2.4% from fiscal 1998. The decrease in sales reflected a 12.4% decrease in average unit selling prices of meat products as the result of significantly lower raw material (live hog) costs passed through to customers in the form of lower unit selling prices. This decrease was nearly offset by a 10.2% increase in MPG sales tonnage due to the inclusion of the sales of the acquired businesses of Schneider, SBS and North Side and increased volumes in the base business. Gross profit increased $151.8 million, or 39.1%, in fiscal 1999 compared to fiscal 1998. The increase in gross profit was primarily due to substantially higher margins in the MPG. Fresh pork margins improved substantially, reflecting the impact of the lower cost of raw materials (live hogs) and margins on increased sales tonnage of both fresh pork and processed meats. MPG gross profits were partially offset by substantial losses in the HPG due to lower live hog prices. Selling, general and administrative expenses increased $75.7 million, or 34.5%, in fiscal 1999 compared to fiscal 1998. The increase was primarily due to the inclusion of selling, general and administrative expenses of acquired businesses, higher selling, marketing and product promotion costs associated with the intensive efforts to market branded fresh pork and processed meats and expenses associated with preparing the Company's information systems for the Year 2000. Depreciation expense increased $21.2 million, or 50.2%, in fiscal 1999 compared to fiscal 1998. This increase was primarily due to the inclusion of the depreciation expense of acquired businesses. Interest expense increased $8.6 million, or 27.1%, in fiscal 1999 compared to fiscal 1998. This increase reflected the inclusion of the interest expense of the acquired businesses, the cost of borrowings to finance the additional investment in Circle Four and the borrowings to finance the acquisitions of SBS and North Side. A nonrecurring charge of $12.6 million in fiscal 1998 reflected the imposition of civil penalties against the Company by the U.S. District Court for the Eastern District of Virginia in a civil action brought by the U.S. Environmental Protection Agency. The effective income tax rate for fiscal 1999 was 33.9% compared to 29.5% in fiscal 1998, excluding the nondeductible nonrecurring charge. This increase reflected higher profits at higher marginal tax rates. The Company had no valuation allowance related to income tax assets as of May 2, 1999 or May 3, 1998. Reflecting the factors previously discussed, net income increased to $94.9 million, or $2.32 per diluted share, in fiscal 1999, up from net income of $66.0 million, or $1.66 per diluted share in fiscal 1998, excluding the nonrecurring charge. Including the nonrecurring charge, net income was $53.4 million, or $1.34 per diluted share, in fiscal 1998. Meat Processing Group Fiscal 2000 Compared To Fiscal 1999 MPG sales in fiscal 2000 increased $1.3 billion, or 33.6%, from fiscal 1999. The increase in sales was primarily attributable to a full year of sales from businesses acquired in fiscal 1999 as well as acquisitions 15 in the current year and an increase in both average unit selling prices and processed meats volume in the base business. For fiscal 2000, processed meats and fresh pork volume increased 36.5% and 3.7%, respectively. In addition, unit selling prices increased 14.0% due to higher live hog costs and a greater proportion of value-added processed meats in the sales mix. Excluding acquired businesses, processed meats volume increased 6.0% which was offset by a 6.2% decrease in fresh pork volume. Fresh pork volume decreased as the Company reduced slaughter levels as a result of sharply lower fresh pork margins compared with the prior year. Operating profit in the MPG decreased to $122.9 million in fiscal 2000 from $253.8 million, the result of sharply lower margins on fresh pork partially offset by the incremental operating profit generated in acquired businesses. In addition, increased spending in the base business on the market expansion of fresh pork and processed meats brands, the implementation of food safety programs at Company facilities and lost production due to the aftereffects of Hurricane Floyd also contributed to lower operating profit. Fiscal 1999 Compared to Fiscal 1998 MPG sales in fiscal 1999 decreased $137.8 million, or 3.6%, from fiscal 1998. The decrease reflected a 12.4% decrease in unit sales prices as the result of sharply lower raw material (live hog) costs passed through to customers. This decrease was partially offset by a 10.2% increase in sales tonnage due to the inclusion of the sales of Schneider, SBS and North Side and increased volumes at existing operations. The increase in sales tonnage reflected a 5.8% increase in fresh pork tonnage, a 17.2% increase in processed meats tonnage and a 12.8% increase in the tonnage of other products. Fresh pork tonnage increased as the result of the inclusion of the sales of Schneider and a full fiscal year of second shift operations at John Morrell's Sioux City, Iowa plant compared to less than a full year of second shift operations in fiscal 1998. The increase in processed meats tonnage resulted from the inclusion of the sales of Schneider, SBS and North Side and increased tonnage at existing operations despite a sharp drop in hot dog exports to Russia. Excluding acquired businesses, processed meats and fresh pork volumes increased 3.3% and 1.6%, respectively. Operating profit in the MPG increased to $253.8 million in fiscal 1999 from $144.1 in fiscal 1998. This increase resulted from sharply improved margins in fresh pork and the impact of acquired businesses and increased volumes from the base business. These increases were partially offset by increased marketing and distribution expenses incurred to market branded fresh pork and processed meat products and expenses related to preparing the Company's information systems for the Year 2000. Hog Production Group Fiscal 2000 Compared to Fiscal 1999 HPG sales increased sharply in fiscal 2000 compared to fiscal 1999 as a result of the inclusion of the sales of MFI and CFI and a 27.9% increase in live hog prices. With the acquisition of CFI and MFI, hogs sold in fiscal 2000 increased to 5.5 million from 2.1 million in fiscal 1999. Intersegment sales to the MPG are eliminated in the Consolidated Statements of Income. Operating profit in the HPG improved to $99.6 million compared to a loss of $46.1 million in fiscal 1999 primarily as a result of a sharp increase in hog prices from their historic lows in fiscal 1999 and the impact of selling significantly more hogs at substantially better margins in the current year. The operating profit was partially offset by the aftereffects of Hurricane Floyd on the hog production operations on the East Coast of the U.S. In addition, operating profit benefited from favorable commodity hedging contracts. 16 Fiscal 1999 Compared to Fiscal 1998 HPG sales were relatively flat in fiscal 1999 compared to fiscal 1998, as a 33.0% decrease in the unit selling price of live hogs, due to an oversupply of hogs in the market, was offset by a 48.5% increase in the number of hogs sold, primarily the result of including the sales of Circle Four. Intersegment sales to the MPG are eliminated in the Consolidated Statements of Income. Operating losses in the HPG increased to $46.1 million compared to $2.3 million in fiscal 1998. The substantially higher loss was primarily the result of the lower unit selling prices of hogs, which were at their lowest levels in five decades. Liquidity and Capital Resources The pork processing industry is characterized by high sales tonnage and rapid turnover of inventories and accounts receivable. Because of the rapid turnover rate, the Company considers its inventories and accounts receivable highly liquid and readily convertible into cash. Borrowings under the Company's credit facilities are used to finance increases in the levels of inventories and accounts receivable resulting from seasonal and other market-related fluctuations in raw material costs. The demand for seasonal borrowings usually peaks in early November when inventories are at their highest levels, and borrowings are repaid in January when accounts receivable are collected. Cash provided by operations totaled $125.2 million for fiscal 2000 compared to $123.4 million in fiscal 1999. The decrease in net income, year to year, was offset by an increase in non-cash charges. Non-cash charges increased to $132.2 million in the current year from $89.3 million in the prior year primarily as a result of the incremental depreciation and amortization expense of acquired businesses. In fiscal 2000, cash used in investing activities declined to $192.3 million from $261.9 million in fiscal 1999 primarily as a result of a substantial decrease in cash acquisitions. Capital expenditures totaled $100.4 million related to processed meats expansion and plant improvement projects as well as additional hog production facilities at Circle Four. In addition, during fiscal 2000, the Company made investments in Agroindustrial del Noroeste, a Mexican meat processing and hog production joint venture, and other long-term investments. These capital expenditures and investments were funded with cash provided by operations and borrowings under the Company's long-term revolving credit facility. As of April 30, 2000, the Company had definitive commitments of $53.6 million for capital expenditures primarily to increase its processed meats and value-added fresh pork capacity at several of its processing plants. Financing activities provided $87.0 million in fiscal 2000 as additional borrowings on revolving credit facilities were used primarily for the repayment of notes payable and the repurchase of approximately 3.0 million shares of the Company's common stock. The Company has been authorized to repurchase a total of 4.0 million shares. During fiscal 2000, the Company repaid a substantial portion of the debt assumed in connection with the CFI and MFI acquisitions with the placement of $225.0 million 10-year senior secured notes and an increase in the existing revolving credit facility borrowing capacity from $300.0 million to $650.0 million. The $225.0 million in senior secured notes include $75.0 million of variable rate debt, $100.0 million of notes at 7.89% and $50.0 million of notes at 8.44%. As of April 30, 2000, the Company has unused availability of $249.9 million under the long-term credit facility. Management believes that through internally generated funds and access to global credit markets, funds are available to adequately meet the Company's current and future operating and capital needs. 17 Risk Management Substantially all of the Company's products are produced from commodity-based raw materials, corn and soybean meal in the HPG and live hogs in the MPG. The cost of corn and soybean meal (the principal feed ingredients for hogs) and live hogs are subject to wide fluctuations due to unpredictable factors such as weather conditions, economic conditions, government regulation and other unforeseen circumstances. The Company utilizes futures and option contracts for live hogs and grains to manage hog production margins when management determines the conditions are appropriate for such hedges. The particular hedging methods employed and the time periods for the contracts depend on a number of factors, including the availability of adequate contracts for the respective periods for the hedge. The Company attempts to closely match the commodity contract expiration periods with the dates for product sale and delivery. The pricing of the Company's fresh pork and processed meats is monitored and adjusted upward and downward in reaction to changes in the cost of the underlying raw materials. The unpredictability of the raw material costs limits the Company's ability to forward price fresh pork and processed meat products without the use of commodity contracts through a program of price-risk management. The Company uses price-risk management to enhance its ability to engage in forward sales contracts, where prices for future deliveries are fixed, by purchasing (or selling) commodity contracts for future periods to reduce or eliminate the effect of fluctuations in future raw material costs on the profitability of the related sales. While this may tend to limit the Company's ability to participate in gains from favorable commodity price fluctuation, it also tends to reduce the risk of loss from adverse changes in raw material prices. As of April 30, 2000, the Company had a deferred loss of $41.3 million compared to a deferred gain on outstanding futures contracts of $8.9 million at May 2, 1999. As of April 30, 2000 and May 2, 1999, the Company had open futures contracts with contract values of $711.7 million and $219.7 million, respectively. As of April 30, 2000 and May 2, 1999, the Company had deposits with brokers for outstanding futures contracts of $45.1 million and $15.6 million, respectively, included in prepaid expenses and other current assets. For open futures contracts, the Company uses a sensitivity analysis technique to evaluate the effect that changes in the market value of commodities will have on these commodity derivative instruments. As of April 30, 2000, the potential change in fair value of open future contracts, assuming a 10% change in the underlying commodity price, was $33.6 million. Year 2000 The Company completed its Year 2000 project as scheduled. As of April 30, 2000, the Company's production, computing and communication infrastructure systems have operated without any significant Year 2000 related problems and appear to be Year 2000 compliant. The Company is not aware that any major customers or third-party suppliers have experienced any significant Year 2000 related problems. The Company believes all critical systems are Year 2000 compliant. However, there is no guarantee that the Company has discovered all possible Year 2000 failure points including non-compliant third parties whose systems and operation impact the Company and other uncertainties. Total costs incurred since the inception of the project to ready the Company for the Year 2000 is $35.8 million of which $20.3 million was capitalized in accordance with generally accepted accounting principles. 18 Forward-Looking Information This report may contain "forward-looking" information within the meaning of the federal securities laws. The forward-looking information may include statements concerning the Company's outlook for the future, as well as other statements of beliefs, future plans and strategies or anticipated events, and similar expressions concerning matters that are not historical facts. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, the statements. These risks and uncertainties include availability and prices of live hogs, raw materials and supplies, live hog production costs, product pricing, the competitive environment and related market conditions, operating efficiencies, access to capital, the cost of compliance with environmental and health standards and actions of domestic and foreign governments. 19 Item 7A. Quantitative and Qualitative Disclosures about Market Risk Incorporated by reference to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. All statements other than historical information incorporated in this Item 7A are forward looking statements. The actual impact of future market changes could differ materially because of, among others, the factors discussed in this Annual Report on Form 10-K. Item 8. Financial Statements and Supplementary Data The consolidated financial statements listed in Item 14(a) hereof are incorporated herein by reference and are filed as a part of this report beginning on page F-1. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 20 PART III Item 10. Directors and Executive Officers of the Company (a) Information required by this Item regarding directors and all persons nominated or chosen to become directors is incorporated by reference from the Company's definitive proxy statement to be filed with respect to its Annual Meeting of Shareholders to be held on August 29, 2000. (b) Information required by this Item regarding the executive officers of the company is included in Part I, Item 4A of this Annual Report on Form 10-K. There is no family relationship between any of the Company's directors and executive officers. Item 11. Executive Compensation Information required by this Item is incorporated by reference from the Company's definitive proxy statement to be filed with respect to its Annual Meeting of Shareholders to be held on August 29, 2000. Item 12. Security Ownership of Certain Beneficial Owners and Management Information required by this Item is incorporated by reference from the Company's definitive proxy statement to be filed with respect to its Annual Meeting of Shareholders to be held on August 29, 2000. Item 13. Certain Relationships and Related Transactions Information required by this Item is incorporated by reference from the Company's definitive proxy statement to be filed with respect to its Annual Meeting of Shareholders to be held on August 29, 2000. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-k (a) 1. and 2. Index to Financial Statements and Financial Statement ----------------------------------------------------- Schedule - -------- An "Index to Financial Statements and Financial Statement Schedule" has been filed as a part of this Form 10-K Annual Report on page F-1 hereof. 3. Exhibits -------- Exhibit 3.1(a) ---- Articles of Incorporation of the Company, as amended through October 27, 1998 (incorporated by reference to Exhibit 2 to the Company's Current Report on From 8-K filed with the Commission on September 5, 1997). Exhibit 3.1(b) ---- Articles of Amendment filed October 28, 1998 to the Articles of Incorporation, as amended, authorizing terms for one Series B Special Voting Preferred Share, par value $1.00 per share (incorporated by reference to Exhibit 3.1(b) to the Company's Annual Report on Form 10-K for its fiscal year ended May 2, 1999 filed with the Commission August 2, 1999). Exhibit 3.2 ---- By-Laws of the Company, as amended to date (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Commission on February 14, 2000). 21 Exhibit 4.1 ---- Articles of Incorporation of the Company, as amended to date (see Exhibit 3.1 above). Exhibit 4.2 ---- Form of Certificate representing the Company's Common Shares, par value $.50 per share (including Rights legend) (incorporated by reference to Exhibit 6 to the Company's Current Report on Form 8-K filed with the Commission on September 5, 1997). Exhibit 4.3 ---- Form of Certificate representing Rights (incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K for its fiscal year ended May 3, 1998 filed with the Commission on July 30, 1998). Exhibit 4.4 ---- Rights Agreement as Amended, dated as of May 1, 1998, between the Company and Harris Trust and Savings Bank, Rights Agent (incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K for its fiscal year ended May 3, 1998 filed with the Commission on July 30, 1998). Exhibit 4.4(a) ---- Amendment No. 2, dated as of November 15, 1999, to the Rights Agreement (incorporated by reference to the Company's Registration Statement on Form 8-A12B/A filed with the Commission on December 22, 1999). Exhibit 4.5(a) ---- Form of Certificate representing the Company's single Series B Special Voting Preferred Share, par value $1.00 per share (incorporated by reference to Exhibit 4.8 to the Company's Registration Statement on Form S4, as amended, filed with the Commission on September 25, 1998 (the "Exchange Offer Registration Statement")). Exhibit 4.5(b) ---- Form of Certificate representing Smithfield Canada Limited Exchangeable Shares (incorporated by reference to Exhibit 4.9 to the Exchange Offer Registration Statement). Exhibit 4.5(c) ---- Voting, Support and Exchange Trust Agreement among Smithfield Foods, Inc., Smithfield Canada Limited and CIBC Mellon Trust Company, dated as of November 10, 1998 (incorporated by reference to Exhibit 4.5(c) to the Company's Annual Report on Form 10-K for its fiscal year ended May 2, 1999 filed with the Commission on August 2, 1999). Exhibit 4.5(d) ---- Exchangeable Share Provisions (excerpted from the Articles of Incorporation, as amended, of Smithfield Canada Limited) (incorporated by reference to Exhibit 4.5(d) to the Company's Annual Report on Form 10-K for its fiscal year ended May 2, 1999 filed with the Commission on August 2, 1999). Exhibit 4.6(a) * ---- Second Amended and Restated Multi-Year Credit Agreement dated as of December 3, 1999, among Smithfield Foods, Inc., the Subsidiary Guarantors party thereto, the Lenders party thereto, and The Chase Manhattan Bank, as Administrative Agent, relating to a $650,000,000 secured multi-year revolving credit facility. Exhibit 4.6(b) ---- Collateral Agency, Pledge and Security Agreement dated as of July 22 10, 1997, among Smithfield Foods, Inc., the Subsidiary Guarantors party thereto, The Chase Manhattan Bank, as Collateral Agent, relating to the Company's multi-year revolving credit facility (incorporated by reference to Exhibit 4.5(b) of the Company's Annual Report on Form 10-K for its fiscal year ended April 27, 1997 filed with the Commission on July 25, 1997). Exhibit 4.7(a) * ---- Amended and Restated Note Purchase Agreement dated as of October 31, 1999, among Smithfield Foods, Inc. and each of the Purchasers listed on Annex 1 thereto, relating to $196,882,354 in senior secured notes. Exhibit 4.7(b) ---- Joint and Several Guaranty dated as of July 15, 1996, by Gwaltney of Smithfield, Ltd., John Morrell & Co., The Smithfield Packing Company, Incorporated, SFFC, Inc., Patrick Cudahy Incorporated, and Brown's of Carolina, Inc. (incorporated by reference to Exhibit 4.7(a) to the Company's Form 10-Q Quarterly Report for the fiscal quarter ended July 28, 1996); and Amendment Number One to the Note Purchase Agreement dated as of July 15, 1997 (incorporated by reference to Exhibit 4.6(a) to the Company's Annual Report on Form 10-K for the fiscal year ended April 27, 1997 filed with the Commission on July 25, 1997). Exhibit 4.7(c) ---- Joint and Several Guaranty dated as of July 15, 1997, by Lykes Meat Group, Inc., Sunnyland, Inc., Valleydale Foods, Inc., Hancock's Old Fashioned Country Hams, Inc., Copaz Packing Corporation, and Smithfield Packing - Landover, Inc. (incorporated by reference to Exhibit 4.6(b) to the Company's Annual Report on Form 10-K for the fiscal year ended April 27, 1997 filed with the Commission on July 25, 1997). Exhibit 4.7(d) * ---- Joinder Agreement dated as of March 9, 2000, among Gwaltney of Smithfield, Ltd., John Morrell & Co., The Smithfield Packing Company, Incorporated, SFFC, Inc., Patrick Cudahy Incorporated, and Brown's of Carolina, Inc. and each of the Noteholders listed on Annex 1. Exhibit 4.8(a) * ---- Amended and Restated Note Purchase Agreement dated as of October 27, 1999, among Smithfield Foods, Inc. and each of the Purchasers listed on Annex 1 thereto, relating to $225,000,000 in senior secured notes. Exhibit 4.8(b) * ---- Joint and Several Guaranty dated as of October 27, 1999, by Gwaltney of Smithfield, Ltd., John Morrell & Co., The Smithfield Packing Company, Incorporated, SFFC, Inc., Patrick Cudahy Incorporated, Brown's of Carolina, Inc., Carroll's Foods, Inc., Carroll's Realty, Inc., Carroll's Realty Partnership, North Side Foods Corp., Lykes Meat Group, Circle Four Corporation, Brown's Farms LLC, Carroll's Foods of Virginia, Inc., Smithfield-Carroll's Farms, and Central Plains Farms. Exhibit 4.8(c) * ---- Joinder Agreement dated as of June 9, 2000, among Murphy Farms, Inc. and Smithfield Packing Real Estate, LLC. Exhibit 4.9(a) * ---- Note Purchase Agreement dated as of March 2, 1999, among Murphy Farms, Inc. and each of the Purchasers listed on Annex 1 23 thereto, relating to $100,000,000 in unsecured notes. Exhibit 4.9(b) * ---- Guaranty by the Company dated as of January 24, 2000. Exhibit 4.10 ---- Indenture between the Company and SunTrust Bank, Atlanta (incorporated by reference to Exhibit 4.8 to the Company's Current Report on Form 10-Q for the fiscal quarter ended February 1, 1998 filed with the Commission on March 17, 1998). Exhibit 4.11(a) ---- Consolidating Loan Agreement between Cape Fear Farm Credit, ACA ("Farm Credit") and Carroll's Foods, Inc., Carroll's Realty, Inc., and Carroll's Realty Partnership ("Carroll's Borrower's") dated as of August 28, 1998 (schedules omitted) (incorporated by reference to Exhibit 4.10(a) to the Company's Form 10- K Annual Report for the fiscal year ended May 2, 1999 filed with the Commission on August 2, 1999). Exhibit 4.11(b) ---- Loan and Loan Document Modification Agreement between Farm Credit and the Carroll's Borrowers, dated as of May 7, 1999 (incorporated by reference to Exhibit 4.10(b) to the Company's Form 10-K Annual Report for the fiscal year ended May 2, 1999 filed with the Commission on August 2, 1999). Exhibit 4.11(c) ---- Unconditional Guaranty to Farm Credit from Smithfield Foods, Inc. dated as of May 7, 1999 (incorporated by reference to Exhibit 4.10(c) to the Company's Form 10- K Annual Report for the fiscal year ended May 2, 1999 filed with the Commission on August 2, 1999). Exhibit 4.11(d) ---- Unconditional Guaranty to Farm Credit from Carroll's Turkeys, Inc. dated as of May 7, 1999 (incorporated by reference to Exhibit 4.10(d) to the Company's Form 10-K Annual Report for the fiscal year ended May 2, 1999 filed with the Commission on August 2, 1999). Exhibit 10.1(a) ---- Agreement with Shareholders dated as of May 7, 1999 by and between the Company and Jeffrey S. Matthews, Carroll M. Baggett and James O. Matthews (incorporated by reference to Exhibit 2.3 to the Company's Current Report on Form 8-K dated May 7, 1999 and filed with the Commission on May 12, 1999). Exhibit 10.1(b) ---- Registration Rights Agreement dated as of May 7, 1999 by and between the Company and Jeffrey S. Matthews, Carroll M. Baggett and James O. Matthews (incorporated by reference to Exhibit 2.4 to the Company's Current Report on Form 8-K dated May 7, 1999 and filed with the Commission on May 12, 1999). Exhibit 10.1(c) ---- Registration Rights Agreement between Smithfield Foods, Inc. and Wendell H. Murphy, Harry D. Murphy, Joyce M. Norman, Wendell H. Murphy, Jr., Wendy Murphy Crumpler, Stratton K. Murphy, Marc D. Murphy and Angela Brown (excluding Smithfield Foods, Inc., the "Murphy Selling Shareholders") (incorporated by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K dated January 20, 2000 and filed February 14, 2000 (the "February 14, 2000 Form 8-K")). Exhibit 10.1(d) ---- Agreement with Shareholders between Smithfield Foods, Inc. and the Murphy Selling Shareholders (incorporated by reference to Exhibit 2.3 to the February 14, 2000 Form 8-K). Exhibit 10.2 ---- Smithfield Foods, Inc. 1984 Stock Option Plan, as amended (incorporated by reference to Exhibit 10.1 to the Company's Form 10-K Annual Report for the fiscal year ended April 28, 1991). Exhibit 10.3 ---- Smithfield Foods, Inc. 1992 Stock Option Plan (incorporated by reference to Exhibit 10.4 to the Company's Form 10-K Annual Report for the fiscal year ended May 2, 1993). 24 Exhibit 10.4 ---- Smithfield Foods, Inc. 1998 Incentive Bonus Plan applicable to the Company's Chief Operating Officer (incorporated by reference to Exhibit 10.6 to the Company's form 10-K annual Report for the fiscal year ended April 27, 1997 filed with the Commission on July 25, 1997). Exhibit 10.5 ---- Smithfield Foods, Inc. 1998 Stock Incentive Plan (incorporated by reference to Exhibit 10.7 to the company's form 10-K Annual Report for the fiscal year ended May 3, 1998 filed with the Commission on July 30, 1998). Exhibit 21 * ---- Subsidiaries of the Registrant. Exhibit 23 * ---- Consent of Independent Public Accountants. Exhibit 27 * ---- Financial Data Schedule. * Filed herewith. (b) Reports on Form 8-K. 1. The Company filed a Current Report on Form 8-K for January 20, 2000, with the Commission on February 14, 2000, to report: (i) the Company's acquisition in January 2000 of Murphy Farms, Inc. and related transactions; (ii) the reorganization on January 20, 2000 of the Company's Board of Directors, including the resignation of six employee directors, the simultaneous election of two non-employee directors and the downsizing of the Board to nine members; and (iii) the Board of Directors' approval of an increase, from 3 million to 4 million, in the number of Common Shares which the Company is authorized to purchase, 2.8 million shares having already been purchased pursuant to such prior authorization. 2. The Company filed on April 12, 2000 an amendment to the Current Report on Form 8-K filed February 14, 2000 in order to file certain historical and pro forma financial information relating to the Company's acquisition of Murphy Farms, Inc. 25 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Registrant: Smithfield Foods, Inc. Date: July 28, 2000 By: /s/ Joseph W. Luter, III ------------------------- Joseph W. Luter, III Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Joseph W. Luter, III Chairman of the Board, President and July 28, 2000 - ----------------------------------------- Chief Executive Officer, and Director Joseph W. Luter, III (Principal Executive Officer) /s/ C. Larry Pope Vice President and Chief Financial July 28, 2000 - ----------------------------------------- Officer (Principal Financial Officer) C. Larry Pope /s/ Daniel G. Stevens Vice President and Corporate July 28, 2000 - ----------------------------------------- Controller (Principal Accounting Daniel G. Stevens Officer) /s/ Robert L. Burrus, Jr. Director July 26, 2000 - ----------------------------------------- Robert L. Burrus, Jr. /s/ Carol T. Crawford Director July 21, 2000 - ----------------------------------------- Carol T. Crawford /s/ Ray A. Goldberg Director July 21, 2000 - ----------------------------------------- Ray A. Goldberg /s/ George E. Hamilton, Jr. Director July 28, 2000 - ----------------------------------------- George E. Hamilton, Jr. /s/ William H. Prestage Director July 24, 2000 - ----------------------------------------- William H. Prestage /s/ Melvin O. Wright Director July 21, 2000 - ----------------------------------------- Melvin O. Wright
26 SMITHFIELD FOODS, INC. INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Page(s) -------- FINANCIAL STATEMENTS Report of Independent Public Accountants F-1 Consolidated Balance Sheets for the Fiscal Years Ended April 30, 2000 and May 2, 1999 F-2 Consolidated Statements of Income for the Fiscal Years 2000, 1999 and 1998 F-4 Consolidated Statements of Cash Flows for the Fiscal Years 2000, 1999 and 1998 F-5 Consolidated Statements of Shareholders' Equity for the Fiscal Years ended May 3, 1998, May 2, 1999 and April 30, 2000 F-6 Notes to Consolidated Financial Statements F-7 to F-23 FINANCIAL STATEMENTS SCHEDULE Independent Public Accountants' Report on Financial Statement Schedule I F-24 Schedule I - Condensed Financial Information of Registrant F-25 to F-29
27 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders of Smithfield Foods, Inc.: We have audited the accompanying consolidated balance sheets of Smithfield Foods, Inc. (a Virginia corporation), and subsidiaries as of April 30, 2000, and May 2, 1999, and the related consolidated statements of income, cash flows, and shareholders' equity for each of the three years in the period ended April 30, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Smithfield Foods, Inc., and subsidiaries as of April 30, 2000, and May 2, 1999, and the results of their operations and their cash flows for each of the three years in the period ended April 30, 2000, in conformity with accounting principles generally accepted in the United States. /s/ ARTHUR ANDERSEN LLP Richmond, Virginia June 7, 2000 F-1 CONSOLIDATED BALANCE SHEETS SMITHFIELD FOODS, INC. AND SUBSIDIARIES FISCAL YEARS ENDED (IN THOUSANDS, EXCEPT SHARE DATA) APRIL 30, 2000 MAY 2, 1999 - ------------------------------------------------------------------------------ ASSETS Current assets: Cash and cash equivalents $ 49,882 $ 30,590 Accounts receivable less allowances of $4,899 and $2,656 390,037 252,332 Inventories 665,143 348,856 Prepaid expenses and other current assets 127,664 50,302 - ------------------------------------------------------------------------------ Total current assets 1,232,726 682,080 - ------------------------------------------------------------------------------ Property, plant and equipment: Land 73,753 29,605 Buildings and improvements 666,428 404,002 Machinery and equipment 732,217 562,745 Breeding stock 100,576 27,394 Construction in progress 39,069 59,670 - ------------------------------------------------------------------------------ 1,612,043 1,083,416 Less accumulated depreciation (398,469) (292,640) - ------------------------------------------------------------------------------ Net property, plant and equipment 1,213,574 790,776 - ------------------------------------------------------------------------------ Other assets: Goodwill, net of accumulated amortization of $8,695 and $2,871 320,148 103,017 Investments in partnerships 102,551 80,182 Other 260,614 115,559 - ------------------------------------------------------------------------------ Total other assets 683,313 298,758 - ------------------------------------------------------------------------------ $3,129,613 $1,771,614 ============================================================================== See Notes to Consolidated Financial Statements F-2 APRIL 30, 2000 MAY 2, 1999 - ------------------------------------------------------------------------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $ 64,924 $ 63,900 Current portion of long-term debt and capital lease obligations 48,505 25,828 Accounts payable 270,004 207,703 Accrued expenses and other current liabilities 239,436 168,784 - ------------------------------------------------------------------------------ Total current liabilities 622,869 466,215 - ------------------------------------------------------------------------------ Long-term debt and capital lease obligations 1,187,770 594,241 - ------------------------------------------------------------------------------ Other noncurrent liabilities: Deferred income taxes 274,329 31,523 Pension and postretirement benefits 78,656 62,276 Other 30,311 17,638 - ------------------------------------------------------------------------------ Total other noncurrent liabilities 383,296 111,437 - ------------------------------------------------------------------------------ Minority interests 32,769 57,475 - ------------------------------------------------------------------------------ Commitments and contingencies - ------------------------------------------------------------------------------ Shareholders' equity: Preferred stock, $1.00 par value, 1,000,000 authorized shares -- -- Common stock, $.50 par value, 100,000,000 authorized shares; 54,705,386 and 41,847,359 issued 27,353 20,924 Additional paid-in capital 473,974 180,020 Retained earnings 415,266 340,154 Accumulated other comprehensive income (13,684) 1,148 - ------------------------------------------------------------------------------ Total shareholders' equity 902,909 542,246 - ------------------------------------------------------------------------------ $3,129,613 $1,771,614 ============================================================================== F-3 CONSOLIDATED STATEMENTS OF INCOME SMITHFIELD FOODS, INC. AND SUBSIDIARIES FISCAL YEARS (IN THOUSANDS, EXCEPT PER SHARE DATA) 2000 1999 1998 - ------------------------------------------------------------------------------ Sales $5,150,469 $3,774,989 $3,867,442 Cost of sales 4,456,403 3,235,414 3,479,629 - ------------------------------------------------------------------------------ Gross profit 694,066 539,575 387,813 Selling, general and administrative expenses 390,634 295,610 219,861 Depreciation expense 109,893 63,524 42,300 Interest expense 71,944 40,521 31,891 Minority interests 1,608 (3,518) 199 Nonrecurring charge (See Note 11) -- -- 12,600 - ------------------------------------------------------------------------------ Income before income taxes 119,987 143,438 80,962 Income taxes 44,875 48,554 27,562 - ------------------------------------------------------------------------------ Net income $ 75,112 $ 94,884 $ 53,400 ============================================================================== Net income per basic common share $ 1.54 $ 2.39 $ 1.42 ============================================================================== Net income per diluted common share $ 1.52 $ 2.32 $ 1.34 ============================================================================== See Notes to Consolidated Financial Statements F-4 CONSOLIDATED STATEMENTS OF CASH FLOWS SMITHFIELD FOODS, INC. AND SUBSIDIARIES
FISCAL YEARS (IN THOUSANDS) 2000 1999 1998 - ---------------------------------------------------------------------------------- Operating activities: Net income $75,112 $94,884 $53,400 Depreciation and amortization 118,964 68,566 45,872 Deferred income taxes 13,227 20,737 14,752 (Gain) loss on sale of property, plant and equipment (2,591) (138) 216 Changes in operating assets and liabilities, net of effect of acquisitions: Accounts receivable (7,192) 954 15,115 Inventories (35,976) (17,680) 11,672 Prepaid expenses and other current assets (44,501) (2,225) (10,550) Other assets 2,153 (55,563) (7,746) Accounts payable, accrued expenses and other liabilities 6,022 13,849 (25,194) - ---------------------------------------------------------------------------------- Net cash provided by operating activities 125,218 123,384 97,537 - ---------------------------------------------------------------------------------- Investing activities: Capital expenditures (100,383) (95,447) (92,913) Business acquisitions, net of cash acquired (34,596) (151,223) (7,810) Investments in partnerships and other assets (63,289) (16,206) (5,357) Proceeds from sale of property, plant and equipment 6,018 991 1,153 - ---------------------------------------------------------------------------------- Net cash used in investing activities (192,250) (261,885) (104,927) - ---------------------------------------------------------------------------------- Financing activities: Net (repayments) borrowings on notes payable (249,393) 24,182 (75,000) Proceeds from issuance of long- term debt 269,041 22,948 450,050 Net borrowings on long-term credit facility 324,000 71,000 -- Principal payments on long-term debt and capital lease obligations (187,632) (21,754) (333,053) Repurchase and retirement of common stock (73,145) -- -- Exercise of common stock options 4,121 12,155 124 - ---------------------------------------------------------------------------------- Net cash provided by financing activities 86,992 108,531 42,121 - ---------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 19,960 (29,970) 34,731 Effect of currency exchange rates on cash (668) 38 -- Cash and cash equivalents at beginning of year 30,590 60,522 25,791 - ---------------------------------------------------------------------------------- Cash and cash equivalents at end of year $49,882 $30,590 $60,522 ================================================================================== Supplemental disclosures of cash flow information: Interest paid, net of amount capitalized $79,780 $37,696 $31,428 ============================================================================== Income taxes paid $30,315 $15,306 $10,179 ============================================================================== Common stock issued for acquisitions $369,407 $73,049 $-- ==============================================================================
See Notes to Consolidated Financial Statements F-5 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY SMITHFIELD FOODS, INC. AND SUBSIDIARIES
ACCUMULATED COMMON STOCK ADDITIONAL OTHER PAR PAID-IN RETAINED COMPREHENSIVE TREASURY (IN THOUSANDS) SHARES VALUE CAPITAL EARNINGS INCOME STOCK TOTAL - ----------------------------------------------------------------------------------------------------------------------------------- Balance, April 27, 1997 19,197 $ 9,598 $113,661 $191,870 $ -- $(7,643) $307,486 Comprehensive income: Net income -- -- -- 53,400 -- -- 53,400 --------- Total comprehensive income 53,400 --------- Two-for-one stock split 19,200 9,600 (9,600) -- -- -- -- Exercise of stock options 14 8 116 -- -- -- 124 Reclassification of treasury stock (874) (437) (7,206) -- -- 7,643 -- - --------------------------------------------------------------------------------------------------------------------------------- Balance, May 3, 1998 37,537 18,769 96,971 245,270 -- -- 361,010 Comprehensive income: Net income -- -- -- 94,884 -- -- 94,884 Unrealized gain on securities -- -- -- -- 1,372 -- 1,372 Foreign currency translation -- -- -- -- 2,960 -- 2,960 Minimum pension liability -- -- -- -- (3,184) -- (3,184) --------- Total comprehensive income 96,032 --------- Common stock issued 2,986 1,493 71,556 -- -- -- 73,049 Exercise of stock options 1,324 662 11,493 -- -- -- 12,155 - --------------------------------------------------------------------------------------------------------------------------------- Balance, May 2, 1999 41,847 20,924 180,020 340,154 1,148 -- 542,246 Comprehensive income: Net income -- -- -- 75,112 -- -- 75,112 Unrealized loss on securities -- -- -- -- (3,882) -- (3,882) Foreign currency translation -- -- -- -- (6,561) -- (6,561) Minimum pension liability -- -- -- -- (4,389) -- (4,389) --------- Total comprehensive income 60,280 --------- Common stock issued 15,604 7,802 361,605 -- -- -- 369,407 Exercise of stock options 232 116 4,005 -- -- -- 4,121 Repurchase and retirement of common stock (2,978) (1,489) (71,656) -- -- -- (73,145) - --------------------------------------------------------------------------------------------------------------------------------- Balance, April 30, 2000 54,705 $27,353 $473,974 $415,266 $(13,684) $ -- $902,909 =================================================================================================================================
See Notes to Consolidated Financial Statements F-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SMITHFIELD FOODS, INC. AND SUBSIDIARIES (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Smithfield Foods, Inc. and subsidiaries (the "Company") operates as a hog producer and a processor, manufacturer, marketer, seller and distributor of fresh pork and processed meats. The Company's principal slaughtering and further processing operations are conducted through the Meat Processing Group ("MPG") which consists primarily of six wholly owned domestic pork processing subsidiaries and four international meat processing entities. The Company's hog production operations are conducted through the Hog Production Group ("HPG") which consists primarily of three hog production operations located in the United States and certain joint venture investments outside the United States. Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company after elimination of all material intercompany balances and transactions. Investments in partnerships are recorded using the equity method of accounting. The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fiscal 2000 and 1999 included 52 weeks of operations compared to fiscal 1998 which included 53 weeks of operations. Foreign Currency Translation The financial statements of foreign operations, where the local currency is the functional currency, are translated using exchange rates in effect at period end for assets and liabilities and average exchange rates during the period for results of operations. Related translation adjustments are reported as a component of other comprehensive income in shareholders' equity. Gains and losses from foreign currency transactions are included in earnings. All amounts presented in the consolidated financial statements are in U.S. dollars. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The carrying value of cash equivalents approximates market value. As of April 30, 2000 and May 2, 1999, cash and cash equivalents include $200 and $3,400, respectively, in short- term marketable securities. Inventories The Company's inventories are valued at the lower of first-in, first-out cost or market. Cost includes direct materials, labor and applicable manufacturing and production overhead. Inventories consist of the following: APRIL 30, 2000 MAY 2, 1999 - ------------------------------------------------------------------------------ Hogs on farms $323,639 $ 83,352 Fresh and processed meats 264,479 219,647 Manufacturing supplies 55,937 30,201 Other 21,088 15,656 - ------------------------------------------------------------------------------ $665,143 $348,856 ============================================================================== F-7 Financial Instruments The Company uses commodity hedging instruments, including futures and options, to reduce the risk of price fluctuations related to future raw material requirements and product sales. The terms of such instruments generally do not exceed twelve months and depend on the commodity and other market factors. The Company attempts to closely match the commodity contract expiration periods with the dates for product sale and delivery. Gains and losses from hedging transactions are recognized when the related sales and purchases are made. Property, Plant and Equipment Property, plant and equipment is stated at cost and depreciated over the estimated useful lives of the assets. Buildings and improvements are depreciated over periods from 20 to 40 years. Machinery and equipment is depreciated over periods from two to 20 years. Breeding stock is depreciated over two and one- half years. Repair and maintenance charges are expensed as incurred. Improvements that materially extend the life of the asset are capitalized. Gains and losses from dispositions or retirements of property, plant and equipment are recognized currently. Interest on capital projects is capitalized during the construction period. Total interest capitalized was $3,293 in fiscal 2000, $2,377 in fiscal 1999 and $2,530 in fiscal 1998. Repair and maintenance expenses totaled $160,222, $120,833 and $106,481 in fiscal 2000, 1999 and 1998, respectively. Other Assets Goodwill is amortized over no more than 40 years. Deferred debt issuance costs are amortized over the terms of the related loan agreements. Revenue Recognition Revenues from product sales are recorded upon shipment to customers. Environmental Expenditures Environmental expenditures that relate to current or future operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations and do not contribute to current or future revenue generation are expensed. Liabilities are recorded when environmental assessments and cleanups are probable and the cost can be reasonably estimated. Generally, the timing of these accruals coincides with the Company's commitment to a formal plan of action (See Note 11). Self-Insurance Programs The Company is self-insured for certain levels of general and vehicle liability, property, workers' compensation and health care coverage. The cost of these self-insurance programs is accrued based upon estimated settlements for known and anticipated claims. Any resulting adjustments to previously recorded reserves are reflected in current operating results. Net Income Per Share The Company presents a dual computation of net income per share (See Note 12). The basic computation is based on weighted average common shares outstanding during the period. The diluted computation reflects the potentially dilutive effect of common stock equivalents such as stock options during the period. F-8 Recently Issued Accounting Standards In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 established accounting and reporting standards for derivative instruments and hedging activities and requires, among other things, that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. SFAS 133, as amended, is not required to be adopted until fiscal 2002. The Company has not completed the analysis required to estimate the impact of the standard. Reclassifications Certain prior year amounts have been restated to conform to fiscal 2000 presentations. NOTE 2 RISK MANAGEMENT Substantially all of the Company's products are produced from commodity- based raw materials, corn and soybean meal in the HPG and live hogs in the MPG. The cost of corn and soybean meal (the principal feed ingredients for hogs) and live hogs are subject to wide fluctuations due to unpredictable factors such as weather conditions, economic conditions, government regulation and other unforeseen circumstances. The Company utilizes futures and option contracts for live hogs and grains to manage hog production margins when management determines the conditions are appropriate for such hedges. The particular hedging methods employed and the time periods for the contracts depend on a number of factors, including the availability of adequate contracts for the respective periods for the hedge. The Company attempts to closely match the commodity contract expiration periods with the dates for product sale and delivery. The pricing of the Company's fresh pork and processed meats is monitored and adjusted upward and downward in reaction to changes in the cost of the underlying raw materials. The unpredictability of the raw material costs limits the Company's ability to forward price fresh pork and processed meat products without the use of commodity contracts through a program of price-risk management. The Company uses price-risk management to enhance its ability to engage in forward sales contracts, where prices for future deliveries are fixed, by purchasing (or selling) commodity contracts for future periods to reduce or eliminate the effect of fluctuations in future raw material costs on the profitability of the related sales. While this may tend to limit the Company's ability to participate in gains from favorable commodity price fluctuation, it also tends to reduce the risk of loss from adverse changes in raw material prices. As of April 30, 2000, the Company had a deferred loss of $41,309 compared to a deferred gain on outstanding futures contracts of $8,895 at May 2, 1999. As of April 30, 2000 and May 2, 1999, the Company had open futures contracts with contract values of $711,654 and $219,748, respectively. As of April 30, 2000 and May 2, 1999, the Company had deposits with brokers for outstanding futures contracts of $45,131 and $15,591, respectively, included in prepaid expenses and other current assets. For open futures contracts, the Company uses a sensitivity analysis technique to evaluate the effect that changes in the market value of commodities will have on these commodity derivative instruments. As of April 30, 2000, the potential change in fair value of open future contracts, assuming a 10% change in the underlying commodity price, was $33,624. NOTE 3 ACQUISITIONS In January of fiscal 2000, the Company completed the acquisition of Murphy Farms, Inc. ("MFI") and its affiliated companies for 11.1 million shares of the Company's common stock (subject to post-closing adjustments) and the assumption of approximately $203,000 in debt, plus other liabilities. MFI is a hog producer that has approximately 345,000 sows which produce approximately 6.0 million market hogs annually. The balance of the purchase price in excess of the fair value of the assets acquired and the liabilities assumed at the date of acquisition was recorded as an intangible asset totaling $147,006. F-9 In May of fiscal 2000, the Company completed the acquisition of Carroll's Foods, Inc. ("CFI") and its affiliated companies and partnership interests for 4.3 million shares of the Company's common stock and the assumption of approximately $231,000 in debt, plus other liabilities. CFI's U.S. hog production operation includes approximately 180 thousand sows which produce approximately 2.9 million market hogs annually. The acquisition included 100% of the capital stock of CFI, CFI's 50% interest in Smithfield-Carroll's, CFI's 16% interest in Circle Four, CFI's 50% interest in Tar Heel Turkey Hatchery, 100% of CFI's turkey grow-out operations, CFI's 49% interest in Carolina Turkeys, and certain hog production interests in Brazil and Mexico. The balance of the purchase price in excess of the fair value of the assets acquired and the liabilities assumed at the date of acquisition was recorded as an intangible asset totaling $45,100. Had the acquisitions of CFI and MFI occurred at the beginning of fiscal 1999, sales, net income and net income per diluted share would have been $5,329,074, $77,633 and $1.31, respectively, for fiscal 2000 and $3,892,769, $66,080 and $1.46, respectively, for fiscal 1999. In August of fiscal 2000, the Company acquired the capital stock of Societe Financiere de Gestion et de Participation S.A. ("SFGP") a private-label processed meats manufacturer in France. SFGP had sales of approximately $100,000 in calendar year 1998. In November of fiscal 1999, the Company acquired 63% of the total equity of Schneider Corporation ("Schneider"), in exchange for approximately 2.5 million Exchangeable Shares of Smithfield Canada Limited, a wholly owned subsidiary of the Company. Schneider produces and markets fresh pork and a full line of processed meats and is the second largest meat processing company in Canada. The balance of the purchase price in excess of the fair value of assets acquired and liabilities assumed at the date of acquisition was recorded as an intangible asset totaling $36,900. Had the acquisition of Schneider occurred at the beginning of fiscal 1998, sales, net income and net income per diluted share would have been $4,053,798, $98,146 and $2.33, respectively, for fiscal 1999 and $4,405,239, $59,447 and $1.40, respectively, for fiscal 1998. In April of fiscal 1999, the Company acquired a 67% interest in Animex S.A. ("Animex"), a major meat and poultry processing company in Poland. During fiscal 2000, the Company increased its ownership in Animex to 85% of total equity. The balance of the purchase price in excess of the fair value of assets acquired and liabilities assumed at the date of acquisition was recorded as an intangible asset totaling $55,100. Had the acquisition of Animex occurred at the beginning of fiscal 1999, sales would have been approximately $4,175,000, and it would not have had a material effect on net income or net income per diluted share. In September of fiscal 1999, the Company acquired all of the capital stock of Societe Bretonne de Salaisons ("SBS"), the largest private-label manufacturer of ham, pork shoulder and bacon products in France. SBS had calendar year 1998 sales of approximately $100,000. In June of fiscal 1999, the Company increased its ownership in the Circle Four hog production operation from 37% to 84%, requiring the Company to consolidate the accounts of Circle Four and to discontinue using the equity method of accounting. Prior to fiscal 1999, the investment in Circle Four was accounted for using the equity method of accounting. As a result of the acquisition of CFI in May of fiscal 2000, Circle Four became a wholly owned subsidiary of the Company. In October of fiscal 1999, the Company acquired all of the assets and business of North Side Foods Corp. ("North Side"), a major domestic supplier of precooked sausage to McDonald's Corporation. North Side had calendar year 1998 sales of approximately $58,000. Each of these acquisitions was accounted for using the purchase method of accounting and, accordingly, the accompanying financial statements include the financial position and results of operations from the dates of acquisition. Had the acquisitions of SFGP, North Side and SBS occurred at the beginning of April 30, 2000 and May 2, 1999, it would not have had a material effect on sales, net income or net income per diluted share for the year ended April 30, 2000 and May 2, 1999. F-10 NOTE 4 DEBT Long-term debt consists of the following:
APRIL 30, 2000 MAY 2, 1999 - ----------------------------------------------------------------------------------------------------------------------------------- Long-term credit facility, expiring July 2002 $ 395,000 $ 71,000 7.625% senior subordinated notes, due February 2008 186,500 200,000 8.52% senior notes, due August 2006 100,000 100,000 7.89% senior note, payable through October 2009 95,000 -- 8.25% note, payable through March 2006 75,000 -- Variable rate note, payable through October 2009 72,500 -- 8.44% note, payable through October 2009 50,000 -- 8.34% senior notes, due August 2003 40,000 40,000 Variable rate note, due March 2002 25,000 -- Euribor 3 mos. + .50% French franc notes, payable through April 2004 16,676 19,355 8.41% senior notes, payable through April 2004 14,779 14,779 9.70% Canadian dollar notes, payable through September 2010 12,228 13,114 6.70% note, payable October 2001 10,134 -- Miscellaneous with interest rates ranging from 3.63% to 10.75% due June 2001 through November 2006 119,506 144,288 - ----------------------------------------------------------------------------------------------------------------------------------- 1,212,323 602,536 Less current portion (44,941) (24,102) - ----------------------------------------------------------------------------------------------------------------------------------- $1,167,382 $578,434 ===================================================================================================================================
Scheduled maturities of long-term debt are as follows: FISCAL YEAR - ------------------------------------------------------------ 2001 $ 44,941 2002 99,634 2003 447,904 2004 113,131 2005 45,866 Thereafter 460,847 - ------------------------------------------------------------ $1,212,323 ============================================================ In fiscal 2000, the Company placed $225,000 ten-year senior secured notes. The $225,000 in senior secured notes include $75,000 of variable rate debt, $100,000 of notes at 7.89% and $50,000 of notes at 8.44%. The net proceeds from the notes were used to repay a substantial portion of debt assumed in connection with the CFI and MFI acquisitions. In connection with the MFI acquisition, the Company assumed $100,000 of outstanding long-term debt including $75,000 of notes at 8.25% and $25,000 of variable rate debt. In fiscal 1998, the Company issued $200,000 in aggregate principal amount of 10-year 7.625% senior subordinated notes. The net proceeds from the sale of the notes were used to repay indebtedness under the Company's revolving credit facility with the balance temporarily invested in short-term marketable securities. In fiscal 2000, the Company increased the revolving credit facility borrowing from $300,000 to $650,000. The borrowings are prepayable and bear interest, at the Company's option, at various rates based on margins over the federal funds rate or Eurodollar rate and expires in July 2002. Including certain facilities which were acquired in connection with business acquisitions, the Company has aggregate credit facilities totaling $735,443. As of April 30, 2000, the Company had unused capacity under these credit facilities of $249,915. Included in the aggregate credit facilities are $85,443 of short-term credit facilities with various financial institutions assumed in connection with business acquisitions in fiscal 1999. These short- term credit facilities are classified as notes payable in the Consolidated Balance Sheets. These facilities are generally at prevailing market rates. The Company pays a commitment fee on the unused portion of the aggregate revolving credit facilities. F-11 Average borrowings under credit facilities were $305,470 in fiscal 2000, $74,820 in fiscal 1999 and $149,723 in fiscal 1998 at average interest rates of approximately 7.5%, 6.3%, and 6.7%, respectively. Maximum borrowings were $458,922 in fiscal 2000, $152,510 in fiscal 1999 and $247,000 in fiscal 1998. Total outstanding borrowings were $457,200 and $134,900 with average interest rates of 7.2% and 7.1% as of April 30, 2000 and May 2, 1999, respectively. The senior subordinated notes are unsecured. Senior notes are secured by four of the Company's major processing plants and certain hog farm facilities. The $650,000 credit facility is secured by substantially all of the Company's U.S. inventories and accounts receivable. The Company determines the fair value of public debt using quoted market prices and values all other debt using discounted cash flow techniques at estimated market prices for similar issues. As of April 30, 2000, the fair value of long-term debt, based on the market value of debt with similar maturities and covenants, was approximately $1,207,134. The Company's various debt agreements contain financial covenants that require the maintenance of certain levels and ratios for working capital, net worth, current ratio, fixed charges, capital expenditures and, among other restrictions, limit additional borrowings, the acquisition, disposition and leasing of assets, and payments of dividends to shareholders. NOTE 5 INCOME TAXES Income tax expense consists of the following: 2000 1999 1998 - ------------------------------------------------------------------------------ Current tax expense: Federal $26,994 $20,445 $11,315 State 3,174 5,409 2,043 Foreign 1,480 1,963 -- - ------------------------------------------------------------------------------ 31,648 27,817 13,358 - ------------------------------------------------------------------------------ Deferred tax expense (benefit): Federal 9,500 19,924 15,684 State 1,073 (2,082) (1,480) Foreign 2,654 2,895 -- - ------------------------------------------------------------------------------ 13,227 20,737 14,204 - ------------------------------------------------------------------------------ $44,875 $48,554 $27,562 ============================================================================== A reconciliation of taxes computed at the federal statutory rate to the provision for income taxes is as follows: 2000 1999 1998 - ------------------------------------------------------------------------------ Federal income taxes at statutory rate 35.0% 35.0% 35.0% State income taxes, net of federal tax benefit 1.7 2.5 1.0 Earnings in jurisdictions taxed at rates different from the statutory U.S. federal rate 2.9 -- -- Foreign sales corporation benefit (2.0) (1.4) (2.0) Amortization of acquisition costs 1.5 0.7 0.5 Benefits of certain insurance contracts -- (1.1) (3.3) Nondeductible settlements -- -- 4.5 Other (1.7) (1.8) (1.7) - ------------------------------------------------------------------------------ 37.4% 33.9% 34.0% ============================================================================== F-12 The tax effects of temporary differences consist of the following: APRIL 30, 2000 MAY 2, 1999 - ------------------------------------------------------------------------------ Deferred tax assets: Accrued expenses $ 16,998 $ 5,398 Tax credits, carryforwards and net operating losses 13,939 14,308 Employee benefits 2,222 17,748 Intangibles 2,210 3,146 Inventories 1,758 1,627 Alternative minimum tax credit 1,407 5,283 Other 572 -- - ------------------------------------------------------------------------------ $ 39,106 $47,510 ============================================================================== Deferred tax liabilities: Accounting method change $138,403 $ -- Property, plant and equipment 120,277 47,876 Investments in subsidiaries 39,560 3,293 Other -- 7,313 - ------------------------------------------------------------------------------ $298,240 $58,482 ============================================================================== As of April 30, 2000 and May 2, 1999, the Company had $15,195 and $20,551, respectively, of net current deferred tax assets included in prepaid expenses and other current assets. The Company had a valuation allowance of $5,265 related to income tax assets as of April 30, 2000 primarily related to losses in foreign jurisdictions for which no tax benefit was recognized. At May 2, 1999, the Company had no valuation allowances for deferred tax assets. The tax credits, carryforwards and net operating losses expire from fiscal 2001 to 2020. The alternative minimum tax credits do not expire. As of April 30, 2000, foreign subsidiary net earnings of $10,065 were considered permanently reinvested in those businesses. Accordingly, federal income taxes have not been provided for such earnings. It is not practicable to determine the amount of unrecognized deferred tax liabilities associated with such earnings. NOTE 6 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consist of the following: APRIL 30, 2000 MAY 2, 1999 - ------------------------------------------------------------------------------ Payroll and related benefits $ 68,611 $ 60,079 Self-insurance reserves 29,248 33,870 Grower fees 21,128 871 Interest 12,801 9,671 Pension and postretirement benefits 12,104 12,671 Other 95,544 51,622 - ------------------------------------------------------------------------------ $239,436 $168,784 ============================================================================== NOTE 7 SHAREHOLDERS EQUITY Reincorporation and Treasury Stock In fiscal 1998, the Company's shareholders approved the reincorporation of the Company in Virginia from Delaware. The purpose of the reincorporation was to reduce annual franchise taxes and does not affect the Company's capitalization or the manner in which it operates. Since Virginia law does not recognize treasury stock, the shares previously classified as treasury stock reverted to unissued shares resulting in a reduction in common stock and additional paid-in capital for the cost basis of the shares. Stock Split In fiscal 1998, the Company effected a two-for-one split of its common stock. Stock option agreements provide for the issuance of additional shares for the stock split. All stock options outstanding and per share amounts for all periods reflect the effect of this split. F-13 Preferred Stock The Company has 1,000,000 shares of $1.00 par value preferred stock authorized, none of which are issued. The board of directors is authorized to issue preferred stock in series and to fix, by resolution, the designation, dividend rate, redemption provisions, liquidation rights, sinking fund provisions, conversion rights and voting rights of each series of preferred stock. Stock Options Under the Company's 1984 Stock Option Plan (the "1984 Plan"), officers and certain key employees were granted incentive and nonstatutory stock options to purchase shares of the Company's common stock for periods not exceeding 10 years at prices that were not less than the fair market value of the common stock on the date of grant. Stock appreciation rights which are exercisable upon a change in control of the Company are attached to the options granted pursuant to the 1984 Plan. The 1984 Plan expired in fiscal 1999 with the final exercise of options. Under the Company's 1992 Stock Incentive Plan (the "1992 Plan"), management and other key employees may be granted nonstatutory stock options to purchase shares of the Company's common stock exercisable five years after grant for periods not exceeding 10 years. The exercise price for options granted prior to August 31, 1994, was not less than 150% of the fair market value of the common stock on the date of grant. On August 31, 1994 the Company amended and restated the 1992 Plan, changing the exercise price of options granted on or after that date to not less than the fair market value of the common stock on the date of grant. The Company reserved 2,500,000 shares of common stock under the 1992 Plan. Under the Company's 1998 Stock Incentive Plan (the "1998 Plan"), management and other key employees may be granted nonstatutory stock options to purchase shares of the Company's common stock exercisable five years after grant for periods not exceeding 10 years. The Company reserved 1,500,000 shares under the 1998 Plan. In fiscal 1999, the 1992 Plan was merged with the 1998 Plan. As of April 30, 2000, there were 1,854,000 shares available for grant under the 1998 Plan. The following is a summary of transactions for the various stock option plans during fiscal 1998, 1999 and 2000: WEIGHTED AVERAGE EXERCISE NUMBER OF SHARES PRICE - ------------------------------------------------------------------------------ Outstanding at April 27, 1997 3,069,000 $ 8.90 Granted 314,000 25.39 Exercised (17,000) 4.06 - ------------------------------------------------------------------------------ Outstanding at May 3, 1998 3,366,000 10.47 Granted 260,000 27.96 Exercised (1,323,500) 4.42 Cancelled (160,000) 15.56 - ------------------------------------------------------------------------------ Outstanding at May 2, 1999 2,142,500 15.95 Granted 55,000 23.99 Exercised (232,000) 11.53 Cancelled (115,000) 16.85 - ------------------------------------------------------------------------------ Outstanding at April 30, 2000 1,850,500 $16.69 ============================================================================== As of April 30, 2000, May 2, 1999 and May 3, 1998, the number of option shares exercisable was 915,500, 1,127,500 and 1,260,000, respectively, at weighted average exercise prices of $11.61, $11.53 and $4.06, respectively. F-14 The following table summarizes information about stock options outstanding as of April 30, 2000: WEIGHTED OPTION SHARES AVERAGE WEIGHTED OUTSTANDING REMAINING AVERAGE EXERCISE APRIL 30, CONTRACTUAL EXERCISE PRICE RANGE 2000 LIFE PRICE - ------------------------------------------------------------------------------ $10.72 to 11.75 955,500 3.6 $11.53 13.63 to 15.31 260,000 5.7 13.76 16.47 to 18.78 135,000 7.3 17.31 25.69 to 29.19 470,000 7.9 27.63 31.63 to 32.69 30,000 7.8 32.07 - ------------------------------------------------------------------------------ Stock options with an exercise price of $11.53 and $15.31 per share are the only options exercisable as of April 30, 2000. The Company does not recognize compensation costs for its stock option plans. Had the Company determined compensation costs based on the fair value at the grant date for its stock options granted subsequent to fiscal 1995, the Company's net income and net income per common share would have been reduced to the pro forma amounts as follows: 2000 1999 1998 - ------------------------------------------------------------------------------ Net income, as reported $75,112 $94,884 $53,400 Pro forma net income 73,960 93,705 52,571 Net income per common share, as reported: Basic $ 1.54 $ 2.39 $ 1.42 Diluted 1.52 2.32 1.34 Pro forma net income per common share: Basic $ 1.52 $ 2.36 $ 1.40 Diluted 1.50 2.29 1.32 - ------------------------------------------------------------------------------ The weighted average fair values of option shares granted were $11.68, $13.40 and $11.88 for fiscal 2000, 1999 and 1998, respectively. The fair value of each stock option share granted is estimated at date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: 2000 1999 1998 - ------------------------------------------------------------------------------ Expected option life 7.0 years 7.0 years 6.0 years Expected annual volatility 35.0% 35.0% 35.0% Risk-free interest rate 5.9% 5.3% 6.3% Dividend yield 0.0% 0.0% 0.0% - ------------------------------------------------------------------------------ Preferred Share Purchase Rights As part of the reincorporation, the Company adopted a preferred share purchase rights plan (the "Rights Plan") and declared a dividend of one preferred share purchase right (a "Right") on each outstanding share of common stock. Under the terms of the Rights Plan, if the Company is acquired in a merger or other business combination transaction, each Right will entitle its holder to purchase, at the Right's then current exercise price, a number of the acquiring company's common shares having a market value of twice such price. In addition, if a person or group acquires 20% (or other applicable percentage, as summarized in the Rights Plan) or more of the outstanding common stock, each Right will entitle its holder (other than such person or members of such group) to purchase, at the Right's then current exercise price, a number of shares of common stock having a market value of twice such price. F-15 Each Right will entitle its holder to buy one one-thousandth of a Series A junior participating preferred share ("Preferred Share"), par value $1.00 per share, at an exercise price of $37.50 subject to adjustment. Each Preferred Share will entitle its holder to 1,000 votes and will have an aggregate dividend rate of 1,000 times the amount, if any, paid to holders of common stock. The Rights will expire on May 31, 2001, unless the date is extended or unless the Rights are earlier redeemed or exchanged at the option of the board of directors for $.0001 per Right. Generally, each share of common stock issued after May 31, 1991 will have one Right attached. NOTE 8 PENSION AND OTHER RETIREMENT PLANS The Company sponsors several defined benefit pension plans covering substantially all U.S. and Canadian employees. Pension plans covering salaried employees provide benefits based on years of service and average salary levels. Pension plans covering hourly employees provide benefits of stated amounts for each year of service. In general, the Company's funding policy for pension plans is to contribute annually the minimum amount required under government regulations. The pension plan assets are invested primarily in equities, debt securities, insurance contracts and money market funds. The Company provides health care and life insurance benefits for certain retired employees. These plans are unfunded and generally pay covered costs reduced by retiree premium contributions, co-payments and deductibles. The Company retains the right to modify or eliminate these benefits. The changes in the status of the Company's pension and postretirement plans, the related components of pension and postretirement expense and the amounts recognized in the Consolidated Balance Sheets are as follows:
PENSION BENEFITS POSTRETIREMENT BENEFITS APRIL 30, 2000 MAY 2, 1999 APRIL 30, 2000 MAY 2, 1999 - ----------------------------------------------------------------------------------------------------------------------------------- Change in benefit obligation Benefit obligation at beginning of year $442,752 $242,554 $30,294 $10,817 Service cost 10,779 6,626 596 397 Interest cost 30,251 22,007 2,006 1,416 Plan amendments -- 15,681 (1,360) -- Employee contributions 1,240 -- -- -- Acquisitions 12,584 156,343 -- 18,843 Benefits paid (26,929) (22,285) (1,869) (1,055) Foreign currency changes (2,727) 10,676 (388) 1,138 Actuarial (gain) loss (42,760) 11,150 (2,646) (1,262) - ----------------------------------------------------------------------------------------------------------------------------------- Benefit obligation at end of year 425,190 442,752 26,633 30,294 - ----------------------------------------------------------------------------------------------------------------------------------- Change in plan assets Fair value of plan assets at beginning of year 396,725 203,392 -- -- Actual return on plan assets 11,982 12,979 -- -- Acquisitions 11,968 172,116 -- -- Employer contributions 20,676 19,049 1,869 1,055 Foreign currency changes (3,149) 11,474 -- -- Benefits paid (26,929) (22,285) (1,869) (1,055) - ----------------------------------------------------------------------------------------------------------------------------------- Fair value of plan assets at end of year 411,273 396,725 -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Reconciliation of accrued cost Funded status (13,917) (46,027) (26,633) (30,294) Unrecognized actuarial (gain) or loss (7,333) 11,303 -- (490) Unrecognized prior service cost 14,236 15,728 -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Accrued cost at end of year $ (7,014) $(18,996) $(26,633) $(30,784) =================================================================================================================================== Amounts recognized in the statement of financial position consist of Prepaid benefit cost $ 35,211 $ 19,546 $ -- $ -- Accrued benefit liability (64,127) (44,163) (26,633) (30,784) Intangible asset 9,508 410 -- -- Accumulated other comprehensive income 12,394 5,211 -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Net amount recognized at end of year $ (7,014) $(18,996) $(26,633) $(30,784) ===================================================================================================================================
F-16 Components of net periodic costs include: PENSION BENEFITS 2000 1999 1998 - ------------------------------------------------------------------------------ Service cost $ 10,779 $ 6,626 $ 4,104 Interest cost 30,251 22,007 16,730 Expected return on plan assets (35,468) (25,834) (15,309) Net amortization 1,174 86 (1,137) - ------------------------------------------------------------------------------ Net periodic cost $ 6,736 $ 2,885 $ 4,388 ============================================================================== POSTRETIREMENT BENEFITS 2000 1999 1998 - ------------------------------------------------------------------------------ Service cost $ 596 $ 397 $ 58 Interest cost 2,006 1,416 767 Net amortization (124) 95 69 - ------------------------------------------------------------------------------ Net periodic cost $2,478 $1,908 $894 ============================================================================== The projected benefit obligations, accumulated benefit obligations and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $184,039, $174,709 and $119,951, respectively, as of April 30, 2000 and $204,648, $193,010 and $139,027, respectively, as of May 2, 1999. In determining the projected benefit obligation and the accumulated postretirement benefit obligation in fiscal 2000 and 1999, the following assumptions were made: PENSION BENEFITS POSTRETIREMENT BENEFITS APRIL 30, MAY 2, APRIL 30, MAY 2, 2000 1999 2000 1999 - ------------------------------------------------------------------------------ Discount rate 7.7% 6.8% 7.5% 6.7% Expected return on assets 8.7% 9.0% -- -- Compensation increase 3.7% 3.9% -- -- - ------------------------------------------------------------------------------ In determining the accumulated postretirement benefit obligation in fiscal 2000 and 1999, the assumed annual rate of increase in per capita cost of covered health care benefits was 6.0% for fiscal 2000 and 5.5% thereafter for U.S. plans. For non-U.S. plans the assumed annual rate of increase was 8.0% for fiscal 2000 and decreased by 0.5% each year until leveling at 5.0%. The assumed health care cost trend rate has an effect on the amounts reported. A one-percentage point change in the assumed per capita cost of covered health care benefits would have the following effect: ONE PERCENTAGE ONE PERCENTAGE POINT INCREASE POINT DECREASE - ------------------------------------------------------------------------------ Effect on postretirement benefit obligations as of April 30, 2000 $1,662 $(1,522) Effect on annual benefit cost in fiscal 2000 $ 205 $ (183) - ------------------------------------------------------------------------------ F-17 NOTE 9 LEASE OBLIGATIONS AND COMMITMENTS The Company leases transportation equipment under operating leases ranging from one to 10 years with options to cancel at earlier dates. In addition, the Company has a long-term maintenance agreement related to this equipment. Maintenance fees are based upon fixed monthly charges for each vehicle, as well as the maintenance facility itself and contingent fees based upon transportation equipment usage. The amounts shown as minimum rental commitments do not include contingent maintenance fees. The Company has agreements, expiring in fiscal 2004 and 2008, to use two cold storage warehouses owned by a partnership, 50% of which is owned by the Company. The Company has agreed to pay prevailing competitive rates for use of the facilities, subject to aggregate guaranteed minimum annual fees of $3,600. In fiscal 2000, 1999 and 1998, the Company paid $6,299, $5,807 and $6,228, respectively, in fees for use of the facilities. As of April 30, 2000 and May 2, 1999, the Company had investments of $545 and $1,108, respectively, in the partnership. In fiscal 1998, the Company entered into a 15-year agreement, expiring in 2013, to use a cold storage warehouse owned by a partnership, 50% of which is owned by the Company. The Company leases the facility for an amount covering debt service costs plus a minimum guaranteed annual fee. Debt service cost was $2,206 and $2,239 in fiscal 2000 and 1999, respectively. The minimum guaranteed annual fee was $200 for both years. As of April 30, 2000 and May 2, 1999, the Company had investments of $444 and $1,028, respectively, in the partnership. Minimum rental commitments under all noncancelable operating leases and maintenance agreements are as follows: FISCAL YEAR - ------------------------------------------------------------------ 2001 $ 24,487 2002 26,246 2003 13,386 2004 10,175 2005 7,558 Thereafter 18,640 - ------------------------------------------------------------------ $100,492 ================================================================== Rental expense was $32,425 in fiscal 2000, $24,535 in fiscal 1999 and $24,839 in fiscal 1998. Rental expense in fiscal 2000, 1999 and 1998 included $2,566, $2,787 and $3,231 of contingent maintenance fees, respectively. The Company has a sale and leaseback arrangement for certain hog production facilities. The arrangement provides for an early termination at predetermined amounts in fiscal 2004. Future minimum lease payments for assets under capital leases and the present value of the net minimum lease payments are as follows: FISCAL YEAR - ------------------------------------------------------------------ 2001 $ 5,639 2002 4,909 2003 4,423 2004 10,759 2005 2,044 Thereafter 2,435 - ------------------------------------------------------------------ 30,209 Less amounts representing interest (6,257) - ------------------------------------------------------------------ Present value of net minimum obligations 23,952 Less current portion (3,564) - ------------------------------------------------------------------ Long-term capital lease obligations $20,388 ================================================================== F-18 As of April 30, 2000, the Company had definitive commitments of $53,582 for capital expenditures primarily to increase its processed meats and value-added fresh pork capacity at several of its processing plants. NOTE 10 RELATED PARTY TRANSACTIONS The president of CFI before the acquisition (see Note 3) was a director of the Company in fiscal 1999. Prior to the acquisition, the Company had a long-term agreement to purchase hogs from CFI at prices that, in the opinion of management, were equivalent to market. Pursuant to this agreement with CFI, the Company purchased $161,965 and $246,371 of hogs in fiscal 1999 and 1998, respectively. A director of the Company is the chairman, president and chief executive officer and a director of Prestage Farms, Inc. ("PFI"). The Company has a long- term agreement to purchase hogs from PFI at prices that, in the opinion of management, are equivalent to market. Pursuant to this agreement with PFI, the Company purchased $138,705, $106,365 and $168,829 of hogs in fiscal 2000, 1999 and 1998, respectively. In fiscal 1999 and 1998, the Company purchased raw materials totaling $5,997 and $18,524, respectively, from a company which was 48%-owned by the chairman and chief executive officer's children in fiscal 1998. In the opinion of management, these purchases were made at prices that were equivalent to market. NOTE 11 REGULATION AND LITIGATION Like other participants in the meat processing industry, the Company is subject to various laws and regulations administered by federal, state and other government entities, including the Environmental Protection Agency and corresponding state agencies as well as the United States Department of Agriculture, the United States Food and Drug Administration and the United States Occupational Safety and Health Administration. Management believes that the Company presently is in compliance with all such laws and regulations in all material respects, and that continued compliance with these standards will not have a material adverse effect on the Company's financial position or results of operations. Furthermore, with respect to the suits discussed below, the Company believes that their ultimate resolution will not have a material adverse effect on the Company's financial position or annual results of operations. In United States of America v. Smithfield Foods, Inc. et al., the United States District Court for the Eastern District of Virginia imposed a $12,600 civil penalty on the Company and two of its subsidiaries for Clean Water Act violations at the Company's Smithfield, Virginia processing plants. The Company recorded a nonrecurring charge of $12,600 during fiscal 1998 with respect to this penalty. In September 1999, the United States Court of Appeals for the Fourth Circuit affirmed the District Court's determination of liability but remanded the penalty determination to the District Court with instructions to recalculate the civil penalty solely to correct a 4% error made by the government's expert. In May 2000, the Company filed a certiorari petition seeking review of the Fourth Circuit's ruling by the United States Supreme Court. There can be no assurance as to the outcome of such appeal or any subsequent proceedings regarding this matter. F-19 In 1998, the Commonwealth of Virginia filed a civil suit against the Company in the Circuit Court of the County of Isle of Wight, Virginia under Virginia's water pollution control laws. Virginia alleges that 22,517 wastewater discharge permit violations occurred at the Company's Smithfield, Virginia processing plants between 1986 and 1997. Most of these alleged violations were also presented in the suit described above. In October 1999, the Circuit Court dismissed the Commonwealth's case against the Company, ruling under the doctrine of res judicata that the subject matter of the case had already been finally adjudicated against the Company in the suit. The Commonwealth has appealed the decision of the Circuit Court to the Supreme Court of Virginia. There can be no assurance as to the outcome of the Commonwealth's appeal or any subsequent proceedings regarding this matter. In June 2000, Neuse River Foundation, Inc., Richard J. Dove, d/b/a The Neuse Riverkeeper, D. Boulton Baldridge, d/b/a The Cape Fear Riverkeeper, New River Foundation, Inc., Tom Mattison, d/b/a The New Riverkeeper, and The Water Keeper Alliance filed a lawsuit in the General Court of Justice, Superior Court Division, of the State of North Carolina against the Company, CFI, Brown's of Carolina, Inc., MFI, Wendell H. Murphy, Sr., Wendell H. Murphy, Jr., and Joseph W. Luter, III. The lawsuit alleges, among other things, claims based on negligence, trespass, strict liability and unfair trade practices related to the operation of swine waste disposal lagoons in North Carolina. The lawsuit apparently seeks numerous and costly remedies, including injunctive relief to end all use of hog waste disposal lagoons in North Carolina, unspecified but very large remediation costs and unspecified additional damages. The Company believes that none of these claims has merit and furthermore that the plaintiffs lack standing to bring such a suit. The Company intends to contest this litigation vigorously. In April 2000, the Company and one of its subsidiaries were named as defendants, along with IBP, inc., in a civil action filed in the United States District Court for the Middle District of Georgia. The case was filed by four named plaintiffs on behalf of a putative nationwide class of hog producers who from 1994 to the present produced and sold finished hogs to defendants on a spot, auction or cash market basis. The plaintiffs contend that the defendants violated the Packers and Stockyards Act of 1921 (the "PSA") by reason of the defendants' engaging in various captive supply arrangements for the procurement of hogs for slaughter. The Company believes that it has valid defenses to this action, that it has acted properly in its dealings with hog producers and that it has not violated the PSA or any other applicable law. The Company further believes that the action does not qualify for certification as a class action. Accordingly, the Company will defend this action vigorously. F-20 NOTE 12 NET INCOME PER SHARE The computation for basic and diluted net income per share follows: WEIGHTED AVERAGE NET INCOME SHARES PER SHARE - ------------------------------------------------------------------------------ FISCAL 2000 Net income per basic share $75,112 48,642 $1.54 Effect of dilutive stock options -- 744 -- - ------------------------------------------------------------------------------ Net income per diluted share $75,112 49,386 $1.52 ============================================================================== FISCAL 1999 Net income per basic share $94,884 39,628 $2.39 Effect of dilutive stock options -- 1,334 -- - ------------------------------------------------------------------------------ Net income per diluted share $94,884 40,962 $2.32 ============================================================================== FISCAL 1998 Net income per basic share $53,400 37,532 $1.42 Effect of dilutive stock options -- 2,200 -- - ------------------------------------------------------------------------------ Net income per diluted share $53,400 39,732 $1.34 ============================================================================== The summary below lists stock options outstanding at the end of each fiscal year which were not included in the computation of net income per diluted share because the options' exercise prices were greater than the average market price of the common shares. These options, which have varying expiration dates, were still outstanding as of April 30, 2000. 2000 1999 1998 - ------------------------------------------------------------------------------ Stock option shares excluded 500,000 495,000 65,000 Average option price per share $27.90 $28.10 $32.42 - ------------------------------------------------------------------------------ NOTE 13 SEGMENTS The MPG markets its products to food retailers, distributors, wholesalers, restaurant and hotel chains, other food processors and manufacturers of pharmaceuticals and animal feeds in both domestic and international markets. The HPG supplies raw materials (live hogs) to the hog slaughtering operations of the Company and independent third parties on both an open-market sales basis and under long-term contracts. The following tables present information about the results of operations and the assets of each of the Company's reportable segments for the fiscal years ended April 30, 2000, May 2, 1999 and May 3, 1998. The information contains certain allocations of expenses that the Company deems reasonable and appropriate for the evaluation of results of operations. Certain prior year amounts have been restated to conform with fiscal 2000 presentations. Segment assets do not include intersegment account balances as the Company feels that such an inclusion would be misleading or not meaningful. Management believes all intersegment sales are at prices which approximate market. F-21 MEAT HOG GENERAL PROCESSING PRODUCTION CORPORATE TOTAL - ------------------------------------------------------------------------------ FISCAL 2000 Sales $4,984,010 $735,328 $ -- $5,719,338 Intersegment sales -- (568,869) -- (568,869) Depreciation and amortization 73,133 41,288 4,543 118,964 Operating profit (loss) 122,880 99,633 (30,582) 191,931 Interest expense 37,941 26,103 7,900 71,944 Assets 1,613,395 1,319,097 197,121 3,129,613 Capital expenditures 91,925 7,262 1,196 100,383 - ------------------------------------------------------------------------------ FISCAL 1999 Sales $3,729,644 $155,796 $ -- $3,885,440 Intersegment sales -- (110,451) -- (110,451) Depreciation and amortization 48,814 16,541 3,211 68,566 Operating profit (loss) 253,839 (46,050) (23,830) 183,959 Interest expense 25,565 12,583 2,373 40,521 Assets 1,292,633 343,069 135,912 1,771,614 Capital expenditures 62,315 28,755 4,377 95,447 - ------------------------------------------------------------------------------ FISCAL 1998 Sales $3,867,442 $ 156,565 $ -- $4,024,007 Intersegment sales -- (156,565) -- (156,565) Depreciation and amortization 34,936 9,206 1,730 45,872 Operating profit (loss) 144,049 (2,292) (28,904) 112,853 Interest expense 22,854 7,390 1,647 31,891 Assets 787,274 178,078 118,293 1,083,645 Capital expenditures 70,329 13,252 9,332 92,913 - ------------------------------------------------------------------------------ The following table presents the Company's sales and long-lived assets attributed to operations in the U.S. and international geographic areas. 2000 1999 1998 - ------------------------------------------------------------------------------ Sales: U.S. $4,016,749 $3,470,307 $3,867,442 Canada 632,897 244,121 -- Poland 344,984 -- -- France 155,839 60,561 -- - ------------------------------------------------------------------------------ Total $5,150,469 $3,774,989 $3,867,442 ============================================================================== Long-lived assets at end of year: U.S. $1,545,204 $ 790,315 $ 572,522 Canada 187,092 169,038 -- Poland 90,809 78,201 -- France 73,782 51,980 -- - ------------------------------------------------------------------------------ F-22 NOTE 14 QUARTERLY RESULTS OF OPERATIONS (Unaudited) FIRST SECOND THIRD FOURTH - ------------------------------------------------------------------------------ 2000 Sales $1,142,415 $1,230,129 $1,377,166 $1,400,759 Gross profit 147,496 172,640 176,183 197,747 Net income 6,930 22,214 17,488 28,480 Net income per common share Basic $ .15 $ .49 $ .37 $ .52 Diluted .15 .48 .36 .51 1999 Sales $ 865,823 $ 874,378 $1,035,728 $ 999,060 Gross profit 72,178 115,132 201,204 151,061 Net (loss) income (5,325) 18,481 54,980 26,748 Net (loss) income per common share Basic $ (.14) $ .48 $ 1.35 $ .64 Diluted (.14) .47 1.31 .63 - ------------------------------------------------------------------------------ F-23 Report of Independent Public Accountants on Schedule I To the Shareholders of Smithfield Foods, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements of Smithfield Foods, Inc. and subsidiaries included in this Form 10-K Annual Report and have issued our report thereon dated June 7, 2000. Our audit was made for the purpose of forming an opinion on the basic financial statements as a whole. Schedule I, listed in the Index to Financial Statements and Financial Statement Schedule, is the responsibility of the Company's management and is presented for the purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in to relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Richmond, Virginia June 7, 2000 F-24 SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT SMITHFIELD FOODS, INC. PARENT COMPANY BALANCE SHEET As of April 30, 2000 and May 2, 1999
Fiscal Years Ended April 30, 2000 May 2, 1999 ---------------- ---------------- (In thousands) ASSETS Current assets: Cash $ 25 $ 24 Accounts receivable 11,516 15,137 Receivable from related parties - 4,051 Refundable income taxes 1,987 1,458 Deferred income taxes 15,195 20,551 Other current assets 49,652 16,005 ---------------- ---------------- Total current assets 78,375 57,226 ---------------- ---------------- Investments in and net advances to subsidiaries, at cost plus equity in undistributed earnings 1,457,414 885,291 ---------------- ---------------- Other assets: Investment in partnerships 545 31,139 Property, plant and equipment, net 20,412 21,422 Other 47,691 42,447 ---------------- ---------------- Total other assets 68,648 95,008 ---------------- ---------------- $1,604,437 $1,037,525 ================ ================ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 18,133 $ 5,633 Accounts payable 6,996 5,086 Accrued expenses 53,368 61,254 ---------------- ---------------- Total current liabilites 78,497 71,973 ---------------- ---------------- Long-term debt 571,237 385,370 ---------------- ---------------- Deferred income taxes and other noncurrent liabilites 51,794 37,936 ---------------- ---------------- Shareholders' equity 902,909 542,246 ---------------- ---------------- $1,604,437 $1,037,525 ================ ================ The accompanying notes are an integral part of these statements
F-25 SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT SMITHFIELD FOODS, INC. PARENT COMPANY STATEMENTS OF INCOME
52 Weeks Ended 52 Weeks Ended 53 Weeks Ended April 30, 2000 May 2, 1999 May 3, 1998 -------------- ------------ ----------- (In thousands) Sales $ - $ - $ - Cost of sales (8,379) 5,073 9,589 ---------------- ---------------- ---------------- Gross Profit 8,379 (5,073) (9,589) ---------------- ---------------- ---------------- General and administrative expenses, net of allocation to subsidiaries 24,696 8,366 4,686 Depreciation expense 2,205 1,252 843 Interest expense 31,756 24,930 24,578 Nonrecurring charge - - 12,600 ---------------- ---------------- ---------------- Loss before income tax benefit and equity in earnings of subsidiaries (50,278) (39,621) (52,296) Income tax benefit (21,795) (16,677) (19,130) ---------------- ---------------- ---------------- Loss before equity in earnings of subsidiaries (28,483) (22,944) (33,166) ---------------- ---------------- ---------------- Equity in earnings of subsidiaries 103,595 117,828 86,566 ---------------- ---------------- ---------------- Net income $75,112 $94,884 $53,400 ================ ================ ================ The accompanying notes are an integral part of these statements F-26
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT SMITHFIELD FOODS, INC. PARENT COMPANY STATEMENTS OF CASH FLOWS
52 Weeks Ended 52 Weeks Ended 53 Weeks Ended April 30, 2000 May 2, 1999 May 3, 1998 -------------- ----------- ----------- (In thousands) Cashflows from operating activities: Net Income $75,112 $94,884 $53,400 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,119 2,758 1,461 (Gain) loss on sale of property, plant and equipment - 30 - Changes in operating assets and liabilities: Deferred income taxes and other noncurrent liabilities 19,214 23,145 13,966 Accounts receivable 3,621 (14,813) 3,351 Receivables from related parties 4,051 (4,051) 1,414 Other current assets (33,647) (84) (10,784) Accounts payable and accrued expenses (5,976) 18,313 14,243 Refundable income taxes (529) 842 (4,089) Other assets (7,158) (17,600) (10,495) -------- -------- -------- Net cash provided by operating activities 58,807 103,424 62,467 -------- -------- -------- Cashflows from investing activities: Capital expenditures (1,196) (4,377) (9,332) Increase in investment in and net advances to subsidiaries (217,547) (131,827) (235,117) Investments in partnerships 30,594 15,827 (5,213) -------- -------- -------- Net cash used in investing activities: (188,149) (120,377) (249,662) -------- -------- -------- Cash flows from financing activities: Proceeds from issuance of long-term debt 225,000 - 447,150 Principal payments on long-term debt (26,633) (2,977) (252,317) Repurchase and retirement of common stock (73,145) - - Proceeds from exercise of stock options 4,121 12,154 124 -------- -------- -------- Net cash provided by financing activities: 129,343 9,177 194,957 -------- -------- -------- Net (decrease) increase in cash and cash equivalents 1 (7,776) 7,762 Cash and cash equivalents at beginning of year 24 7,800 38 -------- -------- -------- Cash and cash equivalents at end of year $ 25 $ 24 $ 7,800 ======== ======== ======== The accompanying notes are an integral part of these statements F-27
Schedule I-Condensed Financial Information of Registrant Smithfield Foods, Inc. Notes to Parent Company Financial Statements (Dollars In Thousands) April 30, 2000 and May 2, 1999 1. The Notes to Parent Company Financial Statements should be read in conjunction with the Registrant's Notes to Consolidated Financial Statements included herein. 2. Restricted assets of Registrant: Existing loan convenants contain provisions which limit the amount of funds available for transfer from the subsidiaries to Smithfield Foods, Inc. without the consent of certain lenders. 3. Accrued expenses as of April 30, 2000 and May 2, 1999 are as follows: 2000 1999 ---------- ---------- Self-insurance reserves $22,006 $20,216 Interest 10,626 8,957 Other 20,736 32,081 ---------- ---------- $53,368 $61,254 ========== ==========
4. Long-term Debt: In fiscal 2000, the Company increased the revolving credit facility borrowing from $300,000 to $650,000. The borrowings are prepayable and bear interest, at the Company's option, at various rates based on margins over the federal funds rate or Eurodollar rate and expires in July 2002. In fiscal 2000, the Company placed $225,000 ten-year senior secured notes. The $225,000 million in senior secured notes include $75,000 in variable rate debt, $100,000 of notes at 7.89% and $50,000 of notes at 8.44%. A substantial portion of the proceeds from the notes were advanced to the Registrant's subsidiaries. As of April 30, 2000, the Registrant guaranteed $18,171 of capital lease obligations of its subsidiaries. Scheduled maturities of the Registrant's long-term debt consists of the following:
Fiscal Year --------------------- 2001 $ 18,133 2002 18,084 2003 25,473 2004 64,886 2005 26,414 Thereafter 436,380 -------- $589,370 ========
5. The amount of dividends received from subsidiaries in fiscal 2000 and 1999 was $37,800 and $76,700 million, respectively. F-28 6. In fiscal 1998, the Registrant's shareholders approved the reincorporation of the Registrant in Virginia from Delaware. The purpose of the reincorporation was to reduce annual franchise taxes and does not affect the Registrant's capitalization or the manner in which it operates. 7. Supplemental disclosures of cash flow information: 2000 1999 1998 ------------- --------------- --------------- Interest paid, net of amount capitalized $ 39,107 $28,180 $20,901 ============= =============== =============== Income taxes paid $ 24,458 $15,306 $10,179 ============= =============== =============== Noncash investing and financing activities: Common stock issued for acquisitions $369,407 $73,049 $ - ============= =============== =============== F-29
EX-4.6A 2 0002.txt 2ND AMENDED AND RESTATED CREDIT AGREEMENT EXHIBIT 4.6(A) [Execution Copy] - -------------------------------------------------------------------------------- SECOND AMENDED and RESTATED MULTI-YEAR CREDIT AGREEMENT dated as of December 3, 1999 among SMITHFIELD FOODS, INC., THE SUBSIDIARY GUARANTORS PARTY HERETO, THE LENDERS PARTY HERETO and THE CHASE MANHATTAN BANK, as Administrative Agent ------------------------- CHASE SECURITIES INC., as Arranger and COOPERATIEVE CENTRALE RAIFFEISEN BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH, as Co-Agent - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS SECTION 1.01. Defined Terms........................................... 2 SECTION 1.02. Classification of Loans and Borrowings.................. 25 SECTION 1.03. Terms Generally......................................... 25 SECTION 1.04. Accounting Terms; GAAP.................................. 26 SECTION 1.05. Currencies, Currency Equivalents........................ 26 ARTICLE II THE CREDITS SECTION 2.01. Commitments............................................. 27 SECTION 2.02. Loans and Borrowings.................................... 27 SECTION 2.03. Requests for Revolving Loan............................. 28 SECTION 2.04. Swingline Loans......................................... 30 SECTION 2.05. Letters of Credit....................................... 31 SECTION 2.06. Funding of Borrowings................................... 37 SECTION 2.07. Interest Elections...................................... 37 SECTION 2.08. Termination or Reduction of Commitments................. 39 SECTION 2.09. Repayment of Loans; Evidence of Debt.................... 40 SECTION 2.10. Prepayment of Loans..................................... 41 SECTION 2.11. Fees.................................................... 42 SECTION 2.12. Interest................................................ 44 SECTION 2.13. Alternate Rate of Interest.............................. 45 SECTION 2.14. Increased Costs......................................... 45 SECTION 2.15. Break Funding Payments.................................. 46 SECTION 2.16. Taxes................................................... 47 SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of Set-offs.................................. 48 SECTION 2.18. Mitigation Obligations; Replacement of Lenders.......... 51 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01. Organization; Powers.................................... 52 SECTION 3.02. Authorization; Enforceability........................... 52 SECTION 3.03. Governmental Approvals; No Conflicts.................... 52 SECTION 3.04. Financial Condition; No Material Adverse Change......... 53 (i) Page ---- SECTION 3.05. Properties.............................................. 53 SECTION 3.06. Litigation and Environmental Matters.................... 53 SECTION 3.07. Compliance with Laws and Agreements..................... 54 SECTION 3.08. Investment and Holding Company Status................... 54 SECTION 3.09. Taxes................................................... 54 SECTION 3.10. ERISA................................................... 54 SECTION 3.11. Disclosure.............................................. 54 SECTION 3.12. Regulations U and X..................................... 55 SECTION 3.13. Material Agreements and Liens........................... 55 SECTION 3.14. Subsidiaries, Etc....................................... 55 SECTION 3.15. Solvency................................................ 56 SECTION 3.16. Year 2000............................................... 56 ARTICLE IV CONDITIONS SECTION 4.01. Effective Date.......................................... 56 SECTION 4.02. Each Credit Event....................................... 58 ARTICLE V AFFIRMATIVE COVENANTS SECTION 5.01. Financial Statements and Other Information.............. 59 SECTION 5.02. Notices of Material Events.............................. 61 SECTION 5.03. Existence; Conduct of Business.......................... 61 SECTION 5.04. Payment of Obligations.................................. 61 SECTION 5.05. Maintenance of Properties; Insurance.................... 61 SECTION 5.06. Books and Records; Inspection Rights.................... 62 SECTION 5.07. Compliance with Laws.................................... 62 SECTION 5.08. Use of Proceeds and Letters of Credit................... 62 SECTION 5.09. Additional Subsidiary Guarantors........................ 62 ARTICLE VI NEGATIVE COVENANTS SECTION 6.01. Indebtedness............................................ 63 SECTION 6.02. Liens................................................... 63 SECTION 6.03. Fundamental Changes..................................... 64 SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions..................................... 66 SECTION 6.05. Hedging Agreements...................................... 66 SECTION 6.06. Restricted Payments..................................... 67 (ii) Page ---- SECTION 6.07. Transactions with Affiliates............................ 67 SECTION 6.08. Restrictive Agreements.................................. 67 SECTION 6.09. Senior Note Documents................................... 68 SECTION 6.10. Limitation on Sale and Leaseback Transactions........... 68 SECTION 6.11. Fiscal Periods.......................................... 68 SECTION 6.12. Financial Covenants..................................... 68 SECTION 6.13. Senior Subordinated Notes............................... 69 ARTICLE VII EVENTS OF DEFAULT.............................. 69 ARTICLE VIII GUARANTEE SECTION 8.01 The Guarantee............................................ 72 SECTION 8.02 Obligations Unconditional................................ 72 SECTION 8.03 Reinstatement............................................ 73 SECTION 8.04 Subrogation.............................................. 73 SECTION 8.05 Remedies................................................. 73 SECTION 8.06 Instrument for the Payment of Money...................... 74 SECTION 8.07 Continuing Guarantee..................................... 74 SECTION 8.08 Rights of Contribution................................... 74 SECTION 8.09 General Limitation on Guarantee Obligations.............. 74 ARTICLE IX THE ADMINISTRATIVE AGENT......................... 75 ARTICLE X MISCELLANEOUS SECTION 10.01. Notices................................................ 77 SECTION 10.02. Waivers; Amendments.................................... 78 SECTION 10.03. Expenses; Indemnity: Damage Waiver..................... 79 SECTION 10.04. Successors and Assigns................................. 81 SECTION 10.05. Survival............................................... 83 SECTION 10.06. Counterparts; Integration; Effectiveness............... 84 SECTION 10.07. Severability........................................... 84 SECTION 10.08. Right of Setoff........................................ 84 SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of Process........................................... 84 (iii) Page ---- SECTION 10.10. WAIVER OF JURY TRIAL................................... 85 SECTION 10.11. Headings............................................... 85 SECTION 10.12. Confidentiality........................................ 85 SECTION 10.13. Perfection of Security Interests....................... 86 SECTION 10.14. Acknowledgements....................................... 87 SECTION 10.15. European Monetary Union................................ 87 SECTION 10.16. Judgment Currency...................................... 89 SCHEDULES: Schedule 2.01 -- Commitments Schedule 3.06 -- Disclosed Matters Schedule 3.13 -- Material Agreements and Liens Schedule 3.14 -- Subsidiaries Schedule 6.01 -- Existing Indebtedness Schedule 6.02 -- Existing Liens Schedule 6.08 -- Existing Restrictions EXHIBITS: Exhibit A -- Form of Assignment and Acceptance Exhibit B -- Form of Borrowing Base Certificate Exhibit C -- Copy of Security Agreement Exhibit D -- Form of Opinion of Counsel to the Obligors Exhibit E -- Form of Opinion of Special Counsel Exhibit F -- Copy of Intercreditor Agreements (iv) SECOND AMENDED AND RESTATED MULTI-YEAR CREDIT AGREEMENT dated as of December 3, 1999, among SMITHFIELD FOODS, INC., a Virginia corporation (the "Borrower"), each of the Subsidiaries of the Borrower identified under the -------- caption "SUBSIDIARY GUARANTORS" on the signature pages hereto or that, pursuant to Section 5.09 hereof, shall become a "Subsidiary Guarantor" hereunder (individually, a "Subsidiary Guarantor" and, collectively, the "Subsidiary -------------------- ---------- Guarantors" and, together with the Borrower, the "Obligors"), each of the - ---------- -------- lenders that is a party hereto identified under the caption "LENDERS" on Schedule 2.01 hereto or that, pursuant to Section 10.04 hereof, shall become a "Lender" hereunder (individually, a "Lender" and, collectively, the "Lenders") ------ ------- and THE CHASE MANHATTAN BANK, in its capacity as administrative agent for the Lenders hereunder (the "Administrative Agent"). -------------------- The Borrower, the Subsidiary Guarantors named therein, the lenders named therein (including certain of the Lenders hereunder) and The Chase Manhattan Bank, as Administrative Agent, are parties to an Amended and Restated Multi-Year Credit Agreement dated as of September 8, 1999 (as heretofore modified and supplemented and in effect on the date hereof immediately before giving effect to the amendment and restatement contemplated hereby, the "Existing Credit --------------- Agreement"). - --------- The Borrower and its subsidiaries are engaged as an integrated group in the business of pork production, hog farming, pork processing and manufacturing spices and chemicals, and in related businesses, and in furnishing the required supplies, services, equipment, credit and other facilities for such integrated operation. The integrated operation requires financing on such a basis that credit supplied to the Borrower be made available from time to time to the Subsidiary Guarantors, as required for the continued successful operation of the Obligors, separately, and the integrated operation as a whole. In that connection, the Obligors have requested that the Lenders (as defined in the Existing Credit Agreement) and the Administrative Agent amend and restate the Existing Credit Agreement to provide, inter alia, for extensions of credit, by ----- ---- means of Dollar and Foreign Currency denominated loans and letters of credit, in an aggregate amount at any one time outstanding up to but not exceeding $650,000,000 or its equivalent as herein provided to the Borrower (to be made available by the Borrower directly or indirectly to the Subsidiary Guarantors and other of its Subsidiaries in the circumstances specified herein) to finance the working capital needs and for other general corporate purposes of the Borrower and its subsidiaries in the ordinary course of business. The Lenders are willing to so agree, and accordingly, the parties hereto agree that the Existing Credit Agreement shall be amended and restated as of the date hereof (but subject to Section 5.01) in its entirety as follows: -2- ARTICLE I DEFINITIONS SECTION 1.01. Defined Terms. As used in this Agreement, the following ------------- terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether --- such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. ABR Loans may be denominated only in Dollars. "Acquisition" means any transaction, or any series of related transactions, ----------- consummated after the date of this Agreement, by which the Borrower and/or any of its Subsidiaries (a) acquires any going business or all or substantially all of the assets of any Person, whether through purchase of assets, merger or otherwise, (b) directly or indirectly acquires control of at least a majority (in number of votes) of the securities of a corporation that have ordinary voting power for the election of directors or (c) directly or indirectly acquires control of at least a majority of the partner, member or other ownership interests of any Person that is not a corporation. "Adjusted LIBO Rate" means, with respect to any Eurocurrency Borrowing for ------------------ any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. "Administrative Agent's Account" means, for each Currency, an account in ------------------------------ respect of such Currency designated by the Administrative Agent in a notice to the Borrower and the Lenders. "Administrative Questionnaire" means an Administrative Questionnaire in a ---------------------------- form supplied by the Administrative Agent. "Affected Currency" has the meaning assigned to such term in Section 2.13. ----------------- "Affiliate" means, with respect to a specified Person, another Person that --------- directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Alternate Base Rate" means, for any day, a rate per annum equal to the ------------------- greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively. "Applicable Dollar Percentage" means, with respect to any Dollar Lender, ---------------------------- the percentage of the Total Dollar Sub-Commitment represented by such Dollar Lender's Dollar -3- Sub-Commitment; provided that if the Dollar Sub-Commitments have terminated or -------- expired, the Applicable Dollar Percentages shall be determined based upon the Total Dollar Sub-Commitment most recently in effect, giving effect to any assignments. "Applicable Percentage" means, with respect to any Lender, the percentage --------------------- of the Total Commitment represented by such Lender's Commitments; provided that -------- if the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Total Commitment most recently in effect, giving effect to any assignments. "Applicable Multicurrency Percentage" means, with respect to any ----------------------------------- Multicurrency Lender, the percentage of the Total Multicurrency Sub-Commitment represented by such Multicurrency Lender's Multicurrency Sub-Commitment; provided that if the Multicurrency Sub-Commitments have terminated or expired, - -------- the Applicable Multicurrency Percentages shall be determined based upon the Total Multicurrency Sub-Commitment most recently in effect, giving effect to any assignments. "Applicable Rate" means, with respect to any ABR Loan, Eurocurrency --------------- Revolving Loan, Federal Funds Loan or Swingline Loan, or with respect to the Commitment Fees payable hereunder, for each Rate Period (as defined below), the respective rate per annum indicated below for Loans of such Type or Commitment Fees, as applicable, opposite the applicable Interest Coverage Ratio (as defined below) indicated below for such Rate Period:
======================================================================================================== Applicable Rate for Applicable Rate Eurocurrency Loans, for ABR Federal Funds Loans and Commitment Interest Coverage Ratio Loans Letters of Credit Fees - -------------------------------------------------------------------------------------------------------- Greater than or equal to 5.0 to 1 -0- 0.750% 0.200% ("Tier I") ------ - -------------------------------------------------------------------------------------------------------- Less than 5.0 to 1 and greater -0- 0.875% 0.225% than or equal to 4.5 to 1 ("Tier II") ------- - -------------------------------------------------------------------------------------------------------- Less than 4.5 to 1 and greater -0- 1.000% 0.250% than or equal to 4.0 to 1 ("Tier III") -------- - -------------------------------------------------------------------------------------------------------- Less than 4.0 to 1 and greater 0.125% 1.125% 0.275% than or equal to 3.5 to 1 ("Tier IV") ------- - -------------------------------------------------------------------------------------------------------- Less than 3.5 to 1 0.250% 1.250% 0.300% ("Tier V") ------ ========================================================================================================
For purposes hereof, (i) a "Rate Period" means the period commencing on a ----------- Rate Reset Date to but not including the immediately following Rate Reset Date; (ii) a "Rate Reset ---------- -4- Date" means, with respect to any fiscal quarter or fiscal year, the earlier of - ---- (x) the date on which the Borrower delivers (or has delivered pursuant to the Existing Credit Agreement) the certificate referred to in Section 5.01(c) (a "Compliance Certificate") in respect of such fiscal quarter or fiscal year, as ---------------------- the case may be, and (y) the date on which the Borrower is required to have delivered the financial statements under Section 5.01(a) or (b) in respect of such fiscal quarter or fiscal year, as the case may be; and (iii) "Interest -------- Coverage Ratio" means, for any Rate Period, the ratio of Consolidated EBITDA for - -------------- the period of four consecutive fiscal quarters of the Borrower ending on or most recently prior to the first day of such Rate Period to Consolidated Interest Expense for such period of four consecutive fiscal quarters. Anything in this Agreement to the contrary notwithstanding, but subject to Section 2.12(d), the Applicable Rate shall be the applicable rate provided for in Tier V in the table set forth above in this definition (x) during any period when an Event of Default shall have occurred and be continuing, or (y) if the applicable Compliance Certificate shall not be delivered within the time that the applicable financial statements are required to be delivered by Section 5.01(a) or (b), as the case may be (but only, in the case of this clause (y), with respect to the portion of such Rate Period prior to the delivery of such Compliance Certificate). "Approved Foreign Currency" means, at any time, the French Franc and the ------------------------- Euro; provided that with the prior written agreement of all of the Multicurrency -------- Lenders, such term shall include any other Foreign Currency, that, at such time, (a) is dealt with in the London interbank market, (b) is freely transferable and convertible into Dollars in the London foreign exchange market and (c) with respect to which no central bank or other governmental authorization in the country of issue of such Foreign Currency is required to permit use of such Foreign Currency by any Multicurrency Lender for making any Loan hereunder and/or to permit the Borrower to borrow and repay the principal thereof and to pay the interest thereon, unless such authorization has been obtained and is in full force and effect. "Arranger" means Chase Securities Inc. -------- "Assessment Rate" means, for any day, the annual assessment rate in effect --------------- on such day that is payable by a member of the Bank Insurance Fund classified as "well-capitalized" and within supervisory subgroup "B" (or a comparable successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any successor provision) to the Federal Deposit Insurance Corporation for insurance by such Corporation of time deposits made in Dollars at the offices of such member in the United States; provided that if, as a result of any change in any -------- law, rule or regulation, it is no longer possible to determine the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall be determined by the Administrative Agent to be representative of the cost of such insurance to the Lenders. "Assignment and Acceptance" means an assignment and acceptance entered into ------------------------- by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent. "Availability Period" means the period from and including the Effective ------------------- Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitments. -5- "Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate ------------ multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate. "Board" means the Board of Governors of the Federal Reserve System of the ----- United States of America. "Borrowing" means (a) Revolving Loans of the same Type, made, converted or --------- continued on the same date and, in the case of Eurocurrency Loans, denominated in the same Currency and as to which a single Interest Period is in effect or (b) a Swingline Loan. "Borrowing Base" means, at any time, the sum of: (a) 75% of the result -------------- obtained from the following calculation: (i) the aggregate amount of Eligible Inventory (valued at the lower of (x) cost, on a first-in-first-out basis or (y) fair market value) of the Borrower and the Subsidiary Guarantors, determined on a consolidated basis at such time, plus (ii) the aggregate amount of Eligible ---- Receivables of the Borrower and the Subsidiary Guarantors, determined on a consolidated basis at such time, in each case as reflected in the Borrowing Base Certificate then most recently received by the Administrative Agent hereunder minus (iii) reserves maintained by such Subsidiary Guarantors in respect of - ----- Eligible Receivables relating to discounts, advertising, allowances and similar items minus (b) the aggregate amount of outstanding checks for the purchase of ----- Farm Products (as defined in the Security Agreement) drawn by the Borrower and its Subsidiaries that have not cleared. "Borrowing Base Certificate" means a certificate substantially in the form -------------------------- of Exhibit B hereto signed by a Financial Officer. "Borrowing Request" means a request by the Borrower for a Revolving ----------------- Borrowing in accordance with Section 2.03. "Business Day" means any day (a) that is not a Saturday, Sunday or other ------------- day on which commercial banks in New York City are authorized or required by law to remain closed, (b) if such day relates to a Borrowing of, a payment or prepayment of principal of or interest on, a continuation or conversion of or into, or the Interest Period for, a Eurocurrency Borrowing denominated in Dollars, or to a notice by the Borrower with respect to any such Borrowing, payment, prepayment, continuation, conversion, or Interest Period, that is also a day on which dealings in deposits denominated in Dollars are carried out in the London interbank market and (c) if such day relates to a Borrowing or continuation of, a payment or prepayment of principal of or interest on, or the Interest Period for, any Borrowing denominated in any Foreign Currency, or to a notice by the Borrower with respect to any such Borrowing, continuation, payment, prepayment or Interest Period, that is also a day on which commercial banks in the London foreign exchange market settle payments in the Principal Financial Center for such Foreign Currency. "Capital Lease Obligations" of any Person means the obligations of such ------------------------- Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and -6- the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Change in Control" means (a) the acquisition of ownership, directly or ----------------- indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof), of shares representing more than 25% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Borrower; (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the board of directors of the Borrower nor (ii) appointed by directors so nominated; or (c) the acquisition of direct or indirect Control of the Borrower by any Person or group. "Change in Law" means (a) the adoption of any law, rule or regulation after ------------- the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or Issuing Bank (or, for purposes of Section 2.14(b), by any lending office of such Lender or by such Lender's or Issuing Bank's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "Chase" means The Chase Manhattan Bank. ----- "Class", when used in reference to any Loan or Borrowing, refers to whether ----- such Loan, or the Loans comprising such Borrowing, are Revolving Loans or Swingline Loans. "Code" means the Internal Revenue Code of 1986, as amended from time to ---- time. "Collateral Agent" means Chase, as collateral agent under the Security ---------------- Agreement. "Commitment" means, with respect to each Lender, the commitment of such ---------- Lender to make Revolving Loans and to acquire participations in Letters of Credit and Swingline Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04 (and the "Commitment" of any Lender shall be deemed to include its Dollar Sub-Commitment and its Multicurrency Sub- Commitment, if any). The initial amount of each Lender's Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Commitment, as applicable. The initial amount of the Total Commitment (including the Total Dollar Sub-Commitment and the Total Multicurrency Sub-Commitment) is $650,000,000. "Commitment Fee" means the fees payable at the Applicable Rate pursuant to -------------- Section 2.11(a). -7- "Consolidated Current Ratio" means, on any date, the ratio of (i) the -------------------------- consolidated current assets of the Borrower and its Subsidiaries on such date to (ii) the sum on such date (without duplication) of the consolidated current liabilities of the Borrower and its Subsidiaries plus the aggregate outstanding ---- principal amount of the Loans and Pari Passu Debt plus the aggregate principal ---- amount of Indebtedness of the Borrower and its Subsidiaries that would be characterized as current liabilities but for the existence of the Commitments hereunder or any commitments of lenders to make Pari Passu Debt available to the Borrower or any of its Subsidiaries. "Consolidated EBIT" means, for any period, an amount equal to (a) the sum ----------------- for such period of (i) Consolidated Net Income, (ii) to the extent subtracted in determining such Consolidated Net Income, provisions for (x) taxes based on income and (y) Consolidated Interest Expense minus (b) any items of gain (or ----- plus any items of loss) which were included in determining such Consolidated Net - ---- Income and were not realized in the ordinary course of business. "Consolidated EBITDA" means, for any period, an amount equal to (a) the sum ------------------- for such period of Consolidated Net Income and, to the extent subtracted in determining such Consolidated Net Income, provisions for (i) taxes based on income, (ii) Consolidated Interest Expense and (iii) depreciation and amortization expense minus (b) any items of gain (or plus any items of loss) ----- ---- which were included in determining such Consolidated Net Income and were (i) not realized in the ordinary course of business or (ii) the result of any sale of assets. "Consolidated Intangible Assets" means, on any date, the aggregate amount ------------------------------ of Intangible Assets of the Borrower and its Subsidiaries, determined on a consolidated basis at such time. "Consolidated Interest Expense" means, for any period, the consolidated ----------------------------- interest expense of the Borrower and its Subsidiaries (whether cash or non-cash interest expense or deferred or accrued interest expense and the interest portion of all Capital Lease Obligations during such period). "Consolidated Net Income" means, for any period, the net income (or ----------------------- deficit) of the Borrower and its Subsidiaries; provided, however, that there -------- shall be excluded from Consolidated Net Income (i) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Borrower or such Person's assets are acquired by the Borrower, (ii) the income (or deficit) of any Person (other than a consolidated Subsidiary) in which the Borrower has an ownership interest, except to the extent that any such income has been actually received by the Borrower in the form of dividends or similar distributions, (iii) the undistributed earnings of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions of such Subsidiary is restricted and (iv) any income or gain resulting from any write-up or revaluation of the assets of the Borrower or its Subsidiaries. "Consolidated Shareholders' Equity" means, on any date, the aggregate --------------------------------- amount of shareholders' equity of the Borrower and its Subsidiaries on such date, determined on a consolidated basis. -8- "Consolidated Tangible Net Worth" means, on any date, the excess of ------------------------------- Consolidated Shareholders' Equity over Consolidated Intangible Assets on such date. "Consolidated Total Funded Debt" means the aggregate amount of Funded Debt ------------------------------ of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, minus, to the extent included therein, the outstanding ----- amount of the Loans (other than the lowest average daily outstanding balance of the Loans for any period of 30 consecutive days during the 12 month period then most recently ended). "Consolidated Total Liabilities" means, on any date, the aggregate amount ------------------------------ at which all liabilities of the Borrower and its Subsidiaries (including, without limitation, (a) all Guarantees of Indebtedness by such Persons and (b) all amounts attributable to Mandatorily Redeemable Stock of the Borrower and its Subsidiaries to the extent that such Mandatorily Redeemable Stock is redeemable within one year of such date) would be shown on a consolidated balance sheet of such Persons at such time. "Consolidated Working Capital" means, on any date, the excess of (i) the ---------------------------- consolidated current assets of the Borrower and its Subsidiaries on such date over (ii) the sum on such date (without duplication) of the consolidated current liabilities of the Borrower and its Subsidiaries plus the aggregate outstanding ---- principal amount of the Loans and Pari Passu Debt plus the aggregate principal ---- amount of any commercial paper or other short-term Indebtedness of the Borrower and its Subsidiaries that would be characterized as current liabilities but for the existence of the Commitments hereunder or any commitments of lenders to make Pari Passu Debt available to the Borrower or any of its Subsidiaries. "Control" means the possession, directly or indirectly, of the power to ------- direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. ----------- ---------- "Currency" means Dollars or any Foreign Currency. -------- "Debt Issuance" means any issuance or incurrence by the Borrower or any of ------------- its Subsidiaries of any Indebtedness. "Debt Service" means, for any period, the sum, for the Borrower and its ------------ Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the following: (a) all regularly scheduled payments or prepayments of principal of Indebtedness made during such period plus (b) all ---- Interest Expense for such period. "Default" means any event or condition which constitutes an Event of ------- Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "Disclosed Matters" means the actions, suits and proceedings and the ----------------- environmental matters disclosed in Schedule 3.06. -9- "Dollar Equivalent" means, with respect to any Borrowing denominated in an ----------------- Approved Foreign Currency, the amount of Dollars that would be required to purchase the amount of the Foreign Currency of such Borrowing on the date two Business Days prior to the date of such Borrowing (or, in the case of any determination made under Section 2.10(b) or redenomination under the last sentence of Section 2.17(c), or in the case of a redenomination of any other amount into Dollars as provided herein, on the date of determination or redenomination therein referred to), based upon the spot selling rate at which the Administrative Agent offers to sell such Approved Foreign Currency for Dollars in the London foreign exchange market at approximately 11:00 a.m., London time, for delivery two days later, provided that with respect to any -------- determination to be made by the Borrower pursuant to Section 5.01(f), such spot selling rate shall be determined by reference to the spot selling rate set forth in the Wall Street Journal on the Business Day immediately preceding the date on ------------------- which such determination is to be made. "Dollar LC Exposure" means, at any time, the sum of (a) the aggregate ------------------ undrawn amount of all outstanding Dollar Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements in respect of such Letters of Credit that have not yet been reimbursed by or on behalf of any Obligor at such time. The Dollar LC Exposure of any Lender at any time shall be its Applicable Dollar Percentage of the total Dollar LC Exposure at such time. "Dollar Lender" means (a) on the Effective Date, the Lenders having Dollar ------------- Sub-Commitments on Schedule 2.01 hereto under the heading "Dollar Lenders" and (b) thereafter, the Lenders from time to time holding Loans made pursuant to Dollar Sub-Commitments or holding Dollar Sub-Commitments, after giving effect to any assignments thereof permitted by Section 10.04(b). "Dollar Letters of Credit" means Letters of Credit that utilize the Dollar ------------------------ Sub-Commitments. "Dollar Loan" means a Loan denominated in Dollars. ----------- "Dollar Sub-Commitment" means, as to each Dollar Lender, the obligation of --------------------- such Dollar Lender to make Revolving Loans and to acquire participations in Letters of Credit hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Revolving Dollar Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04. The initial amount of each Lender's Dollar Sub-Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Dollar Sub- Commitment, as applicable. The initial aggregate amount of the Total Dollar Sub-Commitment is $610,000,000. "Dollars" or "$" refers to lawful money of the United States of America. ------- - "Effective Date" has the meaning specified in Section 4.01. -------------- "Eligible Inventory" means, as at any date with respect to any Person, all ------------------ Inventory (i) that is owned by (and in the possession or under the control of) such Person as at -10- such date, (ii) that is located in a jurisdiction in the United States of America, (iii) as to which (before the Security Termination Date) appropriate Uniform Commercial Code financing statements have been filed naming such Person as "debtor" and the Collateral Agent as "secured party", and over which (before the Security Termination Date) the Collateral Agent has a perfected security interest subject to no prior or equal Lien (other than the pari passu security ---- ----- interest securing the Pari Passu Debt), subject to Section 10.13, (iv) that meets all standards imposed by any governmental agency or department or division thereof having regulatory authority over such inventory, its use or sale, (v) for which such Person has made full and final payment and (vi) that is currently usable in the manufacturing process or saleable in the normal course of such Person's business without any notice to, or consent of, any governmental agency or department or division thereof (excluding however, except to the extent that the Required Lenders otherwise agree with respect to any specific customer or third-party processor, any such Inventory that has been shipped to a customer of such Person, including third-party processors, even if on a consignment or "sale or return" basis, and excluding repair and replacement parts for machinery and equipment). Notwithstanding anything in clause (vi) of the foregoing sentence to the contrary (but subject to clauses (i) through (v) of the foregoing sentence), Eligible Inventory shall include but not be limited to all barrows, gilts, boars, sows, feeder pigs, suckling pigs, nursery pigs and commercial sows and boars, multiplier hogs, nucleus hogs and other hogs (collectively, "Hogs") at ---- the time of determination owned and being raised at facilities owned by such Person or at facilities subject to an exclusive contract with such Person (i.e., the operator of such facility has no similar contract with any other Person) for the feeding and raising of Hogs. "Eligible Receivables" means, as at any date with respect to any Person, -------------------- the aggregate amount of all accounts (as defined in the Uniform Commercial Code) of such Person arising from the sale by such Person of Inventory in the ordinary course of its business and (before the Security Termination Date) over which the Collateral Agent has a perfected security interest subject to no prior or equal Lien (other than the pari passu security interest securing the Pari Passu Debt), ---- ----- subject to Section 10.13, other than the following (determined without duplication): (a) any account not payable in Dollars, (b) any account that is not paid within 60 days (subject to the last sentence of this definition of "Eligible Receivables") after the date of the invoice for the related inventory, (c) any account owing from a subsidiary or Affiliate of such Person, (d) any account (other than an LC-Backed Receivable) owing from an account debtor whose principal place of business is located outside of the United States of America, provided that the aggregate amount of account that are not -------- excluded from the definition of "Eligible Receivables" pursuant to this clause (d) by virtue of their constituting LC-Backed Receivables (other than LC-Backed Receivables the related letter of credit for which has been delivered to the Collateral Agent in pledge under the Security Agreement) may not exceed 10% of the Borrowing Base, -11- (e) any account owing from an account debtor that is insolvent or the subject of a bankruptcy case, (f) any account that is more than 28 days (subject to the last sentence of this definition of "Eligible Receivables") past due, (g) all accounts of any account debtor if more than 20% of the aggregate amount of the accounts owing from such account debtor are more than 28 days (subject to the last sentence of this definition of "Eligible Receivables") past due, (h) all accounts owing from any account debtor if the accounts owing from such account debtor and its Affiliates at the time exceed 10% of all accounts then payable to the Obligors, (i) any account as to which there is any unresolved dispute with the respective account debtor (but only to the extent of the amount thereof in dispute), (j) any account evidenced by an instrument (as defined in the Uniform Commercial Code) not in the possession of the Collateral Agent and containing all necessary endorsements, (k) any account representing an obligation for goods sold on consignment, approval or a sale-or-return basis or subject to any other repurchase, return or offset arrangement, (l) any amount as to which there is an offsetting liability from the Borrower, any Subsidiary or any Affiliate of the Borrower (but only to the extent of the amount of such offsetting liability), and (m) all amounts reserved by any Subsidiary or Affiliate of the Borrower related to advertising and promotional programs for the respective account debtor (excluding general promotional reserves that are not reserved on a specific account basis). In recognition of the fact that, on the date of this Agreement, the accounting systems of certain Subsidiaries are unable to track the number of days specified in clauses (b), (f) and (g) above, such numbers of days for each such Subsidiary shall be deemed for purposes hereof to be the number of days that the accounting system of such Subsidiary can track that is closest to such specified number of days, provided that (i) if such specified number of days is exactly equidistant from two numbers of days that can be so tracked, such specified number of days shall be deemed to be the lower of such two numbers, (ii) if the closest such number of days that can be so tracked is more than seven days higher than such specified number of days, such specified number of days shall be deemed to be the closest number of days that can be so tracked that is lower than such number of specified days and (iii) this sentence shall cease to have any effect after the date falling six months after the date hereof. "Environmental Laws" means all laws, rules, regulations, codes, ordinances, ------------------ orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or -12- entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to health and safety matters. "Environmental Liability" means any liability, contingent or otherwise ----------------------- (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "Equity Issuance" means any issuance or sale by the Borrower after the --------------- Effective Date of any of its capital stock. "Equity Rights" means, with respect to any Person, any outstanding ------------- subscriptions, options, warrants, commitments, preemptive rights or agreements of any kind (including, without limitation, any stockholders' or voting trust agreements) for the issuance, sale, registration or voting of, or outstanding securities convertible into, any additional shares of capital stock of any class, or partnership or other ownership interests of any type in, such Person. "ERISA" means the Employee Retirement Income Security Act of 1974, as ----- amended from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) --------------- that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" means (a) any "reportable event", as defined in Section 4043 ----------- of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. -13- "Eurocurrency", when used in reference to any Loan or Borrowing, refers to ------------ whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate. "Euros", has the meaning assigned to such term in Section 10.15(a). ----- "Event of Default" has the meaning assigned to such term in Article VII. ---------------- "Excluded Taxes" means, with respect to the Administrative Agent, any -------------- Lender, the Issuing Banks or any other recipient of any payment to be made by or on account of any obligation of the Obligors hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which an Obligor is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Obligors under Section 2.18(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender's failure to comply with Section 2.16(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.16(a). "Existing Credit Agreement" has the meaning assigned to such term in the ------------------------- preamble to this Agreement. "Federal Funds", when used in reference to any Loan or Borrowing, refers to ------------- whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Federal Funds Rate. Federal Funds Loans may be denominated only in Dollars. "Federal Funds Effective Rate" means, for any day, the weighted average ---------------------------- (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Federal Funds Rate" means the "offered rate", as determined by the ------------------ Administrative Agent, for overnight federal funds. "Financial Officer" means the chief financial officer, principal accounting ----------------- officer, treasurer or controller of the Borrower. -14- "Foreign Currency" means at any time any Currency other than Dollars. ---------------- "Foreign Currency Equivalent" means, with respect to any amount in --------------------------- Dollars, the amount of a Foreign Currency that could be purchased with such amount of Dollars using the reciprocal of the foreign exchange rate(s) specified in the definition of the term "Dollar Equivalent", as determined by the Administrative Agent. "Foreign Lender" means any Lender that is organized under the laws -------------- of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "Funded Debt" means all Indebtedness which would, in accordance with ----------- GAAP, constitute long term debt, including: (a) any Indebtedness with a maturity more than one year after the creation of such Indebtedness, including any portion thereof in current liabilities; (b) any Indebtedness outstanding under a revolving credit or similar agreement providing for borrowings (and renewals and extensions thereof) over a period of more than one year notwithstanding that any such Indebtedness may be payable on demand or within one year after the creation thereof; (c) any Capital Lease Obligations; and (d) any Guarantee with respect to Funded Debt of another Person. "GAAP" means generally accepted accounting principles in the United ---- States of America. "Governmental Authority" means the government of the United States of ---------------------- America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guarantee" of or by any Person (the "guarantor") means any --------- --------- obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any manner, whether directly or --------------- indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or -15- letter of guaranty issued to support such Indebtedness or obligation; provided, -------- that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. "Hazardous Materials" means all explosive or radioactive substances or ------------------- wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Hedging Agreement" means any swap agreement, cap agreement, collar ----------------- agreement, put or call, futures contract, forward contract or similar agreement or arrangement entered into in respect of interest rates, foreign exchange rates or prices of commodities. "Indebtedness" of any Person means, without duplication, (a) all ------------ obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. The Indebtedness of a Person shall not include obligations of such Person to pay rent under operating leases to the extent that such obligations do not constitute Capital Lease Obligations. "Indemnified Taxes" means Taxes other than Excluded Taxes. ----------------- "Intangible Assets" means, with respect to any Person on any date, the ----------------- following: (a) patents, copyrights, trademarks, trade names, service marks, brand names, franchises, goodwill, experimental expenses and other similar intangibles; (b) deferred assets (other than prepaid taxes, prepaid insurance, prepaid contract payments, prepaid license fees and other prepaid expenses which are refundable); (c) unamortized debt discount and expense; and -16- (d) all other property or assets (whether real, personal or mixed, and whether tangible or intangible) which would be considered to be intangible under GAAP. "Intercreditor Agreements" mean, collectively, the Intercreditor ------------------------ Agreement dated as of July 15, 1997 and the Intercreditor Agreement dated as of October 27, 1999, a copy of each of which is attached as Exhibit F hereto, as the same shall be modified and supplemented and in effect from time to time. "Interest Election Request" means a request by the Borrower to convert ------------------------- or continue a Revolving Borrowing in accordance with Section 2.07. "Interest Expense" means, for any period, the sum, for the Borrower ---------------- (determined without duplication in accordance with GAAP), of the following: (a) all interest in respect of Indebtedness accrued or capitalized during such period (whether or not actually paid during such period) plus (b) the net ---- amounts payable (or minus the net amounts receivable) under Hedging Agreements ----- related to interest and accrued during such period (whether or not actually paid or received during such period). "Interest Payment Date" means (a) with respect to any ABR Revolving --------------------- Loan, the last day of each March, June, September and December, (b) with respect to any Eurocurrency Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period, (c) with respect to any Federal Funds Revolving Loan, the last day of each month and (d) with respect to any Swingline Loan, the day that such Loan is required to be repaid. "Interest Period" means, with respect to any Eurocurrency Borrowing, --------------- the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the Borrower may elect; provided, that (i) if any -------- Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period and (iii) no Interest Period shall extend beyond the Maturity Date. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing. "Inventory" means, collectively, "Inventory" and "Farm Products" as --------- defined in the Security Agreement. "Investment" means, for any Person: (a) the acquisition (whether for ---------- cash, property, services or securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities of any other Person or any agreement -17- to make any such acquisition (including, without limitation, any "short sale" or any sale of any securities at a time when such securities are not owned by the Person entering into such short sale); (b) the making of any deposit with, or advance, loan or other extension of credit to, any other Person (including the purchase of property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such property to such Person, but excluding any such advance, loan or extension of credit having a term not exceeding 90 days representing the purchase price of programming, advertising, inventory or supplies sold in the ordinary course of business); (c) the entering into of any Guarantee of, or other contingent obligation with respect to, Indebtedness or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person or (d) any Hedging Agreement having the commercial effect of a synthetic or derivative Investment. "Issuing Bank" means Chase, in its capacity as the issuer of Letters ------------ of Credit hereunder, and its successors in such capacity as provided in Section 2.05(i). Chase may, in its discretion, arrange for one or more Letters of Credit to be issued by its Affiliates, in which case the term "Issuing Bank" shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate. Any references herein to the "relevant" Issuing Bank shall mean the issuer of the related Letter of Credit. "Joint Venture" means any Investment by the Borrower or any of its ------------- Subsidiaries as a joint venturer or partner in, or lender to, any other Person (other than a Subsidiary) principally engaged in a business in which the Borrower and its Subsidiaries are permitted by Section 6.03(c) to be engaged. "LC-Backed Receivable" means an account (as defined in the Uniform -------------------- Commercial Code) to the extent that the payment thereof is backed by a letter of credit issued for account of the related account debtor, or confirmed, by a domestic office of a commercial bank organized under the laws of the United States of America or any state thereof the short term deposits of which are rated A-1 or better by S&P or P-1 by Moody's. "LC Disbursement" means a payment made by an Issuing Bank pursuant to --------------- a Letter of Credit. "LC Exposure" means, as at any time, the sum of the Dollar LC Exposure ----------- and the Multicurrency LC Exposure. "Letter of Credit" means any letter of credit issued pursuant to this ---------------- Agreement. "LIBO Rate" means, with respect to any Eurocurrency Borrowing for any --------- Interest Period and denominated in any Currency, the rate appearing on the Screen at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for deposits denominated in such Currency with a maturity comparable to such Interest Period. In the event that such rate is not available on the Screen at such time for any reason, then, unless the last sentence of Section 10.15(e) is applicable, the "LIBO Rate" with --------- respect to such Eurocurrency Borrowing for such Interest Period shall be the rate at which deposits in such Currency in the amount of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in -18- immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "LIBOR" means, for any Currency, the rate at which deposits ----- denominated in such Currency are offered to leading banks in the London interbank market. "Lien" means, with respect to any asset, (a) any mortgage, deed of ---- trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. The interest of a lessor in any property leased pursuant to an operating lease shall not constitute a Lien over such property securing obligations of the related lessee to pay rent under such lease to the extent that such obligations do not constitute Capital Lease Obligations. "Loan Documents" means this Agreement, any promissory notes evidencing -------------- Loans hereunder and the Security Documents. "Loans" means the loans made by the Lenders to the Borrower pursuant ----- to this Agreement. "Local Time" means, with respect to any Loan denominated in or any ---------- payment to be made in any Currency, the local time in the Principal Financial Center for the Currency in which such Loan is denominated or such payment is to be made. "Mandatorily Redeemable Stock" means, with respect to any Person, each ---------------------------- share of such Person's capital stock to the extent that it is (a) redeemable, payable or required to be purchased or otherwise retired or extinguished, or convertible into Indebtedness of such Person (i) at a fixed or determinable date, whether by operation of a sinking fund or otherwise, (ii) at the option of any Person other than such Person or (iii) upon the occurrence of a condition not solely within the control of such Person, such as redemption required to be made out of future earnings or (b) convertible into other Mandatorily Redeemable Stock of such Person. "Margin Stock" means margin stock within the meaning of Regulations U ------------ and X. "Material Adverse Effect" means a material adverse effect on (a) the ----------------------- Transactions, (b) the business, assets, operations, property, prospects or condition, financial or otherwise, of the Obligors taken as a whole, (c) the ability of any Obligor to perform any of its obligations under this Agreement or the other Loan Documents or (d) the rights of or benefits available to the Lenders under this Agreement or the other Loan Documents. "Material Indebtedness" means Indebtedness (other than the Loans and --------------------- Letters of Credit), or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower and its Subsidiaries in an aggregate principal amount exceeding $5,000,000. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of the Borrower or any Subsidiary in respect of any Hedging Agreement at any time shall be the -19- maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time. "Maturity Date" means July 15, 2002; provided that if such date is not ------------- -------- a Business Day the Maturity Date shall be the immediately preceding Business Day. "Moody's" means Moody's Investors Service, Inc. ------- "Multicurrency LC Exposure" means, at any time, the sum of (a) the ------------------------- aggregate undrawn amount of all outstanding Multicurrency Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements in respect of such Letters of Credit that have not yet been reimbursed by or on behalf of any Obligor at such time. The Multicurrency LC Exposure of any Lender at any time shall be its Applicable Multicurrency Percentage of the total Multicurrency LC Exposure at such time. "Multicurrency Lender" means (a) on the Effective Date, the Lenders -------------------- having Multicurrency Sub-Commitments on Schedule 2.01 hereto under the heading "Multicurrency Lenders" and (b) thereafter, the Lenders from time to time holding Loans made pursuant to Multicurrency Sub-Commitments or holding Multicurrency Sub-Commitments, after giving effect to any assignments thereof permitted by Section 10.04(b). "Multicurrency Letters of Credit" means Letters of Credit that ------------------------------- utilize the Multicurrency Sub-Commitments. "Multicurrency Loan" means a Loan denominated in an Approved Foreign ------------------ Currency. "Multicurrency Sub-Commitment" means, as to each Multicurrency Lender, ---------------------------- the obligation of such Multicurrency Lender to make Revolving Loans and to acquire participations in Letters of Credit hereunder, in each case, denominated in Dollars or in an Approved Foreign Currency, expressed as a Dollar amount representing the Dollar Equivalent of the maximum aggregate amount of such Lender's Revolving Multicurrency Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04. The initial amount of each Lender's Multicurrency Sub-Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Multicurrency Sub-Commitment, as applicable. The initial aggregate amount of the Total Multicurrency Sub-Commitment is $40,000,000. "Multiemployer Plan" means a multiemployer plan as defined in Section ------------------ 4001(a)(3) of ERISA. "Obligors" means the Borrower and the Subsidiary Guarantors. -------- "Other Taxes" means any and all present or future stamp or documentary ----------- taxes or any other excise or property taxes, charges or similar levies arising from any payment made -20- hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement. "Pari Passu Debt" means any Indebtedness (a) in respect of which the --------------- Borrower is primarily liable as the borrower and the Subsidiary Guarantors (but no other Subsidiary) are liable as guarantors, (b) that is secured only by the Lien created by the Security Agreement and (c) that the Required Lenders consent to as being treated as Pari Passu Debt. All of the requirements set forth in the preceding clauses (a), (b) and (c) must be satisfied in order for any Indebtedness to be Pari Passu Debt. "PBGC" means the Pension Benefit Guaranty Corporation referred to and ---- defined in ERISA and any successor entity performing similar functions. "Permitted Encumbrances" means: ---------------------- (a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.04; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.04; (c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (e) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary; (f) Liens securing judgments to the extent, for an amount and for a period not resulting in an Event of Default under Article VII(k); and (g) Liens created under the Federal Packers and Stockyards Act, as amended; provided that the term "Permitted Encumbrances" shall not include any Lien - -------- securing Indebtedness. -21- "Permitted Investments" means: --------------------- (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof; (b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody's; (c) investments in certificates of deposit, banker's acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000; (d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above; (e) common stock of the Borrower; and (f) capital stock of corporations in similar or related businesses to that of the Borrower and listed on the New York Stock Exchange, NASDAQ, the American Stock Exchange. "Person" means any natural person, corporation, limited liability ------ company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means any employee pension benefit plan (other than a ---- Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Prime Rate" means the rate of interest per annum publicly announced ---------- from time to time by Chase as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "Principal Financial Center" means, in the case of any Currency, the -------------------------- principal financial center where such Currency is cleared and settled, as determined by the Administrative Agent. -22- "Rabobank" means COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., -------- "Rabobank Nederland", New York Branch. "Register" has the meaning set forth in Section 10.04. -------- "Regulations U and X" means, respectively, Regulations U and X of the ------------------- Board, as the same may be amended from time to time. "Related Parties" means, with respect to any specified Person, such --------------- Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Required Lenders" means, at any time, Lenders having Revolving Credit ---------------- Exposures and unused Commitments representing more than 50% of the sum of the total Revolving Credit Exposures and unused Commitments at such time. "Restricted Payment" means any dividend or other distribution (whether ------------------ in cash, securities or other property) with respect to any shares of any class of capital stock of the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such shares of capital stock of the Borrower or any Subsidiary or any option, warrant or other right to acquire any such shares of capital stock of the Borrower or any Subsidiary. "Revolving Credit Exposure" means, with respect to any Lender at any ------------------------- time, the sum of the outstanding principal amount of such Lender's Revolving Loans and its Dollar LC Exposure, Multicurrency LC Exposure and Swingline Exposure at such time. "Revolving Dollar Credit Exposure" means, with respect to any Dollar -------------------------------- Lender at any time, the sum of the outstanding principal amount of such Dollar Lender's Dollar Loans and its Dollar LC Exposure and Swingline Exposure at such time. "Revolving Loan" means a Loan made pursuant to Section 2.03. -------------- "Revolving Multicurrency Credit Exposure" means, with respect to any --------------------------------------- Multicurrency Lender at any time, the sum of the outstanding principal amount of such Multicurrency Lender's Multicurrency Loans and its Multicurrency LC Exposure at such time. "S&P" means Standard & Poor's Ratings Services. --- "Screen" means, for any Currency, the relevant display page for LIBOR ------ for such Currency (as determined by the Administrative Agent) of the Telerate Service of Bridge Information Services (or any successor thereto or substitute therefor); provided that if the Administrative Agent determines that there is no such relevant display page for LIBOR for such Currency, "Screen" shall mean the relevant display page for LIBOR for such Currency (as determined by the Administrative Agent) of the Reuter Monitor Money Rates Service (or any successor thereto or substitute therefor). -23- "Security Agreement" means the Amended and Restated Collateral Agency ------------------ and Security Agreement a copy of which is attached as Exhibit C hereto, as the same shall be modified and supplemented and in effect from time to time. "Security Documents" means the Security Agreement and all Uniform ------------------ Commercial Code financing statements required by the Security Agreement to be filed with respect to the security interests in personal property created pursuant to the Security Agreement. "Security Termination Date" means the date, if any, that the Security ------------------------- Agreement is terminated in accordance with Section 10.02(c)(ii). "Senior Consolidated Funded Debt" means, at any time, the Consolidated ------------------------------- Total Funded Debt, minus the aggregate then-outstanding principal amount of the ----- Senior Subordinated Notes. "Senior Note Documents" means (i) the Note Purchase Agreement dated as --------------------- of July 15, 1996 among the Borrower and the purchasers referred to therein, (ii) the Joint and Several Guaranty, the Notes and the Security Documents referred to in said Note Purchase Agreement, (iii) the Indebtedness (further described in Schedule 6.01 attached hereto) of the Borrower and its Subsidiaries to Colonial Farm Credit ACA and (iv) Note Purchase Agreement dated as of October 27, 1999 among the Borrower and the purchasers referred to therein, in each of the cases referred to in the foregoing clauses (i), (ii), (iii) and (iv) as the same shall, subject to Section 6.09, be modified and supplemented and in effect from time to time. "Senior Subordinated Notes" means, collectively, (a) the 7-5/8 % ------------------------- Senior Subordinated Notes, due 2008, issued by the Borrower pursuant to an Indenture, dated as of February 9, 1998 (the "Indenture"), among the Borrower --------- and SunTrust Bank, Atlanta, as trustee, and (b) any additional Funded Debt of the Borrower (and in respect of which none of its Subsidiaries is directly or indirectly obligated) that is subordinated to the obligations of the Borrower to the Lenders hereunder, which is incurred upon terms and conditions substantially identical (as determined by the Administrative Agent, in its sole discretion) to the terms and conditions set forth on the date hereof in the Indenture (except in respect of interest), which shall have no provisions for a sinking fund or other scheduled reductions of principal prior to final maturity and which shall have a final maturity date for the repayment of principal not earlier than the second anniversary of the Maturity Date, in each case as the same shall, subject to Section 6.13, be modified and supplemented and in effect from time to time. "Solvent" has the meaning assigned to such term in Section 4.01(j). ------- "Special Counsel" means Milbank, Tweed, Hadley & McCloy LLP, in its --------------- capacity as special counsel to Chase, as Administrative Agent of the credit facility contemplated hereby. "Statutory Reserve Rate" means for any day (or for the Interest Period ---------------------- for any Eurocurrency Borrowing), a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the arithmetic mean of the aggregate of the maximum reserve ----- percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the -24- Administrative Agent is subject (a) with respect to the Base CD Rate, for new negotiable nonpersonal time deposits in Dollars of over $100,000 with maturities approximately equal to three months and (b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurocurrency Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "Sub-Commitment" shall refer, as applicable. to a Dollar Sub- -------------- Commitment or a Multicurrency Sub-Commitment. "subsidiary" means, with respect to any Person (the "parent") at any ---------- ------ date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "Subsidiary" means any subsidiary of the Borrower. ---------- "Swingline Exposure" means, at any time, the aggregate principal ------------------ amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall be its Applicable Dollar Percentage of the total Swingline Exposure at such time. "Swingline Lender" means Chase, in its capacity as lender of Swingline ---------------- Loans hereunder. "Swingline Loan" means a Loan made pursuant to Section 2.04. -------------- "Taxes" means any and all present or future taxes, levies, imposts, ----- duties, deductions, charges or withholdings imposed by any Governmental Authority. "Three-Month Secondary CD Rate" means, for any day, the secondary ----------------------------- market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day is not a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day) or, if such rate is not so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately -25- 10:00 a.m., New York City time, on such day (or, if such day is not a Business Day, on the next preceding Business Day) by the Administrative Agent from three negotiable certificate of deposit dealers of recognized standing selected by it. "Total Commitment" means, at any time, the aggregate amount of the ---------------- Commitments as in effect at such time. "Total Dollar Sub-Commitment" means, at any time, the aggregate amount --------------------------- of the Dollar Sub-Commitments as in effect at such time. "Total Multicurrency Sub-Commitment" means, at any time, the aggregate ---------------------------------- amount of the Multicurrency Sub-Commitments as in effect at such time. "Transactions" means (i) with respect to the Borrower, the execution, ------------ delivery and performance by the Borrower of Loan Documents to which it is a party, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder and (ii) with respect to any Obligor (other than the Borrower), the execution, delivery and performance by such Obligor of the Loan Documents to which it is a party. "Type", when used in reference to any Loan or Borrowing, refers to ---- whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate, the Alternate Base Rate or the Federal Funds Rate. "Utilization Fee" means the fees payable pursuant to Section 2.11(c). --------------- "Withdrawal Liability" means liability to a Multiemployer Plan as a -------------------- result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Classification of Loans and Borrowings. For purposes -------------------------------------- of this Agreement, Loans may be classified and referred to by Class (e.g., a ---- "Revolving Loan") or by Type (e.g., a "Eurocurrency Loan") or by Class and Type ---- (e.g., a "Eurocurrency Revolving Loan"). Borrowings also may be classified and ---- referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a ---- ---- "Eurocurrency Borrowing") or by Class and Type (e.g., a "Eurocurrency Revolving ---- Borrowing"). Loans and Borrowings may also be identified by Currency. SECTION 1.03. Terms Generally. The definitions of terms herein shall --------------- apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to -26- include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly ---------------------- provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided -------- that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. SECTION 1.05. Currencies, Currency Equivalents. At any time, any -------------------------------- reference in the definition of the term "Approved Foreign Currency" or in any other provision of this Agreement to the Currency of any particular nation means the lawful currency of such nation at such time whether or not the name of such Currency is the same as it was on the date hereof. Except as provided in Sections 2.10(b) and 2.17(c), for purposes of determining (i) whether the amount of any Borrowing, together with all other applicable Borrowings then outstanding or to be borrowed at the same time as such Borrowing, would exceed the aggregate amount of the Commitments or applicable Sub-Commitments, (ii) the aggregate unutilized amount of the Commitments or either Sub-Commitment and (iii) the aggregate outstanding principal amount of Borrowings, the outstanding principal amount of any Borrowing that is denominated in any Foreign Currency shall be deemed to be the Dollar Equivalent of the amount of the Foreign Currency of such Borrowing determined as of the date of such Borrowing (determined in accordance with the last sentence of the definition of the term "Borrowing"). Wherever in this Agreement in connection with a Borrowing or Loan an amount, such as a required minimum or multiple amount, is expressed in Dollars, but such Borrowing or Loan is denominated in a Foreign Currency, such amount shall be the relevant Foreign Currency Equivalent of such Dollar amount (rounded to the nearest 1,000 units of such Foreign Currency). -27- ARTICLE II THE CREDITS SECTION 2.01. Commitments. Subject to the terms and conditions set ----------- forth herein: (a) each Dollar Lender agrees to make Revolving Loans to the Borrower in Dollars from time to time during the Availability Period in an aggregate principal amount (i) that will not result in such Lender's Revolving Dollar Credit Exposure exceeding such Lender's Dollar Sub-Commitment and (ii) that will not result in the sum of the aggregate amount of the Revolving Credit Exposures of all of the Lenders plus the aggregate principal amount of all ---- Pari Passu Debt then outstanding plus the aggregate principal amount (as ---- defined in the definition of "Material Indebtedness" herein) of the obligations of the Borrower and its Subsidiaries under Hedging Agreements exceeding the Borrowing Base; and (b) each Multicurrency Lender agrees to make Revolving Loans to the Borrower in Dollars or one or more Approved Foreign Currencies from time to time during the Availability Period in an aggregate principal amount (i) that will not result in such Lender's Revolving Multicurrency Credit Exposure exceeding such Lender's Multicurrency Sub-Commitment and (ii) that will not result in the sum of the aggregate amount of the Revolving Credit Exposures of all of the Lenders plus the aggregate principal amount of all ---- Pari Passu Debt then outstanding plus the aggregate principal amount (as ---- defined in the definition of "Material Indebtedness" herein) of the obligations of the Borrower or any of its Subsidiaries under Hedging Agreements exceeding the Borrowing Base. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans. In the event that any loans under the Existing Credit Agreement shall be outstanding on the Effective Date, then on the Effective Date the Borrower shall borrow Dollar Loans, and prepay Loans outstanding under the Existing Credit Agreement, in such amounts as shall be necessary so that the Dollar Loans are held hereunder pro rata in accordance with the respective Dollar Sub- Commitments of the Dollar Lenders. Any payments in respect of any Eurodollar Loans under the Existing Credit Agreement made to any Lender party to the Existing Credit Agreement that is received on any day other than the last day of the Interest Period relating thereto shall be subject to indemnification by the Borrower pursuant to the provisions of Section 2.15 of the Existing Credit Agreement. SECTION 2.02. Loans and Borrowings. -------------------- (a) Obligations Several. Each Revolving Loan shall be made as part ------------------- of a Borrowing consisting of Revolving Loans of the same Currency and Type made by the applicable Lenders ratably in accordance with their respective applicable Sub-Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other -28- Lender of its obligations hereunder; provided that the Commitments (and Sub- -------- Commitments) of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Types. Subject to Section 2.13, each Revolving Borrowing shall ----- be comprised entirely of ABR Loans, Federal Funds Loans or Eurocurrency Loans denominated in a single Currency as the Borrower may request in accordance herewith and each Swingline Loan shall be comprised of a Federal Funds Loan for the period commencing on the date such Loan is made and ending on the fourth Business Day thereafter, and from and after the fifth Business Day following such date shall (automatically and without further action by any Person) be comprised of an ABR Loan. Each Federal Funds Loan and each ABR Loan (whether a Revolving Loan or a Swingline Loan) shall be denominated in Dollars. Each Lender at its option may make any Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any -------- exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. (c) Minimum Amounts. At the commencement of each Interest Period for --------------- any Eurocurrency Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000, or (as applicable) the Foreign Currency Equivalent of said amounts. At the time that each ABR Borrowing and each Federal Funds Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000; provided that an ABR Borrowing or a Federal Funds -------- Borrowing may be in an aggregate amount that is equal to the entire unused balance of the Total Dollar Sub-Commitment or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.05(e). Each Swingline Loan shall be in an amount that is an integral multiple of $500,000 and not less than $1,000,000. Borrowings of more than one Class, Currency and Type may be outstanding at the same time; provided that there shall not at any -------- time be more than a total of nine Eurocurrency Borrowings outstanding. (d) Certain Limits on Interest Periods. Notwithstanding any other ---------------------------------- provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date. (e) Treatment of Loans Outstanding under Existing Credit Agreement. -------------------------------------------------------------- In the event that any loans under the Existing Credit Agreement shall remain outstanding on the Effective Date, then on the Effective Date, the Borrower shall prepay such loans in full from the proceeds of Revolving Loans hereunder, and the Borrower shall pay to each Lender party to the Existing Credit Agreement, all amounts that shall be owing to such Lender under Section 2.15 of the Existing Credit Agreement as a result of such prepayment. SECTION 2.03. Requests for Revolving Loan. --------------------------- (a) Notification to Administrative Agent. To request a Revolving ------------------------------------ Loan, the Borrower shall notify the Administrative Agent of such request by telephone (i) in the case of a Eurocurrency Borrowing denominated in an Approved Foreign Currency, not later than 11:00 a.m., New York City time, five Business Days before the date of the proposed Borrowing, -29- (ii) in the case of a Eurocurrency Borrowing denominated in Dollars, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing, (iii) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of the proposed Borrowing or (iv) in the case of a Federal Funds Borrowing, not later than 12:00 noon, New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower. (b) Content of Notification. Each such telephonic and written ----------------------- Borrowing Request shall specify the following information in compliance with Section 2.02: (i) the aggregate amount and Currency of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) in the case of a Borrowing denominated in Dollars, whether such Borrowing is to be an ABR Borrowing, a Federal Funds Borrowing or a Eurocurrency Borrowing and whether such Borrowing shall constitute a utilization of the Dollar Sub-Commitment or Multicurrency Sub-Commitment; (iv) in the case of a Eurocurrency Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and (v) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.06. (c) Notice by Administrative Agent to Lenders. Promptly following ----------------------------------------- receipt of a Borrowing Request in accordance with this Section 2.03, the Administrative Agent shall advise each applicable Lender of the details thereof and of the amount and Currency of such Lender's Loan to be made as part of the requested Borrowing. (d) Certain Presumptions. If no election as to the Currency of a -------------------- Borrowing is specified in a Borrowing Request, then the Borrower shall be deemed to have requested a Borrowing denominated in Dollars. If no election as to the Type of a Borrowing is specified, then the requested Borrowing shall be a Federal Funds Borrowing unless an Approved Foreign Currency has been specified, in which case the Borrower shall be deemed to have requested a Eurocurrency Borrowing denominated in such Approved Foreign Currency. If no election as to the Sub-Commitment of a Borrowing is specified, then the Borrower shall be deemed to have requested a Borrowing under the Dollar Sub-Commitment, provided -------- that, if at such time the Dollar Sub-Commitment shall be fully drawn, then the Borrower shall be deemed to have requested a Borrowing in Dollars under the Multicurrency Sub-Commitment. -30- SECTION 2.04. Swingline Loans. --------------- (a) Obligation of Swingline Lender. Subject to the terms and ------------------------------ conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to the Borrower from time to time during the Availability Period, in Dollars, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding $15,000,000, (ii) the sum of the aggregate amount of the Revolving Credit Exposures of all of the Lenders plus the aggregate principal amount of all Pari ---- Passu Debt then outstanding plus the aggregate principal amount (as defined in ---- the definition of "Material Indebtedness" herein) of the obligations of the Borrower and its Subsidiaries under Hedging Agreements exceeding the Borrowing Base or (iii) the sum of the total Revolving Dollar Credit Exposures exceeding the Total Dollar Sub-Commitment; provided that the Swingline Lender shall not be -------- required to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swingline Loans. (b) Requests for Swingline Loans. To request a Swingline Loan, the ---------------------------- Borrower shall notify the Administrative Agent of such request by telephone (confirmed by telecopy), not later than 3:00 p.m., New York City time, on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Loan. The Administrative Agent will promptly advise the Swingline Lender of any such notice received from the Borrower. The Swingline Lender shall make each Swingline Loan available to the Borrower by means of a credit to the general deposit account of the Borrower with the Swingline Lender (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(e), by remittance to the relevant Issuing Bank) by 4:00 p.m., New York City time, on the requested date of such Swingline Loan. (c) Participation by Other Lenders. The Swingline Lender may by ------------------------------ written notice given to the Administrative Agent not later than 10:00 a.m., New York City time, on any Business Day require the Dollar Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which Dollar Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Dollar Lender, specifying in such notice such Lender's Applicable Dollar Percentage of such Swingline Loan or Loans. Each Dollar Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swingline Lender, such Lender's Applicable Dollar Percentage of such Swingline Loan or Loans. Each Dollar Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Dollar Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment ------- -------- obligations of the Lenders), and the -31- Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Dollar Lenders. The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from the Borrower (or other party on behalf of the Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Dollar Lenders that shall have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the payment thereof. Notwithstanding the foregoing, a Dollar Lender shall not have any obligation to acquire a participation in a Swingline Loan pursuant to this paragraph if an Event of Default shall have occurred and be continuing at the time such Swingline Loan was made and such Lender shall have notified the Swingline Lender in writing, at least one Business Day prior to the time such Swingline Loan was made, that such Event of Default has occurred and that such Lender will not acquire participations in Swingline Loans made while such Event of Default is continuing. (d) Swingline Loans Payable on Demand. All Swingline Loans made --------------------------------- hereunder shall be payable on demand of the Swingline Lender made at any time upon the Borrower (and, if not so demanded sooner, in any event shall be payable as provided in Section 2.09(a) hereof). SECTION 2.05. Letters of Credit. ----------------- (a) Obligation to Issue Letters of Credit. Subject to the terms and ------------------------------------- conditions set forth herein, the Borrower may request the issuance of Letters of Credit by the Issuing Bank for its own account or for the account of any Subsidiary Guarantor, either under the Dollar Sub-Commitments or under the Multicurrency Sub-Commitments, in a form reasonably acceptable to the Administrative Agent and the relevant Issuing Bank, at any time and from time to time during the Availability Period. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. (b) Requests for Letters of Credit. To request the issuance of a ------------------------------ Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the relevant Issuing Bank) to the relevant Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, the date of issuance, amendment, renewal or extension, the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section 2.05), the Currency (which shall be Dollars or an Approved Foreign Currency) and amount of such Letter of Credit, the name and address of the beneficiary thereof, -32- whether such Letter of Credit is to be made under the Dollar Sub-Commitments or the Multicurrency Sub-Commitments and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the relevant Issuing Bank, the Borrower also shall submit a letter of credit application on the such Issuing Bank's standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the Dollar LC Exposure shall not exceed $40,000,000 and the total Revolving Dollar Credit Exposures shall not exceed the Total Dollar Sub-Commitment, (ii) the Multicurrency LC Exposure shall not exceed $10,000,000 or the Foreign Currency Equivalent thereof and the total Revolving Multicurrency Credit Exposures shall not exceed the Total Multicurrency Sub-Commitment, (iii) the sum of the aggregate amount of the Revolving Credit Exposures of all of the Lenders plus the aggregate principal amount of all Pari Passu Debt then outstanding plus - ---- ---- the aggregate principal amount (as defined in the definition of "Material Indebtedness" herein) of the obligations of the Borrower and its Subsidiaries under Hedging Agreements shall not exceed the Borrowing Base and (iv) the sum of the total Revolving Credit Exposures shall not exceed the Total Commitment. (c) Term of Letters of Credit. Each Letter of Credit shall expire at ------------------------- or prior to the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the Maturity Date. (d) Participations by Other Lenders. By the issuance of a Letter of ------------------------------- Credit (or an amendment to a Letter of Credit increasing the amount thereof), and without any further action on the part of the Issuing Bank or the Lenders, (i) in the case of a Dollar Letter of Credit, the Issuing Bank hereby grants to each Dollar Lender (other than the relevant Issuing Bank), and each Dollar Lender hereby acquires from such Issuing Bank a participation in such Letter of Credit equal to such Lender's Applicable Dollar Percentage, and (ii) in the case of a Multicurrency Letter of Credit, the Issuing Bank hereby grants to each Multicurrency Lender (other than the relevant Issuing Bank), and each Multicurrency Lender hereby acquires from such Issuing Bank a participation in such Letter of Credit equal to such Lender's Applicable Multicurrency Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of each Issuing Bank, such Lender's Applicable Dollar Percentage (in the case of a Dollar Letter of Credit) and such Lender's Applicable Multicurrency Percentage (in the case of a Multicurrency Letter of Credit) of each LC Disbursement made by such Issuing Bank and not reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section 2.05, or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Dollar Lender and each Multicurrency Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Dollar Letters of Credit and Multicurrency Letters of Credit, as the case may be, is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Dollar -33- Sub-Commitment or Multicurrency Sub-Commitment, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (e) Obligation of Borrower to Reimburse. If an Issuing Bank shall ----------------------------------- make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, New York City time, on the date that such LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 10:00 a.m., New York City time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 12:00 noon, New York City time, on (i) the Business Day that the Borrower receives such notice, if such notice is received prior to 10:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided that the Borrower may, subject to the conditions to borrowing set forth - -------- herein, request in accordance with Section 2.03 or 2.04 that such payment be financed with a Eurocurrency Borrowing of the Currency in which such Letter of Credit is issued (or in the case of a Borrowing of Dollars) an ABR Revolving Borrowing, a Federal Funds Borrowing or Swingline Loan in an equivalent amount and, to the extent so financed, the Borrower's obligation to make such payment shall be discharged and replaced by the resulting Eurocurrency Borrowing, ABR Revolving Borrowing, Federal Funds Borrowing or Swingline Loan. If the Borrower fails to make such payment when due, the Administrative Agent shall notify each Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Lender's Applicable Dollar Percentage or Applicable Multicurrency Percentage, as the case may be, thereof. Promptly following receipt of such notice, each Lender shall pay to the Administrative Agent its Applicable Dollar Percentage or Applicable Multicurrency Percentage, as the case may be, of the payment then due from the Borrower, in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Lenders), ------- -------- and the Administrative Agent shall promptly pay to the relevant Issuing Bank, the amounts so received by it from the Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the relevant Issuing Bank or, to the extent that Lenders have made payments pursuant to this paragraph to reimburse such Issuing Bank, then to such Lenders and such Issuing Bank, as their interests may appear. Any payment made by a Lender pursuant to this paragraph to reimburse an Issuing Bank for any LC Disbursement (other than the funding of Eurocurrency Loans, ABR Revolving Loans, Federal Funds Loans or a Swingline Loan as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement. (f) Obligation of Borrower Absolute, Etc. The Borrower's obligation ------------------------------------ to reimburse LC Disbursements as provided in paragraph (e) of this Section 2.05 shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of: (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein; -34- (ii) any amendment or waiver of or any consent to departure from all or any of the provisions of any Letter of Credit or this Agreement; (iii) the existence of any claim, setoff, defense or other right that the Borrower, any other party guaranteeing, or otherwise obligated with, the Borrower, any Subsidiary or other Affiliate thereof or any other Person may at any time have against the beneficiary under any Letter of Credit, the Issuing Bank, the Administrative Agent or any Lender or any other Person, whether in connection with this Agreement or any other related or unrelated agreement or transaction; (iv) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect; (v) payment by an Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply strictly with the terms of such Letter of Credit; and (vi) any other act or omission to act or delay of any kind of the Issuing Bank, the Lenders, the Administrative Agent or any other Person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.05, constitute a legal or equitable discharge of the Borrower's obligations hereunder. Neither the Administrative Agent, the Lenders, the Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the -------- Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by such Issuing Bank's failure to exercise the standard of care agreed hereunder (as set forth in the next sentence) to be applicable when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that the Issuing Bank shall be deemed to have exercised the agreed standard of care in the absence of gross negligence or wilful misconduct on the part of such Issuing Bank when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof, and shall be deemed to have failed to exercise the agreed standard of care only if it shall have engaged in gross negligence or wilful misconduct when making such determination (as determined by a court of competent jurisdiction). In furtherance of the foregoing and without limiting the generality thereof, it is understood that the Issuing Bank may accept documents that appear on their face to be in substantial compliance with the terms of a Letter of Credit without responsibility for further investigation, regardless of any notice or -35- information to the contrary, and may make payment upon presentation of documents that appear on their face to be in substantial compliance with the terms of such Letter of Credit; provided that, notwithstanding the foregoing, the Issuing Bank -------- shall have the right, in its sole discretion, to decline to accept such documents and to make such payment if such documents are not in strict compliance with the terms of such Letter of Credit. (g) Notification by Issuing Bank to Administrative Agent. The ---------------------------------------------------- Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit issued by it. The Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether such Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice -------- shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the relevant participating Lenders with respect to any such LC Disbursement. (h) Interest on LC Disbursements. If an Issuing Bank shall make any ---------------------------- LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof (which, in the case of Multicurrency Letters of Credit, shall be converted into Dollars) shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Loans; provided -------- that, if the Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this Section 2.05, then Section 2.12(e) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the relevant Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant to paragraph (e) of this Section 2.05 to reimburse such Issuing Bank shall be for the account of such Lender to the extent of such payment. (i) Replacement of Issuing Bank. The Issuing Bank may be replaced at --------------------------- any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.11(b). From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit. (j) Cash Collateral. If (i) any Event of Default shall have occurred --------------- and be continuing, (ii) the aggregate amount of Revolving Dollar Credit Exposure of all Dollar Lenders hereunder exceeds the Total Dollar Sub-Commitment, (iii) the aggregate amount of Revolving -36- Multicurrency Credit Exposure of all Multicurrency Lenders hereunder exceeds the Total Multicurrency Sub-Commitment or (iv) the sum of the aggregate amount of Revolving Credit Exposure of all Lenders hereunder plus the aggregate principal ---- amount of all Pari Passu Debt then outstanding plus the aggregate principal ---- amount (as defined in the definition of "Material Indebtedness" herein) of the obligations of the Borrower and its Subsidiaries under Hedging Agreements exceeds the then-current Borrowing Base on the Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Lenders with LC Exposure representing greater than 50% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in Dollars equal to (w) the LC Exposure as of such date, converting the aggregate Multicurrency LC Exposure into the Dollar Equivalent thereof at that date (in the case of the foregoing clause (i)), (x) the amount of the relevant excess (in the case of the foregoing clauses (ii) or (iii)) or (y) the lesser of the Revolving Credit Exposure or the amount of the relevant excess (in the case of the foregoing clause (iv)), plus (in each of the cases referred to in the foregoing clauses (i), (ii), (iii), and (iv)) any accrued and unpaid interest thereon; provided that the obligation to -------- deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (h) or (i) of Article VII. Such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Borrower under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower's risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the relevant Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Lenders with LC Exposure representing greater than 50% of the total LC Exposure), be applied to satisfy other obligations of the Obligors under this Agreement. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default or the renewal of a Letter of Credit or an excess of the Revolving Credit Exposure (either in and of itself or together with the Pari Passu Debt), as the case may be, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived or, in the case of a renewal of a Letter of Credit that would cause the expiration date of such Letter of Credit to extend beyond the Maturity Date, after all amounts drawn or able to be drawn under Letters of Credit have been reimbursed by the Borrower or, in the case of an excess of the Revolving Credit Exposure, after such excess has been eliminated. (k) Certain Existing Letters of Credit. To the extent that there are ---------------------------------- outstanding on the Effective Date pursuant to the Existing Credit Agreement one or more letters of credit issued -37- by Chase (as the "Issuing Lender" thereunder) then, on the Effective Date, each of such letters of credit is hereby designated a "Dollar Letter of Credit" under and for all purposes of this Agreement. In that connection, the Borrower hereby represents and warrants to the Issuing Lender, each Dollar Lender and the Administrative Agent that each such letter of credit satisfies the requirements of this Section 2.05 (including paragraph (c) above). SECTION 2.06. Funding of Borrowings. --------------------- (a) Manner of Funding. Each Lender shall make each Loan to be made ----------------- by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 1:00 p.m., Local Time in the location of the Administrative Agent's Account for the relevant Currency, to the Administrative Agent's Account for such Currency; provided that Swingline Loans shall be made as provided in -------- Section 2.04. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent and designated by the Borrower in the applicable Borrowing Request; provided that Eurocurrency -------- Loans, ABR Revolving Loans or Federal Funds Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(e) shall be remitted by the Administrative Agent to the relevant Issuing Bank. (b) Presumption by Administrative Agent. Unless the Administrative ----------------------------------- Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section 2.06 and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) for the first three Business Days, (A) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation for Loans in the applicable Currency or (B) in the case of the Borrower, the Federal Funds Rate (or, if such Loan is denominated in an Approved Foreign Currency, at such other rate as the Administrative Agent shall determine is appropriate in the circumstances) and (ii) thereafter, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.07. Interest Elections. ------------------ (a) Interest Election Requests. Each Revolving Borrowing initially -------------------------- shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurocurrency Revolving Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurocurrency Revolving Borrowing, may elect Interest Periods therefor, all as provided in this Section 2.07; provided, -------- however, that (i) a - ------- -38- Borrowing denominated in one Currency may not be converted to a Borrowing in a different Currency and (ii) a Eurocurrency Borrowing denominated in an Approved Foreign Currency may not be converted to a Borrowing of a different Type. Subject to the foregoing, the Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section 2.07 shall not apply to Swingline Borrowings, which may not be converted or continued. (b) Notification by Borrower. To make an election pursuant to this ------------------------ Section 2.07, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower. (c) Content of Notifications. Each telephonic and written Interest ------------------------ Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing, a Federal Funds Borrowing or a Eurocurrency Borrowing; and (iv) if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a Eurocurrency Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. (d) Notice by Administrative Agent to Lenders. Promptly following ----------------------------------------- receipt of an Interest Election Request, the Administrative Agent shall advise each applicable Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) Certain Presumptions. If the Borrower fails to deliver a timely -------------------- Interest Election Request with respect to a Eurocurrency Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, (i) if such -39- Borrowing is denominated in Dollars, at the end of such Interest Period such Borrowing shall be converted to a Federal Funds Borrowing, and (ii) if such Borrowing is denominated in a Foreign Currency, the Borrower shall be deemed to have selected an Interest Period of one month's duration. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (A) no outstanding Borrowing denominated in Dollars may be converted to or continued as a Eurocurrency Borrowing, (B) unless repaid, each Eurocurrency Borrowing denominated in Dollars shall be converted to an ABR Borrowing at the end of the Interest Period therefor and (C) no outstanding Eurocurrency Borrowing denominated in an Approved Foreign Currency may have an Interest Period of more than one month's duration. SECTION 2.08. Termination or Reduction of Commitments. --------------------------------------- (a) Scheduled Termination. Unless previously terminated, the --------------------- Commitments shall terminate on the Maturity Date. (b) Voluntary Reductions. The Borrower may at any time terminate, or -------------------- from time to time reduce, the Commitments (and Sub-Commitments); provided that -------- (i) each reduction of the Commitments (and of either Sub-Commitment) shall be in an amount that is an integral multiple of $5,000,000 and not less than $10,000,000 and (ii) the Borrower shall not terminate or reduce the Commitments (and either Sub-Commitment) if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.10, the sum of the Revolving Credit Exposures would exceed the Total Commitment, the sum of the Revolving Dollar Credit Exposure would exceed the Total Dollar Sub-Commitment or the sum of the Revolving Multicurrency Credit Exposures would exceed the Total Multicurrency Sub-Commitment. -40- (c) Notifications, Etc. The Borrower shall notify the Administrative ------------------ Agent of (i) any election to terminate or reduce the Commitments under paragraph (b) of this Section 2.08, and (ii) in the case of a reduction, the amount of such reduction (if any) to be allocated to the Dollar Sub-Commitment and Multicurrency Sub-Commitment hereunder, at least three Business Days prior to the effective date of such termination or reduction, specifying such election, the aggregate amount of a reduction and any allocation as aforesaid, and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section 2.08 shall be irrevocable; provided that a notice of termination of the Commitments delivered -------- by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments (and of Sub-Commitments) shall be permanent. Each reduction of the Commitments and Sub-Commitments shall be made ratably among the Lenders in accordance with their respective Commitments and Sub-Commitments, as the case may be. SECTION 2.09. Repayment of Loans; Evidence of Debt. ------------------------------------ (a) Repayment of Loans. The Borrower hereby unconditionally promises ------------------ to pay (i) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Revolving Loan on the Maturity Date and (ii) to the Swingline Lender the then unpaid principal amount of each Swingline Loan on the earlier of the date such repayment is demanded pursuant to Section 2.04(d) hereof, the Maturity Date and the first date after such Swingline Loan is made that is the 15th or last day of a calendar month and is at least two Business Days after such Swingline Loan is made; provided that on each date that a -------- Revolving Borrowing is made, the Borrower shall repay all Swingline Loans then outstanding. (b) Maintenance of Accounts by Lenders. Each Lender shall maintain ---------------------------------- in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts and Currency of principal and interest payable and paid to such Lender from time to time hereunder. (c) Maintenance of Accounts by Administrative Agent. The ----------------------------------------------- Administrative Agent shall maintain accounts in which it shall record (i) the amount and Currency of each Loan made hereunder, the Sub-Commitment, Class and Type thereof and the Interest Period applicable thereto, (ii) the amount and Currency of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount and Currency of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (d) Effect of Entries. The entries made in the accounts maintained ----------------- pursuant to paragraph (b) or (c) of this Section 2.09 shall be prima facie ----- ----- evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain - -------- such accounts or any error therein shall not in any manner -41- affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement. (e) Promissory Notes. Any Lender may request that Loans of any Sub- ---------------- Commitment made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 10.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.10. Prepayment of Loans. ------------------- (a) Voluntary Prepayments. The Borrower shall have the right at any --------------------- time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (b) of this Section 2.10 and provided that the aggregate principal amount of any prepayment that does not result in the prepayment of a Borrowing in full shall be in an integral multiple of $1,000,000 (or the Foreign Currency Equivalent of such amount). (b) Mandatory Prepayments. The Borrower shall from time to time --------------------- prepay the Revolving Loans and Swingline Loans (and/or provide cover for LC Exposure as specified in Section 2.05(j)) in such amounts as shall be necessary so that at all times the sum of the aggregate outstanding amount of Revolving Credit Exposure plus the aggregate principal amount of Pari Passu Debt then ---- outstanding plus the aggregate principal amount (as defined in the definition of ---- "Material Indebtedness" herein) of the obligations of the Borrower and its Subsidiaries under Hedging Agreements shall not exceed the Borrowing Base, such amounts to be applied, first, to Swingline Loans outstanding, second, to Revolving Loans outstanding and, third, as cover for LC Exposure outstanding. On each date on which a Borrowing Base Certificate is delivered pursuant to Section 5.01(f), the Borrower shall (as provided in Section 5.01(f)) determine the aggregate Revolving Credit Exposure (taking into account the Dollar Equivalent of the aggregate amount of Revolving Credit Loans denominated in any Approved Foreign Currency), and shall provide the Administrative Agent with a copy of such determination. In addition, promptly upon the receipt by the Administrative Agent of a Currency Valuation Notice (as defined below), the Administrative Agent shall (and at any time at the Administrative Agent's option, the Administrative Agent may) similarly determine the aggregate Revolving Credit Exposure. Upon receipt of any such determination from the Borrower, and upon its making any such determination, the Administrative Agent shall promptly notify the Lenders thereof (and in the case of any such determination by the Administrative Agent, the Borrower). If on the date of any such determination the aggregate Revolving Credit Exposure exceeds 105% of the aggregate amount of the Commitments as then in effect, the Borrower shall, if requested by the Required Lenders (through the Administrative Agent), prepay the Revolving Loans and Swingline Loans (and/or provide cover for LC Exposure as specified in Section 2.05(j)) in such amounts as shall be necessary so that after giving effect thereto, the aggregate Revolving Credit Exposure does -42- not exceed the Commitments. For purposes hereof, "Currency Valuation Notice" ------------------------- means a notice given by the Required Lenders stating that such notice is a "Currency Valuation Notice" and requesting that the Administrative Agent determine the Dollar Equivalent of the aggregate Revolving Credit Exposure. The Administrative Agent shall not be required to make more than one valuation determination pursuant to a Currency Valuation Notice during any rolling three- month period. For the purpose of the determinations in this paragraph (b), the outstanding principal amount of any Loan that is denominated in an Approved Foreign Currency shall be deemed to be the Dollar Equivalent of the amount in the Currency of such Loan, determined as of the date of such determination or, in the case of a Currency Valuation Notice received by the Administrative Agent prior to 11:00 a.m., New York City time, on a Business Day, on such Business Day or, in the case of a Currency Valuation Notice otherwise received, on the first Business Day after such Currency Valuation Notice is received. (c) Notification of Prepayments. The Borrower shall notify the --------------------------- Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurocurrency Revolving Borrowing, not later than 11:00 a.m., New York City time (or, in the case of a Borrowing denominated in an Approved Foreign Currency, 11:00 a.m., London time), three Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Revolving Borrowing or a Federal Funds Revolving Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment or (iii) in the case of prepayment of a Swingline Loan, not later than 12:00 noon, New York City time, on the date of prepayment. Each such notice shall be irrevocable and shall identify the Borrowing to be prepaid (specifying the Currency thereof), the prepayment date and the principal amount of such Borrowing or portion thereof to be prepaid; provided that, if a notice -------- of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.08, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.08. Promptly following receipt of any such notice relating to a Revolving Borrowing, the Administrative Agent shall advise the applicable Lenders of the contents thereof. Each partial prepayment of any Revolving Borrowing shall be in an amount that would be permitted in the case of an advance of a Revolving Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Revolving Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.12. SECTION 2.11. Fees. ---- (a) Commitment Fees. The Borrower agrees to pay to the --------------- Administrative Agent for the account of each Lender a Commitment Fee, which shall accrue at the Applicable Rate on the daily unused amount of the Commitment of such Lender during the period from and including the date hereof to but excluding the date on which such Commitment terminates. For purposes of this Section 2.11(a) only, Swingline Loans shall not be deemed to constitute a use of any Lender's Commitment. Accrued Commitment Fees shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the -43- Commitments terminate, commencing on the first such date to occur after the date hereof; provided that any Commitment Fees accruing after the date on which the -------- Commitments terminate shall be payable on demand. All Commitment Fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (b) Letter of Credit Fees. The Borrower agrees to pay (i) to the --------------------- Administrative Agent for the account of each Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at the Applicable Rate for Letters of Credit on the average daily amount of such Lender's LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which such Lender's Commitment terminates and the date on which such Lender ceases to have any LC Exposure, (ii) to the relevant Issuing Bank a fronting fee, which shall accrue at the rate of 1/8 of 1% per annum on the average daily amount of such Issuing Bank's LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date of termination of the Commitments and the date on which there ceases to be any LC Exposure, and (iii) to the relevant Issuing Bank its standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including the last day of March, June, September and December of each year shall be payable on the third Business Day following such last day, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on the date on -------- which the Commitments terminate and any such fees accruing after the date on which the Commitments terminate shall be payable on demand. Any other fees payable to an Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (c) Utilization Fees. The Borrower agrees to pay to the to the ---------------- Administrative Agent for the account of each Lender a Utilization Fee which shall accrue, for each day on which the aggregate Revolving Credit Exposure of all of the Lenders is greater than 50% of the Total Commitment, at a rate per annum equal to 1/8 of 1% of the Revolving Credit Exposure of such Lender on such date. Accrued Utilization Fees (if any) shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the Commitments terminate, commencing on the first such date to occur after the date hereof; provided that any Utilization Fees accruing after the date on which -------- the Commitments terminate shall be payable on demand. All Utilization Fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (d) Administrative Agent's Fees. The Borrower agrees to pay to the --------------------------- Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent. -44- (e) Manner of Payment. All fees payable hereunder shall be paid on ----------------- the dates due, in Dollars and immediately available funds, to the Administrative Agent (or to the relevant Issuing Bank, in the case of fees payable to it) for distribution, in the case of Commitment Fees, Utilization Fees and participation fees, to the Lenders. Fees paid shall not be refundable under any circumstances. SECTION 2.12. Interest. -------- (a) ABR Borrowings. The Loans comprising each ABR Borrowing -------------- (including each Swingline Loan comprised of an ABR Borrowing in accordance with Section 2.02(b)) shall bear interest at the Alternate Base Rate plus the Applicable Rate. (b) Federal Funds Borrowings. The Loans comprising each Federal ------------------------ Funds Borrowing (including each Swingline Loan comprised of a Federal Funds Borrowing in accordance with Section 2.02(b)) shall bear interest at the Federal Funds Rate plus the Applicable Rate. (c) Eurocurrency Borrowings. The Loans comprising each Eurocurrency ----------------------- Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate. (d) Default Rate. Notwithstanding the foregoing, if any principal of ------------ or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section 2.12 or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section 2.12. (e) Interest Payment Dates. Accrued interest on each Loan shall be ---------------------- payable in arrears on each Interest Payment Date for such Loan and upon termination of the Commitments; provided that (i) interest accrued pursuant to -------- paragraph (d) of this Section 2.12 shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan or a Federal Funds Revolving Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurocurrency Revolving Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. (f) Computation. All interest hereunder shall be computed on the ----------- basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Federal Funds Rate and Adjusted LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. -45- SECTION 2.13. Alternate Rate of Interest. If prior to the -------------------------- commencement of any Interest Period for a Eurocurrency Borrowing (the Currency of such Borrowing being herein called the "Affected Currency"): ----------------- (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for the Affected Currency for such Interest Period; or (b) the Administrative Agent is advised by Lenders of the affected Sub-Commitment having more than 50% of such Sub-Commitment that the Adjusted LIBO Rate for the Affected Currency for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Borrower and the affected Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and such Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or the continuation of any Borrowing as, a Eurocurrency Borrowing denominated in the Affected Currency shall be ineffective and, if the Affected Currency is Dollars, such Borrowing (unless prepaid) shall be continued as, or converted to, a Federal Funds Borrowing, (ii) if the Affected Currency is Dollars and any Borrowing Request requests a Eurocurrency Borrowing denominated in Dollars, such Borrowing shall be made as a Federal Funds Borrowing and (iii) if the Affected Currency is a Foreign Currency, any Borrowing Request that requests a Eurocurrency Borrowing denominated in the Affected Currency shall be ineffective. SECTION 2.14. Increased Costs. --------------- (a) Change in Law. If any Change in Law shall: ------------- (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or any Issuing Bank; or (ii) impose on any Lender or any Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurocurrency Loans made by such Lender or any Letter of Credit or participation therein; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurocurrency Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender or the relevant Issuing Bank, as the case may be, in Dollars, such additional -46- amount or amounts as will compensate such Lender or the relevant Issuing Bank for such additional costs incurred or reduction suffered. (b) Capital Requirements. If any Lender or Issuing Bank determines -------------------- that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or Issuing Bank's capital or on the capital of such Lender's or Issuing Bank's holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a level below that which such Lender, such Issuing Bank or such Lender's or Issuing Bank's holding company could have achieved but for such Change in Law (taking into consideration such Lender's or such Issuing Bank's policies and the policies of such Lender's or such Issuing Bank's holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or Issuing Bank, as the case may be, in Dollars, such additional amount or amounts as will compensate such Lender or Issuing Bank or such Lender's or Issuing Bank's holding company for any such reduction suffered. (c) Certificate from Lenders, Etc. A certificate of a Lender or an ----------------------------- Issuing Bank setting forth the amount or amounts, in Dollars, necessary to compensate such Lender or Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section 2.14 shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or Issuing Bank, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Retroactive Requests. Failure or delay on the part of any Lender -------------------- or Issuing Bank to demand compensation pursuant to this Section 2.14 shall not constitute a waiver of such Lender's or Issuing Bank's right to demand such compensation; provided that the Borrower shall not be required to compensate a -------- Lender or an Issuing Bank pursuant to this Section 2.14 for any increased costs or reductions incurred more than 270 days prior to the date that such Lender or Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's or Issuing Bank's intention to claim compensation therefor; provided further that, -------- ------- if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof. SECTION 2.15. Break Funding Payments. In the event of (a) the payment ---------------------- of any principal of any Eurocurrency Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.10(c) and is revoked in accordance therewith) or (d) the assignment of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.18, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurocurrency Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the -47- principal amount of such Loan, denominated in the Currency of such Loan, had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on ---- such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for deposits of a comparable amount and period, denominated in such Currency from other banks in the Eurocurrency market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section 2.15 shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. SECTION 2.16. Taxes. ----- (a) Payment for Taxes. Any and all payments by or on account of any ----------------- obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the -------- Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.16) the Administrative Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) Other Taxes. In addition, the Borrower shall pay any Other Taxes ----------- to the relevant Governmental Authority in accordance with applicable law. (c) Indemnification by Borrower. The Borrower shall indemnify the --------------------------- Administrative Agent, each Lender and each Issuing Bank, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or such Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 2.16) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or an Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or an Issuing Bank, shall be conclusive absent manifest error. (d) Receipts. As soon as practicable after any payment of -------- Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. -48- (e) Exemptions. Upon becoming a party to this Agreement, each ---------- Foreign Lender represents and warrants to the Borrower that it is, on the date such Foreign Lender becomes a party hereto, entitled to complete exemption from withholding tax under the laws of the jurisdiction in which the Borrower is located, or under any treaty to which such jurisdiction is a party, for payments made to it by the Borrower hereunder. Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate. (f) Refunds or Credits. If any Lender or the Administrative Agent ------------------ (i) receives a refund from a taxation authority in respect of any Indemnified Taxes or Other Taxes with respect to which the Borrower has paid additional amounts hereunder or (ii) claims any credit or other tax benefit (such credit to include any increase in any foreign tax credit) with respect to any Taxes or Other Taxes for which it has been indemnified by the Borrower and with respect to which the Borrower has paid additional amounts hereunder which refund, credit or other tax benefit in the sole judgment of such Lender or the Administrative Agent is directly attributable to any such Indemnified Tax or Other Tax paid, such Lender or the Administrative Agent shall promptly pay over to the Borrower the amount of such refund, credit or other tax benefit (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower with respect to the Indemnified Taxes or Other Taxes giving rise to such refund or credit), net of all out-of-pocket expenses (including any taxes on a refund or on interest received or credited) which such Lender or the Administrative Agent certifies that it has reasonably determined to have been incurred in connection with obtaining such refund, credit or other tax benefit; provided, however, that -------- ------- (i) the Borrower agrees to repay, upon the request of such Lender or the Administrative Agent, the amount paid over to the Borrower (plus penalties, interest or other charges) to such Lender or the Administrative Agent in the event such Lender or the Administrative Agent is required to repay such refund or credit to such tax authority, (ii) such Lender or the Administrative Agent, as the case may be, shall have no obligation to cooperate with respect to any contest (or continue to cooperate with respect to any contest), or to seek or claim any refund, credit or other tax benefit if such Lender or the Administrative Agent determines that its interest would be materially adversely affected by so cooperating (or continuing to cooperate) or by seeking or claiming any such refund, credit or other tax benefit and (iii) the Borrower shall not have any right to examine the tax returns or other records of any Lender or the Administrative Agent or to obtain any information with respect thereto by reason of the provisions of this Section or any judgment or determination made by any Lender or the Administrative Agent pursuant to this Section. SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of Set- ------------------------------------------------------ offs. - ---- (a) Manner of Payment. The Borrower shall make each payment required ----------------- to be made by it hereunder and under the other Loan Documents (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.14, 2.15 or 2.16, or otherwise) prior to 12:00 noon, Local Time in the location of the Administrative Agent's -49- Account for the relevant Currency, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at the Administrative Agent's Account for the relevant Currency, except that payments to be made directly to an Issuing Bank or the Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.14, 2.15, 2.16 and 10.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute, in like Currency and funds, any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. (b) Payments on Non-Business Days. If any payment hereunder shall be ----------------------------- due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. (c) Currency of Payments. All amounts owing under this Agreement -------------------- (including Commitment Fees, Utilization Fees, payments required under Section 2.14, and payments required under Section 2.15 relating to any Loan denominated in Dollars) or under any other Loan Document (except to the extent otherwise provided therein) are payable in Dollars, provided that all payments of -------- principal of and interest on any Loan denominated in an Approved Foreign Currency, and all payments relating to such Loans under Section 2.15 should be payable in such Foreign Currency. Notwithstanding the foregoing, if the Borrower shall fail to pay any principal of any Loan when due (whether at stated maturity, by acceleration, by mandatory prepayment or otherwise), the unpaid portion of such Loan shall, if such Loan is not denominated in Dollars, automatically be redenominated in Dollars on the due date thereof (or, if such due date is a day other than the last day of the Interest Period therefor, on the last day of such Interest Period) in an amount equal to the Dollar Equivalent thereof on the date of such redenomination and such principal shall be payable on demand; and if the Borrower shall fail to pay any interest on any Loan that is not denominated in Dollars, such interest shall automatically be redenominated in Dollars on the due date therefor (or, if such due date is a day other than the last day of the Interest Period therefor, on the last day of such Interest Period) in an amount equal to the Dollar Equivalent thereof on the date of such redenomination and such interest shall be payable on demand. (d) Pro Rata Treatment. Except to the extent otherwise provided ------------------ herein: (i) each Borrowing of Dollar Loans or Multicurrency Loans in a particular Currency from the Lenders under Section 2.01 hereof shall be made from the relevant Lenders, each payment of Commitment Fees, Utilization Fees or of participation fees under Section 2.11 hereof in respect of the Dollar Sub- Commitment or the Multicurrency Sub-Commitment shall be made for account of the relevant Lenders, and each termination or reduction of the amount of the Commitment, Dollar Sub-Commitment or Multicurrency Sub-Commitment under Section 2.08 hereof shall be applied to the respective Commitments and Sub-Commitments of the relevant Lenders, pro rata according to the amounts of their respective Commitments or Sub-Commitments; (ii) the making, conversion and continuation of Loans of a particular Type and Currency (other than conversions provided for by Section 2.13 hereof) shall be made pro rata among the relevant -50- Lenders according to the amounts of their respective Sub-Commitments (in the case of the making of Loans) or their respective Loans (in the case of conversions and continuations of Loans) and the then current Interest Period for each Eurocurrency Loan, as applicable, shall be coterminous; (iii) each payment or prepayment of principal of Dollar Loans or of Multicurrency Loans by the Borrowers shall be made for account of the Dollar Lenders and the Multicurrency Lenders, as applicable, pro rata in accordance with the respective unpaid principal amounts of the Dollar Loans and Multicurrency Loans held by them; and (iv) each payment of interest on Dollar Loans and Multicurrency Loans by the Borrowers shall be made for account of the relevant Lenders pro rata in accordance with the amounts of interest on such Dollar Loans and Multicurrency Loans then due and payable to the respective Lenders. (e) Manner of Application if Insufficient Funds. If at any time ------------------------------------------- insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties. (f) Sharing of Payments. If any Lender shall, by exercising any ------------------- right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans and participations in LC Disbursements and Swingline Loans; provided that (i) if any such participations are purchased and all or any - -------- portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by any Obligor pursuant to and in accordance with the express terms of this Agreement or the other Loan Documents or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). Each Obligor consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Obligor in the amount of such participation. (g) Presumption by Administrative Agent. Unless the Administrative ----------------------------------- Agent shall have received notice from the Borrower prior to the date on which any payment is due to the -51- Administrative Agent for the account of the Lenders or the Issuing Banks hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the relevant Issuing Bank, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Banks, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. (h) Withholding by Administrative Agent of Certain Payments. If any ------------------------------------------------------- Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(b) or 2.17(g), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.18. Mitigation Obligations; Replacement of Lenders. ---------------------------------------------- (a) Change of Lending office. If any Lender requests compensation ------------------------ under Section 2.14, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.14 or 2.16 as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) Replacement of Lenders. If any Lender requests compensation ---------------------- under Section 2.14, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 10.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior -------- written consent of the Administrative Agent (and, if a Commitment is being assigned, the Issuing Bank and the Swingline Lender), which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees -52- and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.14 or payments required to be made pursuant to Section 2.16, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. ARTICLE III REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Lenders that: SECTION 3.01. Organization; Powers. Each of the Borrower and its -------------------- Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required. SECTION 3.02. Authorization; Enforceability. The Transactions are ----------------------------- within each Obligor's corporate powers and have been duly authorized by all necessary corporate and, if required, stockholder action. Each of this Agreement and the other Loan Documents has been duly executed and delivered by each Obligor and constitutes a legal, valid and binding obligation of each Obligor, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions ------------------------------------ (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except for filings and recordings in respect of the Liens created pursuant to the Security Documents, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or any of its Subsidiaries or its assets, or give rise to a right thereunder to require any payment to be made by the Borrower or any of its Subsidiaries, and (d) except for the Lien created by the Security Documents, will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. -53- SECTION 3.04. Financial Condition; No Material Adverse Change. ----------------------------------------------- (a) Financial Statements. The Borrower has heretofore furnished to -------------------- the Lenders (i) its consolidated balance sheet, statements of income, stockholders equity and cash flows and pro forma information as of and for the fiscal year ended May 2, 1999, reported on by Arthur Andersen LLP, independent public accountants and (ii) its consolidated balance sheet, statements of income, stockholders equity and cash flows and pro forma information as of and for the fiscal period ended August 1, 1999. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above. (b) No Material Adverse Change. Since May 2, 1999, there has been no -------------------------- event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect, except as reflected in the financial statements referred to in Section 3.04(a) as of and for the fiscal period ended August 1, 1999. (c) No Material Undisclosed Liabilities. The Borrower does not have ----------------------------------- on the date of this Agreement any contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments in each case that are material, except as referred to or reflected in the balance sheets as at May 2, 1999 and August 1, 1999 referred to above. SECTION 3.05. Properties. ---------- (a) Title to Properties. Each of the Borrower and its Subsidiaries ------------------- has good title to, or valid leasehold interests in, all its real and personal property material to its business, except for minor defects in title that do not materially interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes. (b) Intellectual Property. Each of the Borrower and its Subsidiaries --------------------- owns, or is licensed to use, all trademarks, trade names, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.06. Litigation and Environmental Matters. ------------------------------------ (a) Litigation. There are no actions, suits or proceedings by or ---------- before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries (i) as to which an adverse determination is reasonably likely and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve this Agreement, the other Loan Documents or the Transactions. -54- (b) Environmental Matters. Except with respect to any other matters --------------------- that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither the Borrower nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability. (c) Disclosed Matters. Since the Effective Date, there has been no ----------------- change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect. As of the Effective Date, the Borrower does not believe that the Disclosed Matters individually or in the aggregate are reasonably likely to have a Material Adverse Effect. SECTION 3.07. Compliance with Laws and Agreements. Each of the ----------------------------------- Borrower and its Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing. SECTION 3.08. Investment and Holding Company Status. Neither the ------------------------------------- Borrower nor any of its Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 3.09. Taxes. Each of the Borrower and its Subsidiaries has ----- timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably ----- expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $55,000,000 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $55,000,000 the fair market value of the assets of all such underfunded Plans. SECTION 3.11. Disclosure. The Borrower and its Subsidiaries have ---------- disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which they are -55- subject, and all other matters known to them, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of the Obligors to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to -------- projected financial information, the Obligors represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. SECTION 3.12. Regulations U and X. Neither the Borrower nor any of ------------------- its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock and no part of the proceeds of any extension of credit hereunder will be used to buy or carry any Margin Stock. SECTION 3.13. Material Agreements and Liens. ----------------------------- (a) Indebtedness. Part A of Schedule 3.13 hereto is a complete and ------------ correct list, as of the Effective Date, of each credit agreement, loan agreement, indenture, note purchase agreement, guarantee, letter of credit or other arrangement providing for or otherwise relating to any Indebtedness or any extension of credit (or commitment for any extension of credit) to, or guarantee by, the Borrower or any of its Subsidiaries (other than the Existing Credit Agreement and the Senior Note Documents) the aggregate principal or face amount of which equals or exceeds (or may equal or exceed) $100,000 and the aggregate principal or face amount outstanding or that may become outstanding under each such arrangement is correctly described in Part A of said Schedule 3.13. (b) Liens. Part B of Schedule 3.13 hereto is a complete and correct ----- list, as of the Effective Date, of each Lien securing Indebtedness of any Person covering any property of the Borrower or any of its Subsidiaries, and the aggregate Indebtedness secured (or which may be secured) by each such Lien and the property covered by each such Lien is correctly described in Part B of said Schedule 3.13. SECTION 3.14. Subsidiaries, Etc. ----------------- (a) Subsidiaries. Set forth in Part A of Schedule 3.14 hereto is a ------------ complete and correct list, as of the Effective Date, of all of the Subsidiaries of the Borrower, together with, for each Subsidiary, (i) the jurisdiction of organization of such Subsidiary, (ii) each Person holding ownership interests in such Subsidiary and (iii) the nature of the ownership interests held by each such Person and the percentage of ownership of such Subsidiary represented by such ownership interests. Except as disclosed in Part A of Schedule 3.14 hereto, (x) each of the Borrower and its Subsidiaries owns, free and clear of Liens (other than Liens created pursuant to the Security Documents), and has the unencumbered right to vote, all outstanding ownership interests in each Person shown to be held by it in Part A of Schedule 3.14 hereto, (y) all of the issued and outstanding capital stock of each such Person organized as a corporation is validly issued, fully -56- paid and nonassessable and (z) there are no outstanding Equity Rights with respect to such Person. (b) Investments. Set forth in Part B of Schedule 3.14 hereto is a ----------- complete and correct list, as of the Effective Date, of all Investments (other than Investments disclosed in Part A of said Schedule 3.14 hereto) held by the Borrower or any of its Subsidiaries in Person and, for each such Investment, (x) the identity of the Person or Persons holding such Investment and (y) the nature of such Investment. Except as disclosed in Part B of Schedule 3.14 hereto, each of the Borrower and its Subsidiaries owns, free and clear of all Liens (other than Liens created pursuant to the Security Documents), all such Investments. SECTION 3.15. Solvency. On and as of the Effective Date, immediately -------- prior to and after consummation of the Transactions and after giving effect to all Loans and other obligations and liabilities being incurred on such date in connection therewith, and on the date of each subsequent Loan or other extension of credit hereunder and after giving effect to application of the proceeds thereof in accordance with the terms of the Loan Documents, the Borrower and its Subsidiaries, taken as a whole, are, and each Obligor is, and will be Solvent. SECTION 3.16 Year 2000. Any reprogramming required to permit the --------- proper functioning, prior to, in and following the year 2000, of (i) the Borrower's computer systems and (ii) equipment containing embedded microchips (including systems and equipment supplied by others or with which the Borrower's systems interface) and the testing of all such systems and equipment, as so reprogrammed, has been completed, such that any effect of the year 2000 will not be a Material Adverse Effect. The cost to the Borrower of such reprogramming and testing and of the reasonably foreseeable consequences of year 2000 to the Borrower (including, without limitation, reprogramming errors and the failure of others' systems or equipment) has not resulted in a Default or a Material Adverse Effect. ARTICLE IV CONDITIONS SECTION 4.01. Effective Date. This Agreement shall not become -------------- effective until the date (the "Effective Date"), on which the Administrative -------------- Agent shall notify the Borrower that each of the following conditions is satisfied (or waived in accordance with Section 10.02) (provided that this Agreement shall not become effective if the Effective Date does not occur before December 15, 1999): (a) Execution of Agreement. The Administrative Agent (or Special ---------------------- Counsel) shall have received from each Obligor, each Lender under the Existing Credit Agreement, and each Lender intended to be party to this Agreement that is not a party to the Existing Credit Agreement either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. -57- (b) Corporate Documents. The Administrative Agent shall have ------------------- received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of each Obligor, the authorization of the Transactions and any other legal matters relating to each Obligor, this Agreement, the other Loan Documents or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel. (c) Officer's Certificate. The Administrative Agent shall have --------------------- received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02. (d) Borrowing Base Certificate. The Administrative Agent shall have -------------------------- received a Borrowing Base Certificate not more than 3 days prior to the Effective Date. (e) Opinion of Counsel to Obligors. The Administrative Agent shall ------------------------------ have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of McGuire Woods Battle & Boothe LLP, counsel for the Obligors, substantially in the form of Exhibit D, and covering such other matters relating to the Obligors, this Agreement, the other Loan Documents or the Transactions as the Required Lenders shall reasonably request (and the Borrower hereby requests such counsel to deliver such opinion). (f) Opinion of Special Counsel. The Administrative Agent shall have -------------------------- received a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of Special Counsel substantially in the form of Exhibit E hereto (and the Administrative Agent hereby requests such counsel to deliver such opinion). (g) Perfection Actions. The Administrative Agent (or Special ------------------ Counsel) shall have received evidence that duly completed and executed Uniform Commercial Code Financing Statements covering the personal property subject to the Liens created by the Security Agreement have been duly filed in all jurisdictions in which such filing is necessary or appropriate and that such filings are current and in full force and effect as of the Effective Date. (h) Lien Searches. The Administrative Agent (or Special Counsel) ------------- shall have received a copy of the results of such Uniform Commercial Code, tax and judgment searches as may be requested by the Administrative Agent in each relevant jurisdiction with respect to the Borrower and its Subsidiaries and which searches reveal no Liens on any asset of the Borrower or its Subsidiaries except for (i) Liens permitted under this Agreement and (ii) Liens to be discharged on or prior to the Effective Date pursuant to documentation satisfactory to the Administrative Agent. (i) Solvency Certificate. The Administrative Agent (or Special -------------------- Counsel) shall have received a certificate of the Borrower, to the effect that, as of the Effective Date (after giving effect to the Transactions), (a) the aggregate value of all properties of the Borrower and its Subsidiaries at their present fair saleable value (i.e., the amount which -58- may be realized within a reasonable time, considered to be six months to one year, either through collection or sale at the regular market value, regular market value to mean the amount which could be obtained for the property in question within such period by a capable and diligent business person from an interested buyer who is willing to purchase under ordinary selling conditions), exceeds the aggregate amount of all the debts and liabilities (including contingent, subordinated, unmatured and unliquidated liabilities) of the Borrower and its Subsidiaries, (b) the Borrower and its Subsidiaries will not, on a consolidated basis, have an unreasonably small capital with which to conduct their business operations as contemplated to be conducted and (c) the Borrower and its Subsidiaries will have, on a consolidated basis, sufficient cash flow to enable them to pay their debts as they mature (satisfaction of items (a) through (c) of this paragraph (k) is herein referred to as being "Solvent"). ------- (j) Fees, Etc. The Administrative Agent, the Lenders and the --------- Arranger shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Obligors hereunder. (k) Other Documents. The Administrative Agent shall have received --------------- such other documents as the Administrative Agent or any Lender or Special Counsel may reasonably request. The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. SECTION 4.02. Each Credit Event. The obligation of each Lender to ----------------- make a Loan on the occasion of any Borrowing, and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject to the satisfaction of the following conditions: (a) Representations and Warranties. The representations and ------------------------------ warranties of the Obligors set forth in this Agreement and the other Loan Documents shall be true and correct on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable. (b) Absence of Default. At the time of and immediately after giving ------------------ effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing. Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section 4.02. -59- ARTICLE V AFFIRMATIVE COVENANTS Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that: SECTION 5.01. Financial Statements and Other Information. The ------------------------------------------ Borrower will furnish to the Administrative Agent and each Lender: (a) within 90 days after the end of each fiscal year of the Borrower, (i) its audited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by Arthur Andersen LLP or other independent public accountants of recognized national standing (without a "going concern" or like modification, qualification or exception and without any modification, qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied and (ii) its consolidating balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidating basis in accordance with GAAP consistently applied; (b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, (i) its consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year and (ii) its consolidating balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis or consolidating basis, as the case may be, in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; -60- (c) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations of the Interest Coverage Ratio as at the last day of the fiscal quarter or fiscal year, as the case may be, in respect of which such financial statements are delivered, and demonstrating compliance with Section 6.12 and (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 3.04 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate; (d) concurrently with any delivery of financial statements under clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines); (e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Borrower to its shareholders generally, as the case may be; (f) as soon as available and in any event within 5 Business Days after the end of each monthly accounting period, (i) a Borrowing Base Certificate certifying as to the Borrowing Base as at the last day of such accounting period and (ii) a certificate of a Financial Officer in form and detail satisfactory to the Administrative Agent setting forth a determination of the aggregate Revolving Credit Exposure as at the last day of such monthly accounting period (taking into account the Dollar Equivalent of the aggregate amount of Revolving Credit Loans denominated in any Approved Foreign Currency); (g) as soon as available after the end of each fiscal year of the Borrower, a report (prepared at the expense of the Borrower) of an independent collateral auditor (which may be, or be affiliated with, one of the Lenders) approved by the Administrative Agent with respect to the Receivables and Inventory components included in the Borrowing Base which report shall indicate that, based upon a review by such auditors of the Receivables (including, without limitation, verification with respect to the amount, aging, identity and credit of the respective account debtors and the billing practices of the Borrower and its Subsidiaries) and Inventory (including, without limitation, verification as to the value, location and respective types), the information set forth in the Borrowing Base Certificate then most recently received by the Administrative Agent hereunder is accurate and complete in all material respects and whether or not a Trigger Date (as such term is defined in Section 10.13 hereof) has occurred; and -61- (h) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of this Agreement, as the Administrative Agent or any Lender may reasonably request. SECTION 5.02. Notices of Material Events. The Borrower will furnish -------------------------- to the Administrative Agent and each Lender prompt written notice of the following: (a) the occurrence of any Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $250,000; and (d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section 5.02 shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. SECTION 5.03. Existence; Conduct of Business. The Borrower will, and ------------------------------ will cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of its business; provided that the foregoing shall not prohibit -------- any merger, consolidation, liquidation or dissolution permitted under Section 6.03. SECTION 5.04. Payment of Obligations. The Borrower will, and will ---------------------- cause each of its Subsidiaries to, pay its obligations, including Tax liabilities, that, if not paid, could result in a Material Adverse Effect before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.05. Maintenance of Properties; Insurance. The Borrower ------------------------------------ will, and will cause each of its Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, and (b) maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations. -62- SECTION 5.06. Books and Records; Inspection Rights. The Borrower ------------------------------------ will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested. SECTION 5.07. Compliance with Laws. The Borrower will, and will cause -------------------- each of its Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority, including all Environmental Laws, and with all other material obligations, applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.08. Use of Proceeds and Letters of Credit. ------------------------------------- (a) Use of Proceeds. The proceeds of the Loans hereunder will be --------------- used only for working capital and other general corporate purposes of the Borrower and its Subsidiaries. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations U and X. (b) Letters of Credit. Letters of Credit will be issued only to ----------------- support obligations of the Borrower and its Subsidiaries. SECTION 5.09. Additional Subsidiary Guarantors. The Borrower will -------------------------------- take such action, and will cause each of its Subsidiaries to take such action, from time to time as shall be necessary to ensure that each Subsidiary the inventory or receivables of which are included in the calculation of the Borrowing Base is a Subsidiary Guarantor and, thereby, an "Obligor" hereunder and under the Security Agreement pursuant to documentation satisfactory to the Administrative Agent in form and substance. In addition, the Borrower may cause any of its other Subsidiaries to become a Subsidiary Guarantor and, thereby, an "Obligor" hereunder and under the Security Agreement pursuant to documentation satisfactory to the Administrative Agent in form and substance. Each such new Subsidiary Guarantor shall deliver such proof of corporate action, incumbency of officers, opinions of counsel and other documents as is consistent with those delivered by each other Obligor pursuant to Section 4.01 or as any Lender or the Administrative Agent shall have reasonably requested. ARTICLE VI NEGATIVE COVENANTS Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that: -63- SECTION 6.01. Indebtedness. The Borrower will not, and will not ------------ permit any Subsidiary to, create, incur or assume any Indebtedness, except: (a) Indebtedness created hereunder; (b) Pari Passu Debt; (c) any extensions, renewals or replacements of any Indebtedness existing on the date hereof and set forth in Schedule 6.01, provided that the aggregate principal amount of such Indebtedness is not thereby increased; (d) Indebtedness of the Borrower to any Subsidiary and of any Subsidiary to the Borrower or any other Subsidiary; (e) other Indebtedness in an aggregate principal amount not exceeding $20,000,000 created, incurred or assumed in any fiscal year of the Borrower; and (f) other Indebtedness provided that, on the date (the "Incurrence -------- ---------- Date") such Indebtedness is created, incurred or assumed (as the case may ---- be), the Borrower furnishes to the Administrative Agent reasonable projections demonstrating in reasonable detail that the Borrower will be in compliance with Section 6.12(e) on the last day of each of the next succeeding four fiscal quarters of the Borrower that end after the Incurrence Date after giving effect to such creation, incurrence or assumption, together with a certificate of a Financial Officer to the effect that such projections are based upon reasonable assumptions and reflect the Borrower's best estimate as to the matters covered thereby. For purposes of the foregoing paragraphs (e) and (f), the Acquisition of any Person shall be deemed to constitute the assumption of the Indebtedness of such Person by a Subsidiary of the Borrower at the time of the consummation of such Acquisition. SECTION 6.02. Liens. The Borrower will not, and will not permit any ----- Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except: (a) Permitted Encumbrances; (b) Liens created by the Senior Note Documents as in effect on the date hereof; provided that there shall be no Lien securing any obligations -------- under the Senior Note Documents at any time after the Security Termination Date; (c) any Lien on any property or asset of the Borrower or any Subsidiary existing on the date hereof and set forth in Schedule 6.02 (other than Liens created by the Senior Note Documents); provided that (i) -------- such Lien shall not apply to any other property or asset of the Borrower or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof; -64- (d) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary; provided that -------- (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets of the Borrower or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be; (e) Liens on fixed or capital assets acquired, constructed or improved by the Borrower or any Subsidiary; provided that (i) such security -------- interests secure Indebtedness incurred to finance such acquisition, construction or improvement, (ii) such security interests and the Indebtedness secured thereby are incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed 80% of the cost of acquiring, constructing or improving such fixed or capital assets and (iv) such security interests shall not apply to any other property or assets of the Borrower or any Subsidiary; (f) the Lien created by the Security Agreement; provided that there -------- shall be no Lien securing any Pari Passu Debt at any time after the Security Termination Date; (g) any extensions, renewals or replacements of any of the Liens permitted by the foregoing clauses (a) through (f) effected in connection with any extension, renewal or replacement of the Indebtedness secured thereby; provided that (i) the aggregate principal amount of such -------- Indebtedness is not thereby increased, (ii) such Lien shall not be extended to cover any additional property and (iii) there shall be no Lien securing any extension, renewal or replacement of the Pari Passu Debt or any obligations under the Senior Note Documents at any time after the Security Termination Date; and (h) other Liens that (whether before or after the Security Termination Date) do not cover any Collateral (as defined in the Security Agreement). Notwithstanding anything contained herein to the contrary, the aggregate amount of obligations of the Borrower and its Subsidiaries secured by Liens permitted by any of clauses (c), (d), (e), (g) (to the extent extending, renewing or replacing any of the Liens permitted by any of clauses (c), (d) and (e)) and (h) shall not exceed 15% of Consolidated Tangible Net Worth at any time on or after the Security Termination Date. SECTION 6.03. Fundamental Changes. ------------------- (a) Mergers, Sales of Assets, Etc. The Borrower will not, and will ----------------------------- not permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of its assets, or all or substantially all of the stock of any of its Subsidiaries (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing (i) any Subsidiary may merge -65- into the Borrower in a transaction in which the Borrower is the surviving corporation, (ii) any Subsidiary may merge into any Subsidiary in a transaction in which the surviving entity is a Subsidiary, provided that if any such -------- transaction shall be between a Subsidiary Guarantor and a Subsidiary not a Subsidiary Guarantor, and such Subsidiary Guarantor is not the continuing or surviving corporation, then the continuing or surviving corporation shall have assumed all of the obligations of such Subsidiary Guarantor hereunder and under the other Loan Documents pursuant to documentation satisfactory to the Administrative Agent in form and substance, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose of its assets to the Borrower or to another Subsidiary, provided that if any such transaction shall be between a Subsidiary Guarantor and a Subsidiary not a Subsidiary Guarantor, and if such Subsidiary Guarantor is not the continuing or surviving corporation, then the continuing or surviving corporation shall have assumed all of the obligations of such Subsidiary Guarantor hereunder and under the other Loan Documents pursuant to documentation satisfactory to the Administrative Agent in form and substance and (iv) any Subsidiary may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders; provided that any -------- such merger that would otherwise be permitted by this Section 6.03 involving a Person that is not a wholly owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 6.04. (b) Joint Ventures. The Borrower will not, and will not permit any -------------- of its Subsidiaries to invest in any Joint Venture, consummate any Acquisition or otherwise acquire any business, or the related assets, of any other Person (whether by way of purchase of assets or stock, by merger or consolidation or otherwise), unless immediately prior to such acquisition and after giving effect thereto, no Default shall have occurred and be continuing, and: (i) such acquisition is an Acquisition and such Acquisition (if by purchase of assets, merger or consolidation) is effected in such manner that the acquired business, and the related assets, are owned either by the Borrower or a Subsidiary and, if effected by merger or consolidation involving the Borrower, the Borrower is the continuing or surviving entity and, if effected by merger or consolidation involving a Subsidiary, the continuing or surviving entity is a Subsidiary; or (ii) such acquisition is an Acquisition and such Acquisition (if by purchase of stock) is effected in such manner so that the acquired entity becomes a Subsidiary; or (iii) such transaction is an Acquisition or a Joint Venture and after giving effect to such Acquisition or Joint Venture the Borrower is in compliance with Section 6.12 (the determination of such compliance to be calculated on a pro forma basis, as at the end of and for the period of four consecutive fiscal quarters most recently ended prior to the date of such Acquisition or Joint Venture for which financial statements of the Borrower and its Subsidiaries are available, under the assumption that such Acquisition or Joint Venture shall have occurred, and any Indebtedness in connection therewith shall have been incurred, at the beginning of the applicable period, and under the assumption that interest for such period had been equal to the actual weighted average interest rate in effect for the Loans hereunder on the date of such Acquisition or Joint Venture) -66- and, in the event that the aggregate amount of expenditures in respect of such Acquisition or Joint Venture and of all prior Acquisitions and Joint Ventures made during a single fiscal year and not covered by a certificate delivered under this subclause (iii) exceeds $50,000,000, the Borrower shall have delivered to the Administrative Agent a certificate of a Financial Officer showing calculations in reasonable detail to demonstrate compliance with this subclause (iii). (c) Lines of Business. The Borrower will not, and will not permit ----------------- any of its Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Borrower and its Subsidiaries on the Effective Date and businesses reasonably related thereto. SECTION 6.04. Investments, Loans, Advances, Guarantees and -------------------------------------------- Acquisitions. The Borrower will not, and will not permit any of its Subsidiaries - ------------ to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly owned Subsidiary prior to such merger) any capital stock, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit, except: (a) Permitted Investments; (b) Investments by the Borrower existing on the date hereof in the capital stock of its Subsidiaries and Investments by the Borrower existing on the date hereof described in Part B of Schedule 3.14; (c) Investments made by the Borrower in any Subsidiary and made by any Subsidiary in the Borrower or any other Subsidiary; (d) Guarantees constituting Indebtedness permitted by Section 6.01; (e) Investments in an aggregate amount not exceeding $10,000,000 at any one time outstanding in a cold storage warehouse and distribution center in Sioux Falls, South Dakota constituting a joint venture between Freezer Services Inc., the Borrower and John Morrell & Co.; (f) other Investments not exceeding $5,000,000 in the aggregate amount outstanding at any time; and (g) Investments constituting Acquisitions or Joint Ventures permitted by Section 6.03(b) made by the Borrower or any of its Subsidiaries in any Person (other than a Subsidiary) principally engaged in a business in which the Borrower and its Subsidiaries are permitted by Section 6.03(c) to be engaged. SECTION 6.05. Hedging Agreements. The Borrower will not, and will not ------------------ permit any of its Subsidiaries to, enter into any Hedging Agreement, other than Hedging Agreements entered into in the ordinary course of business to hedge or mitigate risks to which -67- the Borrower or any Subsidiary is exposed in the conduct of its business or the management of its liabilities. SECTION 6.06. Restricted Payments. The Borrower will not, and will ------------------- not permit any of its Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except that (a) the Borrower may declare and pay dividends with respect to its capital stock payable solely in additional shares of its common stock, (b) Subsidiaries may declare and pay dividends ratably with respect to their capital stock and (c) the Borrower may make Restricted Payments pursuant to and in accordance with stock option plans or other benefit plans for management or employees of the Borrower and its Subsidiaries. SECTION 6.07. Transactions with Affiliates. The Borrower will not, ---------------------------- and will not permit any of its Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties, (b) transactions between or among the Borrower and its Subsidiaries not involving any other Affiliate and (c) any Restricted Payment permitted by Section 6.06. SECTION 6.08. Restrictive Agreements. The Borrower will not, and will ---------------------- not permit any of its Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the Borrower or any other Subsidiary; provided that (i) the foregoing shall not -------- apply to restrictions and conditions imposed by law or by this Agreement or any of the other Loan Documents, (ii) the foregoing shall not apply to restrictions and conditions existing on the date hereof identified on Schedule 6.08 (but shall apply to any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition), (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement or any of the other Loan Documents if such restrictions or conditions apply only to the property or assets securing such Indebtedness, (v) clause (a) of the foregoing shall not apply to customary provisions in leases restricting the assignment thereof, (vi) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement under which the Indebtedness governed by the Senior Note Documents is refinanced, provided that such restrictions or conditions are not materially more restrictive than those contained in the Senior Note Documents on the date hereof (and, if such agreement does not provide that the Indebtedness created thereunder will be secured by Liens on property or assets of the Borrower or any Subsidiary, such agreement may contain restrictions or conditions limiting Liens on property or assets of the Borrower or any Subsidiary which are not the subject of Liens granted -68- under the Security Agreement and such restrictions or conditions shall not be deemed more onerous than those contained in the Senior Note Documents on the date hereof) and (vii) clause (a) of the foregoing shall not apply to any requirement that obligations of the Borrower or its Subsidiaries, as the case may be, that are pari passu or subordinated in right of payment to the Senior ---- ----- Subordinated Notes or the guaranties by Subsidiaries of the Borrower in respect thereof, as the case may be, may not be secured unless the Senior Subordinated Notes and/or such guaranties are at least equally and ratably secured. SECTION 6.09. Senior Note Documents. Promptly following the execution --------------------- thereof, the Borrower will supply each Lender with a copy of any modification, supplement or waiver to a Senior Note Document. SECTION 6.10. Limitation on Sale and Leaseback Transactions. The --------------------------------------------- Borrower will not, and will not permit any of its Subsidiaries to, enter into, renew or extend any transaction or series of related transactions pursuant to which the Borrower or such Subsidiary sells or transfers any property in connection with the leasing, or the release against installment payments, or as part of an arrangement involving the leasing or resale against installment payments, of such property to the seller or transferor. SECTION 6.11. Fiscal Periods. If the Borrower changes the manner of -------------- determining the last day of its fiscal year or the last days of the first three fiscal quarters in each of its fiscal years, the parties hereto shall negotiate in good faith to agree to modify any financial calculations and determinations hereunder to reflect their original intent in light of such changes, and if they fail so to agree all such financial calculations determinations hereunder shall continue to be made as if such change had not occurred. SECTION 6.12. Financial Covenants. ------------------- (a) Consolidated Current Ratio. The Borrower will not permit the -------------------------- Consolidated Current Ratio to be less than 1.05 to 1 at any time. (b) Consolidated Working Capital. The Borrower will not permit ---------------------------- Consolidated Working Capital to be less than $35,000,000 at any time. (c) Consolidated Leverage Ratio. The Borrower will not permit the --------------------------- ratio of Consolidated Total Funded Debt to Consolidated EBITDA (for the four prior fiscal quarters) on any date to be more than 4.00 to 1; and the Borrower will not permit the ratio of Senior Consolidated Funded Debt to Consolidated EBITDA on any date to be more than 3.20 to 1. (d) Consolidated Tangible Net Worth. The Borrower will not permit ------------------------------- Consolidated Tangible Net Worth on any date (the "Determination Date") to be ------------------ less than the sum of (i) $450,000,000 plus (ii) 50% of the aggregate amount of ---- Consolidated Net Income for each quarter that ends after the Effective Date and on or before the Determination Date in respect of which Consolidated Net Income is greater than zero plus (iii) 50% of the aggregate amount of increases in ---- Consolidated Tangible Net Worth after the Effective Date and on or before the Determination Date resulting from the issuance by it of capital stock as consideration in Acquisitions made by it and its Subsidiaries. -69- (e) Consolidated Interest Coverage Ratio. The Borrower will not ------------------------------------ permit the ratio of Consolidated EBIT to Consolidated Interest Expense for any period of four consecutive fiscal quarters of the Borrower to be less than 2.50 to 1. SECTION 6.13. Senior Subordinated Notes. If any Default then exists ------------------------- or would result therefrom, the Borrower will not, and will not permit any of its Subsidiaries to, purchase, redeem, retire or otherwise acquire for value, or set apart any money for a sinking, defeasance or other analogous fund for the purchase, redemption, retirement or other acquisition of, or make any voluntary payment or prepayment of the principal of or interest on, or any other amount owing in respect of, the Senior Subordinated Notes, except (subject to the terms of subordination thereof) for regularly scheduled payments of principal and interest in respect thereof required pursuant to the terms) hereof. The Borrower shall not, and shall not permit any of its Subsidiaries to, consent to any modification, supplement or waiver of any of the provisions of any agreement, instrument or other document evidencing or relating to the Senior Subordinated Notes without the prior consent of the Administrative Agent (with the approval of the Required Lenders) if such modification, supplement or waiver would be adverse in any material respect to the interests of the Borrower, any of its Subsidiaries or any of the Lenders. ARTICLE VII EVENTS OF DEFAULT If any of the following events ("Events of Default") shall occur: ----------------- (a) the Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise; (b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three or more Business Days; (c) any representation or warranty made or deemed made by or on behalf of any Obligor in or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or thereof or waiver hereunder or thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or thereof or waiver hereunder or thereunder, shall prove to have been incorrect in any material respect when made or deemed made; (d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.03 (with respect to the existence of the Borrower or any Subsidiary) or 5.08 or in Article VI; -70- (e) any Obligor shall fail to observe or perform any covenant, condition or agreement contained in this Agreement or any other Loan Document (other than those specified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Borrower (which notice will be given at the request of any Lender); (f) the Borrower or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable; (g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) -------- shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness; (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (i) the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; (j) the Borrower or any Subsidiary shall become unable, admit in writing or fail generally to pay its debts as they become due; (k) one or more judgments for the payment of money in an aggregate amount in excess of $5,000,000 shall be rendered against the Borrower, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action -71- shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any Subsidiary to enforce any such judgment; (l) the Borrower or any Subsidiary receives any notice, notification, demand, request for information, citation, summons or order or there has been filed any complaint or any penalty has been assessed or an investigation or review is pending or threatened by any governmental or other entity, in each case with respect to any alleged failure by the Borrower or any of its Subsidiaries to have any environmental, health or safety permit, license or other authorization required under any Environmental Law in connection with the conduct of the business of the Borrower or any of its Subsidiaries or with respect to any generation, treatment, storage, recycling, transportation, discharge or disposal, or any release of any Hazardous Materials generated by the Borrower or any of its Subsidiaries, in each case which could reasonably be expected to result in a Material Adverse Effect; (m) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding (i) $2,000,000 in any year or (ii) $10,000,000 for all periods; (n) any of the following shall occur: (i) subject to Section 10.13, the Lien created by any Security Document shall at any time cease to constitute a valid and perfected Lien on the collateral intended to be covered thereby before the Security Termination Date; (ii) subject to Section 10.13, except for expiration in accordance with its terms, any Security Document shall for whatever reason be terminated, or shall cease to be in full force and effect before the Security Termination Date; or (iii) subject to Section 10.13, the actual or asserted invalidity of any Security Document or of any guarantee under Article VIII hereof or the validity of any Security Document or of any guarantee under Article VIII hereof or the validity of any subordination provision contained in Article VIII hereof shall be contested by any party before (in the case of any Security Document) the Security Termination Date; or (o) a Change in Control shall occur; then, and in every such event (other than an event with respect to the Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Borrower described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with -72- accrued interest thereon and all fees and other obligations of the Obligors accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Obligors. ARTICLE VIII GUARANTEE SECTION 8.01 The Guarantee. The Subsidiary Guarantors hereby jointly ------------- and severally guarantee to each Lender and the Administrative Agent and their respective successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest on the Loans (and, in the case of Letters of Credit, LC Disbursements) made by the Lenders to the Borrower and all other amounts from time to time owing to the Lenders or the Administrative Agent by the Borrower under this Agreement and by any Obligor under any of the other Loan Documents, and all obligations of the Borrower to any Lender (or any affiliate of any Lender) in respect of any Hedging Agreement, in each case in the Currency thereof and otherwise strictly in accordance with the terms thereof (such obligations being herein collectively called the "Guaranteed Obligations"). The Subsidiary ---------------------- Guarantors hereby further jointly and severally agree that if the Borrower shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, the Subsidiary Guarantors will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. SECTION 8.02 Obligations Unconditional. The obligations of the ------------------------- Subsidiary Guarantors under Section 8.01 hereof are absolute and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of the Borrower under this Agreement or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 8.02 that the obligations of the Subsidiary Guarantors hereunder shall be absolute and unconditional, joint and several, under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Subsidiary Guarantors hereunder which shall remain absolute and unconditional as described above: (i) at any time or from time to time, without notice to the Subsidiary Guarantors, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of this Agreement or any other agreement or instrument referred to herein or therein shall be done or omitted; -73- (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under this Agreement or any other agreement or instrument referred to herein or therein shall be waived or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; or (iv) any lien or security interest granted to, or in favor of, the Administrative Agent or any Lender or Lenders as security for any of the Guaranteed Obligations shall fail to be perfected. The Subsidiary Guarantors hereby expressly waive diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Administrative Agent or any Lender exhaust any right, power or remedy or proceed against the Borrower under this Agreement or any other agreement or instrument referred to herein or therein, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations. SECTION 8.03 Reinstatement. The obligations of the Subsidiary ------------- Guarantors under this Article VIII shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrower in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise and the Subsidiary Guarantors jointly and severally agree that they will indemnify the Administrative Agent and each Lender on demand for all reasonable costs and expenses (including, without limitation, fees of counsel) incurred by the Administrative Agent or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. SECTION 8.04 Subrogation. The Subsidiary Guarantors hereby jointly ----------- and severally agree that until the payment and satisfaction in full of all Guaranteed Obligations and the expiration and termination of the Commitments and Letters of Credit under this Agreement they shall not exercise any right or remedy arising by reason of any performance by them of their guarantee in Section 8.01 hereof, whether by subrogation or otherwise, against the Borrower or any other guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations. SECTION 8.05 Remedies. The Subsidiary Guarantors jointly and -------- severally agree that, as between the Subsidiary Guarantors and the Lenders, the obligations of the Borrower under this Agreement may be declared to be forthwith due and payable as provided in Article VII hereof (and shall be deemed to have become automatically due and payable in the circumstances provided in said Article VII) for purposes of Section 8.01 notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the Borrower) shall forthwith become due and payable by the Subsidiary Guarantors for purposes of said Section 8.01. -74- SECTION 8.06 Instrument for the Payment of Money. Each Subsidiary ----------------------------------- Guarantor hereby acknowledges that the guarantee in this Article VIII constitutes an instrument for the payment of money, and consents and agrees that any Lender or the Administrative Agent, at its sole option, in the event of a dispute by such Subsidiary Guarantor in the payment of any moneys due hereunder, shall have the right to bring motion-action under New York CPLR Section 3213. SECTION 8.07 Continuing Guarantee. The guarantee in this Article VIII -------------------- is a continuing guarantee, and shall apply to all Guaranteed Obligations whenever arising. SECTION 8.08 Rights of Contribution. The Subsidiary Guarantors hereby ---------------------- agree, as between themselves, that if any Subsidiary Guarantor shall become an Excess Funding Guarantor (as defined below) by reason of the payment by such Subsidiary Guarantor of any Guaranteed Obligations, each other Subsidiary Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the next sentence), pay to such Excess Funding Guarantor an amount equal to such Subsidiary Guarantor's Pro Rata Share (as defined below and determined, for this purpose, without reference to the Properties, debts and liabilities of such Excess Funding Guarantor) of the Excess Payment (as defined below) in respect of such Guaranteed Obligations. The payment obligation of a Subsidiary Guarantor to any Excess Funding Guarantor under this Section 8.08 shall be subordinate and subject in right of payment to the prior payment in full of the obligations of such Subsidiary Guarantor under the other provisions of this Article VIII and such Excess Funding Guarantor shall not exercise any right or remedy with respect to such excess until payment and satisfaction in full of all of such obligations. For purposes of this Section 8.08, (i) "Excess Funding Guarantor" ------------------------ means, in respect of any Guaranteed Obligations, a Subsidiary Guarantor that has paid an amount in excess of its Pro Rata Share of such Guaranteed Obligations, (ii) "Excess Payment" means, in respect of any Guaranteed Obligations, the -------------- amount paid by an Excess Funding Guarantor in excess of its Pro Rata Share of such Guaranteed Obligations and (iii) "Pro Rata Share" means, for any Subsidiary -------------- Guarantor, the ratio (expressed as a percentage) of (x) the amount by which the aggregate present fair saleable value of all properties of such Subsidiary Guarantor (excluding any shares of stock of any other Subsidiary Guarantor) exceeds the amount of all the debts and liabilities of such Subsidiary Guarantor (including contingent, subordinated, unmatured and unliquidated liabilities, but excluding the obligations of such Subsidiary Guarantor hereunder and any obligations of any other Subsidiary Guarantor that have been Guaranteed by such Subsidiary Guarantor) to (y) the amount by which the aggregate fair saleable value of all properties of all of the Subsidiary Guarantors exceeds the amount of all the debts and liabilities (including contingent, subordinated, unmatured and unliquidated liabilities, but excluding the obligations of the Borrower and the Subsidiary Guarantors hereunder and under the other Loan Documents) of all of the Subsidiary Guarantors, determined (A) with respect to any Subsidiary Guarantor that is a party hereto on the Effective Date, as of the Effective Date, and (B) with respect to any other Subsidiary Guarantor, as of the date such Subsidiary Guarantor becomes a Subsidiary Guarantor hereunder. SECTION 8.09 General Limitation on Guarantee Obligations. In any ------------------------------------------- action or proceeding involving any state corporate law, or any state or Federal bankruptcy, insolvency, -75- reorganization or other law affecting the rights of creditors generally, if the obligations of any Subsidiary Guarantor under Section 8.01 would otherwise, taking into account the provisions of Section 8.08, be held or determined to be void, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under said Section 8.01, then, notwithstanding any other provision hereof to the contrary, the amount of such liability shall, without any further action by such Subsidiary Guarantor, any Lender, the Administrative Agent or any other Person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding. ARTICLE IX THE ADMINISTRATIVE AGENT Each of the Lenders and the Issuing Banks hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto. Each of the Lenders and the Issuing Banks hereby irrevocably appoints the Collateral Agent as its collateral agent under the Security Agreement and authorizes the Collateral Agent to take such actions on its behalf and to exercise such powers as are delegated to the Collateral Agent by the terms hereof or of the Security Agreement, together with such actions and powers as are reasonably incidental thereto. The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.02), and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.02) or in the absence of its own gross negligence or -76- wilful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. The Administrative Agent shall take such action (subject to Section 10.02(b) hereof and subject to the right of the Administrative Agent to receive further assurances to its satisfaction from the Lenders of their indemnification obligations under Section 10.03(c) hereof against any and all liability and expense that may be incurred by it by reason of taking or continuing to take such action) with respect to the notice of a Default referred to in the preceding paragraph as shall be directed by the Required Lenders, provided that, -------- unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such notice of Default as it shall deem advisable in the best interest of the Lenders except to the extent that this Agreement expressly requires that such action be taken, or not be taken, only with the consent or upon the authorization of the Required Lenders or all of the Lenders. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the Required Lenders -77- shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 10.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder. The Arranger identified on the cover page of this Agreement shall have no duties or responsibilities hereunder. The Co-Agent identified on the cover page of this Agreement shall have no duties or responsibilities hereunder other than as a Lender and as an Issuing Bank hereunder. ARTICLE X MISCELLANEOUS SECTION 10.01. Notices. Except in the case of notices and other ------- communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to the Borrower, to it at Smithfield Foods, Inc. at 200 Commerce Street, Smithfield, VA 23430, Attention: Mr. C. Larry Pope (Telecopy No. 757-365-3023) and Michael H. Cole (Telecopy No. 757-365- 3023); (b) if to any Subsidiary Guarantor, at the address for notices to the Borrower as provided herein; -78- (c) if to the Administrative Agent or the Collateral Agent, to The Chase Manhattan Bank, Agent Bank Services Group, 1 Chase Manhattan Plaza, New York, New York 10017, Attention of Deidre Wall (Telecopy No. 212-552- 7391), and, if such notice or other communication relates to borrowings of, or payments or prepayments of, or the duration of Interest Periods for, Loans denominated in a Foreign Currency, also to The Chase Manhattan Bank, 4 Thomas More Street, London, E1 94T, England, Attention: Agency Loans Department (Telecopy No. 44-171-777-2360; Telephone No. 44-171-777-2353), in each case with a copy to The Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017, Attention of Gary L. Spevack (Telecopy No. 212-270- 8963); (d) if to Chase in its capacity as Issuing Bank, to it at 1 Chase Manhattan Plaza, New York, New York 10017, Attention of Paul W. Robinson, Supervisor L/C (Telecopy No. 212-638-8200); (e) if to the Swingline Lender, to The Chase Manhattan Bank, Agent Bank Services Group, 1 Chase Manhattan Plaza, New York, New York 10017, Attention of Deidre Wall (Telecopy No. 212-552-7391); and (f) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. SECTION 10.02. Waivers; Amendments. ------------------- (a) Waivers. No failure or delay by the Administrative Agent, any ------- Issuing Bank or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Issuing Banks and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Obligor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 10.02, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or any Issuing Bank may have had notice or knowledge of such Default at the time. (b) Amendments of Agreement. Neither this Agreement nor any ----------------------- provision hereof, nor the Intercreditor Agreements nor any provision thereof, may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Obligors -79- and the Required Lenders or by the Obligors and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) -------- increase the Commitment (or either Sub-Commitment) of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan or LC Disbursement, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.17 in a manner that would alter the pro rata treatment of Lenders required thereby, without the written consent of each Lender, (v) change the definition of "Approved Foreign Currency", "Dollar Equivalent", "Foreign Currency" or "Foreign Currency Equivalent", or any provision affecting the calculation of an amount payable in an Approved Foreign Currency, without the written consent of each Multicurrency Lender, (vi) change any of the provisions of this Section 10.02 or the definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender, (vii) change the reference to 75% in the definition of "Borrowing Base" to a higher percentage without the written consent of each Lender; (viii) release all or substantially all of the Subsidiary Guarantors from their obligations in respect of their Guarantee hereunder without the written consent of each Lender; or (ix) release all or substantially all of the collateral under the Security Documents without the written consent of each Lender; provided further that no such agreement shall -------- ------- amend, modify or otherwise affect the rights or duties of the Administrative Agent, any Issuing Bank or the Swingline Lender hereunder without the prior written consent of the Administrative Agent, such Issuing Bank or the Swingline Lender, as the case may be. (c) Amendments of Security Documents. Neither any Security Document -------------------------------- nor any provision thereof may be waived, amended or modified, nor may any collateral thereunder be released, except pursuant to an agreement or agreements in writing entered into by the Obligors party thereto, and by the Administrative Agent with the consent of the Required Lenders. Notwithstanding the foregoing, the Administrative Agent shall, at the request of the Borrower, (i) agree to release from the Lien of the Security Agreement any property that is the subject of a permitted sale hereunder to a Person other than the Borrower or a Subsidiary and (ii) agree to terminate the Security Agreement if (w) at the time of such release, the aggregate amount of obligations of the Borrower and its Subsidiaries secured by Liens permitted by any of clauses (c), (d), (e), (g) (to the extent extending, renewing or replacing any of the Liens permitted by any of clauses (c), (d) and (e)) and (h) does not exceed 15% of Consolidated Tangible Net Worth, (x) the long term senior, unsecured debt of the Borrower is rated at least Baa3 by Moody's and is rated at least BBB- by S&P, (y) no Default has occurred and is continuing and (z) all collateral security provided with respect to the Senior Note Documents and the Pari Passu Debt shall have been released. SECTION 10.03. Expenses; Indemnity: Damage Waiver. ---------------------------------- (a) Expenses. The Borrower shall pay (i) all reasonable out-of- -------- pocket expenses incurred by the Administrative Agent and its Affiliates, including the reasonable fees, charges -80- and disbursements of counsel for the Administrative Agent, in connection with the administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of- pocket expenses incurred by the Administrative Agent, the Issuing Bank or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent, any Issuing Bank or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement and the other Loan Documents, including its rights under this Section 10.03, or in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit. (b) Indemnification by Borrower. The Borrower shall indemnify the --------------------------- Administrative Agent, any Issuing Bank and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee") ---------- against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or the other Loan Documents or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by the an Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to - -------- the extent that such losses, claims, damages, liabilities or related expenses resulted from the gross negligence or wilful misconduct of such Indemnitee. (c) Indemnification by Lenders. To the extent that the Borrower -------------------------- fails to pay any amount required to be paid by it to the Administrative Agent, an Issuing Bank or the Swingline Lender under paragraph (a) or (b) of this Section 10.03, each Lender severally agrees to pay to the Administrative Agent, such Issuing Bank or the Swingline Lender, as the case may be, such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, - -------- liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, such Issuing Bank or the Swingline Lender in its capacity as such. -81- (d) No Consequential Damages, Etc. To the extent permitted by ----------------------------- applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof. (e) Payment Due Dates. All amounts due under this Section 10.03 ----------------- shall be payable promptly after written demand therefor. SECTION 10.04. Successors and Assigns. ---------------------- (a) Assignments Generally. The provisions of this Agreement shall be --------------------- binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that an Obligor may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by such Obligor without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of an Issuing Bank that issues any Letter of Credit) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the relevant Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Assignments by Lenders. Any Lender may assign to one or more ---------------------- assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender or an -------- Affiliate of a Lender, each of the Borrower and the Administrative Agent (and, in the case of an assignment of all or a portion of a Commitment or any Lender's obligations in respect of its LC Exposure or Swingline Exposure, the Issuing Bank and the Swingline Lender) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld or delayed), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender's Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $10,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement, (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500, and (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; provided further that any consent of the Borrower -------- ------- otherwise required under this paragraph shall not be required if an Event of Default under clause (h) or (i) of Article VII has occurred and is continuing. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section 10.04, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto -82- and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.15, 2.16 and 10.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section 10.04. (c) Maintenance of Register. The Administrative Agent, acting for ----------------------- this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, - --------- the Administrative Agent, the Issuing Bank and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Effectiveness of Assignments. Upon its receipt of a duly ---------------------------- completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section 10.04 and any written consent to such assignment required by paragraph (b) of this Section 10.04, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Participations by Lenders. Any Lender may, without the consent ------------------------- of the Borrower, the Administrative Agent, the Issuing Banks or the Swingline Lender, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under - ------------ this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall -------- remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Issuing Banks and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided -------- that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 10.02(b) that -83- affects such Participant. Subject to paragraph (f) of this Section 10.04, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.14, 2.15 and 2.16 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section 10.04. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.17(f) as though it were a Lender. (f) Rights of Participants. A Participant shall not be entitled to ---------------------- receive any greater payment under Section 2.14 or 2.16 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.16 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.16(e) as though it were a Lender. (g) Pledges by Lenders. Any Lender may at any time pledge or assign ------------------ a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section 10.04 shall not apply to any such pledge or assignment of a security interest; provided that no such -------- pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. (h) No Assignments to Borrower and Affiliates. Anything in this ----------------------------------------- Section 10.04 to the contrary notwithstanding, no Lender may assign or participate any interest in any Loan held by it hereunder to the Borrower or any Affiliates or Subsidiaries of the Borrower without the prior consent of each Lender. SECTION 10.05. Survival. All covenants, agreements, representations -------- and warranties made by the Obligors herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement and the other Loan Documents shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, any Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.14, 2.15, 2.16 and 10.03 and Article IX shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof. -84- SECTION 10.06. Counterparts; Integration; Effectiveness. This ---------------------------------------- Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Subject to Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 10.07. Severability. Any provision of this Agreement held to ------------ be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 10.08. Right of Setoff. If an Event of Default shall have --------------- occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of any Obligor against any of and all the obligations of such Obligor now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section 10.08 are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of -------------------------------------------------- Process. - ------- (a) Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE ------------- WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. (b) Submission to Jurisdiction. EACH OBLIGOR HEREBY IRREVOCABLY AND -------------------------- UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. Each -85- of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, any Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Obligor or its properties in the courts of any jurisdiction. (c) Waiver of Forum Matters. Each Obligor hereby irrevocably and ----------------------- unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section 10.09. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Service of Process. Each party to this Agreement irrevocably ------------------ consents to service of process in the manner provided for notices in Section 10.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY -------------------- WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.10. SECTION 10.11. Headings. Article and Section headings and the Table -------- of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 10.12. Confidentiality. Each of the Administrative Agent, the --------------- Issuing Banks and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement or the other Loan Documents, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the other Loan -86- Documents or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 10.12, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or the other Loan Documents, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 10.12 or (ii) becomes available to the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential basis from a source other than the Borrower. For the purposes of this Section 10.12, "Information" ----------- means all information received from any Obligor relating to such Obligor or its business, other than any such information that is available to the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of -------- information received from any Obligor after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section 10.12 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. SECTION 10.13. Perfection of Security Interests. Notwithstanding -------------------------------- anything contained herein or in any Security Document to the contrary, neither the Borrower nor any of its Subsidiaries shall be responsible for the failure of the Lien created by the Security Agreement to be perfected (a) to the extent that such failure results from the failure by the Collateral Agent to file continuation statements under the Uniform Commercial Code in respect of such Lien, (b) to the extent that such failure relates to Liens over letters of credit supporting LC-Backed Receivables, provided that the aggregate amount of LC-Backed Receivables in respect of which such Liens over the related letters of credit are not perfected does not exceed 10% of the Borrowing Base, (c) to the extent that such failure relates to Liens over Inventory stored in warehouses, provided that the amount of the Borrowing Base attributable to such Inventory shall not exceed $250,000 for any single warehouse and that the amount of the Borrowing Base attributable to such Inventory and to Eligible Receivables referred to in the following clause (d) shall not exceed the greater of $20,000,000 or 5% of the amount of the Borrowing Base in the aggregate or (d) to the extent that such failure relates to Liens over Eligible Receivables and results from such Eligible Receivables being due from Governmental Authorities, provided that the amount of the Borrowing Base attributable to such Eligible Receivables and to Inventory referred to in the preceding clause (c) shall not exceed the greater of $20,000,000 or 5% of the amount of the Borrowing Base in the aggregate. If, as determined by the annual report of the independent collateral auditor referred to in Section 5.01(g) hereof, the amount of Collateral subject to any such failure exceeds any relevant amount referred to in clause (a), (b) or (c) of the preceding sentence, then, (i) on such date (the "Trigger Date") ------------ that the Borrower determines that such excess exists, the Borrower shall immediately notify the Administrative Agent and the Collateral Agent of such event, (ii) the Borrower shall furnish to the Administrative Agent on the Trigger Date a Borrowing Base Certificate calculated on the basis of the Borrowing Base Certificate most recently furnished hereunder but recalculating the Borrowing Base with pro forma adjustments reflecting the exclusion of such excess Collateral from the Eligible Receivables or Eligible Inventory, as the case may be, (iii) the Borrower shall forthwith on the Trigger Date comply with -87- its obligations under Section 2.10(b) after giving effect to the Borrowing Base as so calculated and (iv) not later than 30 days following the Trigger Date, the Borrower shall have taken such action as shall be necessary to eliminate such excess. If the Borrower is in compliance with the preceding sentence, then (x) except as expressly provided in the preceding sentence, no account or Inventory shall be excluded from Eligible Receivables or Eligible Inventory, as the case may be, (y) no Obligor shall be deemed to have breached any covenant or made any untrue representation or warranty and (z) no Default or Event of Default shall be deemed to have occurred or be continuing, in each of the cases referred to in the foregoing clauses (x), (y) and (z) solely because any Lien created by the Security Agreement shall fail to be perfected if such failure is described in clause (a), (b) or (c) of the first sentence or this Section 10.13; except that, notwithstanding the preceding provisions of this Section 10.13, the Borrower shall from time to time upon the request of the Administrative Agent or the Required Lenders deliver or cause to be delivered to the Collateral Agent in pledge under the Security Agreement the letters of credit supporting LC-Backed Receivables. SECTION 10.14. Acknowledgements. Each Obligor hereby acknowledges ---------------- that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents; (b) neither the Administrative Agent nor any Lender or Issuing Bank has any fiduciary relationship with or fiduciary duty to any Obligor arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Administrative Agent, the Lenders and the Issuing Banks, on the one hand, and the Obligors, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among any party or parties hereto. SECTION 10.15. European Monetary Union. ----------------------- (a) Definitions. As used herein, the following terms shall have the ----------- following meanings: "EMU" means economic and monetary union as contemplated in the Treaty --- on European Union. "EMU Legislation" means legislative measures of the European Council --------------- for the introduction of, changeover to or operation of a single or unified European currency (whether known as the Euro or otherwise), being in part the implementation of the third stage of EMU. "Euros" means the single currency of Participating Member States of ----- the European Union, which shall be an Approved Foreign Currency and a Foreign Currency under this Agreement. -88- "National Currency" means the Currency, other than the Euro, of a ----------------- Participating Member State. "Participating Member State" means each state so described in any EMU -------------------------- Legislation. "Target Operating Day" means any day that is not (i) a Saturday or -------------------- Sunday, (ii) Christmas Day or New Year's Day or (iii) any other day on which the Trans-European Real-time Gross Settlement Operating System (or any successor settlement system) is not operating (as determined by the Administrative Agent). "Treaty on European Union" means the Treaty of Rome of March 25, 1957, ------------------------ as amended by the Single European Act 1986 and the Maastricht Treaty (which was signed at Maastricht on February 7, 1992, and came into force on November 1, 1993), as amended from time to time. (b) Effectiveness of Provisions. The provisions of paragraphs (c) --------------------------- through (h) of this Section 10.15 shall be effective on the Effective Date, provided that, if and to the extent that any such provision relates to any state - -------- (or the Currency of such state) that is not a Participating Member State on the Effective Date, such provision shall become effective in relation to such state (and such Currency) at and from the date on which such state becomes a Participating Member State. (c) Redenomination and Alternative Currencies. Each obligation under ----------------------------------------- this Agreement of a party to this Agreement which has been denominated in the National Currency of a Participating Member State shall be redenominated in Euros in accordance with EMU Legislation; provided that, if and to the extent -------- that any EMU Legislation provides that following the Effective Date an amount denominated either in Euros or in the National Currency of a Participating Member State and payable within the Participating Member State by crediting an account of the creditor can be paid by the debtor either in Euros or in such National Currency, any party to this Agreement shall be entitled to pay or repay any such amount either in Euros or in such National Currency. (d) Payments by the Administrative Agent Generally. With respect to ---------------------------------------------- the payment of any amount denominated in Euros or in a National Currency, the Administrative Agent shall not be liable to the Borrower or any of the Lenders in any way whatsoever for any delay, or the consequences of any delay, in the crediting to any account of any amount required by this Agreement to be paid by the Administrative Agent if the Administrative Agent shall have taken all relevant steps to achieve, on the date required by this Agreement, the payment of such amount in immediately available, freely transferable, cleared funds (in Euros or in such National Currency, as the case may be) to the account of any Lender in the Principal Financial Center in the Participating Member State which the Borrower or such Lender, as the case may be, shall have specified for such purpose. For the purposes of this paragraph, "all relevant steps" means all such steps as may be prescribed from time to time by the regulations or operating procedures of such clearing or settlement system as the Administrative Agent may from time to time determine for the purpose of clearing or settling payments in Euros or in such National Currency. -89- (e) Certain Rate Determinations. For the purposes of determining the --------------------------- date on which the LIBO Rate is determined under this Agreement for the Interest Period for any Borrowing denominated in Euros (or in any National Currency), references in this Agreement to Business Days shall be deemed to be references to Target Operating Days. In addition, if the Administrative Agent determines, with respect to the Interest Period for any Borrowing denominated in a National Currency, that there is no LIBOR displayed on the Screen for deposits denominated in such National Currency, the LIBO Rate for such Interest Period shall be based upon LIBOR displayed on the Screen for the offering of deposits denominated in Euros. (f) Basis of Accrual. If the basis of accrual of interest or fees ---------------- expressed in this Agreement with respect to the Currency of any state that becomes a Participating Member State shall be inconsistent with any convention or practice in the interbank market for the basis of accrual of interest or fees in respect of the Euro, such convention or practice shall replace such expressed basis effective as of and from the date on which such state becomes a Participating Member State; provided that, with respect to any Borrowing -------- denominated in such Currency that is outstanding immediately prior to such date, such replacement shall take effect at the end of the Interest Period therefor. (g) Rounding. Without prejudice and in addition to any method of -------- conversion or rounding prescribed by the EMU Legislation, each reference in this Agreement to a minimum amount, or to a multiple of a specified amount, in a National Currency to be paid to or by the Administrative Agent shall be replaced by a reference to such reasonably comparable and convenient amount, or to a multiple of such reasonably comparable and convenient amount, in Euros as the Administrative Agent may from time to time specify. (h) Other Consequential Changes. Without prejudice to the respective --------------------------- liabilities of the Borrower to the Lenders and the Lenders to the Borrower under or pursuant to this Agreement, except as expressly provided in this Section 10.15, each provision of this Agreement shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time reasonably specify to be necessary or appropriate to reflect the introduction of or changeover to the Euro in Participating Member States. SECTION 10.16. Judgment Currency. This is an international loan ----------------- transaction in which the specification of Dollars or any Foreign Currency, as the case may be (the "Specified Currency"), and payment in New York City or the ------------------ country of the Specified Currency, as the case may be (the "Specified Place"), --------------- is of the essence, and the Specified Currency shall be the currency of account in all events relating to Loans denominated in the Specified Currency. The payment obligations of each Obligor under this Agreement shall not be discharged or satisfied by an amount paid in another currency or in another place, whether pursuant to a judgment or otherwise, to the extent that the amount so paid on conversion to the Specified Currency and transfer to the Specified Place under normal banking procedures does not yield the amount of the Specified Currency at the Specified Place due hereunder. If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder in the Specified Currency into another currency (the "Second Currency"), the rate of exchange --------------- that shall be applied shall be the rate at which in accordance with normal banking procedures the Administrative Agent could purchase the Specified Currency with the Second Currency on the Business Day next preceding -90- the day on which such judgment is rendered. The obligation of each Obligor in respect of any such sum due from it to the Administrative Agent or any Lender hereunder or under any other Loan Document (in this Section 10.16 called an "Entitled Person") shall, notwithstanding the rate of exchange actually applied --------------- in rendering such judgment, be discharged only to the extent that on the Business Day following receipt by such Entitled Person of any sum adjudged to be due hereunder in the Second Currency such Entitled Person may in accordance with normal banking procedures purchase and transfer to the Specified Place the Specified Currency with the amount of the Second Currency so adjudged to be due; and each Obligor hereby, as a separate obligation and notwithstanding any such judgment, agrees to indemnify such Entitled Person against, and to pay such Entitled Person on demand, in the Specified Currency, the amount (if any) by which the sum originally due to such Entitled Person in the Specified Currency hereunder exceeds the amount of the Specified Currency so purchased and transferred. -91- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. SMITHFIELD FOODS, INC. By_________________________ Name: C. Larry Pope Title: Vice President & C.F.O. SUBSIDIARY GUARANTORS --------------------- THE SMITHFIELD PACKING COMPANY, GWALTNEY OF SMITHFIELD, LTD. INCORPORATED By_________________________ By_________________________ Name: C. Larry Pope Name: C. Larry Pope Title: Treasurer Title: Treasurer PATRICK CUDAHY INCORPORATED JOHN MORRELL & CO. By_________________________ By_________________________ Name: C. Larry Pope Name: C. Larry Pope Title: Treasurer Title: Vice President LYKES MEAT GROUP, INC. BROWN'S OF CAROLINA, INC. By_________________________ By_________________________ Name: C. Larry Pope Name: C. Larry Pope Title: Treasurer Title: Treasurer HANCOCK'S OLD FASHIONED COUNTRY SUNNYLAND, INC. HAMS, INC. By_________________________ By_________________________ Name: C. Larry Pope Name: C. Larry Pope Title: Treasurer Title: Treasurer -92- NORTH SIDE FOODS, CORP. CARROLL'S FOODS, INC. HAMS, INC. By_________________________ By_________________________ Name: C. Larry Pope Name: C. Larry Pope Title: Treasurer Title: Treasurer CARROLL'S FOODS OF VIRGINIA, INC. CIRCLE FOUR CORPORATION By_________________________ By_________________________ Name: C. Larry Pope Name: C. Larry Pope Title: Treasurer Title: Treasurer CENTRAL PLAINS FARMS, INC. By_________________________ Name: C. Larry Pope Title: Treasurer -93- LENDERS ------- THE CHASE MANHATTAN BANK, individually and as Administrative Agent, By_________________________ Name: Gary L. Spevack Title: Vice President COOPERATIEVE CENTRALE RAIFFEISEN - BOERENLEENBANK B.A. "RABOBANK NEDERLAND", NEW YORK BRANCH, By_________________________ Name: Title: By_________________________ Name: Title: AGRIBANK, FCB, By_________________________ Name: Title: CREDIT AGRICOLE INDOSUEZ, By_________________________ Name: Title: By_________________________ Name: Title: -94- DG BANK, DEUTSCHE GENOSSENSCHAFTSBANK, CAYMAN ISLANDS BRANCH, By_________________________ Name: Title: By_________________________ Name: Title: BANK OF AMERICA, N.A., By_________________________ Name: Title: U.S. BANCORP AG CREDIT, INC., By_________________________ Name: Title: SUNTRUST BANK, ATLANTA, By_________________________ Name: Title: By_________________________ Name: Title: BANK OF TOKYO-MITSUBISHI, TRUST COMPANY By_________________________ Name: Title: -95- DRESDNER BANK AG, By_________________________ Name: Title: FARM CREDIT SERVICES OF AMERICA, PCA, By_________________________ Name: Title: HARRIS TRUST AND SAVINGS BANK, By_________________________ Name: Title: THE SANWA BANK, LIMITED, By_________________________ Name: Title: SUMITOMO BANK, LIMITED, NEW YORK BRANCH, By_________________________ Name: Title: CAPE FEAR FARM CREDIT, ACA By_________________________ Name: Title: -96- BANQUE NATIONALE DE PARIS By_________________________ Name: Title: By_________________________ Name: Title: FIRST UNION NATIONAL BANK By_________________________ Name: Title: FARM CREDIT SERVICES OF MID-AMERICA, PCA By_________________________ Name: Title: RZB FINANCE, LLC By_________________________ Name: Title: By_________________________ Name: Title: AGFIRST, FCB By_________________________ Name: -97- Title: -98- SCHEDULE 2.01 COMMITMENTS
Total Dollar Multicurrency Lenders Commitment ($) Commitment ($) Sub-Commitment ($) - ------- -------------- --------------- ------------------ The Chase Manhattan Bank 62,785,714.29 51,935,714.29 10,850,000.00 Bank of America, N.A. 52,000,000.00 52,000,000.00 -0- SunTrust Bank, Atlanta 52,000,000.00 43,600,000.00 8,400,000.00 Cooperatieve Centrale Raiffeisen Boerenleenbank B.A. "Rabobank" Nederland, New York Branch 44,285,714.29 38,035,714.29 6,250,000.00 Bank of Tokyo-Mitsubishi Trust Company 40,000,000.00 40,000,000.00 -0- Cape Fear Farm Credit, ACA 40,000,000.00 40,000,000.00 -0- Credit Agricole Indosuez 40,000,000.00 30,000,000.00 10,000,000.00 Farm Credit Services of America, PCA 35,000,000.00 35,000,000.00 -0- Farm Credit Services of Mid-America, PCA 35,000,000.00 35,000,000.00 -0- First Union National Bank 35,000,000.00 35,000,000.00 -0- U.S. Bancorp Ag Credit, Inc., 35,000,000.00 35,000,000.00 -0- DG Bank, Deutsche Genossenschaftsbank, Cayman Islands Branch 33,214,285.71 28,714,285.71 4,500,000.00 Sumitomo Bank, Limited, New York Branch 30,000,000.00 30,000,000.00 -0- Agribank, FCB 25,714,285.71 25,714,285.71 -0- Banque Nationale de Paris 25,000,000.00 25,000,000.00 -0- Harris Trust and Savings Bank 25,000,000.00 25,000,000.00 -0- Dresdner Bank AG 15,000,000.00 15,000,000.00 -0- The Sanwa Bank, Limited 15,000,000.00 15,000,000.00 -0- RZB Finance, LLC 10,000,000.00 10,000,000.00 -0- --------------- --------------- -------------- $650,000,000.00 $610,000,000.00 $40,000,000.00
EX-4.7A 3 0003.txt AMENDED AND RESTATED NOTE PURCHASE AGREEMENT EXHIBIT 4.7(A) - -------------------------------------------------------------------------------- SMITHFIELD FOODS, INC. -------------------------- AMENDED AND RESTATED NOTE PURCHASE AGREEMENT -------------------------- Dated as of October 31, 1999 $9,852,942 8.41% Series B Senior Secured Notes Due August 1, 2006 $40,000,000 8.34% Series C Senior Secured Notes Due August 1, 2003 $9,000,000 9.80% Series D Senior Secured Notes Due August 1, 2003 $9,250,000 10.75% Series E Senior Secured Notes Due August 1, 2005 $100,000,000 8.52% Series F Senior Secured Notes Due August 1, 2006 $14,000,000 9.85% Series G Senior Secured Notes Due November 1, 2006 $14,779,412 8.41% Series H Senior Secured Notes Due August 1, 2004 Guarantied By: Gwaltney of Smithfield, Ltd. John Morrell & Co. The Smithfield Packing Company, Incorporated SFFC, Inc. Patrick Cudahy Incorporated Carroll's Foods, Inc. Carroll's realty, Inc. Carroll's Realty Partnership North Side Foods Corp. Lykes Meat Group, Inc. Circle Four Corporation Brown's of Carolina, Inc. Brown's Farms, LLC Carroll's Foods of Virginia, Inc. Smithfield-Carroll's Farms Central Plains Farms, Inc. Smithfield Packing Real Estate, LLC Murphy Farms, Inc. - -------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE 1. BACKGROUND; AMENDMENT AND RESTATEMENT.................................. 1 1.1 Background........................................................... 1 1.2 Agreement and Consent of Noteholders to Amendment and Restatement; Waiver; Closing................................................... 2 1.3 Failure of Conditions................................................ 3 1.4 Expenses............................................................. 3 1.5 Collateral; Release.................................................. 4 2. WARRANTIES AND REPRESENTATIONS......................................... 5 2.1 Material Adverse Change.............................................. 5 2.2 Financial Statements; Debt........................................... 5 2.3 Subsidiaries and Affiliates.......................................... 6 2.4 Pending Litigation................................................... 6 2.5 Title to Properties; UCC Matters..................................... 6 2.6 Patents, Trademarks, Licenses, etc................................... 7 2.7 Taxes................................................................ 7 2.8 Full Disclosure...................................................... 8 2.9 Corporate Organization and Authority................................. 8 2.10 Restrictions on Company and Subsidiaries............................. 9 2.11 Compliance with Law.................................................. 10 2.12 Pension Plans........................................................ 10 2.13 Certain Laws......................................................... 12 2.14 Environmental Compliance............................................. 12 2.15 Transaction is Legal and Authorized; Obligations are Enforceable..... 13 2.16 Governmental Consent................................................. 14 2.17 No Defaults.......................................................... 14 2.18 Company and the Guarantors........................................... 14 2.19 Solvency............................................................. 15 2.20 True and Correct Copies.............................................. 15 3. CLOSING CONDITIONS..................................................... 15 3.1 Opinions of Counsel.................................................. 15 3.2 Warranties and Representations True.................................. 15 3.3 No Defaults.......................................................... 16 3.4 Officers' Certificates............................................... 16 3.5 Other Noteholders.................................................... 16 3.6 Expenses............................................................. 16 3.7 Joinder Agreement.................................................... 16 3.8 Consents Under the Revolving Credit Agreements....................... 16 3.9 Transaction Structuring Fee.......................................... 17 3.10 Bladen Real Estate................................................... 17 3.11 Compliance with this Agreement....................................... 17 3.12 Proceedings Satisfactory............................................. 17 4. PAYMENTS............................................................... 18 4.1 Interest Payments.................................................... 18 4.2 Scheduled Required Prepayments....................................... 19 i 4.3 Offer to Prepay upon Change in Control............................... 21 4.4 Optional Prepayments................................................. 23 4.5 Notice of Optional Prepayment........................................ 23 4.6 Pro Rata Payments.................................................... 24 4.7 Notation of Notes on Prepayment...................................... 24 4.8 No Other Optional Prepayments........................................ 25 5. REGISTRATION; SUBSTITUTION OF NOTES.................................... 25 5.1 Registration of Notes................................................ 25 5.2 Exchange of Notes.................................................... 25 5.3 Replacement of Notes................................................. 26 5.4 Issuance Taxes....................................................... 26 6. GENERAL COVENANTS...................................................... 26 6.1 Payment of Taxes and Claims.......................................... 26 6.2 Maintenance of Properties and Corporate Existence.................... 27 6.3 Payment of Notes and Maintenance of Office........................... 28 6.4 Current Ratio........................................................ 28 6.5 Consolidated Working Capital......................................... 28 6.6 Funded Debt.......................................................... 29 6.7 Maintenance of Funded Debt........................................... 29 6.8 Fixed Charges Coverage............................................... 29 6.9 Restrictions on Dividends, etc....................................... 30 6.10 Consolidated Tangible Net Worth...................................... 30 6.11 Intentionally Left Blank............................................. 30 6.12 Restricted Payments and Restricted Investments....................... 30 6.13 Liens................................................................ 32 6.14 Merger; Acquisition.................................................. 35 6.15 Transfers of Property; Subsidiary Stock.............................. 36 6.16 Trademark Subsidiaries............................................... 40 6.17 Environmental Compliance............................................. 41 6.18 Line of Business..................................................... 41 6.19 Transactions with Affiliates......................................... 41 6.20 Tax Consolidation.................................................... 42 6.21 ERISA................................................................ 42 6.22 Guaranties........................................................... 44 6.23 Private Offering..................................................... 44 6.24 Covenants Regarding the Bladen County Cogeneration Property.......... 45 7. INFORMATION AS TO COMPANY AND THE GUARANTORS........................... 45 7.1 Financial and Business Information................................... 45 7.2 Officer's Certificates............................................... 49 7.3 Accountants' Report.................................................. 49 7.4 Inspection........................................................... 50 8. EVENTS OF DEFAULT...................................................... 50 8.1 Nature of Events..................................................... 50 8.2 Default Remedies..................................................... 52 8.3 Annulment of Acceleration of Notes................................... 54 9. INTERPRETATION OF THIS AGREEMENT....................................... 55 ii 9.1 Terms Defined........................................................ 55 9.2 GAAP................................................................. 78 9.3 Directly or Indirectly............................................... 78 9.4 Section Headings, Table of Contents and Construction................. 79 9.5 Governing Law........................................................ 79 10. MISCELLANEOUS......................................................... 79 10.1 Communications...................................................... 79 10.2 Reproduction of Documents........................................... 80 10.3 Survival............................................................ 81 10.4 Successors and Assigns.............................................. 81 10.5 Amendment and Waiver................................................ 81 10.6 Payments, When Received............................................. 83 10.7 Entire Agreement.................................................... 83 10.8 Duplicate Originals, Execution in Counterpart....................... 83 iii ANNEXES AND EXHIBITS Annex 1 - Information as to Noteholders Annex 2 - Information as to Company and Subsidiaries Exhibit A1 - Form of 8.41% Series B Senior Secured Note Due August 1, 2006 Exhibit A2 - Form of 8.34% Series C Senior Secured Note Due August 1, 2003 Exhibit A3 - Form of 9.80% Series D Senior Secured Note Due August 1, 2003 Exhibit A4 - Form of 10.75% Series E Senior Secured Note Due August 1, 2005 Exhibit A5 - Form of 8.52% Series F Senior Secured Note Due August 1, 2006 Exhibit A6 - Form of 9.85% Series G Senior Secured Note Due November 1, 2006 Exhibit A7 - Form of 8.41% Series H Senior Secured Note Due August 1, 2004 Exhibit B - Form of Company Counsel's Closing Opinion Exhibit C - Form of Company Officers' Certificate Exhibit D1 - Form of Company Secretary's Certificate Exhibit D2 - Form of Guarantor Secretary's Certificates Exhibit E - Assumption Agreement iv SMITHFIELD FOODS, INC. --------------- AMENDED AND RESTATED NOTE PURCHASE AGREEMENT --------------- $9,852,942 8.41% SERIES B SENIOR SECURED NOTES DUE AUGUST 1, 2006 $40,000,000 8.34% SERIES C SENIOR SECURED NOTES DUE AUGUST 1, 2003 $9,000,000 9.80% SERIES D SENIOR SECURED NOTES DUE AUGUST 1, 2003 $9,250,000 10.75% SERIES E SENIOR SECURED NOTES DUE AUGUST 1, 2005 $100,000,000 8.52% SERIES F SENIOR SECURED NOTES DUE AUGUST 1, 2006 $14,000,000 9.85% SERIES G SENIOR SECURED NOTES DUE NOVEMBER 1, 2006 $14,779,412 8.41% SERIES H SENIOR SECURED NOTES DUE AUGUST 1, 2004 Dated as of October 31, 1999 [SEPARATELY ADDRESSED TO EACH OF THE NOTEHOLDERS LISTED ON ANNEX 1] Ladies and Gentlemen: SMITHFIELD FOODS, INC., a Virginia corporation (together with its successors and assigns, the "COMPANY"), hereby agrees with you as follows: 1. BACKGROUND; AMENDMENT AND RESTATEMENT 1.1 BACKGROUND. Pursuant to those certain Note Purchase Agreements dated as of July 15, 1996 (collectively, as amended up to, but excluding, the Closing Date, the "EXISTING NOTE PURCHASE AGREEMENT"), entered into by the Company with each of the institutions named on Annex 1 hereto (the "NOTEHOLDERS"), the Company has issued: (A) $2,825,000 in aggregate principal amount of its six and twenty- four one-hundredths percent (6.24%) Series A Senior Secured Notes due November 1, 1998 (the "SERIES A NOTES"); (B) $9,852,942 in aggregate principal amount of its eight and forty- one one-hundredths percent (8.41%) Series B Senior Secured Notes due August 1, 2006, substantially in the form of Exhibit A1 hereto (the "SERIES B NOTES"); 1 (C) $40,000,000 in aggregate principal amount of its eight and thirty- four one-hundredths percent (8.34%) Series C Senior Secured Notes due August 1, 2003, substantially in the form of Exhibit A2 hereto (the "SERIES C NOTES"); (D) $9,000,000 in aggregate principal amount of its nine and eighty one-hundredths percent (9.80%) Series D Senior Secured Notes due August 1, 2003, substantially in the form of Exhibit A3 hereto (the "SERIES D NOTES"); (E) $9,250,000 in aggregate principal amount of its ten and seventy- five one-hundredths percent (10.75%) Series E Senior Secured Notes due August 1, 2005, substantially in the form of Exhibit A4 hereto (the "SERIES E NOTES"); (F) $100,000,000 in aggregate principal amount of its eight and fifty- two one-hundredths percent (8.52%) Series F Senior Secured Notes due August 1, 2006, substantially in the form of Exhibit A5 hereto ("SERIES F NOTES"); (G) $14,000,000 in aggregate principal amount of its nine and eighty- five one-hundredths percent (9.85%) Series G Senior Secured Notes due November 1, 2006, substantially in the form of Exhibit A6 hereto (the "SERIES G NOTES"); and (H) $14,779,412 in aggregate principal amount of its eight and forty- one one-hundredths percent (8.41%) Series H Senior Secured Notes due August 1, 2004, substantially in the form of Exhibit A7 hereto (the "SERIES H NOTES"). The Series A Notes have matured and been paid in full. The Series B Notes, the Series C Notes, the Series D Notes, the Series E Notes, the Series F Notes, the Series G Notes and the Series H Notes, including Notes of each such series delivered from time to time pursuant to this Agreement and the other Note Purchase Agreements, are herein referred to, individually, as a "NOTE," and collectively, as the "NOTES." 1.2 AGREEMENT AND CONSENT OF NOTEHOLDERS TO AMENDMENT AND RESTATEMENT; WAIVER; CLOSING. (A) AGREEMENT AND CONSENT; WAIVER. Subject to the satisfaction of the conditions set forth in Section 3, you agree, by execution of this Agreement, that (i) the Existing Note Purchase Agreement is hereby amended and restated in the form of this Agreement (ii) the Pre-Closing Events of Default are deemed not to have occurred and are permanently waived and you shall have no right to act in respect thereof and (iii) to the extent the provisions of the Financing Documents 2 and this Agreement prohibit the transaction contemplated by the Assumption Agreement (including section 1.18 of the Packing-Bladen Deed of Trust, section 3.2 of the Packing Security Agreement and Section 6.15 of this Agreement), the obligations set forth therein are hereby waived solely for the purpose of permitting the transaction contemplated by the Assumption Agreement. (B) CLOSING DATE. The closing (the "CLOSING") of the transactions contemplated by this Agreement will be held contemporaneously with the execution and delivery of this Agreement (the "CLOSING DATE") at the office of [Bingham Dana LLP, One State Street, Hartford, Connecticut 06103]. (C) OTHER NOTEHOLDERS. Contemporaneously with the execution and delivery hereof, the Company is entering into a separate Amended and Restated Note Purchase Agreement identical (except for the name, address and signature of the Noteholder) hereto (this Agreement and such other separate Amended and Restated Note Purchase Agreements, collectively, as may be amended from time to time, the "NOTE PURCHASE AGREEMENTS") with each other Noteholder. 1.3 FAILURE OF CONDITIONS. If on the Closing Date the conditions specified in Section 3 to be fulfilled at the Closing have not been fulfilled, you may thereupon elect to be relieved of all further obligations under this Agreement, without thereby waiving any rights you may have by reason of such failure or such nonfulfillment, the Existing Note Purchase Agreement shall remain in full force and effect and the waivers set forth in Section 1.2(a) shall be of no force or effect. 1.4 EXPENSES. (A) GENERALLY. Whether or not the transactions contemplated by this Agreement are consummated, the Company will promptly (and in any event within thirty (30) days of receiving any statement or invoice therefor) pay all fees, expenses and costs relating hereto, including but not limited to: (I) the cost of reproducing the Financing Documents; (II) the fees and disbursements of your special counsel; (III) the fees and disbursements of the Security Trustee and its counsel; (IV) the fees, expenses and costs incurred in complying with each of the conditions to closing set forth in Section 3; 3 (V) all other expenses incurred in connection with the transactions contemplated by this Agreement; and (VI) the expenses relating to the consideration, negotiation, preparation or execution of any amendments, waivers or consents pursuant to the provisions hereof and of the other Financing Documents, whether or not any such amendments, waivers or consents are executed. (B) COUNSEL. Without limiting the generality of the foregoing, it is agreed and understood that the Company will pay, at the Closing, the statement for fees and disbursements of your special counsel presented at the Closing and the Company will also pay upon receipt of any statement thereof, each additional statement for fees and disbursements of your special counsel rendered after the Closing in connection with the issuance of the Notes or the matters referred to in Section 1.4(a)(vi). (C) SURVIVAL. The obligations of the Company under this Section 1.4 shall survive the payment or prepayment of the Notes and the termination hereof. 1.5 COLLATERAL; RELEASE. The Notes are secured pursuant to and entitled to all of the benefits of the Security Documents. In the event that at any time after the Closing Date the Company shall have obtained an Acceptable Rating in respect of its long- term, senior unsecured debt, the Company may give written notice to each holder of Notes (which notice shall include copies of the letters to the Company from Moody's and Standard & Poor's evidencing that such Acceptable Rating has been in full force and effect for the one hundred eighty (180) day period immediately preceding the date of such notice) requesting that the holders of the Notes direct the Security Trustee to release the Collateral from the security interests created by the Security Documents on a date specified in such notice (the "COLLATERAL RELEASE DATE") that is not less than thirty (30) days and not more than sixty (60) days after the date of such notice. The holders of the Notes agree to direct the Security Trustee to so release the Collateral, provided that the Collateral Release Conditions have been satisfied and the holders of the Notes and the Security Trustee shall have received an officer's certificate, executed by a Senior Officer and dated the Collateral Release Date, specifying that at the time of such release and after giving effect thereto, each of the Collateral Release Conditions are satisfied. Notwithstanding such release of Collateral, the provisions of Section 6.13 hereof shall continue to apply on and after the Collateral Release Date. 4 2. WARRANTIES AND REPRESENTATIONS To induce you to enter into this Agreement, the Company warrants and represents, as of the Closing Date, as follows: 2.1 MATERIAL ADVERSE CHANGE. Since May 2, 1999, there has been no change in the business, prospects, profits, Properties or condition (financial or otherwise) of the Company, except changes that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 2.2 FINANCIAL STATEMENTS; DEBT. (A) FINANCIAL STATEMENTS. The quarterly and annual financial statements most recently delivered to you pursuant to Section 7.1 of the Existing Note Purchase Agreement have been prepared in accordance with GAAP consistently applied and present fairly, in all material respects, the consolidated financial position of the Company and its consolidated subsidiaries as of such dates and the results of their operations and cash flows for the periods specified therein. Except as set forth on Part 2.2(a) of Annex 2, all Subsidiaries were subsidiaries during all of the periods covered by such financial statements. (B) DEBT. Part 2.2(b) of Annex 2 lists all Debt of the Company and the Subsidiaries as of the Closing Date (prior to giving effect to the transactions contemplated to occur on the Closing Date) which Debt is of an outstanding amount, in each case, in excess of fifty thousand dollars ($50,000), and provides the following information with respect to each item of such Debt: (I) the obligor in respect thereof, (II) the holder thereof, (III) the outstanding amount thereof and the interest rate or rates applicable thereto, (IV) the portion thereof classified as current in accordance with GAAP, (V) the final maturity thereof, and (VI) the collateral securing such Debt, if any. 5 The aggregate amount of Debt of the Company and the Subsidiaries as of the Closing Date that is not set forth on Part 2.2(b) of Annex 2 does not exceed two million five hundred thousand dollars ($2,500,000). 2.3 SUBSIDIARIES AND AFFILIATES. Part 2.3 of Annex 2 states: (A) the name of each of the Subsidiaries, its jurisdiction of incorporation and the percentage of its Voting Stock owned by the Company and each other Subsidiary; and (B) the name of each of the Affiliates and the nature of the affiliation. Each of the Company and the Subsidiaries has good and marketable title to all of the shares it purports to own of the stock of each Subsidiary, free and clear in each case of any Lien. All such shares have been duly issued and are fully paid and nonassessable. 2.4 PENDING LITIGATION. (A) PENDING LITIGATION. There are no proceedings, actions or investigations pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary in any court or before any Governmental Authority or arbitration board or tribunal that, in the aggregate for all such proceedings, actions and investigations, could reasonably be expected to have a Material Adverse Effect. (B) NO DEFAULTS. Neither the Company nor any Subsidiary is in default with respect to any judgment, order, writ, injunction or decree of any court, Governmental Authority, arbitration board or tribunal that, in the aggregate for all such defaults, could reasonably be expected to have a Material Adverse Effect. 2.5 TITLE TO PROPERTIES; UCC MATTERS. (A) TITLE TO PROPERTIES. The Company and the Subsidiaries have valid title to all of the Property reflected in the most recent audited consolidated balance sheet referred to in Section 2.2(a) (except as sold or otherwise disposed of in the ordinary course of business), except for such failures to have valid title as are immaterial in the context of such balance sheet and that, in the aggregate for all such failures, could not reasonably be expected to have a Material Adverse Effect. (B) LEASES. All leases necessary for the conduct of the business of the Company and the Subsidiaries are valid and subsisting and are in 6 full force and effect, except for such failures to be valid and subsisting that, in the aggregate for all such failures, could not reasonably be expected to have a Material Adverse Effect. (C) LIENS. All Property of the Company and the Subsidiaries is free from Liens not permitted by Section 6.13. (D) UCC MATTERS. Part 2.5(d) of Annex 2 sets forth with respect to the Company and each Guarantor: (I) each name under which such Person conducts or has conducted all or a portion of its business operations, and (II) the location of the principal executive office of each such Person. Neither the Company nor any Guarantor has changed its name or the name under which it conducts its business operations within the immediately preceding period of five (5) years. 2.6 PATENTS, TRADEMARKS, LICENSES, ETC. Except as set forth on Part 2.6 of Annex 2, each of the Company and the Subsidiaries owns, possesses or has the right to use all of the patents, trademarks, service marks, trade names, copyrights and licenses, and rights with respect thereto, necessary for the present and currently planned future conduct of its business, without any known conflict with the rights of others. The Trademark Subsidiaries own all such patents, trademarks, service marks, trade names, copyrights and licenses. Part 2.6 of Annex 2 sets forth the identity of each of the Trademark Subsidiaries on the Closing Date. 2.7 TAXES. (A) RETURNS FILED; TAXES PAID. All tax returns required to be filed by each of the Company and the Subsidiaries and any other Person with which the Company or any Subsidiary files or has filed a consolidated return in any jurisdiction have in fact been filed on a timely basis, and all taxes, assessments, fees and other governmental charges upon each of the Company and the Subsidiaries and any such Person, and upon any of their respective Properties, income or franchises, that are due and payable have been paid. All liabilities of the Company and the Subsidiaries with respect to federal income taxes have been finally determined except with respect to the fiscal years disclosed on Part 2.7 of Annex 2, which are the only fiscal years not closed by the completion of an audit or the expiration of the statute of limitations. There is currently in effect no tax sharing, tax allocation or similar agreement providing for the manner in which tax payments (whether in respect of federal or state 7 income or other taxes) owing by the members of the affiliated group of which the Company is the "common parent" (as defined in section 1504 of the IRC) are allocated between any member of such group and any Person other than the Company or a Subsidiary. (B) BOOK PROVISIONS ADEQUATE. (I) The amount of the liability for taxes reflected in the most recent balance sheet referred to in Section 2.2(a) is an adequate provision for taxes as of the date of such balance sheet (including, without limitation, any payment due pursuant to any tax sharing agreement) as are or may become payable by any one or more of the Company, any Subsidiary and the other Persons consolidated with the Company in such financial statements in respect of all tax periods ending on or prior to such dates. (II) Neither the Company nor any Subsidiary knows of any proposed additional tax assessment against it or any such Person that is not reflected in full in the most recent balance sheet referred to in Section 2.2(a). 2.8 FULL DISCLOSURE. The financial statements referred to in Section 2.2(a) do not, nor does any Financing Document or any written statement furnished by or on behalf of the Company or any Subsidiary to you in connection with the negotiation or the closing of the transactions contemplated by this Agreement, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein not misleading when viewed in the aggregate. There is no fact that the Company has not disclosed to you in writing that has had or, so far as the Company can now reasonably foresee, could reasonably be expected to have a Material Adverse Effect. 2.9 CORPORATE ORGANIZATION AND AUTHORITY. The Company and each Subsidiary: (A) is a corporation, limited liability company or partnership duly organized, validly existing and in good standing (to the extent that such concept is applicable) under the laws of its jurisdiction of organization; (B) has all legal and corporate, limited liability company or partnership, as the case may be, power and authority to own and operate its Properties and to carry on its business as now conducted and as presently proposed to be conducted; 8 (C) has all necessary licenses, certificates and permits to own and operate its Properties and to carry on its business as now conducted and as presently proposed to be conducted, except where the failure to have such licenses, certificates and permits, in the aggregate, could not reasonably be expected to have a Material Adverse Effect; and (D) has duly qualified or has been duly licensed, and is authorized to do business and is in good standing, as a foreign corporation, limited liability company or foreign partnership, as the case may be, in each state in the United States of America and in each other jurisdiction where the failure to be so qualified or licensed and authorized and in good standing, in the aggregate for all such failures, could reasonably be expected to have a Material Adverse Effect. 2.10 RESTRICTIONS ON COMPANY AND SUBSIDIARIES. (A) Neither the Company nor any Subsidiary: (I) is a party to any contract or agreement, or subject to any charter, bylaw, partnership agreement or other restriction that, in the aggregate for all such contracts, agreements, constitutive documents and other restrictions (assuming that all such contracts and agreements are performed in accordance with their respective terms), could reasonably be expected to have a Material Adverse Effect; or (II) 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 Section 6.13. (B) Neither the Company nor any Guarantor is a party to any contract or agreement that restricts the right or ability of the Company or such Subsidiary to incur Debt, other than this Agreement and the agreements listed in Part 2.10(b) of Annex 2 (none of which restricts the performance of the Company hereunder or under the Notes and none of which restricts the guaranty of the Notes by any of the Guarantors under the Joint and Several Guaranty). 9 2.11 COMPLIANCE WITH LAW. Neither the Company nor any Subsidiary: (A) is in violation of any law, ordinance, governmental rule or regulation to which it is subject (including, without limitation, those relating to zoning and planning, building, subdivision, inland wetland and environmental and hazardous waste disposal); or (B) has failed to obtain any license, certificate, permit, franchise or other governmental authorization necessary to the ownership of its Property or to the conduct of its business (including, without limitation, to the extent required, building, zoning, subdivision, traffic and environmental approvals and certificates of occupancy); which violations or failures to obtain, in the aggregate, could reasonably be expected to have a Material Adverse Effect. 2.12 PENSION PLANS. (A) DISCLOSURE. Part 2.12(a) of Annex 2 identifies all ERISA Affiliates and all "employee benefit plans" with respect to which the Company or any "affiliate" of the Company is a "party-in-interest" or in respect of which the Notes could constitute an "employer security" ("employee benefit plan" and "party-in-interest" have the meanings specified in section 3 of ERISA and "affiliate" and "employer security" have the meanings specified in section 407(d) of ERISA). (B) PROHIBITED TRANSACTIONS. The execution and delivery of this Agreement 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) through section 4975(D), inclusive, of the IRC. (C) RELATIONSHIP OF VESTED BENEFITS TO PENSION PLAN ASSETS. Except as set forth on Part 2.12(c) of Annex 2, the present value of all benefits, determined as of the most recent valuation date for such benefits (as provided in Section 6.21(c)), vested under each Pension Plan does not exceed the value of the assets of such Pension Plan allocable to such vested benefits, determined as of the most recent valuation date (as provided in Section 6.21(c)). (D) ERISA REQUIREMENTS. Each of the Company and the ERISA Affiliates: 10 (I) has fulfilled all obligations under the minimum funding standards of ERISA and the IRC with respect to each Pension Plan that is not a Multiemployer Plan; (II) is in compliance in all material respects with all other applicable provisions of ERISA and the IRC with respect to each Pension Plan and each Multiemployer Plan; and (III) has not incurred any liability under Title IV of ERISA to the PBGC (other than in respect of required insurance premiums, all of which that are due having been paid), with respect to any Pension Plan, any Multiemployer Plan or any trust established thereunder. (E) ACCUMULATED FUNDING DEFICIENCY. Except as set forth in Part 2.12(e) of Annex 2, no accumulated funding deficiency (as defined in section 302 of ERISA and section 412 of the IRC), whether or not waived, exists with respect to any Pension Plan. (F) REPORTABLE EVENTS. No Pension Plan or trust created thereunder has been terminated, and there have been no "reportable events" (as such term is defined in section 4043 of ERISA), with respect to any Pension Plan or trust created thereunder or with respect to any Multiemployer Plan, which reportable event or events will or could result in the termination of such Pension Plan or Multiemployer Plan and give rise to a liability of the Company or any ERISA Affiliate in respect thereof. (G) MULTIEMPLOYER PLANS. Other than as set forth on Part 2.12(g) of Annex 2, neither the Company nor any ERISA Affiliate is an employer required to contribute to any Multiemployer Plan. Neither the Company nor any ERISA Affiliate has incurred, nor is expected to incur, any withdrawal liability (that has not previously been fully satisfied) under ERISA with respect to any Multiemployer Plan, the effect of which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. No Multiemployer Plans have been terminated under section 4041A of ERISA, have been placed in reorganization status under Title IV of ERISA, or have been determined to be "insolvent" (as such term is defined in section 4245 of ERISA). (H) MULTIPLE EMPLOYER PENSION PLANS. Neither the Company nor any ERISA Affiliate is a "contributing sponsor" (as such term is defined in section 4001 of ERISA) in any Multiple Employer Pension Plan and neither the Company nor any ERISA Affiliate has incurred (without fully satisfying the same), or reasonably expects to incur, withdrawal liability in respect of any Multiple Employer Pension Plan, which 11 withdrawal liability could reasonably be expected to have a Material Adverse Effect. (I) FOREIGN PENSION PLAN. Except as set forth in Part 2.12(i) of Annex 2, no Foreign Pension Plans presently exist and neither the Company nor any Subsidiary has any present or future obligations in respect of any Foreign Pension Plan. 2.13 CERTAIN LAWS. The execution and delivery of this Agreement by the Company and the Joinder Agreement by the New Guarantors, and the performance under the Financing Documents by the Company and the Subsidiaries: (A) is not 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, as amended, or the Federal Power Act, as amended, and (B) does not violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Subsidiary. 2.14 ENVIRONMENTAL COMPLIANCE. (A) COMPLIANCE. Except as set forth in Part 2.14(a) of Annex 2, neither the Company nor any Subsidiary is in violation of any Environmental Protection Law in effect in any jurisdiction where it currently is doing business or owns Property, except for such violations that, in the aggregate for all such violations, could not reasonably be expected to have a Material Adverse Effect. (B) LIABILITY. Except as set forth in Part 2.14(b) of Annex 2, neither the Company nor any Subsidiary is subject to any liability under any Environmental Protection Law that, in the aggregate for all such liabilities, could reasonably be expected to have a Material Adverse Effect. (C) NOTICES. Except as set forth in Part 2.14(c) of Annex 2, neither the Company nor any Subsidiary has received any: (I) notice from any Governmental Authority by which any of its currently or previously owned or leased Properties has been identified in any manner by any Governmental Authority as a hazardous substance disposal or removal site, "Super Fund" clean-up site, or other clean-up site or candidate for removal or closure pursuant to any Environmental Protection Law; 12 (II) notice of any Lien arising under or in connection with any Environmental Protection Law that has attached to any revenues of, or to, any of its currently or previously owned or leased Properties; or (III) communication from any Governmental Authority concerning any action or omission by the Company or such Subsidiary in connection with its currently or previously owned or leased Properties resulting in the release of any Hazardous Substance or resulting in any violation of any Environmental Protection Law; in each case where the effect of which, in the aggregate for all such notices and communications, could reasonably be expected to have a Material Adverse Effect. 2.15 TRANSACTION IS LEGAL AND AUTHORIZED; OBLIGATIONS ARE ENFORCEABLE. (A) TRANSACTION IS LEGAL AND AUTHORIZED. Each of the execution and delivery of this Agreement by the Company and the Joinder Agreement by each of the Guarantors and compliance by the Company and each of the Guarantors with all of their respective obligations under the Financing Documents: (I) is within the corporate powers of the Company and each of the Guarantors; (II) is legal and does not conflict with, result in any breach in any of the provisions of, constitute a default under, or result in the creation of any Lien upon any Property of the Company or any Subsidiary under the provisions of, any agreement, charter instrument, bylaw or other instrument to which it is a party or by which it or any of its Property may be bound; and (III) does not give rise to a right or option of any other Person under any agreement or other instrument, which right or option could reasonably be expected to have a Material Adverse Effect. (B) OBLIGATIONS ARE ENFORCEABLE. Each of this Agreement and the Joinder Agreement has been duly authorized by all necessary action on the part of each Obligor party thereto and has been executed and delivered by one or more duly authorized officers of each Obligor party thereto, and each Financing Document constitutes a legal, valid and binding obligation of each Obligor party thereto, enforceable in 13 accordance with its terms, except that the enforceability of the Financing Documents may be: (I) limited by applicable bankruptcy, reorganization, arrangement, insolvency, moratorium or other similar laws affecting the enforceability of creditors' rights generally; and (II) subject to the availability of equitable remedies. 2.16 GOVERNMENTAL CONSENT. Neither the nature of the Company or any Subsidiary, or of any of their respective businesses or Properties, nor any relationship between the Company or any Subsidiary and any other Person, nor any circumstance in connection with the execution and delivery of this Agreement or the Joinder Agreement, is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority on the part of the Company or any Guarantor as a condition to the execution and delivery of this Agreement or the Joinder Agreement. 2.17 NO DEFAULTS. (A) THE NOTES. No event has occurred and no condition exists that, upon the execution and delivery of this Agreement (and giving effect to the waiver set forth in Section 1.2(a)) or the Joinder Agreement, would constitute a Default or an Event of Default. (B) CHARTER INSTRUMENTS, OTHER AGREEMENTS. Neither the Company nor any Subsidiary is in violation in any respect of any term of any charter instrument, bylaw, partnership agreement or other constitutive document or instrument. Neither the Company nor any Subsidiary is in violation in any respect of any term in any agreement or other instrument to which it is a party or by which it or any of its Property may be bound except for such violations that, in the aggregate for all such violations, could not reasonably be expected to have a Material Adverse Effect. 2.18 COMPANY AND THE GUARANTORS. The Company and the Guarantors are operated as part of one consolidated business entity and are directly dependent upon each other for and in connection with their respective business activities and their respective financial resources. The Company and each of the Original Guarantors received direct economic and financial benefits from the Debt incurred under the Note Purchase Agreements by the Company and the incurrence of such Debt was in the best interests of the Company and each of the Original Guarantors. 14 2.19 SOLVENCY. The fair value of the business and assets of the Company and each Guarantor will be 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 after giving effect to the transactions contemplated by this Agreement and the Joinder Agreement. Neither the Company nor any Guarantor, after giving effect to the transactions contemplated by this Agreement and the Joinder Agreement, will be engaged in any business or transaction, or about to engage in any business or transaction, for which such Person has unreasonably small assets or capital (within the meaning of applicable law, including, without limitation, Section 548 of the United States Bankruptcy Code), and neither the Company nor any Guarantor has any intent to (A) hinder, delay or defraud any entity to which it is, or will become, on or after the Closing Date, indebted, or (B) incur debts that would be beyond its ability to pay as they mature. 2.20 TRUE AND CORRECT COPIES. The Company has delivered to you or your special counsel true and correct copies of (a) each Revolving Credit Agreement (including, without limitation, all schedules and exhibits thereto and all agreements delivered in connection therewith) of the Company or any Subsidiary in effect on the Closing Date and (b) the 1999 Note Purchase Agreement. 3. CLOSING CONDITIONS The effectiveness of this Agreement, as to the parties hereto, is subject to the following conditions precedent: 3.1 OPINIONS OF COUNSEL. You shall have received a closing opinion from McGuire, Woods, Battle & Boothe, counsel for the Company and the Subsidiaries, dated the Closing Date, and substantially in the forms set forth in Exhibit B, and as to such other matters as you may reasonably request. The Company hereby requests and directs its counsel to deliver such closing opinion to you and the other Noteholders. 15 3.2 WARRANTIES AND REPRESENTATIONS TRUE. The warranties and representations contained in Section 2 shall be true on the Closing Date with the same effect as though made on and as of that date. 3.3 NO DEFAULTS. Except for the Pre-Closing Events of Default, no "Default" or "Event of Default" (as such terms are defined in the Existing Note Purchase Agreements) shall exist in respect of the Notes, this Agreement or the Existing Note Purchase Agreements. 3.4 OFFICERS' CERTIFICATES. You shall have received: (A) a certificate dated the Closing Date and signed by the President, a Vice-President, the Controller, the Treasurer or an Assistant Treasurer of the Company, substantially in the form of Exhibit C, certifying that the conditions specified in Section 3.2, Section 3.3 and Section 3.10 have been fulfilled and that no Default or Event of Default exists on the Closing Date; (B) a certificate dated the Closing Date and signed by the Secretary or an Assistant Secretary of the Company, substantially in the form of Exhibit D1, with respect to the matters set forth therein; and (C) separate certificates dated the Closing Date and signed by the Secretary or an Assistant Secretary of each the New Guarantors, substantially in the form of Exhibit D2, with respect to the matters set forth therein. 3.5 OTHER NOTEHOLDERS. None of the other Noteholders shall have failed to execute and deliver a Note Purchase Agreement on the Closing Date. 3.6 EXPENSES. All fees and disbursements required to be paid on or before the Closing Date pursuant to Section 1.4 shall have been paid in full. 3.7 JOINDER AGREEMENT. Each of the New Guarantors shall have executed and delivered to you the Joinder Agreement, in form and substance satisfactory to you and your special counsel, pursuant to which the New Guarantors shall become Guarantors under the Joint and Several Guaranty. 16 3.8 CONSENTS UNDER THE REVOLVING CREDIT AGREEMENTS. The Company shall have delivered to you copies of all consents (in form and substance satisfactory to you and your special counsel) required under the Revolving Credit Agreements to permit the Company and the Guarantors to enter into and perform their respective obligations hereunder and under the Joint and Several Guaranty. 3.9 TRANSACTION STRUCTURING FEE. The Company shall have paid to each Noteholder a non-refundable transaction restructuring fee equal to fifteen hundredths of one percent (0.15%) of the aggregate principal amount of the Notes held by such Noteholder on the Closing Date. 3.10 BLADEN REAL ESTATE. Packing LLC shall have executed and delivered (a) the Assumption Agreement, and (b) such Uniform Commercial Financing Statements as may be necessary or desirable to evidence the Liens granted by Packing LLC pursuant to the Packing Security Agreement and the Packing-Bladen Deed of Trust. Packing LLC shall have provided the Security Trustee with evidence that the title insurance policy existing with respect to the Property which is the subject of the Packing-Bladen Deed of Trust is in full force and effect and insures the interest of the owner and the mortgagee in the manner contemplated by the title insurance policy originally issued to the Security Trustee with respect to such Property. All other insurance policies required by the Packing-Bladen Deed of Trust and this Agreement shall be in full force and effect. 3.11 COMPLIANCE WITH THIS AGREEMENT. Each of the Company and the Guarantors shall have performed and complied with all agreements and conditions contained herein that are required to be performed or complied with by the Company and the Guarantors on or prior to the Closing Date, and such performance and compliance shall remain in effect on the Closing Date. 3.12 PROCEEDINGS SATISFACTORY. All proceedings taken in connection with the transactions contemplated hereby and all documents and papers relating thereto shall be satisfactory to you and your special counsel. You and your special counsel shall have received copies of such documents and papers as you or they may reasonably request in connection therewith or in connection with your special counsel's closing opinion, all in form and substance satisfactory to you and your special counsel. 17 4. PAYMENTS 4.1 INTEREST PAYMENTS. Interest shall accrue on the unpaid principal balance of the Notes on the basis of a 360-day year of twelve 30-day months: (A) SERIES B NOTES. With respect to the Series B Notes, at the rate of 8.41% per annum and shall be payable to the holders of the Series B Notes, in arrears, quarterly on the first day of February, May, August and November in each year, commencing on August 1, 1996, until the principal amount of the Series B Notes in respect of which such interest shall have accrued shall become due and payable, and interest shall accrue on any overdue principal (including any overdue prepayment of principal), Make- Whole Amount, if any, and (to the extent permitted by applicable law) on any overdue installment of interest at a rate equal to the lesser of (i) the highest rate allowed by applicable law, and (ii) 10.41% per annum, (B) SERIES C NOTES. With respect to the Series C Notes, at the rate of 8.34% per annum and shall be payable to the holders of the Series C Notes, in arrears, quarterly on the first day of February, May, August and November in each year, commencing on August 1, 1996, until the principal amount of the Series C Notes in respect of which such interest shall have accrued shall become due and payable, and interest shall accrue on any overdue principal (including any overdue prepayment of principal), Make- Whole Amount, if any, and (to the extent permitted by applicable law) on any overdue installment of interest at a rate equal to the lesser of (i) the highest rate allowed by applicable law, and (ii) 10.34% per annum, (C) SERIES D NOTES. With respect to the Series D Notes, at the rate of 9.80% per annum and shall be payable to the holders of the Series D Notes, in arrears, quarterly on the first day of February, May, August and November in each year, commencing on August 1, 1996, until the principal amount of the Series D Notes in respect of which such interest shall have accrued shall become due and payable, and interest shall accrue on any overdue principal (including any overdue prepayment of principal), Make- Whole Amount, if any, and (to the extent permitted by applicable law) on any overdue installment of interest at a rate equal to the lesser of (i) the highest rate allowed by applicable law, and (ii) 11.80% per annum, (D) SERIES E NOTES. With respect to the Series E Notes, at the rate of 10.75% per annum and shall be payable to the holders of the Series E Notes, in arrears, quarterly on the first day of February, May, 18 August and November in each year, commencing on August 1, 1996, until the principal amount of the Series E Notes in respect of which such interest shall have accrued shall become due and payable, and interest shall accrue on any overdue principal (including any overdue prepayment of principal), Make-Whole Amount, if any, and (to the extent permitted by applicable law) on any overdue installment of interest at a rate equal to the lesser of (i) the highest rate allowed by applicable law, and (ii) 12.75% per annum, (E) SERIES F NOTES. With respect to the Series F Notes, at the rate of 8.52% per annum and shall be payable to the holders of the Series F Notes, in arrears, quarterly on the first day of February, May, August and November in each year, commencing on August 1, 1996, until the principal amount of the Series F Notes in respect of which such interest shall have accrued shall become due and payable, and interest shall accrue on any overdue principal (including any overdue prepayment of principal), Make- Whole Amount, if any, and (to the extent permitted by applicable law) on any overdue installment of interest at a rate equal to the lesser of (i) the highest rate allowed by applicable law, and (ii) 10.52% per annum, and (F) SERIES G NOTES. With respect to the Series G Notes, at the rate of 9.85% per annum and shall be payable to the holders of the Series G Notes, in arrears, quarterly on the first day of February, May, August and November in each year, commencing on August 1, 1996, until the principal amount of the Series G Notes in respect of which such interest shall have accrued shall become due and payable, and interest shall accrue on any overdue principal (including any overdue prepayment of principal), Make- Whole Amount, if any, and (to the extent permitted by applicable law) on any overdue installment of interest at a rate equal to the lesser of (i) the highest rate allowed by applicable law, and (ii) 11.85% per annum, and (G) SERIES H NOTES. With respect to the Series H Notes, at the rate of 8.41% per annum and shall be payable to the holders of the Series H Notes, in arrears, quarterly on the first day of February, May, August and November in each year, commencing on May 1, 2000, until the principal amount of the Series H Notes in respect of which such interest shall have accrued shall become due and payable, and interest shall accrue on any overdue principal (including any overdue prepayment of principal), Make- Whole Amount, if any, and (to the extent permitted by applicable law) on any overdue installment of interest at a rate equal to the lesser of (i) the highest rate allowed by applicable law, and (ii) 10.41% per annum. 19 4.2 SCHEDULED REQUIRED PREPAYMENTS (A) SERIES B NOTES. In addition to paying the entire then outstanding principal amount and the interest due on the Series B Notes on the maturity date thereof (August 1, 2006), the Company shall prepay, and there shall become due and payable, seven hundred fifty-eight thousand dollars ($758,000) in aggregate principal amount of the Series B Notes on the first day of February, May, August and November in each year, commencing on August 1, 2003 and ending on May 1, 2006, inclusive. Each such prepayment shall be at one hundred percent (100%) of the amount prepaid, together with interest accrued thereon to the date of prepayment. (B) SERIES C NOTES. There shall be no required prepayments in respect of the Series C Notes. The entire principal amount of the Series C Notes remaining outstanding on August 1, 2003, together with accrued unpaid interest thereon, shall be due and payable on such date. (C) SERIES D NOTES. In addition to paying the entire then outstanding principal amount and the interest due on the Series D Notes on the maturity date thereof (August 1, 2003), the Company shall prepay, and there shall become due and payable, one hundred eighty-seven thousand five hundred dollars ($187,500) in aggregate principal amount of the Series D Notes on the first day of February, May, August and November in each year, commencing on August 1, 1996 and ending on May 1, 2003, inclusive. Each such prepayment shall be at one hundred percent (100%) of the amount prepaid, together with interest accrued thereon to the date of prepayment. (D) SERIES E NOTES. In addition to paying the entire then outstanding principal amount and the interest due on the Series E Notes on the maturity date thereof (August 1, 2005), the Company shall prepay, and there shall become due and payable, two hundred fifty thousand dollars ($250,000) in aggregate principal amount of the Series E Notes on the first day of February, May, August and November in each year, commencing on August 1, 1996 and ending on May 1, 2005, inclusive. Each such prepayment shall be at one hundred percent (100%) of the amount prepaid, together with interest accrued thereon to the date of prepayment. (E) SERIES F NOTES. There shall be no required prepayments in respect of the Series F Notes. The entire principal amount of the Series F Notes remaining outstanding on August 1, 2006, together with accrued unpaid interest thereon, shall be due and payable on such date. (F) SERIES G NOTES. In addition to paying the entire then outstanding principal amount and the interest due on the Series G Notes on the maturity date thereof (November 1, 2006), the Company shall 20 prepay, and there shall become due and payable, three hundred thirty-three thousand three hundred thirty-three and 33/100 dollars ($333,333.33) in aggregate principal amount of the Series G Notes on the first day of February, May, August and November in each year, commencing on August 1, 1996 and ending on August 1, 2006, inclusive. Each such prepayment shall be at one hundred percent (100%) of the amount prepaid, together with interest accrued thereon to the date of prepayment. (G) SERIES H NOTES. In addition to paying the entire then outstanding principal amount and the interest due on the Series H Notes on the maturity date thereof (August 1, 2004), the Company shall prepay, and there shall become due and payable, seven million three hundred eighty-nine thousand seven hundred six dollars ($7,389,706) in aggregate principal amount of the Series H Notes on August 1, 2002. Such prepayment shall be at one hundred percent (100%) of the amount prepaid, together with interest accrued thereon to the date of prepayment. 4.3 OFFER TO PREPAY UPON CHANGE IN CONTROL. (A) NOTICE AND OFFER. In the event of either (I) a Change in Control, or (II) the obtaining of knowledge of a Control Event by any officer of the Company, then the Company will, within three (3) Business Days of (x) such Change in Control or (y) the obtaining of knowledge of such Control Event (including via the receipt of notice of a Control Event from any holder of Notes), as the case may be, give written notice of such Change in Control or Control Event to each holder of Notes and, simultaneously with the sending of such written notice, give telephonic advice of such Change in Control or Control Event to an investment officer or other similar representative or agent of each such holder specified on Annex 1 at the telephone number specified thereon, or to such other Person at such other telephone number as any holder of a Note may specify to the Company in writing. In the event of a Change in Control, such written notice shall contain, and such written notice shall constitute, an irrevocable offer to prepay all, but not less than all, of the Notes of each Series held by such holder on a date specified in such notice (the "CONTROL PREPAYMENT DATE") that is not less than thirty (30) days and not more than sixty (60) days after the date of such notice. (If the Control Prepayment Date shall not be specified in such notice, the 21 Control Prepayment Date shall be the thirtieth (30th) day after the date of such notice.) (B) ACCEPTANCE AND PAYMENT. To accept such offered prepayment, a holder of Notes shall cause a notice of such acceptance (which notice of acceptance may be in respect of one or more Series of Notes held by such holder, but which notice need not treat Notes of all Series held by such holder in the same manner) to be delivered to the Company not later than fourteen (14) days after the date of receipt by such holder of the written offer of such prepayment. If so accepted, such offered prepayment shall be due and payable on the Control Prepayment Date. Such offered prepayment shall be made at one hundred percent (100%) of the principal amount of such Notes, together with (i) an amount equal to the Make- Whole Amount, if any, at the time applicable with respect to the principal amount of the Notes then being prepaid and (ii) interest on the Notes then being prepaid accrued to the Control Prepayment Date. (C) OFFICER'S CERTIFICATE. Each offer to prepay the Notes pursuant to this Section 4.3 will be accompanied by an officer's certificate, executed by a Senior Officer and dated the date of such offer, specifying: (I) the Control Prepayment Date; (II) the principal amount of each Note offered to be prepaid; (III) the interest to be paid on each such Note, accrued to the Control Prepayment Date; (IV) the calculation of an estimated Make-Whole Amount, if any (assuming the date of prepayment was the date of such notice), due in connection with such prepayment, accompanied by a copy of the Applicable H.15 used in determining the Make-Whole Discount Rate in respect thereof; (V) that the conditions of this Section 4.3 have been fulfilled; and (VI) in reasonable detail, the nature and date or proposed date of the Change in Control. Contemporaneously with any such prepayment the Company shall deliver to each holder of Notes a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date, accompanied by a copy of the Applicable H.15 used in determining the Make-Whole Discount Rate in respect thereof. 22 (D) EFFECT OF PREPAYMENTS. Each prepayment of principal of the Notes of any Series pursuant to this Section 4.3 shall be applied to reduce the principal amount of the Notes of such Series due on the maturity date of the Notes of such Series and to reduce each remaining scheduled required prepayment of principal (if any) applicable to each such Series required by Section 4.2, apportioned on a ratable basis (based on the principal amount due on each such date) among all such amounts. 4.4 OPTIONAL PREPAYMENTS. (A) OPTIONAL PREPAYMENTS. The Company may at any time after the Closing Date prepay the principal amount of the Notes, in part, in integral multiples of five million dollars ($5,000,000), or in whole, in each case together with: (I) an amount equal to the Make-Whole Amount at such time in respect of the principal amount of the Notes being so prepaid; and (II) interest on such principal amount then being prepaid accrued to the prepayment date. (B) EFFECT OF PREPAYMENTS. Each prepayment of principal of the Notes pursuant to Section 4.4(a) shall be applied first, to the principal amount of the Notes of each Series due on the maturity date of the Notes of such Series and second, to the scheduled required prepayments of principal (if any) applicable to such Series required by Section 4.2, in the inverse order of the maturity thereof. 4.5 NOTICE OF OPTIONAL PREPAYMENT. The Company will give notice of any optional prepayment of the Notes to each holder of the Notes not less than thirty (30) days or more than sixty (60) days before the date fixed for prepayment, specifying: (A) such date; (B) that such prepayment is being made pursuant to Section 4.4; (C) the principal amount of such holder's Notes to be prepaid on such date with respect to each Series of Notes held by such holder; (D) the interest to be paid on each such Note, accrued to the date fixed for prepayment; and 23 (E) the calculation of an estimated Make-Whole Amount, if any (assuming the date of prepayment was the date of such notice) due in connection with such prepayment with respect to each Series of Notes held by such holder, accompanied by a copy of the Applicable H.15 used in determining the Make- Whole Discount Rate in respect thereof. Such notice of prepayment shall also certify all facts that are conditions precedent to any such prepayment. Notice of prepayment having been so given, the aggregate principal amount of the Notes specified in such notice, together with the Make-Whole Amount, if any, and accrued interest thereon shall become due and payable on the specified prepayment date. Contemporaneously with such prepayment the Company shall deliver to each holder of Notes a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date, accompanied by a copy of the Applicable H.15 used in determining the Make-Whole Discount Rate in respect thereof. 4.6 PRO RATA PAYMENTS. (A) SCHEDULED REQUIRED PREPAYMENTS. If, at the time of any required prepayment of the principal of Notes of any Series made pursuant to Section 4.2 there is more than one Note of such Series outstanding, the aggregate principal amount of such required prepayment shall be allocated among the Notes of such Series at the time outstanding pro rata in proportion to the respective unpaid principal amounts of all such outstanding Notes of such Series. (B) OPTIONAL PREPAYMENTS. If, at the time of any optional prepayment of the principal of Notes made pursuant to Section 4.4 there is more than one Note outstanding, the aggregate principal amount of such optional prepayment shall be allocated among the Notes at the time outstanding pro rata in proportion to the respective unpaid principal amounts of all such outstanding Notes, without regard to the Series of such Notes. 4.7 NOTATION OF NOTES ON PREPAYMENT. Upon any partial prepayment of a Note, such Note may, at the option of the holder thereof, be (A) surrendered to the Company pursuant to Section 5.2 in exchange for a new Note of the same Series, in a principal amount equal to the principal amount remaining unpaid on the surrendered Note, (B) made available to the Company for notation thereon of the portion of the principal so prepaid, or 24 (C) marked by such holder with a notation thereon of the portion of the principal so prepaid. In case the entire principal amount of any Note is prepaid, such Note shall be surrendered to the Company for cancellation and shall not be reissued, and no Note shall be issued in lieu of the prepaid principal amount of any Note. 4.8 NO OTHER OPTIONAL PREPAYMENTS. Except as provided in Section 4.4, the Company may not make any optional prepayment (whether directly or indirectly by purchase or acquisition) in respect of the Notes. 5. REGISTRATION; SUBSTITUTION OF NOTES 5.1 REGISTRATION OF NOTES. The Company will cause to be kept at its office, maintained pursuant to Section 6.3, a register for the registration and transfer 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 the register. 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. 5.2 EXCHANGE OF NOTES. (A) Upon surrender of any Note at the office of the Company maintained pursuant to Section 6.3 duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or its attorney duly authorized in writing, the Company will execute and deliver, at the Company's expense (except as provided below), new Notes of the same Series in exchange therefor, in denominations of at least five hundred thousand dollars ($500,000) (except as may be necessary to reflect any principal amount not evenly divisible by five hundred thousand dollars ($500,000)), 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, shall be of the same Series as the surrendered Note and shall be substantially in the form of the Exhibit in Exhibit A1 through Exhibit A7 corresponding to the Series of the surrendered Note. 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 or other issuance tax or governmental charge imposed in respect of any such transfer of Notes. 25 (B) The Company will pay the cost of delivering to or from such holder's home office or custodian bank from or to the Company, insured to the reasonable satisfaction of such holder, the surrendered Note and any Note issued in substitution or replacement for the surrendered Note. 5.3 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 (or of ownership by such Institutional Investor's nominee) and such loss, theft, destruction or mutilation), and (A) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to the Company (provided that if the holder of such Note is an Institutional Investor or a nominee of an Institutional Investor, such Institutional Investor's own unsecured letter agreement of indemnity shall be deemed to be satisfactory for such purpose), or (B) in the case of mutilation, upon surrender and cancellation thereof, the Company at its own expense will execute and, within five (5) Business Days after such receipt, deliver, in lieu thereof, a new Note of the same Series, 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. 5.4 ISSUANCE TAXES. The Company will pay all taxes (if any) due in connection with the execution and delivery of this Agreement and in connection with any modification, amendment or waiver of any Financing Document and shall save each holder of Notes harmless without limitation as to time against any and all liabilities with respect to all such taxes. The obligations of the Company under this Section 5.4 shall survive the payment or prepayment of the Notes and the termination hereof. 6. GENERAL COVENANTS The Company covenants and agrees that on and after the Closing Date and thereafter for so long as any of its obligations under the Note Purchase Agreements and the Notes shall be outstanding: 26 6.1 PAYMENT OF TAXES AND CLAIMS. The Company shall, and shall cause each Subsidiary to, pay before they become delinquent, (A) all taxes, assessments and governmental charges or levies imposed upon it or its Property, and (B) all claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons that, if unpaid, might result in the creation of a Lien upon its Property, provided, that items of the foregoing description need not be paid (x) while being contested in good faith and by appropriate proceedings diligently pursued as long as adequate book reserves have been established and maintained and exist with respect thereto, and (y) so long as the title of the Company or the Subsidiary, as the case may be, to, and its right to use, such Property, is not materially adversely affected thereby. 6.2 MAINTENANCE OF PROPERTIES AND CORPORATE EXISTENCE. The Company shall, and shall cause each Subsidiary to, (A) PROPERTY -- maintain its Property in good condition, ordinary wear and tear excepted, and make all necessary renewals, replacements, additions, betterments and improvements thereto, and, in addition to the foregoing, the Guarantors shall collectively, during each year, either expend or invest an aggregate amount equal to at least fifty percent (50%) of Depreciation determined for the then most recently ended fiscal year of the Company on repairs, maintenance or capital improvements to the "Improvements" (as such term is defined in the Deeds of Trust); (B) INSURANCE -- maintain, with financially sound and reputable insurers accorded a rating by A.M. Best Company of "A" or better and a size rating of "XII" or better (or comparable ratings by any comparable successor rating agency), insurance (including, without limitation, the insurance required by the Security Documents) with respect to its Property and business against such casualties and contingencies, of such types (including, without limitation, insurance with respect to losses arising out of Property loss or damage, public liability, business interruption, larceny, workers' compensation, embezzlement or other criminal misappropriation) and in such amounts as is customary in the case of corporations of established reputations engaged in the same or a similar business and similarly situated; provided that the Company and the Subsidiaries may maintain one or more systems of self-insurance if adequate reserves are maintained with respect thereto and if such systems are implemented and operated in a manner consistent with the sound financial practices of similarly situated corporations of established reputations that maintain similar systems of self-insurance; 27 (C) FINANCIAL RECORDS -- maintain sound accounting policies and an adequate and effective system of accounts and internal accounting controls that will safeguard assets, properly record income, expenses and liabilities and assure the production of proper financial statements in accordance with GAAP; (D) CORPORATE EXISTENCE AND RIGHTS -- do or cause to be done all things necessary (I) to preserve and keep in full force and effect its existence, rights and franchises, (II) to ensure that the Company legally and beneficially owns eighty-six percent (86%) of the capital stock of each class of Brown's and one hundred percent (100%) of the capital stock of each of the other Guarantors, and (III) to maintain each Subsidiary as a Subsidiary, except as otherwise permitted by Section 6.14 and Section 6.15(b); and (E) COMPLIANCE WITH LAW -- not be in violation of any law, ordinance or governmental rule or regulation to which it is subject (including, without limitation, any Environmental Protection Law) and not fail to obtain any license, permit, franchise or other governmental authorization necessary to the ownership of its Properties or to the conduct of its business if such violation or failure to obtain could be reasonably expected to have a Material Adverse Effect. 6.3 PAYMENT OF NOTES AND MAINTENANCE OF OFFICE. The Company shall punctually pay, or cause to be paid, the principal of and interest (and Make-Whole Amount, if any) to become due in respect of, the Notes, as and when the same shall become due according to the terms hereof and of the Notes, and shall maintain an office at the address of the Company set forth in Section 10.1 where notices, presentations and demands in respect hereof and of the Notes may be made upon it. Such office shall be maintained at such address until such time as the Company shall notify the holders of the Notes of any change of location of such office, which shall in any event be located within the United States of America. 6.4 CURRENT RATIO. The Company shall not at any time permit the ratio of Consolidated Current Assets to Consolidated Current Liabilities to be less than 1.05 to 1.00. 28 6.5 CONSOLIDATED WORKING CAPITAL. The Company shall not at any time permit Consolidated Working Capital to be less than Thirty-Five Million Dollars ($35,000,000). 6.6 FUNDED DEBT. The Company shall not, and shall not permit any Subsidiary to, directly or indirectly, create, assume, incur or Guaranty or otherwise become or be liable in respect of any Funded Debt other than: (A) Funded Debt represented by the Notes; (B) Funded Debt outstanding on the Closing Date and described on Part 2.2(b) of Annex 2; (C) Funded Debt of a Wholly-Owned Subsidiary to the Company or to any other Wholly-Owned Subsidiary; (D) Funded Debt of the Company to a Wholly-Owned Subsidiary; and (E) additional Funded Debt of the Company and the Subsidiaries if, after giving effect thereto and to any concurrent application of the proceeds of such Funded Debt, (i) Consolidated Funded Debt would not exceed sixty-five percent (65%) of Consolidated Total Capitalization and (ii) Consolidated Senior Funded Debt would not exceed fifty-five percent (55%) of the result of (A) Consolidated Total Capitalization minus (B) Senior Subordinated Debt. 6.7 MAINTENANCE OF FUNDED DEBT. (A) CONSOLIDATED FUNDED DEBT. The Company shall not permit Consolidated Funded Debt, determined as of the end of each fiscal quarter of the Company, to exceed four hundred percent (400%) of Consolidated EBITDA for the period of four (4) consecutive fiscal quarters of the Company ended at such time. (B) CONSOLIDATED SENIOR FUNDED DEBT. The Company shall not permit Consolidated Senior Funded Debt, determined as of the end of each fiscal quarter of the Company, to exceed three hundred twenty percent (320%) of Consolidated EBITDA for the period of four (4) consecutive fiscal quarters of the Company ended at such time. 6.8 FIXED CHARGES COVERAGE. The Company shall not at any time permit the ratio of Consolidated Net Income Available for Fixed Charges (calculated in respect of the period of eight (8) consecutive fiscal quarters of the Company then most recently ended) to 29 Consolidated Fixed Charges (calculated in respect of such period) to be less than 1.50 to 1.00. 6.9 RESTRICTIONS ON DIVIDENDS, ETC. The Company shall not, and shall not permit any Subsidiary to, create or otherwise cause or suffer to exist or become effective any restriction or encumbrance (other than statutory, regulatory or common law restrictions) on the right or power of any Subsidiary to (A) pay dividends or make any other distributions on such Subsidiary's stock to the Company or any Subsidiary, (B) pay any indebtedness owed by such Subsidiary to the Company or any Subsidiary, (C) make loans or pay advances to the Company or any Subsidiary, or (D) transfer any of its Property to the Company or any Guarantor; provided, however, that a Subsidiary may be subject to restrictions on the payment of dividends or the making of other distributions on its stock to the Company or the other Subsidiaries so long as such restrictions permit the payment of such dividends and the making of such other distributions that are necessary in order to make any and all payments due (including, without limitation, any and all amounts due by way of acceleration, required or optional prepayment or otherwise) in connection with the Notes, the Note Purchase Agreements and the other Financing Documents, and any and all indebtedness used to refinance or repay such indebtedness (without increase as to principal amount or interest rate of such refinancing indebtedness). 6.10 CONSOLIDATED TANGIBLE NET WORTH. The Company shall not at any time permit Consolidated Tangible Net Worth, determined at such time, to be less than the sum of (A) four hundred fifty million dollars ($450,000,000), plus (B) the sum of the Company Fiscal Year Net Worth Increase Amounts calculated for all fiscal years of the Company ended on or after the date of this Agreement. 6.11 INTENTIONALLY LEFT BLANK. 30 6.12 RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS. (A) LIMITATION ON RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS. The Company shall not, and shall not permit any Subsidiary to, at any time declare or make or incur any liability to declare or make any Restricted Payment (other than Restricted Payments comprised solely of Distributions to the Company or a Wholly-Owned Subsidiary in respect of the capital stock of a Subsidiary ("PERMITTED DISTRIBUTIONS")) or make or authorize any Restricted Investment, unless (I) immediately after giving effect to the proposed Restricted Payment or Restricted Investment, the aggregate amount of all Restricted Payments (other than Permitted Distributions) and Restricted Investments in each case made or authorized after February 1, 2000 does not exceed the sum of (A) one hundred million dollars ($100,000,000); plus (B) fifty percent (50%) of the aggregate Consolidated Net Income (or, in case such aggregate Consolidated Net Income shall be a deficit, minus one hundred percent (100%) of such deficit) for the period commencing on February 1, 2000 and ending on the date of such proposed transaction; plus (C) one hundred percent (100%) of the aggregate net cash proceeds received by the Company after the Closing Date from the issuance or sale of shares of capital stock of the Company (other than Mandatorily Redeemable Stock); plus (D) the market value of (but in any event not exceeding the Fair Market Value of the assets or stock acquired with) the shares of capital stock issued by the Company in payment for the stock or assets of any Person acquired by the Company or any Subsidiary after the Closing Date in an arm's-length transaction; (II) immediately prior to, and immediately after giving effect to the proposed Restricted Payment or Restricted Investment, the Company would be permitted by Section 6.6(e)(i) and Section 6.6(e)(ii) to incur at least one dollar ($1.00) of additional Funded Debt owed to a Person other than a Subsidiary; and (III) immediately prior to, and immediately after giving effect to, the proposed Restricted Payment or Restricted Investment, no Default or Event of Default exists or would exist. 31 (B) TIME OF PAYMENT OF DISTRIBUTIONS. The Company shall not, and shall not permit any Subsidiary to, authorize a Distribution on its capital stock that is not payable within sixty (60) days of authorization. (C) SUBSIDIARIES. Each corporation that becomes a Subsidiary after the Closing Date shall be deemed to have made, at the time it becomes a Subsidiary, all Restricted Investments of such corporation existing immediately after it becomes a Subsidiary. 6.13 LIENS. (A) NEGATIVE PLEDGE. The Company shall not, and shall not permit any Subsidiary to, cause or permit, or agree or consent to cause or permit in the future (upon the happening of a contingency or otherwise), any of their Property, whether now owned or hereafter acquired, to be subject to a Lien except: (I) Liens securing taxes, assessments or governmental charges or levies or the claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons, provided that the payment thereof is not at the time required by Section 6.1 or by any provision of the other Financing Documents; (II) Liens incurred or deposits made in the ordinary course of business (A) in connection with workers' compensation, unemployment insurance, social security and other like laws, and (B) to secure the performance of letters of credit, bids, tenders, sales contracts, leases, statutory obligations, surety and performance bonds (of a type other than set forth in Section 6.13(a)(iii)) and other similar obligations not incurred in connection with the borrowing of money, the obtaining of advances or the payment of the deferred purchase price of Property; (III) Liens (A) arising from judicial attachments and judgments, (B) securing appeal bonds, supersedeas bonds, or 32 (C) arising in connection with court proceedings (including, without limitation, surety bonds and letters of credit or any other instrument serving a similar purpose), provided that the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings, and provided further that the aggregate amount so secured shall not at any time exceed one million dollars ($1,000,000); (IV) Liens in the nature of reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other similar title exceptions or encumbrances affecting real Property, provided that such exceptions and encumbrances do not in the aggregate materially detract from the value of such Properties or materially interfere with the use of such Properties in the ordinary conduct of the owning Person's business; (V) (A) Liens (of a type other than set forth in Section 6.13(a)(ix)) in existence on the Closing Date, more specifically described on Part 6.13(a)(v) of Annex 2; and (B) Liens securing renewals, extensions and refinancings of Debt secured by the Liens permitted by clause (A) immediately above, provided that the amount of Debt secured by each such Lien is not increased in excess of the amount of Debt outstanding on the date such Lien was originally created, and none of such Liens is extended to include any additional Property of the Company or any Subsidiary; (VI) on or prior to the Collateral Release Date, Liens on the Collateral (A) in favor of the Security Trustee for the benefit of the holders of the Notes that secure obligations under any of the Financing Documents, and (B) constituting Permitted Exceptions; (VII) on or prior to the Collateral Release Date, Liens on Property other than the Collateral securing Funded Debt (other than Bank Funded Debt) incurred and permitted to exist in accordance with the provisions of Sections 6.6 and 6.7; 33 (VIII) Purchase Money Liens, if, after giving effect thereto and to any concurrent transactions: (A) each such Purchase Money Lien secures Debt in an amount not exceeding the cost of acquisition or construction of the particular Property to which such Debt relates; and (B) no Default or Event of Default would exist; (IX) on or prior to the Collateral Release Date, Liens on Property of the Subsidiaries primarily constituting inventory or accounts that secure obligations arising under Revolving Credit Agreements of the Company or any Subsidiary; and (X) after the Collateral Release Date, Liens securing Debt of the Company or any Subsidiary, provided that at the time of the incurrence thereof and after giving effect thereto and to the concurrent retirement of any other Debt, (A) the aggregate outstanding principal amount of all Debt of the Company and the Subsidiaries secured by Liens (including, without limitation, Liens permitted by Section 6.13(a)(v) and Section 6.13(a)(viii)) would not exceed fifteen percent (15%) of Consolidated Tangible Net Worth, determined at such time; and (B) no Default or Event of Default would exist. (B) COLLATERAL. Nothing in this Section 6.13 shall be deemed to permit the Company or any Guarantor to cause or permit, or agree or consent to cause or permit in the future (upon the happening of a contingency or otherwise), any of the Collateral, whether now owned or hereafter acquired, to be subject to a Lien in violation of the terms of the Security Documents. (C) STOCK. Notwithstanding anything to the contrary in Section 6.13(a), the Company shall not, and shall not permit any Subsidiary to cause or permit, or agree or consent to cause or permit in the future (upon the happening of a contingency or otherwise), any of the capital stock of any Subsidiary, whether now owned or hereafter acquired, to be subject to a Lien. (D) EQUAL AND RATABLE LIEN; EQUITABLE LIEN. In case any Property not otherwise the subject of a prior perfected Lien in favor of the Security Trustee shall be subjected to a Lien in violation of this Section 6.13, the Company shall forthwith make or cause to be made, to the 34 fullest extent permitted by applicable law, provision whereby the Notes shall be secured equally and ratably with all other obligations secured thereby pursuant to such agreements and instruments as shall be approved by the Required Holders, and the Company shall cause to be delivered to each holder of a Note an opinion of independent counsel to the effect that such agreements and instruments are enforceable in accordance with their terms, and in any such case the Notes shall have the benefit, to the full extent that, and with such priority as, the holders may be entitled thereto under applicable law, of an equitable Lien on such Property securing the Notes. Such violation of this Section 6.13 shall constitute an Event of Default hereunder, whether or not any such provision is made pursuant to this Section 6.13(d). (E) FINANCING STATEMENTS. The Company shall not, and shall not permit any Subsidiary to, sign or file a financing statement under the Uniform Commercial Code of any jurisdiction that names the Company or such Subsidiary as debtor, or sign any security agreement authorizing any secured party thereunder to file any such financing statement, except, in any such case, a financing statement filed or to be filed to perfect or protect a security interest that the Company or such Subsidiary is entitled to create, assume or incur, or permit to exist, under the foregoing provisions of this Section 6.13 or to evidence for informational purposes a lessor's interest in Property leased to the Company or any such Subsidiary. 6.14 MERGER; ACQUISITION. (A) MERGER AND CONSOLIDATION. The Company shall not, and shall not permit any Subsidiary to, merge with or into, consolidate with, or sell, lease as lessor, transfer or otherwise dispose of all or substantially all of its Property to, any other Person or permit any other Person to merge with or into or consolidate with it (except that a Subsidiary other than a Guarantor may merge into, consolidate with, or sell, lease, transfer or otherwise dispose of all or substantially all of its assets to, the Company or a Wholly-Owned Subsidiary other than a Guarantor); provided that the foregoing restriction does not apply to the merger or consolidation of the Company with or into, or the sale, lease, transfer or other disposition by the Company of all or substantially all of its Property to, another corporation, if: (I) the corporation that results from such merger or consolidation or that purchases, leases, or acquires all or substantially all of such Property (the "SURVIVING CORPORATION") is organized under the laws of, and has substantially all of its Property located in, the United States of America or any jurisdiction thereof; 35 (II) the due and punctual payment of the principal of and Make- Whole Amount, if any, and interest on all of the Notes, according to their tenor, and the due and punctual performance and observance of all the covenants herein and in the other Financing Documents to be performed and observed by the Company, are expressly assumed by the Surviving Corporation pursuant to such agreements or instruments as shall be satisfactory to the Required Holders, and the Company shall cause to be delivered to each holder of Notes an opinion of independent counsel (which opinion and counsel are satisfactory to the Required Holders) to the effect that such agreements and instruments are enforceable in accordance with their terms; (III) immediately prior to, and immediately after the consummation of such transaction, and after giving effect thereto, the Company would be permitted by Section 6.6(e)(i) and Section 6.6(e)(ii) to incur at least one dollar ($1.00) of additional Funded Debt owed to a Person other than a Subsidiary; and (IV) immediately prior to, and immediately after the consummation of such transaction, and after giving effect thereto, no Default or Event of Default exists or would exist. (B) ACQUISITION OF STOCK. The Company shall not, and shall not permit any Subsidiary to, acquire any stock of any corporation if upon completion of such acquisition such corporation would be a Subsidiary, or acquire all of the assets of, or such of the assets as would permit the transferee to continue any one or more integral business operations of, any Person unless, immediately after the consummation of such acquisition, and after giving effect thereto, no Default or Event of Default exists or would exist under any provision hereof. 6.15 TRANSFERS OF PROPERTY; SUBSIDIARY STOCK. (A) TRANSFERS OF PROPERTY. The Company shall not, and shall not permit any Subsidiary to, sell (including, without limitation, any sale and subsequent leasing as lessee of such Property), lease as lessor, transfer, or otherwise dispose of any Property (individually, a "TRANSFER" and collectively, "TRANSFERS"), except (I) Transfers of inventory, obsolete or worn-out Property or excess equipment no longer useful in the business of the Company or such Subsidiary, in each case in the ordinary course of business of the Company or such Subsidiary; (II) Transfers from a Subsidiary to the Company or to any Guarantor and Transfers from the Company to any Guarantor; and 36 (III) any other Transfer (including a Transfer of Property to any Person and the concurrent rental or lease of such transferred Property from such Person) at any time of any Property to a Person, other than an Affiliate, for an Acceptable Consideration, if each of the following conditions would be satisfied with respect to such Transfer: (A) the sum of (I) the current book value of such Property, plus (II) the aggregate book value of all other Property of the Company and the Subsidiaries Transferred (other than in Transfers referred to in the foregoing clause (i) and clause (ii) (collectively, "EXCLUDED TRANSFERS")) during the period beginning on the first day of the then current fiscal year of the Company and ended immediately prior to the date of such Transfer, would not exceed ten percent (10%) of Consolidated Total Assets determined as at the end of the most recently ended fiscal year of the Company prior to giving effect to such Transfer, (B) the sum of (I) the current book value of such Property, plus (II) the aggregate book value of all other Property of the Company and the Subsidiaries Transferred (other than in Excluded Transfers) during the period commencing on July 31, 1996 and ended at the time of such Transfer, would not exceed twenty percent (20%) of Consolidated Total Assets determined as at the end of the most recently ended fiscal year of the Company prior to giving effect to such Transfer, and (C) immediately prior to, and immediately after the consummation of such transaction, and after giving effect thereto, no Default or Event of Default exists or would exist, 37 provided, that all or any portion of the assets which are the subject of any Transfer of Property shall be excluded for purposes of clause (A) and clause (B) of this Section 6.15(a)(iii) if, within three hundred sixty (360) days after such Transfer, the entire proceeds of such Transfer (net of ordinary and reasonable transaction costs and expenses incurred in connection with such Transfer) are applied by the Company or such Subsidiary to: (y) the purchase of operating assets of the Company or any Subsidiary reasonably equal in value to the Property which is the subject of such Transfer, so long as each such investment shall not have been included in the calculation of any other exclusion of any other Transfer proposed to be excluded from the operation of clause (A) or clause (B) of this Section 6.15(a)(iii), or (z) an optional prepayment of Notes pursuant to Section 4.4. Notwithstanding anything to the contrary contained herein, the Company shall not, and shall not permit any Subsidiary to, sell, lease as lessor, transfer or otherwise dispose of any of the Collateral except as expressly permitted by Section 6.15(c). Nothing in this Section 6.15(a) shall be deemed to permit the Company or any Subsidiary to violate any provisions of Section 6.16. (B) TRANSFERS OF SUBSIDIARY STOCK. The Company shall not, and shall not permit any Subsidiary to, Transfer any shares of the capital stock (or any warrants, rights or options to purchase stock or other Securities exchangeable for or convertible into capital stock) of a Subsidiary (such capital stock, warrants, rights, options and other Securities herein called "SUBSIDIARY STOCK"), nor shall any Subsidiary issue, sell or otherwise dispose of any shares of its own Subsidiary Stock, provided that the foregoing restrictions do not apply to: (I) the issuance by a Subsidiary of shares of its own Subsidiary Stock to the Company or a Wholly-Owned Subsidiary; (II) Transfers by the Company or a Subsidiary of shares of Subsidiary Stock to the Company or a Wholly-Owned Subsidiary; (III) the issuance by a Subsidiary of directors' qualifying shares; and (IV) the Transfer of all of the Subsidiary Stock of a Subsidiary owned by the Company and the other Subsidiaries if 38 (A) such Transfer satisfies the requirements of Section 6.15(a)(iii); (B) in connection with such Transfer the entire investment (whether represented by stock, Debt, claims or otherwise) of the Company and the other Subsidiaries in such Subsidiary is Transferred to a Person other than the Company or a Subsidiary not simultaneously being disposed of; (C) the Subsidiary being disposed of has no continuing investment in any other Subsidiary not simultaneously being disposed of or in the Company; and (D) immediately prior to, and immediately after the consummation of such Transfer, and after giving effect thereto, no Default or Event of Default exists or would exist. For purposes of determining the book value of Property constituting Subsidiary Stock being Transferred as provided in clause (iv) above, such book value shall be deemed to be the aggregate book value of all assets of the Subsidiary that shall have issued such Subsidiary Stock. Nothing in this Section 6.15(b) shall be deemed to permit the Company or any Subsidiary to (x) sell any shares of capital stock of any Subsidiary in violation of Section 6.2(d)(ii) or (y) violate any of the provisions of Section 6.16. (C) TRANSFERS OF COLLATERAL. The Company shall not, and shall not permit any Subsidiary to, sell or otherwise Transfer any Property constituting Collateral, except Transfers for an Acceptable Consideration of obsolete or worn-out equipment constituting Collateral, or excess equipment constituting Collateral, in each case that is no longer useful in the business of the Company or such Subsidiary, if each of the following conditions would be satisfied with respect to such Transfer: (I) the sum of (A) the current book value of such Property, plus (B) the aggregate book value of all other Property of the Company and the Subsidiaries Transferred pursuant to this Section 6.15(c) during the period beginning on the first day of the then current fiscal year of the Company and ended immediately prior to the date of such Transfer, 39 would not exceed five million dollars ($5,000,000), (II) the sum of (A) the current book value of such Property, plus (B) the aggregate book value of all other Property of the Company and the Subsidiaries Transferred pursuant to this Section 6.15(c) during the period commencing on July 31, 1996 and ended at the time of such Transfer, would not exceed twenty million dollars ($20,000,000) and (III) immediately prior to, and immediately after the consummation of such transaction, and after giving effect thereto, no Default or Event of Default exists or would exist, provided, that all or any portion of the assets which are the subject of any Transfer of Property shall be excluded for purposes of clause (i) and clause (ii) of this Section 6.15(c) if, within three hundred sixty (360) days after such Transfer, the entire proceeds of such Transfer (net of ordinary and reasonable transaction costs and expenses incurred in connection with such Transfer) are applied by the Company or such Subsidiary to: (y) the purchase of Property of the Company or any Subsidiary reasonably equal in value or use to the Property which is the subject of such Transfer, so long as (1) such Property is subject to a perfected first-priority security interest in favor of the Security Trustee for the benefit of the holders from time to time of the Notes, (2) such Property constitutes Collateral and (3) each such investment shall not have been included in the calculation of any other exclusion of any other Transfer proposed to be excluded from the operation of clause (i) or clause (ii) of this Section 6.15(c), or (z) an optional prepayment of Notes pursuant to Section 4.4. The Company acknowledges and agrees that until applied pursuant to this Section 6.15(c), the net proceeds of any such Transfer of Collateral by the Company or any Subsidiary shall be held in trust by the Security Trustee pursuant to the terms of the Security Documents. 6.16 TRADEMARK SUBSIDIARIES. (A) GENERALLY. The Company shall not, and shall not permit any Subsidiary other than a Trademark Subsidiary to, own any patents, 40 trademarks, service marks, trade names, copyrights and other similar licenses and intangibles used or useful in the conduct of the business of the Company or any Subsidiary. (B) OWNERSHIP OF TRADEMARK SUBSIDIARIES. The Company (i) shall, at all times, maintain each Trademark Subsidiary as a Wholly-Owned Subsidiary and (ii) shall not permit any of the capital stock of any Trademark Subsidiary to be subject to a Lien. (C) NO SALE OR MERGER. The Company shall not permit any Trademark Subsidiary to merge with or into, consolidate with, or sell, lease, transfer or otherwise dispose of all or substantially all of its Property to, any other Person other than another Trademark Subsidiary, or permit any other Person other than a Trademark Subsidiary to merge with or into or consolidate with it. The Company shall not permit any Trademark Subsidiary to sell, lease as lessor, license as licensor, transfer or otherwise dispose of any patents, trademarks, service marks, trade names, copyrights and licenses. (D) NO DEBT OR LIENS. The Company shall not permit any Trademark Subsidiary to cause or permit, or agree or consent 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. The Company shall not at any time permit any Trademark Subsidiary to be or become liable for any Debt or to issue any Mandatorily Redeemable Stock. 6.17 ENVIRONMENTAL COMPLIANCE. (A) COMPLIANCE. The Company shall, and shall cause each Subsidiary to, comply with all Environmental Protection Laws in effect in each jurisdiction where it is doing business and where the failure to comply with which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (B) LIABILITY. The Company shall not, and shall not permit any Subsidiary to, permit itself to be subject to any liability under any Environmental Protection Laws that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (C) MORRELL. The Company shall cause Morrell to use its best efforts to comply with all reasonable environmental testing, hazard prevention and remediation recommendations of its environmental consultants with respect to the real Property of Morrell identified in the Morrell Mortgage. 41 6.18 LINE OF BUSINESS. The Company shall not, and shall not permit any Subsidiary to, engage in any business other than businesses engaged in by the Company and the Subsidiaries on the Closing Date. 6.19 TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall not permit any Subsidiary to, enter into any transaction, including, without limitation, the purchase, sale or exchange of Property or the rendering of any service, with any Affiliate, except in the ordinary course of 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 obtain in a comparable arm's-length transaction with a Person not an Affiliate. 6.20 TAX CONSOLIDATION. The Company shall not file or consent to the filing of a consolidated tax return with any Person other than a Subsidiary, or permit the filing of any consolidated tax return by any Subsidiary with any Person other than the Company or another Subsidiary. 6.21 ERISA. (A) COMPLIANCE. The Company shall, and shall cause each ERISA Affiliate to, at all times with respect to each Pension Plan, (I) make timely payment of contributions required (A) to meet the minimum funding standard set forth in ERISA or the IRC with respect thereto, or (B) to be paid as provided for by section 515 of ERISA, and (II) comply with all other applicable provisions of ERISA. (B) RELATIONSHIP OF VESTED BENEFITS TO PENSION PLAN ASSETS. (I) The Company shall not at any time permit the present value of all employee benefits vested under all Morrell Pension Plans to exceed the assets of such Morrell Pension Plans allocable to such vested benefits at such time by more than fifty-five million dollars ($55,000,000), in each case determined pursuant to Section 6.21(c). (II) The Company shall not at any time permit the present value of all employee benefits vested under all Pension Plans other 42 than Morrell Pension Plans to exceed the assets of all such Pension Plans other than Morrell Pension Plans allocable to such vested benefits at such time by more than five percent (5%) of Consolidated Total Liabilities, in each case determined pursuant to Section 6.21(c). (C) VALUATIONS. All assumptions and methods used to determine the actuarial valuation of vested employee benefits under Pension Plans and the present value of assets of Pension Plans shall be reasonable in the good faith judgment of the Company and shall comply with all requirements of law. (D) PROHIBITED ACTIONS. The Company shall not, and shall not permit any ERISA Affiliate to: (I) engage in any "prohibited transaction" (as such term is defined in section 406 of ERISA or section 4975 of the IRC) or "reportable event" (as such term is defined in section 4043 of ERISA) that would result in the imposition of a material tax or penalty; (II) incur with respect to any Pension Plan any "accumulated funding deficiency" (as such term is defined in section 302 of ERISA), whether or not waived; (III) terminate any Pension Plan in a manner that could result in (A) the imposition of a Lien on the Property of the Company or any Subsidiary pursuant to section 4068 of ERISA or (B) the creation of any liability under section 4062 of ERISA; (IV) fail to make any payment required by section 515 of ERISA; or (V) be an "employer" (as such term is defined in section 3 of ERISA) required to contribute to any Multiemployer Plan or a "substantial employer" (as such term is defined in section 4001 of ERISA) required to contribute to any Multiple Employer Pension Plan if, at such time, it could reasonably be expected that the Company or any Subsidiary will incur withdrawal liability in respect of such Multiemployer Plan and such liability, if incurred, together with the aggregate amount of all other withdrawal liability as to which there is a reasonable expectation of incurrence by the 43 Company or any Subsidiary under any one or more Multiemployer Plans, could reasonably be expected to have a Material Adverse Effect. (E) FOREIGN PENSION PLANS. To the extent that the Company or any Subsidiary is subject to any requirements of any Foreign Pension Plan, the Company shall, and shall cause each such Subsidiary to, comply with such requirements if the failure to so comply would have, either individually or in the aggregate, a Material Adverse Effect. 6.22 GUARANTIES. (A) The Company shall not, and shall not permit any Subsidiary to, be or become liable in respect of any Guaranty except (I) Guaranties of Debt which constitutes a part of Consolidated Funded Debt; (II) Guaranties of obligations incurred in the ordinary course of business of the Company and the Subsidiaries; (III) Guaranties of liabilities which constitute a part of Consolidated Current Liabilities (including, without limitation, Guaranties of obligations of the Company and the Subsidiaries under Revolving Credit Agreements to the extent such Guaranties are not permitted by clause (i) above); and (IV) Guaranties of amounts payable with respect to Operating Rentals constituting a portion of Consolidated Fixed Charges. (B) Notwithstanding the provisions of clause (a) above, the Company shall not permit any Subsidiary to (I) be or become liable for any Guaranty of Debt of the Company, any other Subsidiary or any Affiliate, or (II) issue any Mandatorily Redeemable Stock, in each case unless such Subsidiary enters into an enforceable and unconditional Guaranty of the obligations of the Company under the Notes, upon terms and conditions satisfactory to the Required Holders. Notwithstanding the foregoing, in no event shall the Company or any Subsidiary be or become liable in respect of any Guaranty if the indebtedness or other liabilities that are the subject of such Guaranty would not be permitted pursuant to Section 6.6 or Section 6.7. 44 6.23 PRIVATE OFFERING. The Company shall not, and shall not permit any Subsidiary or any Person acting on its behalf to, offer the Notes or any part thereof or any similar Securities for issuance or sale to, or solicit any offer to acquire any of the same from, any Person so as to bring the issuance and sale of the Notes within the provisions of section 5 of the Securities Act. 6.24 COVENANTS REGARDING THE BLADEN COUNTY COGENERATION PROPERTY. The Company covenants and agrees that, in the event the Company or any Affiliate shall acquire all or any portion of the Bladen County Cogeneration Property pursuant to the Bladen County Option Documents or otherwise, the Company shall, simultaneously with such acquisition, cause the Bladen County Cogeneration Property (or the Portion thereof) so acquired to be pledged as additional collateral security for the indebtedness evidenced by the Notes pursuant to documentation and in a manner that is in all respects satisfactory to the Required Holders. The Company shall pay any and all fees, costs and expenses including, without limitation, legal fees and expenses and title insurance charges and premiums, incurred by the holders of the Notes, the Security Trustee and the other parties to such transaction. The Company further covenants and agrees that it shall not, directly or indirectly, terminate, modify or amend any of the Bladen County Option Documents, without the prior written consent of the Required Holders. 7. INFORMATION AS TO COMPANY AND THE GUARANTORS 7.1 FINANCIAL AND BUSINESS INFORMATION. The Company shall deliver to each holder of Notes: (A) COMPANY QUARTERLY STATEMENTS -- as soon as practicable 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), and in any event within forty-five (45) days thereafter, duplicate copies of: (I) consolidated and consolidating balance sheets of the Company and its consolidated subsidiaries, and of the Company and the Subsidiaries, as at the end of such quarter, and (II) consolidated and consolidating statements of income and cash flows of the Company and its consolidated subsidiaries, and of the Company and the Subsidiaries, for such quarter and (in 45 the case of the second and third quarters) for the portion of the fiscal year endingwith 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 as complete and correct, subject to changes resulting from year-end adjustments, by a Senior Financial Officer, accompanied by the certificate required by Section 7.2; (B) COMPANY ANNUAL STATEMENTS -- as soon as practicable after the end of each fiscal year of the Company, and in any event within ninety (90) days thereafter, duplicate copies of: (I) a consolidated balance sheet of the Company and its consolidated subsidiaries, and a consolidating balance sheet of the Company and each Guarantor, 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 consolidated subsidiaries, and consolidating statements of income and cash flows of the Company and each Guarantor, for such year, setting forth in each case in comparative form the figures for the immediately preceding fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by (A) in the case of such consolidated financial statements, an audit report thereon of independent certified public accountants of recognized national standing, which opinion shall state, without qualification, 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 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, (B) a certification by a Senior Financial Officer that such consolidated statements are complete and correct, and (C) the certificates required by Section 7.2 and Section 7.3; 46 (C) AUDIT REPORTS -- promptly upon receipt thereof, a copy of each other report submitted to the Company or any Subsidiary by independent accountants in connection with any management report, special audit report or comparable analysis prepared by them with respect to the books of the Company or any Subsidiary; (D) SEC AND OTHER REPORTS -- promptly upon their becoming available, a copy of each financial statement, report (including, without limitation, each Quarterly Report on Form 10-Q, each Annual Report on Form 10-K and each Current Report on Form 8-K), notice or proxy statement sent by the Company or any Subsidiary to stockholders generally and of each regular or periodic report and any registration statement, prospectus or written communication (other than transmittal letters), and each amendment thereto, in respect thereof filed by the Company or any Subsidiary with, or received by, such Person in connection therewith from, the National Association of Securities Dealers, any securities exchange or the Securities and Exchange Commission or any successor agency; (E) ERISA -- (I) promptly (and in any event, within five (5) Business Days) after any officer of the Company becoming aware of any (A) "reportable event" (as defined in section 4043 of ERISA), or (B) "prohibited transaction" (as defined in section 406 of ERISA or section 4975 of the IRC), in connection with any Pension Plan or any trust created thereunder, a written notice specifying the nature thereof, what action the Company is taking or proposes to take with respect thereto and, when known, any action taken by the IRS, the Department of Labor or the PBGC with respect thereto, and (II) promptly (and in any event, within five (5) Business Days) after any officer of the Company becoming aware thereof, written notice of and, where applicable, a description of (A) any notice from the PBGC in respect of the commencement of any proceedings pursuant to section 4042 of ERISA to terminate any Pension Plan or for the appointment of a trustee to administer any Pension Plan, 27 (B) any distress termination notice delivered to the PBGC under section 4041 of ERISA in respect of any Pension Plan, and any determination of the PBGC in respect thereof, (C) the placement of any Multiemployer Plan in reorganization status under Title IV of ERISA, (D) any Multiemployer Plan becoming "insolvent" (as defined in section 4245 of ERISA) under Title IV of ERISA, or (E) the whole or partial withdrawal of the Company or any ERISA Affiliate from any Multiemployer Plan and the withdrawal liability incurred in connection therewith; (F) ACTIONS, PROCEEDINGS -- promptly after 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 probability of an adverse determination and that, if adversely determined, would have a Material Adverse Effect; (G) CERTAIN ENVIRONMENTAL MATTERS -- prompt written notice of and a description of any event or circumstance that, had such event or circumstance occurred or existed prior to the Closing Date, would have been required to be disclosed as an exception to any statement set forth in Section 2.14 and a description of the action that the Company is taking or proposes to take with respect thereto; (H) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- within five (5) Business Days of any Senior Officer becoming aware of the existence of any condition or event that constitutes a Default or an Event of Default, 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; (I) NOTICE OF CLAIMED DEFAULT -- within five (5) Business Days of any Senior Officer becoming aware that the holder of any Note, or of any Debt or any Security of the Company or any Subsidiary, shall have given notice or taken any other action with respect to a claimed Default, Event of Default, default or event of default, a written notice specifying the notice given or action taken by such holder and the nature of the claimed Default, Event of Default, default or event of default and what action the Company is taking or proposes to take with respect thereto; (J) INFORMATION FURNISHED UNDER REVOLVING CREDIT AGREEMENT -- at any time that at least one Revolving Credit Agreement is 48 in effect, at the same time required thereby, a copy of each item required to be furnished by the Company or any Subsidiary pursuant thereto; (K) OTHER CREDITORS -- promptly upon the request of any holder of Notes, copies of any statement, report or certificate furnished to any holder of Debt of the Company or any Subsidiary to the extent that the information contained in such statement, report or certificate has not already been delivered to each holder of Notes; (L) RULE 144A -- with reasonable promptness, upon the request of any holder of Notes, information required to comply with 17 C.F.R. (S)230.144A, as amended from time to time; and (M) REQUESTED INFORMATION -- with reasonable promptness, such other data and information as from time to time may be reasonably requested by any holder of Notes. 7.2 OFFICER'S CERTIFICATES. Each set of financial statements delivered to each holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) 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 Section 6.4 through Section 6.8, inclusive, and Section 6.10 through Section 6.15, inclusive, during the period covered by the income statement then being furnished (including with respect to each such Section, 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 amounts, ratio or percentage then in existence); and (B) EVENT OF DEFAULT -- a statement that the signer has reviewed the relevant terms of the Financing Documents and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and the Subsidiaries from the beginning of the accounting period covered by the income statements being delivered therewith to the date of the certificate and that such review shall not have 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, specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto. 49 7.3 ACCOUNTANTS' REPORT. Each set of annual financial statements delivered pursuant to Section 7.1(b) shall be accompanied by a certificate of the accountants who certify such financial statements, stating that they have reviewed this Agreement and stating further, whether, in making their audit, such accountants have become aware of any condition or event that then constitutes a Default or an Event of Default, and, if such accountants are aware that any such condition or event then exists, specifying the nature and period of existence thereof. 7.4 INSPECTION. The Company shall permit the representatives of each holder of Notes (at the expense of the Company) to visit and inspect any of the 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, employees and independent public accountants (former and present) (and by this provision the Company authorizes all such accountants to discuss the finances and affairs of the Company and the Subsidiaries), all at such reasonable times and as often as may be reasonably requested. 8. EVENTS OF DEFAULT 8.1 NATURE OF EVENTS. An "EVENT OF DEFAULT" shall exist if any of the following occurs and is continuing: (A) PRINCIPAL AND MAKE-WHOLE AMOUNT PAYMENTS -- the Company shall fail to make any payment of principal or Make-Whole Amount on any Note on or before the date such payment is due; or (B) INTEREST PAYMENTS -- the Company shall fail to make any payment of interest on any Note on or before the date such payment is due; or (C) WARRANTIES OR REPRESENTATIONS -- any warranty, representation or other material statement by or on behalf of the Company or any Subsidiary contained herein or in any instrument furnished in compliance with or in reference hereto or any of the other Financing Documents shall have been false or misleading when made or deemed made; or (D) PARTICULAR COVENANT DEFAULTS -- the Company or any Subsidiary shall fail to perform or observe any covenant contained in Section 6.4 through Section 6.18, inclusive, Section 6.20, Section 6.22, Section 7.1(h) or Section 7.1(i); or 50 (E) OTHER DEFAULTS -- the Company or any Subsidiary shall fail to comply with any other provision hereof, and such failure continues for more than thirty (30) days after such failure shall first become known to any officer of the Company; or (F) DEFAULT ON DEBT OR OTHER SECURITY -- (I) the Company or any Subsidiary shall fail to make any payment on any Debt when due; (II) any event shall occur or any condition shall exist in respect of any Debt or any Security of the Company or any Subsidiary, or under any agreement securing or relating to such Debt or Security, that immediately or with the passage of time or the giving of notice or both: (A) causes (or permits any one or more of the holders thereof or a trustee therefor to cause) such Debt or Security, or a portion thereof, to become due prior to its stated maturity or prior to its regularly scheduled date or dates of payment; (B) permits any one or more of the holders thereof or a trustee therefor to elect any of the directors on the Board of Directors of the Company or such Subsidiary; or (C) permits any one or more of the holders thereof or a trustee therefor to require the Company or any Subsidiary to repurchase such Debt or Security from such holder; provided that the aggregate amount of all obligations in respect of all such Debt and Securities referred to in this clause (f) exceeds at such time ten million dollars ($10,000,000); or (III) an "Event of Default" shall have occurred under, and as defined in, any of the other Financing Documents and be continuing; or (G) INVOLUNTARY BANKRUPTCY PROCEEDINGS -- (I) a receiver, liquidator, custodian or trustee of the Company or any Subsidiary, or of all or any of the Collateral or any material Property of the Company or any Subsidiary, shall be appointed by court order and such order remains in effect for more than thirty (30) days; or an order for relief shall be entered with 51 respect to the Company or any Subsidiary, or the Company or any Subsidiary, shall be adjudicated insolvent; (II) any of the Collateral or any material Property of the Company or any Subsidiary shall be sequestered by court order and such order remains in effect for more than thirty (30) days; or (III) a petition shall be filed against the Company or any Subsidiary under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, and shall not be dismissed within thirty (30) days after such filing; or (H) VOLUNTARY PETITIONS -- the Company or any Subsidiary shall file a petition in voluntary bankruptcy or seeking relief under any provision of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, or shall consent to the filing of any petition against it under any such law; or (I) ASSIGNMENTS FOR BENEFIT OF CREDITORS, ETC. -- the Company or any Subsidiary shall make an assignment for the benefit of its creditors, or shall admit in writing its inability, or shall fail, to pay its debts generally as they become due, or shall consent to the appointment of a receiver, liquidator or trustee of the Company or any Subsidiary or of all or any part of the Property of them; or (J) UNDISCHARGED FINAL JUDGMENTS -- final judgment or judgments for the payment of money aggregating in excess of two million five hundred thousand dollars ($2,500,000) is or are outstanding against one or more of the Company and the Subsidiaries and any one of such judgments shall have been outstanding for more than thirty (30) days from the date of its entry and shall not have been discharged in full or stayed; or (K) CERTAIN OBLIGATIONS -- the undertakings of any Guarantor under the Joint and Several Guaranty shall at any time cease to constitute the legal, valid and binding obligation of such Guarantor, or any Guarantor or any Person acting by or on behalf of any Guarantor shall deny or disaffirm such Guarantor's obligations under the Joint and Several Guaranty or any undertaking of the Company hereunder shall at any time cease to constitute the legal, valid and binding obligation of the Company, enforceable against the Company. If any action, condition, event or other matter would, at any time, constitute an Event of Default under any provision of this Section 8.1, then an Event of Default shall exist, regardless of whether the same or a similar action, 52 condition, event or other matter is addressed in a different provision of this Section 8.1 and would not constitute an Event of Default at such time under such different provision. 8.2 DEFAULT REMEDIES. (A) ACCELERATION ON EVENT OF DEFAULT. If an Event of Default specified in clause (g), (h) or (i) of Section 8.1 shall exist, all of the Notes at the time outstanding shall automatically become immediately due and payable together with interest accrued thereon and, to the extent permitted by law, the Make-Whole Amount at such time with respect to the principal amount of such Notes, and all other amounts due under the Financing Documents, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and, if any other Event of Default shall exist, the holder or holders of at least thirty-five percent (35%) in principal amount of the Notes then outstanding (exclusive of Notes then owned by any one or more of the Company, any Subsidiary and any Affiliate) may exercise any right, power or remedy permitted to such holder or holders by law, and shall have, in particular, without limiting the generality of the foregoing, the right to declare the entire principal of, and all interest accrued on, all the Notes then outstanding to be, and such Notes shall thereupon become, forthwith due and payable, without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, and the Company shall forthwith pay to the holder or holders of all the Notes then outstanding the entire principal of, and interest accrued on, the Notes and, to the extent permitted by law, the Make-Whole Amount at such time with respect to such principal amount of the Notes. (B) ACCELERATION ON PAYMENT DEFAULT. During the existence of an Event of Default described in Section 8.1(a) or Section 8.1(b), and irrespective of whether the Notes then outstanding shall have been declared to be due and payable pursuant to Section 8.2(a), any holder of Notes who or that shall have not consented to any waiver with respect to such Event of Default may, at its option, by notice in writing to the Company, declare the Notes then held by such holder to be, and such Notes shall thereupon become, forthwith due and payable together with all interest accrued thereon, without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, and the Company shall forthwith pay to such holder the entire principal of and interest accrued on such Notes and, to the extent permitted by law, the Make-Whole Amount at such time with respect to such principal amount of the Notes and all other amounts due under the Financing Documents. 53 (C) VALUABLE RIGHTS. The Company acknowledges, and the parties hereto agree, that the right of each holder to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) is a valuable right and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes of any Series are prepaid or are accelerated as a result of an Event of Default is intended to provide compensation for the deprivation of such right under such circumstances. (D) OTHER REMEDIES. During the existence of an Event of Default and irrespective of whether the Notes then outstanding shall have been declared to be due and payable pursuant to Section 8.2(a) or Section 8.2(b) and irrespective of whether any holder of Notes then outstanding shall otherwise have pursued or be pursuing any other rights or remedies, but subject to the terms and conditions of the Trust Agreement, any holder of Notes may proceed to protect and enforce its rights hereunder, under such Notes and under the other Financing Documents by exercising such remedies as are available to such holder in respect thereof under applicable law, either by suit in equity or by action at law, or both, whether for specific performance of any agreement contained herein or in aid of the exercise of any power granted herein, provided that the maturity of such holder's Notes may be accelerated only in accordance with Section 8.2(a) and Section 8.2(b). (E) NONWAIVER AND EXPENSES. No course of dealing on the part of any holder of Notes nor any delay or failure on the part of any holder of Notes to exercise any right shall operate as a waiver of such right or otherwise prejudice such holder's rights, powers and remedies. If the Company shall fail to pay when due any principal of, or Make-Whole Amount or interest on, any Note, or shall fail to comply with any other provision of the Financing Documents, the Company shall pay to each holder of Notes, to the extent permitted by law, such further amounts as shall be sufficient to cover the costs and expenses, including but not limited to reasonable attorneys' fees, incurred by such holder in collecting any sums due on such Notes or in otherwise assessing, analyzing or enforcing any rights or remedies that are or may be available to it. 8.3 ANNULMENT OF ACCELERATION OF NOTES. If a declaration is made pursuant to Section 8.2(a), then and in every such case, the holders of sixty-six percent (66%) in aggregate principal amount of the Notes then outstanding (exclusive of Notes then owned by any one or more of the Company, any Subsidiary and any Affiliate) may, by written instrument filed with the Company, rescind and annul such declaration, and 54 the consequences thereof, provided that at the time such declaration is annulled and rescinded: (A) no judgment or decree shall have been entered for the payment of any moneys due on or pursuant hereto or the Notes; (B) all arrears of interest upon all the Notes and all other sums payable hereunder and under the Notes (except any principal of, or interest or Make-Whole Amount on, the Notes that shall have become due and payable by reason of such declaration under Section 8.2(a)) shall have been duly paid; and (C) each and every other Default and Event of Default shall have been waived pursuant to Section 10.5 or otherwise made good or cured; and provided further that no such rescission and annulment shall extend to or affect any subsequent Default or Event of Default or impair any right consequent thereon. 9. INTERPRETATION OF THIS AGREEMENT 9.1 TERMS DEFINED. As used herein, the following terms have the respective meanings set forth below or set forth in the Section following such term: ACCEPTABLE BANK - means any commercial bank (A) that is organized under the laws of the United States or any state thereof, (B) that has capital, surplus and undivided profits aggregating at least five hundred million dollars ($500,000,000), and (C) whose long-term unsecured debt obligations (or the long-term unsecured debt obligations of the bank holding company owning all of the capital stock of such bank) shall be rated "A3" or higher by Moody's or "A-" or higher by Standard & Poor's (or comparable ratings by any comparable successor agency). ACCEPTABLE CONSIDERATION -- means, with respect to any Transfer of any Property of the Company or any Subsidiary, cash consideration, promissory notes or such other consideration (or any combination of the foregoing) as is, in each case, determined by the Board of Directors of the Company or such Subsidiary, in its good faith opinion, to be in the best interests of the Company and to reflect the Fair Market Value of such Property. 55 ACCEPTABLE RATING -- means a rating of at least Baa2 by Moody's and, in addition, a rating of at least BBB by Standard & Poor's. AFFILIATE -- means, at any time, a Person (other than a Subsidiary) (A) that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Company, (B) that beneficially owns or holds five percent (5%) or more of any class of the Voting Stock of the Company, or (C) five percent (5%) or more of the Voting Stock (or in the case of a Person that is not a corporation, five percent (5%) or more of the equity interest) of which is beneficially owned or held by the Company or a Subsidiary, at such time. As used in this definition: Control -- means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. AGREEMENT, THIS -- means this agreement, as it may be amended or restated from time to time. APPLICABLE H.15 -- means, at any time, United States Federal Reserve Statistical Release H.15(519) or its successor publication most recently published and available to the public at such time, or if no such successor publication is available, then any other source of current information in respect of interest rates on securities of the United States of America that is generally available and, in the sole judgment of the Required Holders, provides information reasonably comparable to the H.15(519) report. ASSUMPTION AGREEMENT - means that certain Assumption Agreement pursuant to which Packing LLC agrees to assume the obligations of, and become a party to, the Packing-Bladen Deed of Trust and the Packing Security Agreement in the form of Exhibit E attached hereto to be recorded in the Land Records of Bladen County, North Carolina immediately following the recordation of the deed or other instrument of transfer of the Property which is the subject thereof from Packing to Packing LLC. 56 BANK FUNDED DEBT AMOUNT -- means, at any time, the smallest average daily principal amount of all Debt of the Company and the Subsidiaries under all Revolving Credit Agreements of the Company and the Subsidiaries which is outstanding during any period of thirty (30) consecutive days selected by the Company falling within the three hundred sixty-five (365) day period ending at such time. BLADEN COUNTY COGENERATION PROPERTY -- means that certain piece or parcel of land located in Hollow Township, Bladen County, North Carolina, together with a certain twenty-five (25) foot right of way easement, which property is more particularly described in that certain Deed made and entered into on or around July 16, 1997, by and between The Smithfield Packing Company, Incorporated, as grantor and party of the first part, and United Supply of America, as grantee and party of the second part, together with any and all buildings, structures, improvements, fixtures, equipment, machinery and other property now or hereafter affixed to, located on, within or beneath, or used in connection with said property. BLADEN COUNTY OPTION DOCUMENTS -- means that certain Steam Purchase and Sales Agreement dated July 16, 1997, between United Supply of America, as supplier, and The Smithfield Packing Company, Incorporated, as purchaser, together with that certain Memorandum of Option to Purchase made and executed by United Supply of America in connection therewith or any other instruments and agreements pursuant to which The Smithfield Packing Company, Incorporated, or its successors and assigns, may acquire all or any portion of the Bladen County Cogeneration Property. BOARD OF DIRECTORS -- means, at any time with respect to any Person, the board of directors of such Person, or any committee thereof which, in the instance, shall have the lawful power to exercise the power and authority of such board of directors. BROWN'S -- means Brown's of Carolina, Inc., a North Carolina corporation, and its successors and assigns. BUSINESS DAY -- means (A) with respect to any payment to be made to the holder of any Note under any of the Financing Documents, a day other than a Saturday, a Sunday or a day on which the bank designated by such holder to receive for such holder's account payments on such Note is required by law (other than a general banking moratorium or holiday for a period exceeding four (4) consecutive days) to be closed, and 57 (B) for all other purposes, a day other than a Saturday, a Sunday or a day on which the national banks located in New York City, New York, are required by law (other than a general banking moratorium or holiday for a period exceeding four (4) consecutive days) to be closed. CAPITAL LEASE -- means a lease with respect to which the lessee is required to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP, or for which the amount of the asset and the liability thereunder, as if so capitalized, should be disclosed in a note to such balance sheet. CAPITAL LEASE OBLIGATION -- means, with respect to any Person and a Capital Lease, the amount of the obligation of such Person as the lessee under such Capital Lease that would appear as a liability on a balance sheet of such Person prepared in accordance with GAAP. CHANGE IN CONTROL -- means the acquisition at any time after the Closing Date by any Person or group of related Persons of beneficial ownership of more than fifty percent (50%) of the Voting Stock of the Company outstanding (excluding for such purpose Persons who own shares through any employee benefit plan of the Company or any trust in connection therewith) at such time. CLOSING -- Section 1.2(b). CLOSING DATE -- Section 1.2(b). COLLATERAL -- shall have the meaning assigned to such term in the Trust Agreement. COLLATERAL RELEASE CONDITIONS -- means, at any time: (A) the Acceptable Rating is in full force and effect, not having been withdrawn by Moody's or Standard & Poor's; (B) any and all Liens on Property of the Company or any Guarantor securing Debt incurred under or pursuant to each Revolving Credit Agreement of the Company or any Subsidiary have been released or will be released on or prior to the Collateral Release Date; (C) the aggregate principal amount of all Debt of the Company and the Subsidiaries secured by Liens permitted solely by Section 6.13(a)(x) does not exceed fifteen percent (15%) of Consolidated Tangible Net Worth, determined at such time; 58 (D) the Company and the holders of the Notes shall have entered into an amendment to the Note Purchase Agreements, in form and substance satisfactory to all holders of the Notes, which provides for an amendment to the covenants set forth in Section 6.4 through 6.15, inclusive, such that the Company's obligations concerning its financial condition and results of operations are established in a manner which, if complied with, would result in the Company at all times maintaining an Acceptable Rating for its long term, senior unsecured debt; and (E) no Default or Event of Default exists; in each case as of such time. COLLATERAL RELEASE DATE -- Section 1.5. COMPANY -- has the meaning specified in the introductory sentence. COMPANY FISCAL YEAR NET WORTH INCREASE AMOUNT -- means, for any fiscal year of the Company, the greater of (I) fifty percent (50%) of Consolidated Net Income for such fiscal year and (II) zero dollars ($0). CONSOLIDATED CURRENT ASSETS -- means, at any time, the aggregate amount at which the current assets of the Company and the Subsidiaries would be shown on a consolidated balance sheet for such Persons at such time. CONSOLIDATED CURRENT LIABILITIES -- means, at any time, the aggregate amount of current liabilities of the Company and the Subsidiaries as would be shown on a consolidated balance sheet for such Persons at such time including, without limitation, all liabilities of the Company and the Subsidiaries under the Revolving Credit Facilities (other than the Bank Funded Debt Amount) at such time. CONSOLIDATED EBITDA -- means, with respect to any fiscal period, the sum of (A) Consolidated Net Income, plus (B) the aggregate amount of all interest expense, depreciation, amortization and income taxes, 59 (to the extent, and only to the extent, that such aggregate amount was deducted in the computation of Consolidated Net Income), in each case accrued for such period by the Company. CONSOLIDATED FIXED CHARGES -- means, with respect to any fiscal period, the sum of (A) the amount payable in respect of such fiscal period with respect to interest due on, or with respect to, Debt (including, without limitation, the Notes) owing by or guaranteed by any one or more of the Company and the Subsidiaries and including, without limitation, amortization of debt discount and expense and imputed interest in respect of Capital Lease Obligations of the Company and the Subsidiaries, plus (B) the amount payable in respect of such fiscal period with respect to Operating Rentals payable by any one or more of the Company and the Subsidiaries, determined on a consolidated basis for the Company and the Subsidiaries for such period. CONSOLIDATED FUNDED DEBT -- means, at any time, the aggregate amount of Funded Debt of the Company and the Subsidiaries, determined on a consolidated basis for such Persons at such time. CONSOLIDATED INTANGIBLE ASSETS -- means, at any time, the aggregate amount of Intangible Assets of the Company and the Subsidiaries, determined on a consolidated basis at such time. CONSOLIDATED NET INCOME -- means, with respect to any fiscal period, net earnings (or loss) after income taxes of the Company and the Subsidiaries determined on a consolidated basis for such Persons for such period, provided there shall be excluded: (A) any net income or gain (or net loss) during such period from any extraordinary items, and (B) the income (or loss) of any Person (other than a Subsidiary) in which the Company or any Subsidiary has an ownership interest, except to the extent that any such income has been actually received by the Company or such Subsidiary in the form of cash dividends or similar cash distributions. CONSOLIDATED NET INCOME AVAILABLE FOR FIXED CHARGES -- means, with respect to any fiscal period, the sum of 60 (A) Consolidated Net Income, plus (B) the aggregate amount of (I) income taxes, and (II) Consolidated Fixed Charges, (to the extent, and only to the extent, that such aggregate amount was reflected in the computation of Consolidated Net Income), in each case accrued for such period by the Company and the Subsidiaries, determined on a consolidated basis for such Persons. CONSOLIDATED SENIOR FUNDED DEBT -- means, at any time, the result of (a) Consolidated Funded Debt at such time minus (b) Senior Subordinated Debt at such time. CONSOLIDATED SHAREHOLDERS' EQUITY -- means, at any time, the aggregate amount of shareholders' equity of the Company and the Subsidiaries as would be shown on a consolidated balance sheet of such Persons at such time. CONSOLIDATED TANGIBLE NET WORTH -- means, at any time, the result of (a) Consolidated Shareholders' Equity, minus (b) Consolidated Intangible Assets, determined in each case at such time. CONSOLIDATED TOTAL ASSETS -- means, at any time, the aggregate amount at which all assets of the Company and the Subsidiaries would be shown on a consolidated balance sheet for such Persons at such time. CONSOLIDATED TOTAL CAPITALIZATION -- means, at any time, the sum of (a) Consolidated Shareholders' Equity, plus (b) Consolidated Funded Debt, determined in each case at such time. CONSOLIDATED TOTAL LIABILITIES -- means, at any time, the aggregate amount at which all liabilities of the Company and the Subsidiaries (including, without limitation, (a) all Guaranties of Debt by 61 such Persons and (b) all amounts attributable to Mandatorily Redeemable Stock of the Company and the Subsidiaries to the extent that such Mandatorily Redeemable Stock is redeemable within one year of such time) would be shown on a consolidated balance sheet for such Persons at such time. CONSOLIDATED WORKING CAPITAL -- means, at any time, the result of (A) Consolidated Current Assets, minus (B) Consolidated Current Liabilities, determined in each case at such time. CONTROL EVENT -- means (A) the execution by the Company, any Subsidiary or any Affiliate of any letter of intent with respect to any proposed transaction or event or series of transactions or events that, individually or in the aggregate, could reasonably be expected to result in a Change in Control, (B) the execution of any written agreement that, when fully performed by the parties thereto, would result in a Change in Control, or (C) the making of any written offer by any Person to the holders of Voting Stock of the Company which offer, if accepted by the requisite number of such holders, would result in a Change in Control. CONTROL PREPAYMENT DATE -- Section 4.3(a). CREDIT FACILITY -- means that certain Credit Agreement among the Company, certain of the Subsidiaries, The Chase Manhattan Bank as administrative agent and the lenders party thereto, providing for an aggregate amount of up to six hundred fifty million dollars ($650,000,000) in loans to the Company, as amended from time to time. DEBT -- means, at any time, with respect to any Person, without duplication: (A) all obligations of such Person for borrowed money (including, without limitation, all obligations of such Person evidenced by any debenture, bond, note, commercial paper or Security, but also including all such obligations for borrowed money not so evidenced); 62 (B) all obligations of such Person to pay the deferred purchase price of Property or services, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreements, provided that accounts payable incurred in the ordinary course of business of such Person shall be excluded from this clause (b); (C) all Capital Lease Obligations of such Person; (D) all obligations for borrowed money secured by any Lien existing on Property owned by such Person (whether or not such obligations have been assumed by such Person or recourse in respect thereof is available against such Person); and (E) any Guaranty of such Person of any obligation or liability of another Person of a type described in any of clause (a) through clause (d), inclusive, of this definition. Debt of a Person shall include all obligations of such Person of the character described in clause (a) through clause (e) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. DEEDS OF TRUST -- means, collectively, the Packing-Smithfield Deed of Trust, the Packing-Bladen Deed of Trust, the Gwaltney-Smithfield Deed of Trust and the Morrell Mortgage. DEFAULT -- means an event or condition the occurrence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. DEPRECIATION -- means, for any fiscal year of the Company, the aggregate amount of depreciation attributable to the "Improvements" (as such term is defined in the Deeds of Trust) which would be included in the total amount of depreciation that would be shown on a statement of income prepared in respect of the Company and the Subsidiaries on a consolidated basis for such fiscal year. DISTRIBUTION -- means (A) any dividend or other distribution, direct or indirect, on account of capital stock of the Company or any Subsidiary (except dividends payable solely in shares of capital stock other than Mandatorily Redeemable Stock of the Company or such Subsidiary), and 63 (B) any redemption, retirement, purchase or other acquisition, direct or indirect, of any capital stock of the Company or any Subsidiary, or of any warrants, rights or other options to acquire any shares of such capital stock. ENVIRONMENTAL INDEMNIFICATION AGREEMENT -- means, collectively, the environmental indemnification agreements, dated as of July 15, 1996, as amended from time to time, entered into by the Company with each of Packing, Gwaltney and Morrell, to and for the benefit of the Security Trustee and the holders of the Notes. ENVIRONMENTAL PROTECTION LAW -- means any federal, state, county, regional or local law, statute, or regulation (including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act, the Superfund Amendments and Reauthorization Act, all amendments to any of the foregoing and all rules and regulations issued in connection therewith) enacted in connection with or relating to the protection or regulation of the environment, including, without limitation, those laws, statutes, and regulations regulating the disposal, removal, production, storing, refining, handling, transferring, processing, or transporting of Hazardous Substances, and any regulations, issued or promulgated in connection with such statutes by any Governmental Authority and any orders, decrees or judgments issued by any court of competent jurisdiction in connection with any of the foregoing. ERISA -- means the Employee Retirement Income Security Act of 1974, as amended from time to time. ERISA AFFILIATE -- means any corporation or trade or business that (I) is a member of the same controlled group of corporations (within the meaning of section 414(b) of the IRC) as the Company, or (II) is under common control (within the meaning of section 414(c) of the IRC) with the Company. EVENT OF DEFAULT -- Section 8.1. EXCLUDED TRANSFERS -- Section 6.15(a)(iii). EXISTING NOTE PURCHASE AGREEMENT -- Section 1.1. FAIR MARKET VALUE -- means, at any time, with respect to any Property, the sale value of such Property that would be realized in an arm's-length sale at such time between an informed and willing buyer, 64 and an informed and willing seller, under no compulsion to buy or sell, respectively. FINANCING DOCUMENTS -- means the Note Purchase Agreements, the Notes, the Joint and Several Guaranty, the Joinder Agreement, the Security Documents, the Intercreditor Agreement, the Environmental Indemnification Agreement and the other agreements and instruments to be executed pursuant to the terms of each of such Financing Documents, as each may be amended from time to time. FOREIGN PENSION PLAN -- means any plan, fund or other similar program (A) established or maintained outside of the United States of America by any one or more of the Company or the Subsidiaries primarily for the benefit of the employees (substantially all of whom are aliens not residing in the United States of America) of the Company or such Subsidiaries which plan, fund or other similar program provides for retirement income for such employees or results in a deferral of income for such employees in contemplation of retirement, and (B) not otherwise subject to ERISA. FUNDED DEBT -- means, at any time, with respect to any Person, without duplication: (A) all Debt of such Person (including, without limitation, the current portion thereof) that by its terms or by the terms of any instrument or agreement relating thereto matures, or that is otherwise payable or unpaid, more than one (1) year from, or is directly or indirectly renewable or extendible at the option of such Person to a date more than one (1) year (including, without limitation, an option of the debtor under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of more than one (1) year) from, the date of the creation of such Debt (notwithstanding that such Debt may be under certain contingencies payable on demand or within one (1) year after such date of creation), provided, however, that, with respect to the Company and the Subsidiaries, such Debt shall include, without duplication, only the Bank Funded Debt Amount and no other portion of any Debt outstanding under the Credit Facility; (B) all Capital Lease Obligations of such Person; and 65 (C) all Debt of such Person of the type specified in clause (e) of the definition of "Debt," provided that such Debt of such Person is in respect of or in support of Funded Debt of another Person. GAAP -- means generally accepted accounting principles as set forth from time to time in the statements, opinions and pronouncements of the American Institute of Certified Public Accountants and the Financial Accounting Standards Board or in such statements, opinions and pronouncements of such other entities as shall be approved by a significant segment of the accounting profession in the United States of America. GOVERNMENTAL AUTHORITY -- means (A) the government of (I) the United States of America and any state or other political subdivision thereof, or (II) any jurisdiction (A) in which the Company or any Subsidiary conducts all or any part of its business or (B) that asserts jurisdiction over the conduct of the affairs or Properties of the Company or any Subsidiary, or (B) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. GUARANTOR -- means each of the Original Guarantors, each of the New Guarantors and each other Person that becomes a "Guarantor" pursuant to the Joint and Several Guaranty. GUARANTY -- means, with respect to any Person (for the purposes of this definition, the "SUBJECT GUARANTOR"), any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person (the "PRIMARY OBLIGOR") in any manner (including, without limitation, obligations that arise as a matter of law or otherwise as a result of such Person's status as a general partner in a partnership or a holder of equity or other Property interest in a corporation, partnership, limited liability company or other business operation commonly referred to as a "joint venture"), whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by the Subject Guarantor: 26 (A) to purchase such indebtedness or obligation or any Property or assets constituting security therefor; (B) to advance or supply funds (I) for the purpose of payment of such indebtedness or obligation, or (II) to maintain working capital or other balance sheet condition or any income statement condition of the Primary Obligor or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation; (C) to lease Property or to purchase Securities or other Property or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of the Primary Obligor to make payment of the indebtedness or obligation; or (D) otherwise to assure the owner of the indebtedness or obligation of the Primary Obligor against loss in respect thereof. For purposes of computing the amount of any Guaranty, in connection with any computation of indebtedness or other liability, it shall be assumed that the indebtedness or other liabilities that are the subject of such Guaranty are direct obligations of the Subject Guarantor. GWALTNEY -- means Gwaltney of Smithfield, Ltd., a Delaware corporation, together with its successors and assigns. GWALTNEY SECURITY AGREEMENT -- means the Security Agreement, dated as of July 15, 1996, as amended from time to time, between Gwaltney and the Security Trustee, pursuant to which Gwaltney has granted a first-priority lien on and a security interest in certain personal property of Gwaltney to the Security Trustee for the benefit of the holders of the Notes. GWALTNEY-SMITHFIELD DEED OF TRUST -- means the Amended, Restated and Consolidated Deed of Trust, Security Agreement and Assignment of Rents and Leases, dated as of July 15, 1996, as amended from time to time, by Gwaltney in favor of Thomas E. Cabaniss and Laura R. Lucas, as trustees, for the benefit of the Security Trustee. GWALTNEY-SMITHFIELD PROPERTY -- means the real Property of Gwaltney identified in the Gwaltney-Smithfield Deed of Trust. 67 HAZARDOUS SUBSTANCES -- means any and all pollutants, contaminants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, radon gas, urea formaldehyde foam insulation, polychlorinated biphenyls, radioactive materials, petroleum and petroleum derivatives and by-products). INSTITUTIONAL INVESTOR -- means the Noteholders, any affiliate of any of the Noteholders, and any holder of Notes that is an "accredited investor" as defined in Section 2(15) of the Securities Act. INTANGIBLE ASSETS - means, with respect to any Person at any time, the following: (A) patents, copyrights, trademarks, trade names, service marks, brand names, franchises, goodwill, experimental expenses and other similar intangibles; (B) deferred assets (other than prepaid taxes, prepaid insurance, prepaid contract payments, prepaid license fees and other prepaid expenses which are refundable); (C) unamortized debt discount and expense; and (D) all other Property which would be considered to be intangible under GAAP. INTERCREDITOR AGREEMENT -- means the Intercreditor Agreement, dated as of July 15, 1996, as amended from time to time, among the Company, Gwaltney, Packing, SFFC, Patrick Cudahy Incorporated, Brown's and the Secured Parties (as defined therein). INVESTMENT -- means any investment, made in cash or by delivery of Property, by the Company or any Subsidiary: (A) in any Person, whether by acquisition of stock, indebtedness or other obligation or Security, or by loan, Guaranty, advance, capital contribution or otherwise; or (B) in any Property. 68 IRC -- means the Internal Revenue Code of 1986, together with all rules and regulations promulgated pursuant thereto, as amended from time to time. IRS -- means the Internal Revenue Service and any successor agency. JOINDER AGREEMENT -- means the Joinder Agreement, dated as of the Closing Date, entered into by each of the Guarantors, relating to the Joint and Several Guaranty. JOINT AND SEVERAL GUARANTY -- means the Joint and Several Guaranty, dated as of July 15, 1996, entered into by the Original Guarantors, as amended by the Joinder Agreement and as further amended or restated from time to time. LIEN -- means any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and including but not limited to the security interest lien arising from a mortgage, deed of trust, encumbrance, pledge, conditional sale or trust receipt or a lease, consignment or bailment for security purposes, and the filing of any financing statement under the Uniform Commercial Code of any jurisdiction, or an agreement to give any of the foregoing. The term "Lien" includes reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances (including, with respect to stock, stockholder agreements, voting trust agreements, buy-back agreements and all similar arrangements) affecting Property. For the purposes of this definition, each of the Company and the Subsidiaries is deemed to be the owner of any Property that it shall have acquired or holds subject to a conditional sale agreement, Capital Lease or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person for security purposes, and such retention or vesting is deemed a Lien. The term "Lien" does not include negative pledge clauses in agreements relating to the borrowing of money. MAKE-WHOLE AMOUNT -- means, at any time, with respect to a principal amount of Notes being prepaid (in whole or in part) or accelerated, the greater of (A) Zero Dollars ($0), and (B) the remainder of (I) the sum of the present values of the then remaining scheduled payments of principal and interest that 69 would be payable but for the prepayment or acceleration of such principal amount of Notes being prepaid or accelerated, minus (II) the sum of (A) the aggregate principal amount of the Notes so prepaid or accelerated, plus (B) interest on such principal amount accrued during the period beginning on the most nearly preceding scheduled interest payment date preceding prepayment or acceleration and ending on the date such principal amount was prepaid or accelerated. In determining such present values, a discount rate equal to the Make-Whole Discount Rate at such time with respect to such principal amount of Notes being prepaid or accelerated divided by four (4), and a discount period of three (3) months of thirty (30) days each shall be used. MAKE-WHOLE DISCOUNT RATE -- means, at any time, with respect to a principal amount of Notes being prepaid or accelerated, (A) the per annum percentage rate (rounded to the nearest three decimal places) equal to (I) the annual yield to maturity at such time of the United States Treasury obligation listed in the then Applicable H.15 for the most recently available day in such Applicable H.15 with a Treasury Constant Maturity (as such term is defined in such Applicable H.15) equal to the Weighted Average Life to Maturity of the principal amount of the Notes then being prepaid or accelerated, or, if no such United States Treasury obligation is so listed, then (II) the annual yield to maturity at such time determined by interpolating between (A) the annual yield to maturity of the United States Treasury obligations listed in such Applicable H.15 with a Treasury Constant Maturity (as such term is defined in such Applicable H.15) most nearly equal to and less than the Weighted Average Life to Maturity of the principal amount of Notes then being prepaid or accelerated, and 70 (B) the annual yield to maturity of the United States Treasury obligations listed in such Applicable H.15 with a Treasury Constant Maturity (as such term is defined in such Applicable H.15) most nearly equal to and greater than the Weighted Average Life to Maturity of the principal amount of Notes then being prepaid or accelerated, plus (B) fifty one-hundredths percent (0.50%) per annum. As used in this definition: Remaining Dollar-Years -- at any time with respect to any indebtedness for borrowed money means the product obtained by (a) multiplying (i) the amount of each then remaining required principal payment (including repayment of principal at final maturity) of such borrowing unpaid immediately prior to such time, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such time and the date each such required principal payment is due, and (b) calculating the sum of the products obtained in the preceding subsection (a). Weighted Average Life to Maturity -- at any time with respect to any indebtedness for borrowed money means the number of years obtained by dividing the then Remaining Dollar-Years of such indebtedness at such time by the then outstanding principal amount of such indebtedness. MANDATORILY REDEEMABLE STOCK -- means, with respect to any Person, each share of such Person's capital stock to the extent that it is (a) redeemable, payable or required to be purchased or otherwise retired or extinguished, or convertible into Debt of such Person (i) at a fixed or determinable date, whether by operation of a sinking fund or otherwise, (ii) at the option of any Person other than such Person or (iii) upon the occurrence of a condition not solely within the control of such Person, such as redemption required to be made out of future earnings or (b) convertible into other Mandatorily Redeemable Stock of such Person. 71 MATERIAL ADVERSE EFFECT -- means, with respect to any event or circumstance (either individually or in the aggregate with all other events and circumstances), an effect caused thereby or resulting therefrom that would be materially adverse as to, or in respect of (A) the business, prospects, profits, Properties or condition (financial or otherwise) of the Company (individually) or the Company and the Subsidiaries (taken as a whole), (B) the ability of the Company to perform its obligations set forth herein and in the Notes or the ability of any Guarantor to perform its obligations under the Joint and Several Guaranty, or (C) any of the rights or remedies of the holders of the Notes under any Financing Document or the enforceability of any Financing Document against the Company or any Guarantor. MOODY'S -- means Moody's Investors Service, Inc. MORRELL -- means John Morrell & Co., a Delaware corporation, and its successors and assigns. MORRELL MORTGAGE -- means the Mortgage, Security Agreement and Assignment of Rents and Leases, dated as of July 15, 1996, as amended from time to time, by Morrell in favor of the Security Trustee. MORRELL PENSION PLANS -- means, collectively, the defined benefit Pension Plan administered for salaried employees of Morrell and the defined benefit Pension Plan administered for hourly employees of Morrell, in each case as maintained on the Closing Date by Morrell. MORRELL SECURITY AGREEMENT -- means the Security Agreement, dated as of July 15, 1996, as amended from time to time, between Morrell and the Security Trustee, pursuant to which Morrell has granted a first-priority lien on and a security interest in certain personal property of Morrell to the Security Trustee for the benefit of the holders of the Notes. MULTIEMPLOYER PLAN -- means any multiemployer plan (as defined in Section 3(37) of ERISA) in respect of which the Company or any ERISA Affiliate is an "employer" (as such term is defined in Section 3(5) of ERISA). MULTIPLE EMPLOYER PENSION PLAN -- means any employee benefit plan within the meaning of Section 3(3) of ERISA (other than a Multiemployer Plan), subject to Title IV of ERISA, to which the Company or any ERISA Affiliate and an employer (as such term is defined in 72 Section 3 of ERISA) other than an ERISA Affiliate or the Company contribute. NEW GUARANTORS -- means each of Carroll's Foods, Inc., Carroll's Realty, Inc., Carroll's Realty Partnership, North Side Foods Corp., Lykes Meat Group, Inc., Circle Four Corporation, Brown's Farms, LLC, Carroll's Foods of Virginia, Inc., Smithfield-Carroll's Farms, Central Plains Farms, Inc., Packing LLC and Murphy Farms, Inc. 1999 NOTE PURCHASE AGREEMENT -- means, collectively, the separate Note Purchase Agreements, dated as of October 27, 1999, as amended up to and including the Closing Date, between the Company and each of the purchasers named on Annex 1 thereto. NOTE -- Section 1.1. NOTE PURCHASE AGREEMENTS -- Section 1.2(c). NOTEHOLDER -- means the Persons listed as holders of Notes on Annex 1 hereto. OBLIGORS --means the Company and the Guarantors. OPERATING LEASE -- means any lease other than a Capital Lease. OPERATING RENTALS -- means, at any time, all fixed and contingent payments (other than amounts constituting the purchase price payable by the lessee to acquire title to the Property which is the subject of a lease) that the lessee is required to make by the terms of any Operating Lease. ORIGINAL GUARANTORS -- means each of Gwaltney of Smithfield, Ltd., Morrell, The Smithfield Packing Company, Incorporated, SFFC, Inc., Patrick Cudahy Incorporated and Brown's. PACKING - means The Smithfield Packing Company, Incorporated, a Virginia corporation, together with its successors and assigns. PACKING LLC - means Smithfield Packing Real Estate, LLC, a Delaware limited liability company, and a Wholly-Owned Subsidiary. PACKING SECURITY AGREEMENT -- means the Security Agreement, dated as of July 15, 1996, as amended from time to time, between Gwaltney and the Security Trustee, pursuant to which Gwaltney has granted a first-priority lien on and a security interest in certain personal property of Gwaltney to the Security Trustee for the benefit of the holders 73 of the Notes, and as assumed by Packing LLC pursuant to the Assumption Agreement. PACKING-BLADEN DEED OF TRUST - means the Amended and Restated Deed of Trust, Security Agreement and Assignment of Rents and Leases, dated as of July 15, 1996, as amended from time to time, by Packing in favor of The Fidelity Company, as trustee, for the benefit of the Security Trustee, as assumed by Packing LLC pursuant to the Assumption Agreement. PACKING-SMITHFIELD DEED OF TRUST -- means the Amended, Restated and Consolidated Deed of Trust, Security Agreement and Assignment of Rents and Leases, dated as of July 15, 1996, as amended from time to time, by Packing in favor of Thomas E. Cabaniss and Laura R. Lucas, as trustees, for the benefit of the Security Trustee.. PBGC - means the Pension Benefit Guaranty Corporation and any successor corporation or governmental agency. PENSION PLAN -- means, at any time, any "employee pension benefit plan" (as such term is defined in Section 3(2) of ERISA) maintained at such time by the Company or any ERISA Affiliate for employees of the Company or such ERISA Affiliate, excluding any Multiemployer Plan, but including, without limitation any Multiple Employer Pension Plan. PERMITTED DISTRIBUTIONS -- Section 6.12(a). PERMITTED EXCEPTIONS -- means each of the items constituting a "Permitted Exception" in each of the Deeds of Trust. PERSON -- means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof. PRE-CLOSING EVENTS OF DEFAULT -- means any Event of Default which may have occurred on or after the date hereof and prior to the Closing Date which shall have resulted from a failure by the Company to perform its obligations under Section 6.11 or Section 6.12 of the Existing Note Purchase Agreement. PROPERTY -- means any interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible. 74 PURCHASE MONEY LIEN -- means: (A) a Lien held by any Person (whether or not the seller of such Property) on tangible Property (or a group of related items of Property the substantial portion of which are tangible) acquired or constructed by the Company or any Subsidiary, which Lien secures all or a portion of the related purchase price or construction costs of such Property, provided that such Lien (I) is created contemporaneously with, or within one hundred eighty (180) days of, such acquisition or construction, (II) encumbers only Property purchased or constructed after the Closing Date and acquired with the proceeds of the Debt secured thereby, and (III) is not thereafter extended to any other Property; and (B) any Lien existing on Property of any corporation at the time it becomes a Subsidiary, provided that (I) no such Lien shall extend to or cover any Property other than the Property subject to such Lien at the time of any such transaction, and (II) such Lien was not created in contemplation of any such transaction. REQUIRED HOLDERS -- means, at any time, the holder or holders of at least sixty-six and two-thirds percent (66-2/3%) in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by any one or more of the Company, any Subsidiary or any Affiliate), without regard to Series of such outstanding Notes. RESTRICTED INVESTMENTS -- means, at any time, all Investments except the following: (A) Investments in existence on the Closing Date and described on Part 9.1(RI) of Annex 2; (B) Investments in certificates of deposit, repurchase agreements and banker's acceptances issued by an Acceptable Bank, provided that such obligations mature within one (1) year from the date of acquisition thereof; 75 (C) Investments in commercial paper that (i) is rated either "P- 1" or higher by Moody's or "A-1" or higher by Standard & Poor's (or comparable ratings by any comparable successor agency) and (ii) mature not more than two hundred seventy (270) days from the date of creation thereof; (D) Investments in direct obligations of the United States of America, or any agency thereof, or obligations unconditionally guaranteed by the United States of America, provided that such obligations mature within one (1) year from the date of acquisition thereof; (E) Investments in Property to be used in the ordinary course of business of the Company and the Subsidiaries; (F) Investments in one or more Subsidiaries or in any corporation that concurrently with such Investment becomes a Subsidiary; and (G) Investments in one or more joint ventures that are engaged in the businesses engaged in by the Company and the Subsidiaries on the Closing Date, provided that the Company and/or one or more of the Subsidiaries maintains significant control over the business operations of such joint venture. RESTRICTED PAYMENT -- means (A) any Distribution, and (B) any Subordinated Payment. REVOLVING CREDIT AGREEMENT -- means, with respect to the Company or any Subsidiary, a credit or loan agreement to which the Company or such Subsidiary is a party and pursuant to which the Company or such Subsidiary is entitled to obtain working capital loans or other loans from the commercial bank or commercial banks party thereto, and shall include, without limitation, the Credit Facility. SECURITIES ACT -- means the Securities Act of 1933, as amended. SECURITY -- means "security" as defined by Section 2(1) of the Securities Act. SECURITY AGREEMENTS -- means, collectively, the Packing Security Agreement, the Gwaltney Security Agreement and the Morrell Security Agreement. 76 SECURITY DOCUMENTS -- means the Trust Agreement, the Deeds of Trust, the Security Agreements, the SFFC Pledge Agreement and the other agreements and instruments executed or required to be executed pursuant to the terms of each of such Security Documents, as each may be amended from time to time. SECURITY TRUSTEE -- shall have the meaning assigned to such term in the Trust Agreement. SENIOR FINANCIAL OFFICER -- means the chief financial officer, the principal accounting officer, the controller or the treasurer of the Company. SENIOR OFFICER -- means the chairman of the Board of Directors, the chief executive officer, the chief operating officer, the president, the chief financial officer, the general counsel or any vice president of the Company. SENIOR SUBORDINATED DEBT -- means, at any time, the aggregate principal amount of the Company's Senior Subordinated Notes due 2008 outstanding at such time and any additional Debt of the Company outstanding at such time which has subordination provisions and other terms and conditions acceptable to the Required Holders. SERIES -- means a series of Notes. SERIES A NOTES -- Section 1.1(a). SERIES B NOTES -- Section 1.1(b). SERIES C NOTES -- Section 1.1(c). SERIES D NOTES -- Section 1.1(d). SERIES E NOTES -- Section 1.1(e). SERIES F NOTES -- Section 1.1(f). SERIES G NOTES -- Section 1.1(g). SERIES H NOTES -- Section 1.1(h). SFFC -- means SFFC, Inc. a Delaware corporation, and its successors and assigns. SFFC PLEDGE AGREEMENT -- means the Note Pledge Agreement, dated as of July 15, 1996, as amended from time to time, between SFFC and the Security Trustee. 77 STANDARD & POOR'S -- means Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc. SUBORDINATED PAYMENT -- means payments of interest on, or payments or prepayments of principal of, or the setting apart of money for a sinking or other analogous fund for the purchase, redemption, retirement or other acquisition of any principal or interest on (a) Debt of the Company (including, without limitation, Senior Subordinated Debt) or any Guarantor which is subordinate or junior in right of payment or otherwise to the Debt evidenced by the Notes or the Joint and Several Guaranty or (b) Debt owing to any Affiliate. SUBSIDIARY -- means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Company. SUBSIDIARY STOCK -- Section 6.15(b). SURVIVING CORPORATION -- Section 6.14(a)(i). TRADEMARK SUBSIDIARY -- means a Subsidiary that has no material assets other than: (A) patents, trademarks, service marks, trade names, copyrights and other similar licenses and intangibles used or useful in the conduct of the business of the Company or any Subsidiary; (B) intercompany obligations in its favor obtained in respect of the granting of rights to the Company and the other Subsidiaries with respect to the patents, trademarks, service marks, trade names, copyrights and other similar licenses and intangibles held by it; and (C) in the case of SF Investments, Inc, certain other assets (including, without limitation, the capital stock of Smithfield 78 Companies, Inc.) that are material but in any event whose primary assets are of the type described in clauses (a) and (b) above. TRANSFER -- Section 6.15(a). TRUST AGREEMENT -- means the Trust Agreement, dated as of July 15, 1996, as amended from time to time, among the Company, Gwaltney, Morrell, Packing, SFFC, Patrick Cudahy Incorporated, Brown's, the Bank (as defined therein) and the Security Trustee. VOTING STOCK -- means capital stock of any class or classes of a corporation having power under ordinary circumstances to vote for the election of members of the board of directors, or Persons performing similar functions (irrespective of whether or not at the time stock of any of the class or classes shall have or might have special voting power or rights by reason of the happening of any contingency). WHOLLY-OWNED SUBSIDIARY -- means, at any time, any Subsidiary one hundred percent (100%) of all of the equity Securities (except directors' qualifying shares) and voting Securities of which are owned by any one or more of the Company and the other Wholly-Owned Subsidiaries at such time. 9.2 GAAP. Where the character or amount of any asset or liability or item of income or expense, or any consolidation or other accounting computation is required to be made for any purpose hereunder, it shall be done in accordance with GAAP as in effect on the date of, or at the end of the period covered by, the financial statements from which such asset, liability, item of income, or item of expense, is derived, or, in the case of any such computation, as in effect on the date as of which such computation is required to be determined, provided, that if any term defined herein includes or excludes amounts, items or concepts that would not be included in or excluded from such term if such term were defined with reference solely to GAAP, such term will be deemed to include or exclude such amounts, items or concepts as set forth herein. 9.3 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 actions taken by or on behalf of any partnership in which such Person is a general partner. 79 9.4 SECTION HEADINGS, TABLE OF CONTENTS AND CONSTRUCTION. The titles of the Sections and the Table of Contents 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 Agreement as a whole and not to any particular Section or other subdivision. Unless otherwise specified, references to Sections are to Sections of this Agreement, references to Annexes are to Annexes to this Agreement, references to Attachments are to Attachments to this Agreement and references to Exhibits are to Exhibits to this Agreement. 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. 9.5 GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL VIRGINIA LAW, EXCLUDING CHOICE-OF-LAW PROVISIONS OF SUCH COMMONWEALTH THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH COMMONWEALTH. 10. MISCELLANEOUS 10.1 COMMUNICATIONS. (A) METHOD; ADDRESS. All communications hereunder or under the Notes shall be in writing and sent by telecopy with receipt thereof confirmed, or by registered or certified mail with return receipt requested (postage prepaid), or by overnight courier, and shall be addressed, (I) if to the Company, Smithfield Foods, Inc. 200 Commerce Street Smithfield, Virginia 23430 Attention: Mr. C. Larry Pope Fax: (757) 365-3023 or at such other address as the Company shall have furnished in writing to all holders of the Notes at the time outstanding, (II) if to any Guarantor c/o Smithfield Foods, Inc. 200 Commerce Street Smithfield, Virginia 23430 Attention: Mr. C. Larry Pope Fax: (757) 365-3023 80 or at such other address as such Guarantor shall have furnished in writing to all holders of the Notes at the time outstanding, (III) if to any of the holders of the Notes, (A) if such holders are the Noteholders, at their respective addresses set forth on Annex 1, and further including any parties referred to on Annex 1 that are required to receive notices in addition to such holders of the Notes, and (B) if such holders are not the Noteholders, at their respective addresses set forth in the register for the registration and transfer of Notes maintained pursuant to Section 5.1, or to any such party at such other address as such party may designate by notice duly given in accordance with this Section 10.1 to the Company and the Guarantors (which other address shall be entered in such register). (B) WHEN GIVEN. Any communication so addressed and deposited in the United States mail, postage prepaid, by registered or certified mail (in each case, with return receipt requested) shall be deemed to be received on the third (3rd) succeeding Business Day after the day of such deposit (not including the date of such deposit). Any communication so addressed and delivered otherwise shall be deemed to be received when actually received at the address of the addressee. 10.2 REPRODUCTION OF DOCUMENTS. This Agreement and the other Financing Documents, and all documents relating hereto and thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the closing of your purchase of the Notes (except the Notes themselves) and (c) financial statements, certificates and other information previously or hereafter furnished to you or any other holder of Notes, may be reproduced by any holder of Notes by any photographic, photostatic, microfilm, micro-card, miniature photographic, digital or other similar process and each holder of Notes may destroy any original document so reproduced. The Company and the Guarantors agree and stipulate that 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 such holder of Notes in the regular course of 81 business) and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. 10.3 SURVIVAL. All warranties, representations, certifications and covenants made by the Company and the Guarantors herein and in the other Financing Documents or in any certificate or other instrument delivered by the Company or the Guarantors or on their behalf pursuant to any of the Financing Documents shall be considered to have been relied upon by you and shall survive the delivery to you of the Notes regardless of any investigation made by you or on your behalf. All statements in any such certificate or other instrument shall constitute warranties and representations by the Company and the Guarantors hereunder. 10.4 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto. The provisions hereof are intended to be for the benefit of all holders, from time to time, of Notes, and shall be enforceable by any such holder, whether or not an express assignment to such holder of rights hereunder shall have been made by you or your successor or assign. 10.5 AMENDMENT AND WAIVER. (A) REQUIREMENTS. This Agreement may be amended, and the observance of any term hereof may be waived, with (and only with) the written consent of the Company and the Required Holders; provided that no such amendment or waiver of any of the provisions of Section 1 through Section 4 hereof, inclusive, shall be effective as to any holder of Notes unless consented to by such holder in writing; and provided further that no such amendment or waiver shall, without the written consent of the holders of all Notes (exclusive of Notes held by the Company or any Subsidiary) at the time outstanding, (I) subject to Section 8.2, change the amount or time of any prepayment or payment of principal or Make-Whole Amount or the rate or time of payment of interest, (II) amend Section 8, (III) amend this Section 10.5, or (IV) release any Guarantor from its obligations set forth in the Joint and Several Guaranty. 82 The holder of any Note may specify that any such written consent executed by it shall be effective only with respect to a portion of the Notes held by it (in which case it shall specify, by dollar amount, the aggregate principal amount of Notes with respect to which such consent shall be effective) and in the event of any such specification such holder shall be deemed to have executed such written consent only with respect to the portion of the Notes so specified. (B) SOLICITATION OF NOTEHOLDERS. (I) SOLICITATION. The Company will not negotiate with any holder of the Notes with respect to a material matter, nor will it solicit, request or negotiate in writing with respect to any proposed waiver or amendment of any of the provisions hereof or the Notes or any other Financing Document, unless each holder of the Notes (irrespective of the amount of Notes then owned by it) shall be informed thereof by the Company with sufficient information to enable it to make an informed decision with respect thereto. Executed or true and correct copies of any waiver or consent effected pursuant to the provisions of this Section 10.5 shall be delivered by the Company to each holder of outstanding Notes forthwith following the date on which the same shall have been executed and delivered by all holders of outstanding Notes required to consent or agree to such waiver or consent. (II) PAYMENT. The Company shall 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 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 the holders of all Notes then outstanding. (III) SCOPE OF CONSENT. Any consent made pursuant to this Section 10.5 by a holder of Notes that has transferred or has agreed to transfer its Notes to the Company, any Subsidiary or any Affiliate and has provided or has agreed to provide such written consent as a condition to such transfer shall be void and of no force and effect except solely as to such holder, and any amendments effected or waivers granted or to be effected or granted that would not have been or would not be so effected or granted but for such consent (and the consents of all other holders of Notes that were acquired under the same or similar conditions) shall be void and of no force and effect, retroactive to the date such 83 amendment or waiver initially took or takes effect, except solely as to such holder. (C) BINDING EFFECT. Except as provided in Section 10.5(b), any amendment or waiver consented to as provided in this Section 10.5 shall apply equally to all holders of Notes and shall be binding upon them and upon each future holder of any Note and upon the Company whether or not such Note shall have been marked to indicate such amendment or waiver. No such amendment or waiver shall extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. 10.6 PAYMENTS, WHEN RECEIVED. (A) PAYMENTS DUE ON HOLIDAYS. If any payment due on, or with respect to, any Note shall fall due on a day other than a Business Day, then such payment shall be made on the first Business Day following the day on which such payment shall have so fallen due; provided that if all or any portion of such payment shall consist of a payment of interest, for purposes of calculating such interest, such payment shall be deemed to have been originally due on such first following Business Day, and such interest shall accrue and be payable to (but not including) the actual date of payment. (B) PAYMENTS, WHEN RECEIVED. Any payment actually received by you before 11:00 a.m., New York time, by federal funds wire transfer on any Business Day, shall be deemed to have been received by you on such day. Any payment actually received by you at or after 11:00 a.m., New York time, by federal funds wire transfer on any Business Day, shall be deemed to have been received on the next following Business Day. All payments received by you on a day other than a Business Day, or in a manner other than by federal funds wire transfer, shall be deemed to have been received by you on the Business Day such amounts actually become available to you prior to 11:00 a.m., New York time. 10.7 ENTIRE AGREEMENT. This Agreement constitutes the final written expression of all of the terms hereof and is a complete and exclusive statement of those terms. 10.8 DUPLICATE ORIGINALS, EXECUTION IN COUNTERPART. Two or more duplicate originals hereof may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may be executed in one or more counterparts and shall be effective when at least one counterpart shall have been executed by each party hereto, and each set of counterparts which, 84 collectively, show execution by each party hereto shall constitute one duplicate original. [REMAINDER OF PAGE INTENTIONALLY BLANK; NEXT PAGE IS SIGNATURE PAGE.] 85 If this Agreement is satisfactory to you, please so indicate by signing the acceptance at the foot of a counterpart hereof and returning such counterpart to the Company, whereupon this Agreement shall become binding among us in accordance with its terms. Very truly yours, SMITHFIELD FOODS, INC. By ---------------------------------------- Name: Title: ACCEPTED: [NAME OF NOTEHOLDER] By ---------------------------------- Name: Title 86 EX-4.7D 4 0004.txt JOINDER AGREEMENT EXHIBIT 4.7(d) Joinder Agreement ----------------- March 9, 2000 To each of the Noteholders (as defined in the Joint and Several Guaranty hereinafter referred to) Ladies and Gentlemen: Reference is made to the Joint and Several Guaranty, dated as of July 15, 1996 (as amended, restated or otherwise modified from time to time, the "Guaranty Agreement"), by each of Gwaltney of Smithfield, Ltd., a Delaware corporation (together with its successors and assigns, "Gwaltney"), John Morrell & Co., a Delaware corporation (together with its successors and assigns, "Morrell"), The Smithfield Packing Company, Incorporated, a Virginia corporation (together with its successors and assigns, "Packing"), SFFC, Inc., a Delaware corporation (together with its successors and assigns, "SFFC"), Patrick Cudahy Incorporated, a Delaware corporation (together with its successors and assigns, "Cudahy"), and Brown's of Carolina, Inc., a North Carolina corporation (together with its successors and assigns, ("Brown's," and together with Gwaltney, Morrell, Packing, SFFC and Cudahy, individually, a "Guarantor") and collectively, the "Guarantors"), in favor of each of the holders, from time to time, of certain Senior Secured Notes of Smithfield Foods, Inc., as more particularly described on Annex 1 attached hereto. Capitalized terms used herein and not otherwise defined have the meanings ascribed to such terms in the Guaranty Agreement. Each of the undersigned subsidiaries of Smithfield Foods, Inc. (each a "New Guarantor", and, collectively, the "New Guarantors"), agrees with you as follows: 1. Guaranty Each New Guarantor hereby unconditionally and expressly agrees to become, by execution and delivery of this Agreement does become, and assumes each and every one of the obligations of, a "Guarantor" under and as defined in the Guaranty Agreement. In addition, each New Guarantor makes, as of the date hereof, each and every representation and warranty of a Guarantor set forth or incorporated in the Guaranty Agreement. Without limitation of the foregoing or of anything in the Guaranty Agreement, by such execution and delivery hereof each New Guarantor does become fully liable, as a Guarantor, for the payment of the Guarantied Obligations as further provided in Section 2 of the Guaranty Agreement. The Guaranty Agreement is hereby amended, without any further action, to add each New Guarantor as a Guarantor thereunder as if each New Guarantor had been an original party to the Guaranty Agreement. 2. Further Assurances. Each New Guarantor agrees to cooperate with the Noteholders and execute such further instruments and documents as the Required Holders, shall reasonably request to effect, to the reasonable satisfaction of the Required Holders, the purposes of this Agreement. 3. Binding Effect. This Agreement shall be binding upon each New Guarantor and shall inure to the benefit of the Noteholders and their respective successors and assigns. 4. 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 VIRGINIA, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURIDICTION OTHER THAN SUCH STATE. IN WITNESS WHEREOF, the New Guarantors have caused this Joinder Agreement to be executed on their behalf by a duly authorized officer of such New Guarantors. CARROLL'S FOODS, INC. CARROLL'S REALTY, INC. CARROLL'S REALTY PARTNERSHIP NORTH SIDE FOODS CORP. LYKES MEAT GROUP, INC. CIRCLE FOUR CORPORATION BROWN'S FARMS, LLC, By: Brown's of Carolina, Inc. CARROLL'S FOODS OF VIRGINIA, INC. SMITHFIELD-CARROLL'S FARMS CENTRAL PLAINS FARMS, INC. SMITHFIELD PACKING REAL ESTATE, LLC, By: The Smithfield Packing Company, Incorporated MURPHY FARMS, INC. By: ------------------------------------- Name: Title: [Signature Page to Joinder Agreement] CARROLL'S REALTY PARTNERSHIP By: CARROLL'S REALTY, INC. CARROLL'S FOODS, INC., its general partners By: ------------------------------------- Name: Title: SMITHFIELD-CARROLL'S FARMS By: SMITHFIELD PURCHASE CORPORATION CARROLL'S FOODS OF VIRGINIA, INC., its general partners By: ------------------------------------- Name: Title: [Signature Page to Joinder Agreement] ANNEX 1 A. $9,852,942 in aggregate principal amount of its eight and forty-one one-hundredths percent (8.41%) Series B Senior Secured Notes due August 1, 2006 (the "Series B Notes"); B. $40,000,000 in aggregate principal amount of its eight and thirty-four one-hundredths percent (8.34%) Series C Senior Secured Notes due August 1, 2003 (the "Series C Notes"); C. $9,000,000 in aggregate principal amount of its nine and eighty one- hundredths percent (9.80%) Series D Senior Secured Notes due August 1, 2003 (the "Series D Notes"); D. $9,250,000 in aggregate principal amount of its ten and seventy- five one-hundredths percent (10.75%) Series E Senior Secured Notes due August 1, 2005 (the "Series E Notes"); E. $100,000,000 in aggregate principal amount of its eight and fifty-two one-hundredths percent (8.52%) Series F Senior Secured Notes due August 1, 2006 ("Series F Notes"); F. $14,000,000 in aggregate principal amount of its nine and eighty-five one-hundredths percent (9.85%) Series G Senior Secured Notes due November 1, 2006 (the "Series G Notes"); and G. $14,779,412 in aggregate principal amount of its eight and forty-one one-hundredths percent (8.41%) Series H Senior Secured Notes due August 1, 2004 (the "Series H Notes"). EX-4.8A 5 0005.txt AMENDED AND RESTATED NOTE PURCHASE AGREEMENT EXHIBIT 4.8(A) - -------------------------------------------------------------------------------- SMITHFIELD FOODS, INC. ------------------------- AMENDED AND RESTATED NOTE PURCHASE AGREEMENT ------------------------- Dated as of October 27, 1999 $100,000,000 7.89% Series I Senior Secured Notes Due October 1, 2009 $50,000,000 Variable Rate Series J Senior Secured Notes Due October 1, 2009 $50,000,000 8.44% Series K Senior Secured Notes Due October 1, 2009 $25,000,000 LIBOR Rate Series L Senior Secured Notes Due October 1, 2009 Guarantied By: Gwaltney of Smithfield, Ltd. John Morrell & Co. The Smithfield Packing Company, Incorporated SFFC, Inc. Patrick Cudahy Incorporated Carroll's Foods, Inc. Carroll's Realty, Inc. Carroll's Realty Partnership North Side Foods Corp. Lykes Meat Group, Inc. Circle Four Corporation Brown's of Carolina, Inc. Brown's Farms, LLC Carroll's Foods of Virginia, Inc. Smithfield-Carroll's Farms Central Plains Farms, Inc. - -------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE 1. PURCHASE AND SALE OF NOTES................................................ 1 1.1. Authorization of Notes........................................... 1 1.2. The Closing...................................................... 2 1.3. Purchase of Notes, Etc........................................... 3 1.4. Failure To Deliver, Failure of Conditions........................ 5 1.5. Expenses......................................................... 5 1.6. Collateral; Release............................................... 6 2. WARRANTIES AND REPRESENTATIONS............................................ 7 2.1. Material Adverse Change.......................................... 7 2.2. Financial Statements; Debt....................................... 7 2.3. Subsidiaries and Affiliates...................................... 8 2.4. Pending Litigation............................................... 8 2.5. Title to Properties; UCC Matters................................. 9 2.6. Patents, Trademarks, Licenses, etc............................... 9 2.7. Taxes............................................................ 10 2.8. Full Disclosure.................................................. 10 2.9. Corporate Organization and Authority............................. 11 2.10. Restrictions on Company and Subsidiaries......................... 11 2.11. Compliance with Law.............................................. 12 2.12. Pension Plans.................................................... 12 2.13. Certain Laws..................................................... 14 2.14. Environmental Compliance......................................... 14 2.15. Sale is Legal and Authorized; Obligations are Enforceable........ 15 2.16. Governmental Consent............................................. 16 2.17. Private Offering................................................. 17 2.18. No Defaults...................................................... 17 2.19. Use of Proceeds.................................................. 17 2.20. Appraisal of Fixed Asset Collateral............................. 18 2.21. Company and the Guarantors....................................... 18 2.22. Solvency......................................................... 18 2.23. True and Correct Copies.......................................... 19 3. CLOSING CONDITIONS........................................................ 19 3.1. Opinions of Counsel.............................................. 19 3.2. Warranties and Representations True.............................. 20 3.3. Officers' Certificates........................................... 20 3.4. Legality......................................................... 20 3.5. Private Placement Numbers........................................ 21 3.6. Other Purchasers................................................. 21 3.7. Expenses......................................................... 21 i 3.8. Joint and Several Guaranty...................................... 21 3.9. Security Documents; Collateral.................................. 21 3.10. Collateral Matters.............................................. 23 3.11. Appraisals...................................................... 24 3.12. Uniform Commercial Code Items................................... 24 3.13. Consents Under the Revolving Credit Agreement................... 24 3.14. Intercreditor Agreement......................................... 24 3.15. Fees............................................................ 24 3.16. Cooperative Membership.......................................... 25 3.17. Compliance with this Agreement.................................. 25 3.18. Proceedings Satisfactory........................................ 25 4. PAYMENTS................................................................. 25 4.1. Interest Payments............................................... 25 4.2. Scheduled Required Prepayments.................................. 35 4.3. Offer to Prepay upon Change in Control.......................... 36 4.4. Optional Prepayments............................................ 38 4.5. Notice of Optional Prepayment................................... 39 4.6. Pro Rata Payments............................................... 40 4.7. Notation of Notes on Prepayment................................. 41 4.8. No Other Optional Prepayments................................... 41 4.9. Administrative Fee.............................................. 41 5. REGISTRATION; SUBSTITUTION OF NOTES...................................... 41 5.1. Registration of Notes........................................... 41 5.2. Exchange of Notes............................................... 42 5.3. Replacement of Notes............................................ 42 5.4. Issuance Taxes.................................................. 43 6. GENERAL COVENANTS........................................................ 43 6.1. Payment of Taxes and Claims..................................... 43 6.2. Maintenance of Properties and Corporate Existence............... 44 6.3. Payment of Notes and Maintenance of Office...................... 45 6.4. Current Ratio................................................... 45 6.5. Consolidated Working Capital.................................... 45 6.6. Funded Debt..................................................... 45 6.7. Maintenance of Funded Debt...................................... 46 6.8. Fixed Charges Coverage.......................................... 46 6.9. Restrictions on Dividends, etc.................................. 46 6.10. Consolidated Tangible Net Worth................................. 47 6.11. Intentionally Left Blank........................................ 47 6.12. Restricted Payments and Restricted Investments.................. 47 6.13. Liens........................................................... 49 6.14. Merger; Acquisition............................................. 52 6.15. Transfers of Property; Subsidiary Stock......................... 53 ii 6.16. Trademark Subsidiaries.......................................... 57 6.17. Environmental Compliance........................................ 58 6.18. Line of Business................................................ 58 6.19. Transactions with Affiliates.................................... 58 6.20. Tax Consolidation............................................... 59 6.21. ERISA........................................................... 59 6.22. Guaranties...................................................... 61 6.23. Private Offering................................................ 61 6.24. Title Opinions.................................................. 62 7. INFORMATION AS TO COMPANY AND THE GUARANTORS............................ 62 7.1. Financial and Business Information.............................. 62 7.2. Officer's Certificates.......................................... 66 7.3. Accountants' Report............................................. 66 7.4. Inspection...................................................... 66 8. EVENTS OF DEFAULT....................................................... 67 8.1. Nature of Events................................................ 67 8.2. Default Remedies................................................ 69 8.3. Annulment of Acceleration of Notes.............................. 71 9. INTERPRETATION OF THIS AGREEMENT........................................ 72 9.1. Terms Defined................................................... 72 9.2. GAAP............................................................ 97 9.3. Directly or Indirectly.......................................... 97 9.4. Section Headings, Table of Contents and Construction............ 97 9.5. Governing Law................................................... 97 10. MISCELLANEOUS........................................................... 98 10.1. Communications.................................................. 98 10.2. Reproduction of Documents....................................... 99 10.3. Survival........................................................ 99 10.4. Successors and Assigns.......................................... 99 10.5. Amendment and Waiver............................................ 100 10.6. Payments, When Received......................................... 101 10.7. Entire Agreement................................................ 102 10.8. Duplicate Originals, Execution in Counterpart................... 102 iii ANNEXES AND EXHIBITS Annex 1 - Information as to Purchasers Annex 2 - Company Wire Transfer Instructions Annex 3 - Information as to Company and Subsidiaries Annex 4 - Mortgaged Properties for Title Opinions Exhibit A1 - Form of 7.89% Series I Senior Secured Note Due October 1, 2009 Exhibit A2 - Form of Variable Rate Series J Senior Secured Note Due October 1, 2009 Exhibit A3 - Form of 8.44% Series K Senior Secured Note Due October 1, 2009 Exhibit A4 - Form of LIBOR Rate Series L Senior Secured Note Due October 1, 2009 Exhibit B1 - Form of Company Counsel's Closing Opinion Exhibit B2 - Form of Closing Opinion of Special Counsel to Noteholders Exhibit B3 - Form of Trustee Counsel's Closing Opinion Exhibit B4 - Form of Company Special Colorado Counsel's Closing Opinion Exhibit B5 - Form of Company Special Utah Counsel's Closing Opinion Exhibit C1 - Form of Company Officers' Certificate Exhibit C2 - Form of Guarantor Officers' Certificate Exhibit D1 - Form of Company Secretary's Certificate Exhibit D2 - Form of Guarantor Secretary's Certificates Exhibit E - Form of Joint and Several Guaranty Exhibit F - Form of Trust Agreement Exhibit G1 - Form of Utah Deed of Trust Exhibit G2 - Form of Virginia Deed of Trust Exhibit G3 - Form of North Carolina Deed of Trust Exhibit G4 - Form of South Carolina Deed of Trust Exhibit G5 - Form of Colorado Deed of Trust Exhibit H - Form of Security Agreement Exhibit I - Form of Environmental Indemnification Agreement Exhibit J - Form of Intercreditor Agreement iv SMITHFIELD FOODS, INC. ------------------------------ AMENDED AND RESTATED NOTE PURCHASE AGREEMENT ------------------------------ $100,000,000 7.89% Series I Senior Secured Notes Due October 1, 2009 $50,000,000 Variable Rate Series J Senior Secured Notes Due October 1, 2009 $50,000,000 8.44% Series K Senior Secured Notes Due October 1, 2009 $25,000,000 LIBOR Rate Series L Senior Secured Notes Due October 1, 2009 Dated as of October 27, 1999 [Separately addressed to each of the Purchasers listed on Annex 1] Ladies and Gentlemen: SMITHFIELD FOODS, INC., a Virginia corporation (together with its successors and assigns, the "Company"), hereby agrees with you as follows: 1. PURCHASE AND SALE OF NOTES 1.1. Authorization of Notes. The Company will authorize the issuance and sale of (a) one hundred million dollars ($100,000,000) in aggregate principal amount of its seven and eighty-nine one-hundredths percent (7.89%) Series I Senior Secured Notes due October 1, 2009 (as they may be amended, restated or otherwise modified from time to time, the "Series I Notes," such term to include each Series I Note delivered from time to time in accordance with any of the Note Purchase Agreements). The Series I Notes shall be substantially in the form of Exhibit A1 and shall have the terms as herein and therein provided; (b) fifty million dollars ($50,000,000) in aggregate principal amount of its Variable Rate Series J Senior Secured Notes due October 1, 2009 (as they may be amended, restated or otherwise modified from time to time, the "Series J Notes," such term to include each Series J Note delivered from time to time in accordance with any of the Note Purchase Agreements). The Series J Notes shall be substantially in the form of Exhibit A2 and shall have the terms as herein and therein provided; (c) fifty million dollars ($50,000,000) in aggregate principal amount of its eight and forty-four one-hundredths percent (8.44%) Series K Senior Secured Notes due October 1, 2009 (as they may be amended, restated or otherwise modified from time to time, the "Series K Notes," such term to include each Series K Note delivered from time to time in accordance with any of the Note Purchase Agreements). The Series K Notes shall be substantially in the form of Exhibit A3 and shall have the terms as herein and therein provided; and (d) twenty-five million dollars ($25,000,000) in aggregate principal amount of its LIBOR Rate Series L Senior Secured Notes due October 1, 2009 (as they may be amended, restated or otherwise modified from time to time, the "Series L Notes," such term to include each Series L Note delivered from time to time in accordance with any of the Note Purchase Agreements). The Series L Notes shall be substantially in the form of Exhibit A4 and shall have the terms as herein and therein provided. The Series I Notes, the Series J Notes, the Series K Notes and the Series L Notes are herein referred to, individually, as a "Note," and collectively, as the "Notes". 1.2. The Closing. (a) Purchase and Sale of Notes. The Company hereby agrees to sell to you and you hereby agree to purchase from the Company, in accordance with the provisions hereof, the aggregate principal amount of Notes set forth below your name on Annex 1, of the Series set forth below your name, at a price equal to one hundred percent (100%) of the principal amount thereof. (b) The Closing. The closing (the "Closing") of the Company's sale of Notes will be held on October 29, 1999 (the "Closing Date") at 10:00 a.m., eastern time, at the office of McGuire Woods Battle & Boothe LLP, 100 North Tryon Street, Suite 2900, Charlotte, North Carolina 28202. At the Closing, the Company will deliver to you one or more Notes (as set forth below your name on Annex 1), of the Series and in the denominations indicated on Annex 1, in the aggregate principal amount of your purchase, dated the Closing Date and payable to you or payable as indicated on Annex 1, against payment by federal funds wire transfer in immediately available funds of the amount of the purchase price therefor as directed by the Company on Annex 2. (c) Other Purchasers. Contemporaneously with the execution and delivery hereof, the Company is entering into a separate Note Purchase Agreement identical (except for the name, address and 2 signature of the purchaser) hereto (this Agreement and such other separate Note Purchase Agreements, collectively, as may be amended from time to time, the "Note Purchase Agreements") with each other purchaser (individually, an "Other Purchaser," and collectively, the "Other Purchasers") listed on Annex 1, providing for the sale to each Other Purchaser of Notes in the aggregate principal amount set forth below its name on such Annex. The sales of the Notes to you and to each Other Purchaser are to be separate sales. 1.3. Purchase of Notes, Etc. (a) Purchase for Investment. If you are a purchaser of Series K Notes or Series L Notes, you represent to the Company that: (i) you are purchasing the Notes for investment for your own account or for the account of an insurance company, for a separate account (as such term is used in Rule 144A, 17 C.F.R. (S)230.144A), for the account of another for which you have sole investment discretion or for a trust of which you are the trustee, and (ii) you are not purchasing the Notes with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act; provided, that this representation shall not be deemed to prejudice your right to (x) sell or otherwise dispose of all or any part of the Notes in compliance with the Securities Act or the rules and regulations thereunder; and (y) have control over the disposition of all of your assets to the fullest extent permitted or required by any applicable law. (b) Purchase for Other Purposes. If you are a purchaser of Series I Notes or Series J Notes, you represent to the Company that: (i) you are purchasing the Notes in order to make a loan to the Company and with the intention of selling or participating all or a portion of your interest in such loan to one or more institutions of the Farm Credit System, which interest may be further participated or sold to other institutions of the Farm Credit System, and 3 (ii) you are not purchasing the Notes with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act; provided, that this representation shall not be deemed to prejudice your right to (x) sell or otherwise dispose of all or any part of the Notes in compliance with the Securities Act or the rules and regulations thereunder; and (y) have control over the disposition of all of your assets to the fullest extent permitted or required by any applicable law. (c) ERISA. If you are a purchaser of Series K Notes or Series L Notes, you represent to the Company that: (i) you are acquiring the Notes for your own account with funds from your "insurance company general account" (as defined in Department of Labor Prohibited Transaction Exemption 95-60 (60 FR 35925, July 12, 1995)) or for the insurance company general account of another insurance company and that there is no "employee benefit plan" (as defined in section 3 of ERISA and section 4975(e)(1) of the IRC, 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 employee benefit plan exceeds ten percent (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; or (ii) if any part of the funds being used by you to purchase the Notes shall come from assets of an employee benefit plan or plan, that: (A) (1) if such funds are attributable to a "separate account" (as defined in section 3 of ERISA), then (aa) all requirements for an exemption under Department of Labor Prohibited Transaction Class Exemption 90-1, issued January 29, 1990 are met with respect to the use of such funds to purchase the Notes, or 4 (bb) the employee benefit plans with an interest in such separate account have been identified in a writing delivered by you to the Company; (2) if such funds are attributable to a "separate account" (as defined in section 3 of ERISA) that is maintained solely in connection with fixed contractual obligations of an insurance company, any amounts payable, or credited, to any employee benefit plan having an interest in such account and to any participant or beneficiary of such plan (including an annuitant) are not affected in any manner by the investment performance of the separate account; or (3) if such funds are attributable to an "investment fund" managed by a "qualified professional asset manager" (as such terms are defined in Part V of Department of Labor Prohibited Transaction Class Exemption 84-14, issued March 13, 1984), all requirements for an exemption under such Exemption are met with respect to the use of such funds to purchase the Notes; or (B) such employee benefit plan is excluded from the provisions of section 406 of ERISA by virtue of section 4(b) of ERISA; or (iii) the funds being used by you to purchase the Notes do not include assets of any employee benefit plan. 1.4. Failure To Deliver, Failure of Conditions. If at the Closing the Company fails to tender to you the Notes to be purchased by you thereat, or if the conditions specified in Section 3 to be fulfilled at the Closing have not been fulfilled, you may thereupon elect to be relieved of all further obligations hereunder. Nothing in this Section 1.4 shall operate to relieve the Company from any of its obligations hereunder or to waive any of your rights against the Company. 1.5. Expenses. (a) Generally. Whether or not the Notes are sold, the Company will promptly (and in any event within thirty (30) days of receiving any statement or invoice therefor) pay all fees, expenses and costs relating hereto, including but not limited to: 5 (i) the cost of reproducing the Financing Documents; (ii) the fees and disbursements of your special and local counsel; (iii) the fees and disbursements of the Security Trustee and its counsel; (iv) the fees, expenses and costs incurred complying with each of the conditions to closing set forth in Section 3; (v) all other expenses incurred in connection with the transactions contemplated by the Financing Documents, including, but not limited to, all charges for title examinations, mortgagee title insurance premiums, flood hazard determinations and flood insurance premiums (where required), surveys, appraisals, environmental audits, recording and filing fees, taxes and expenses; and (vi) the expenses relating to the consideration, negotiation, preparation or execution of any amendments, waivers or consents pursuant to the provisions hereof and of the other Financing Documents, whether or not any such amendments, waivers or consents are executed. (b) Counsel. Without limiting the generality of the foregoing, it is agreed and understood that the Company will pay, at the Closing, the statement for fees and disbursements of your special and local counsel presented at the Closing and the Company will also pay upon receipt of any statement thereof, each additional statement for fees and disbursements of your special and local counsel rendered after the Closing in connection with the issuance of the Notes or the matters referred to in Section 1.5(a)(vi). (c) Survival. The obligations of the Company under this Section 1.5 shall survive the payment or prepayment of the Notes and the termination hereof. 1.6. Collateral; Release. The Notes will be secured pursuant to and entitled to all of the benefits of the Security Documents to be executed and delivered pursuant to Section 3.9. In the event that at any time after the Closing Date the Company shall have obtained an Acceptable Rating in respect of its long-term, senior unsecured debt, the Company may give written notice to each holder of Notes (which notice shall include copies of the letters to the Company from Moody's 6 and Standard & Poor's evidencing that such Acceptable Rating has been in full force and effect for the one hundred eighty (180) day period immediately preceding the date of such notice) requesting that the holders of the Notes direct the Security Trustee to release the Collateral from the security interests created by the Security Documents on a date specified in such notice (the "Collateral Release Date") that is not less than thirty (30) days and not more than sixty (60) days after the date of such notice. The holders of the Notes agree to direct the Security Trustee to so release the Collateral, provided that the Collateral Release Conditions have been satisfied and the holders of the Notes and the Security Trustee shall have received an officer's certificate, executed by a Senior Officer and dated the Collateral Release Date, specifying that at the time of such release and after giving effect thereto, each of the Collateral Release Conditions are satisfied. Notwithstanding such release of Collateral, the provisions of Section 6.13 hereof shall continue to apply on and after the Collateral Release Date. 2. WARRANTIES AND REPRESENTATIONS To induce you to enter into this Agreement and to purchase the Notes listed on Annex 1 below your name, the Company warrants and represents, as of the Closing Date, as follows: 2.1. Material Adverse Change. Since May 2, 1999, there has been no change in the business, prospects, profits, Properties or condition (financial or otherwise) of the Company, except changes that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 2.2. Financial Statements; Debt. (a) Financial Statements. The Company has provided you with the financial statements described in Part 2.2(a) of Annex 3. All such financial statements have been prepared in accordance with GAAP consistently applied and present fairly, in all material respects, the consolidated financial position of the Company and its consolidated subsidiaries as of such dates and the results of their operations and cash flows for the periods specified therein. Except as set forth on Part 2.2(a) of Annex 3, all Subsidiaries were subsidiaries during all of the periods covered by such financial statements. (b) Debt. Part 2.2(b) of Annex 3 lists all Debt of the Company and the Subsidiaries as of the Closing Date (prior to giving effect to the transactions contemplated to occur on the Closing Date) which Debt is of an outstanding amount, in each case, in excess of fifty thousand 7 dollars ($50,000), and provides the following information with respect to each item of such Debt: (i) the obligor in respect thereof, (ii) the holder thereof, (iii) the outstanding amount thereof and the interest rate or rates applicable thereto, (iv) the portion thereof classified as current in accordance with GAAP, (v) the final maturity thereof, and (vi) the collateral securing such Debt, if any. The aggregate amount of Debt of the Company and the Subsidiaries as of the Closing Date that is not set forth on Part 2.2(b) of Annex 3 does not exceed two million five hundred thousand dollars ($2,500,000). 2.3. Subsidiaries and Affiliates. Part 2.3 of Annex 3 states: (a) the name of each of the Subsidiaries, its jurisdiction of incorporation and the percentage of its Voting Stock owned by the Company and each other Subsidiary; and (b) the name of each of the Affiliates and the nature of the affiliation. Each of the Company and the Subsidiaries has good and marketable title to all of the shares it purports to own of the stock of each Subsidiary, free and clear in each case of any Lien. All such shares have been duly issued and are fully paid and nonassessable. 2.4. Pending Litigation. (a) Pending Litigation. There are no proceedings, actions or investigations pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary in any court or before any Governmental Authority or arbitration board or tribunal that, in the aggregate for all such proceedings, actions and investigations, could reasonably be expected to have a Material Adverse Effect. 8 (b) No Defaults. Neither the Company nor any Subsidiary is in default with respect to any judgment, order, writ, injunction or decree of any court, Governmental Authority, arbitration board or tribunal that, in the aggregate for all such defaults, could reasonably be expected to have a Material Adverse Effect. 2.5. Title to Properties; UCC Matters. (a) Title to Properties. The Company and the Subsidiaries have valid title to all of the Property reflected in the most recent audited consolidated balance sheet referred to in Part 2.2(a) of Annex 3 (except as sold or otherwise disposed of in the ordinary course of business), except for such failures to have valid title as are immaterial in the context of such balance sheet and that, in the aggregate for all such failures, could not reasonably be expected to have a Material Adverse Effect. (b) Leases. All leases necessary for the conduct of the business of the Company and the Subsidiaries are valid and subsisting and are in full force and effect, except for such failures to be valid and subsisting that, in the aggregate for all such failures, could not reasonably be expected to have a Material Adverse Effect. (c) Liens. All Property of the Company and the Subsidiaries is free from Liens not permitted by Section 6.13. (d) UCC Matters. Part 2.5(d) of Annex 3 sets forth with respect to the Company and each Guarantor: (i) each name under which such Person conducts or has conducted all or a portion of its business operations, and (ii) the location of the principal executive office of each such Person. Neither the Company nor any Guarantor has changed its name or the name under which it conducts its business operations within the immediately preceding period of five (5) years. (e) Real Estate Collateral. Part 2.5(e) of Annex 3 sets forth a list of real Properties held by each of Circle Four, Smithfield-Carroll's Farms, Brown's Farms, Carroll's Realty Partnership and Central Plains, and such list sets forth, with respect to each such Property that constitutes Collateral, the book value and the Company's good faith estimate of the Fair Market Value thereof. 9 2.6. Patents, Trademarks, Licenses, etc. Except as set forth on Part 2.6 of Annex 3, each of the Company and the Subsidiaries owns, possesses or has the right to use all of the patents, trademarks, service marks, trade names, copyrights and licenses, and rights with respect thereto, necessary for the present and currently planned future conduct of its business, without any known conflict with the rights of others. The Trademark Subsidiaries own all such patents, trademarks, service marks, trade names, copyrights and licenses. Part 2.6 of Annex 3 sets forth the identity of each of the Trademark Subsidiaries on the Closing Date. 2.7. Taxes. (a) Returns Filed; Taxes Paid. All tax returns required to be filed by each of the Company and the Subsidiaries and any other Person with which the Company or any Subsidiary files or has filed a consolidated return in any jurisdiction have in fact been filed on a timely basis, and all taxes, assessments, fees and other governmental charges upon each of the Company and the Subsidiaries and any such Person, and upon any of their respective Properties, income or franchises, that are due and payable have been paid. All liabilities of the Company and the Subsidiaries with respect to federal income taxes have been finally determined except with respect to the fiscal years disclosed on Part 2.7 of Annex 3, which are the only fiscal years not closed by the completion of an audit or the expiration of the statute of limitations. There is currently in effect no tax sharing, tax allocation or similar agreement providing for the manner in which tax payments (whether in respect of federal or state income or other taxes) owing by the members of the affiliated group of which the Company is the "common parent" (as defined in section 1504 of the IRC) are allocated between any member of such group and any Person other than the Company or a Subsidiary. (b) Book Provisions Adequate. (i) The amount of the liability for taxes reflected in the most recent balance sheet referred to in Part 2.2(a) of Annex 3 is an adequate provision for taxes as of the date of such balance sheet (including, without limitation, any payment due pursuant to any tax sharing agreement) as are or may become payable by any one or more of the Company, any Subsidiary and the other Persons consolidated with the Company in such financial statements in respect of all tax periods ending on or prior to such dates. (ii) Neither the Company nor any Subsidiary knows of any proposed additional tax assessment against it or any such 10 Person that is not reflected in full in the most recent balance sheet referred to in Part 2.2(a) of Annex 3. 2.8. Full Disclosure. The financial statements referred to in Part 2.2(a) of Annex 3 do not, nor does any Financing Document or any written statement furnished by or on behalf of the Company or any Subsidiary to you in connection with the negotiation or the closing of the sale of the Notes, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein not misleading when viewed in the aggregate. There is no fact that the Company has not disclosed to you in writing that has had or, so far as the Company can now reasonably foresee, could reasonably be expected to have a Material Adverse Effect. 2.9. Corporate Organization and Authority. The Company and each Subsidiary: (a) is a corporation, limited liability company or partnership duly organized, validly existing and in good standing (to the extent that such concept is applicable) under the laws of its jurisdiction of organization; (b) has all legal and corporate, limited liability company or partnership, as the case may be, power and authority to own and operate its Properties and to carry on its business as now conducted and as presently proposed to be conducted; (c) has all necessary licenses, certificates and permits to own and operate its Properties and to carry on its business as now conducted and as presently proposed to be conducted, except where the failure to have such licenses, certificates and permits, in the aggregate, could not reasonably be expected to have a Material Adverse Effect; and (d) has duly qualified or has been duly licensed, and is authorized to do business and is in good standing, as a foreign corporation, limited liability company or foreign partnership, as the case may be, in each state in the United States of America and in each other jurisdiction where the failure to be so qualified or licensed and authorized and in good standing, in the aggregate for all such failures, could reasonably be expected to have a Material Adverse Effect. 2.10. Restrictions on Company and Subsidiaries. (a) Neither the Company nor any Subsidiary: 11 (i) is a party to any contract or agreement, or subject to any charter, bylaw, partnership agreement or other restriction that, in the aggregate for all such contracts, agreements, constitutive documents and other restrictions (assuming that all such contracts and agreements are performed in accordance with their respective terms), could reasonably be expected to have a Material Adverse Effect; or (ii) 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 Section 6.13. (b) Neither the Company nor any Guarantor is a party to any contract or agreement that restricts the right or ability of the Company or such Subsidiary to incur Debt, other than this Agreement and the agreements listed in Part 2.10(b) of Annex 3 (none of which restricts the issuance and sale of the Notes or the performance of the Company hereunder or under the Notes and none of which restricts the guaranty of the Notes by any of the Guarantors under the Joint and Several Guaranty). 2.11. Compliance with Law. Neither the Company nor any Subsidiary: (a) is in violation of any law, ordinance, governmental rule or regulation to which it is subject (including, without limitation, those relating to zoning and planning, building, subdivision, inland wetland and environmental and hazardous waste disposal); or (b) has failed to obtain any license, certificate, permit, franchise or other governmental authorization necessary to the ownership of its Property or to the conduct of its business (including, without limitation, to the extent required, building, zoning, subdivision, traffic and environmental approvals and certificates of occupancy); which violations or failures to obtain, in the aggregate, could reasonably be expected to have a Material Adverse Effect. 2.12. Pension Plans. (a) Disclosure. Part 2.12(a) of Annex 3 identifies all ERISA Affiliates and all "employee benefit plans" with respect to which the Company or any "affiliate" of the Company is a "party-in-interest" or in respect of which the Notes could constitute an "employer security" 12 ("employee benefit plan" and "party-in-interest" have the meanings specified in section 3 of ERISA and "affiliate" and "employer security" have the meanings specified in section 407(d) of ERISA). (b) Prohibited Transactions. The execution and delivery of this Agreement and the issuance and sale of the Notes 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) through section 4975(D), inclusive, of the IRC. The representation by the Company in the immediately preceding sentence is made in reliance upon the representations in Section 1.3(c) as to the source of funds used by you. (c) Relationship of Vested Benefits to Pension Plan Assets. Except as set forth on Part 2.12(c) of Annex 3, the present value of all benefits, determined as of the most recent valuation date for such benefits (as provided in Section 6.21(c)), vested under each Pension Plan does not exceed the value of the assets of such Pension Plan allocable to such vested benefits, determined as of the most recent valuation date (as provided in Section 6.21(c)). (d) ERISA Requirements. Each of the Company and the ERISA Affiliates: (i) has fulfilled all obligations under the minimum funding standards of ERISA and the IRC with respect to each Pension Plan that is not a Multiemployer Plan; (ii) is in compliance in all material respects with all other applicable provisions of ERISA and the IRC with respect to each Pension Plan and each Multiemployer Plan; and (iii) has not incurred any liability under Title IV of ERISA to the PBGC (other than in respect of required insurance premiums, all of which that are due having been paid), with respect to any Pension Plan, any Multiemployer Plan or any trust established thereunder. (e) Accumulated Funding Deficiency. Except as set forth in Part 2.12(e) of Annex 3, no accumulated funding deficiency (as defined in section 302 of ERISA and section 412 of the IRC), whether or not waived, exists with respect to any Pension Plan. (f) Reportable Events. No Pension Plan or trust created thereunder has been terminated, and there have been no "reportable events" (as such term is defined in section 4043 of ERISA), with respect 13 to any Pension Plan or trust created thereunder or with respect to any Multiemployer Plan, which reportable event or events will or could result in the termination of such Pension Plan or Multiemployer Plan and give rise to a liability of the Company or any ERISA Affiliate in respect thereof. (g) Multiemployer Plans. Other than as set forth on Part 2.12(g) of Annex 3, neither the Company nor any ERISA Affiliate is an employer required to contribute to any Multiemployer Plan. Neither the Company nor any ERISA Affiliate has incurred, nor is expected to incur, any withdrawal liability (that has not previously been fully satisfied) under ERISA with respect to any Multiemployer Plan, the effect of which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. No Multiemployer Plans have been terminated under section 4041A of ERISA, have been placed in reorganization status under Title IV of ERISA, or have been determined to be "insolvent" (as such term is defined in section 4245 of ERISA). (h) Multiple Employer Pension Plans. Neither the Company nor any ERISA Affiliate is a "contributing sponsor" (as such term is defined in section 4001 of ERISA) in any Multiple Employer Pension Plan and neither the Company nor any ERISA Affiliate has incurred (without fully satisfying the same), or reasonably expects to incur, withdrawal liability in respect of any Multiple Employer Pension Plan, which withdrawal liability could reasonably be expected to have a Material Adverse Effect. (i) Foreign Pension Plan. Except as set forth in Part 2.12(i) of Annex 3, no Foreign Pension Plans presently exist and neither the Company nor any Subsidiary has any present or future obligations in respect of any Foreign Pension Plan. 2.13. Certain Laws. The issuance and sale of the Notes, the execution and delivery of the Joint and Several Guaranty, the incurrence of the Debt evidenced by the Notes and the Joint and Several Guaranty, and the performance under the Financing Documents by the Company and the Subsidiaries: (a) is not 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, as amended, or the Federal Power Act, as amended, and 14 (b) does not violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Subsidiary. 2.14. Environmental Compliance. (a) Compliance. Except as set forth in Part 2.14(a) of Annex 3, neither the Company nor any Subsidiary is in violation of any Environmental Protection Law in effect in any jurisdiction where it currently is doing business or owns Property, except for such violations that, in the aggregate for all such violations, could not reasonably be expected to have a Material Adverse Effect. (b) Liability. Except as set forth in Part 2.14(b) of Annex 3, neither the Company nor any Subsidiary is subject to any liability under any Environmental Protection Law that, in the aggregate for all such liabilities, could reasonably be expected to have a Material Adverse Effect. (c) Notices. Except as set forth in Part 2.14(c) of Annex 3, neither the Company nor any Subsidiary has received any: (i) notice from any Governmental Authority by which any of its currently or previously owned or leased Properties has been identified in any manner by any Governmental Authority as a hazardous substance disposal or removal site, "Super Fund" clean-up site, or other clean-up site or candidate for removal or closure pursuant to any Environmental Protection Law; (ii) notice of any Lien arising under or in connection with any Environmental Protection Law that has attached to any revenues of, or to, any of its currently or previously owned or leased Properties; or (iii) communication from any Governmental Authority concerning any action or omission by the Company or such Subsidiary in connection with its currently or previously owned or leased Properties resulting in the release of any Hazardous Substance or resulting in any violation of any Environmental Protection Law; in each case where the effect of which, in the aggregate for all such notices and communications, could reasonably be expected to have a Material Adverse Effect. 2.15. Sale is Legal and Authorized; Obligations are Enforceable. 15 (a) Sale is Legal and Authorized. Each of the issuance, sale and delivery of the Notes by the Company, the execution and delivery of the Financing Documents to which it is a party by the Company and each of the Guarantors, and compliance by the Company and each of the Guarantors with all of their respective obligations under the Financing Documents: (i) is within the corporate powers of the Company and each of the Guarantors; (ii) is legal and does not conflict with, result in any breach in any of the provisions of, constitute a default under, or result in the creation of any Lien upon any Property of the Company or any Subsidiary under the provisions of, any agreement, charter instrument, bylaw or other instrument to which it is a party or by which it or any of its Property may be bound; and (iii) does not give rise to a right or option of any other Person under any agreement or other instrument, which right or option could reasonably be expected to have a Material Adverse Effect. (b) Obligations are Enforceable. Each of the Financing Documents has been duly authorized by all necessary action on the part of each Obligor party thereto, has been executed and delivered by one or more duly authorized officers of each Obligor party thereto and constitutes a legal, valid and binding obligation of each Obligor party thereto, enforceable in accordance with its terms, except that the enforceability of the Financing Documents may be: (i) limited by applicable bankruptcy, reorganization, arrangement, insolvency, moratorium or other similar laws affecting the enforceability of creditors' rights generally; and (ii) subject to the availability of equitable remedies. 2.16. Governmental Consent. Neither the nature of the Company or any Subsidiary, or of any of their respective businesses or Properties, nor any relationship between the Company or any Subsidiary and any other Person, nor any circumstance in connection with the offer, issuance, sale or delivery of the Notes and the execution and delivery of the Financing Documents, is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority on the part of the Company or any 16 Guarantor as a condition to the execution and delivery of any Financing Document or the offer, issuance, sale or delivery of the Notes. 2.17. Private Offering. (a) Neither the Company, any Guarantor nor John Hancock (the only Person assisting the Company in connection with the offering or sale of the Notes, the Joint and Several Guaranty or any similar Security of the Company or any Guarantor, other than employees of the Company) has offered any of the Notes or the Joint and Several Guaranty or any similar Security of the Company or any Guarantor for sale to, or solicited offers to buy any thereof from, or otherwise approached or negotiated with respect thereto with, any prospective purchaser, other than not more than twenty (20) institutional investors (including the Purchasers, AgFirst Farm Credit Bank and CoBank, ACB), each of whom was offered all or a portion of the Notes and the Joint and Several Guaranty at private sale for investment. (b) Neither the Company nor any of the Subsidiaries, nor any agent acting on behalf of any of them, has taken any action that would subject the issuance or sale of the Notes or the Joint and Several Guaranty to the registration provisions of section 5 of the Securities Act or to the registration, qualification or other similar provisions of any securities or "blue sky" law of any applicable jurisdiction. 2.18. No Defaults. (a) The Notes. No event has occurred and no condition exists that, upon the issuance of the Notes and the execution and delivery of the Financing Documents, would constitute a Default or an Event of Default. (b) Charter Instruments, Other Agreements. Neither the Company nor any Subsidiary is in violation in any respect of any term of any charter instrument, bylaw, partnership agreement or other constitutive document or instrument. Neither the Company nor any Subsidiary is in violation in any respect of any term in any agreement or other instrument to which it is a party or by which it or any of its Property may be bound except for such violations that, in the aggregate for all such violations, could not reasonably be expected to have a Material Adverse Effect. 17 2.19. Use of Proceeds. (a) Use of Proceeds. The Company will apply the proceeds from the sale of the Notes for the purposes specified in Part 2.19(a) of Annex 3. (b) Margin Securities. None of the transactions contemplated by the Financing Documents (including, without limitation, the use of the proceeds from the sale of the Notes) violates, will violate or will result in a violation of Section 7 of the Exchange Act, or any regulations issued pursuant thereto, including, without limitation, Regulations T, U and X of the Board of Governors of the United States of America Federal Reserve System, 12 C.F.R., Chapter II. The Company does not intend to use the proceeds of the sale of the Notes to own, carry or purchase, or refinance borrowings that were used to own, carry or purchase, any Margin Security, including Margin Securities originally issued by the Company or any Subsidiary. The Financing Documents will not be secured by any Margin Security, and no Notes are being sold on the basis of any such collateral. (c) Absence of Foreign or Enemy Status. Neither the sale of the Notes nor the use of proceeds from the sale thereof will result in a violation of any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended), or any ruling issued thereunder or any enabling legislation or Presidential Executive Order in connection therewith. 2.20. Appraisal of Fixed Asset Collateral. The ratio of the aggregate principal amount of the Notes to the appraised value of the Property constituting the Fixed Asset Collateral is less than or equal to 0.75:1.0. 2.21. Company and the Guarantors. The Company and the Guarantors are operated as part of one consolidated business entity and are directly dependent upon each other for and in connection with their respective business activities and their respective financial resources. The Company and each of the Guarantors will receive direct economic and financial benefits from the Debt incurred under the Note Purchase Agreements by the Company and the incurrence of such Debt is in the best interests of the Company and each of the Guarantors. 2.22. Solvency. 18 The fair value of the business and assets of the Company and each Guarantor will be 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 after giving effect to the transactions contemplated by the Financing Documents. Neither the Company nor any Guarantor, after giving effect to the transactions contemplated by the Financing Documents, will be engaged in any business or transaction, or about to engage in any business or transaction, for which such Person has unreasonably small assets or capital (within the meaning of applicable law, including, without limitation, Section 548 of the United States Bankruptcy Code), and neither the Company nor any Guarantor has any intent to (a) hinder, delay or defraud any entity to which it is, or will become, on or after the Closing Date, indebted, or (b) incur debts that would be beyond its ability to pay as they mature. 2.23. True and Correct Copies. The Company has delivered to you or your special counsel true and correct copies of each Revolving Credit Agreement (including, without limitation, all schedules and exhibits thereto and all agreements delivered in connection therewith) of the Company or any Subsidiary in effect on the Closing Date. 3. CLOSING CONDITIONS Your obligation to purchase and pay for the Notes to be delivered to you at the Closing is subject to the following conditions precedent: 3.1. Opinions of Counsel. You shall have received closing opinions from (a) McGuire, Woods, Battle & Boothe, counsel for the Company and the Subsidiaries, (b) Bingham Dana LLP, your special counsel, (c) Shipman & Goodwin, counsel for the Security Trustee, (d) Hogan & Hartson L.L.P., special Colorado counsel for the Company and the Subsidiaries, and 19 (e) Waddingham & Peterson, special Utah counsel for the Company and the Subsidiaries closing opinions, each dated as of the Closing Date, and substantially in the forms set forth in Exhibit B1 through Exhibit B5, respectively, and as to such other matters as you may reasonably request. The Company hereby requests and directs its counsel named in the foregoing clause (a), clause (d) and clause (e) to deliver such closing opinions to you and the Other Purchasers. The Company hereby acknowledges that in purchasing the Notes listed on Annex 1 below your name you will be relying on, among other things, the closing opinions of such counsel for the Company. 3.2. Warranties and Representations True. The warranties and representations contained in Section 2 shall be true on the Closing Date with the same effect as though made on and as of that date. 3.3. Officers' Certificates. You shall have received: (a) a certificate dated the Closing Date and signed by the President, a Vice-President, the Controller, the Treasurer, an Assistant Treasurer or the Chief Financial Officer of the Company, substantially in the form of Exhibit C1, certifying that the conditions specified in Sections 3.2 and 3.17 have been fulfilled and that no Default or Event of Default exists on the Closing Date; (b) a certificate dated the Closing Date and signed by the President, a Vice-President, the Controller, the Treasurer, an Assistant Treasurer or the Chief Financial Officer of each of the Guarantors, substantially in the form of Exhibit C2, with respect to the matters set forth therein; (c) a certificate dated the Closing Date and signed by the Secretary or an Assistant Secretary of the Company, substantially in the form of Exhibit D1, with respect to the matters set forth therein; and (d) separate certificates dated the Closing Date and signed by the Secretary or an Assistant Secretary of each of the Guarantors, substantially in the form of Exhibit D2, with respect to the matters set forth therein. 3.4. Legality. 20 To the extent that they are required to do so by law or regulation applicable to you, the Notes shall on the Closing Date qualify as a legal investment for you under applicable insurance and other law (without regard to any "basket" or "leeway" provisions), and the acquisition thereof shall not subject you to any penalty or other onerous condition pursuant to any such law or regulation, and you shall have received such evidence as you may reasonably request to establish compliance with this condition. 3.5. Private Placement Numbers. The Company shall have obtained or caused to be obtained a private placement number for each Series of Notes from the CUSIP Service Bureau of Standard & Poor's and you shall have been informed of such private placement numbers. 3.6. Other Purchasers. None of the Other Purchasers shall have failed to execute and deliver a Note Purchase Agreement or to accept delivery of or make payment for the Notes to be purchased by it on the Closing Date. 3.7. Expenses. All fees and disbursements required to be paid on or before the Closing Date pursuant to Section 1.5 shall have been paid in full. 3.8. Joint and Several Guaranty. Each of the Guarantors shall have executed and delivered to you a guaranty agreement with respect to the Notes (as amended from time to time, the "Joint and Several Guaranty"), in the form of Exhibit E. 3.9. Security Documents; Collateral. (a) Trust Agreement. The Company and the Guarantors shall have executed and delivered to the Security Trustee a trust agreement (as amended from time to time, the "Trust Agreement"), in the form of Exhibit F. (b) Utah Deed of Trust. Circle Four shall have executed and delivered to the Security Trustee a deed of trust, security agreement and assignment of rents and leases, substantially in the form of Exhibit G1, for the Circle Four Properties located in the State of Utah (as amended from time to time, the "Utah Deed of Trust"), securing Circle Four's indebtedness and obligations under the Joint and Several Guaranty and 21 in respect of the Notes with a first-priority lien encumbering each of the Circle Four Properties located in the State of Utah. (c) Virginia Deed of Trust. Smithfield-Carroll's Farms shall have executed and delivered to the Security Trustee a deed of trust, security agreement and assignment of rents and leases, substantially in the form of Exhibit G2, for the Smithfield-Carroll's Farms Properties located in the Commonwealth of Virginia (as amended from time to time, the "Virginia Deed of Trust"), securing Smithfield-Carroll's Farms' indebtedness and obligations under the Joint and Several Guaranty and in respect of the Notes with a first-priority lien (subject to the Liens described in the note at the end of Part 2.2(b) of Annex 3) encumbering each of the Smithfield-Carroll's Farms Properties located in the Commonwealth of Virginia. (d) South Carolina Deeds of Trust. Brown's Farms and Carroll's Realty Partnership shall have executed and delivered to the Security Trustee a deed of trust, security agreement and assignment of rents and leases, substantially in the form of Exhibit G4, for each of the Brown's Farms Properties and Carroll's Realty Partnership Properties located in the State of South Carolina (collectively, as amended from time to time, the "South Carolina Deeds of Trust"), securing the indebtedness and obligations of Brown's Farms and Carroll's Realty Partnership under the Joint and Several Guaranty and in respect of the Notes with a first-priority lien encumbering each of the Brown's Farms Properties and Carroll's Realty Partnership Properties located in the State of South Carolina. (e) North Carolina Deeds of Trust. Brown's Farms, Carroll's Realty Partnership and Smithfield-Carroll's Farms shall have executed and delivered to the Security Trustee a deed of trust, security agreement and assignment of rents and leases, substantially in the form of Exhibit G3, for each of the Brown's Farms Properties, Carroll's Realty Partnership Properties and Smithfield-Carroll's Farms Properties located in the State of North Carolina (collectively, as amended from time to time, the "North Carolina Deeds of Trust"), securing the indebtedness and obligations of Brown's Farms, Carroll's Realty Partnership and Smithfield-Carroll's Farms under the Joint and Several Guaranty and in respect of the Notes with a first-priority lien (subject to the Liens described in the note at the end of Part 2.2(b) of Annex 3) encumbering each of the Brown's Farms Properties, Carroll's Realty Partnership Properties and Smithfield- Carroll's Farms Properties located in the State of North Carolina. 22 (f) Colorado Deed of Trust. Central Plains shall have executed and delivered to the Security Trustee a deed of trust, security agreement and assignment of rents and leases, substantially in the form of Exhibit G5, for the Central Plains Properties located in the State of Colorado (as amended from time to time, the "Colorado Deed of Trust"), securing Central Plains' indebtedness and obligations under the Joint and Several Guaranty and in respect of the Notes with a first-priority lien encumbering each of the Central Plains Properties located in the State of Colorado. (g) Security Agreements. Each of Circle Four, Carroll's Realty Partnership, Smithfield-Carroll's Farms, Brown's Farms and Central Plains shall have executed and delivered to the Security Trustee a Security Agreement, substantially in the form of Exhibit H (collectively, as amended from time to time, the "Security Agreements"), securing the indebtedness and obligations of each of such Subsidiaries under the Joint and Several Guaranty and in respect of the Notes with a lien encumbering certain personal property of such Guarantors, subject only to prior Liens permitted by the Security Agreements. (h) Collateral. The Security Documents shall be in full force and effect and there shall be no defaults or events of default thereunder and as defined therein. All actions necessary to perfect the Liens of the Security Trustee in the Collateral (including, without limitation, the filing of all appropriate financing statements and the recording of all appropriate documents with appropriate public officials) shall have been taken in accordance with the terms and provisions of the Security Documents and confirmation thereof received by you. The Liens of the Security Trustee in the Collateral shall be valid, enforceable and perfected and the Collateral shall be subject to no other Liens not otherwise acceptable to you. All recording, subscription and other similar fees, and all taxes and other expenses related to such filings, registrations and recordings shall have been paid, or caused to be paid, in full by the Company. 23 3.10. Collateral Matters. (a) Survey and Environmental Information. You shall have received a survey and an environmental site assessment report, each to the extent available, with respect to each of (i) the Circle Four Properties, (ii) the Smithfield-Carroll's Farms Properties, (iii) the Brown's Farms Properties, (iv) the Carroll's Realty Partnership Properties and (v) the Central Plains Properties (collectively, the "Mortgaged Properties"), each in form and substance satisfactory to you and your special counsel. (b) Environmental Indemnification. Each of the Company, Circle Four, Smithfield-Carroll's Farms, Brown's Farms, Carroll's Realty Partnership and Central Plains shall have delivered to you and the Security Trustee one or more environmental indemnification agreements (collectively, as amended from time to time, the "Environmental Indemnification Agreement"), substantially in the form of Exhibit I. (c) Casualty Insurance. The Security Trustee shall have received (and copies shall have been delivered to you), with respect to each of the Mortgaged Properties: (i) insurance policies insuring each such Mortgaged Property against all insurable hazards, casualties and contingencies; and (ii) evidence that none of such Mortgaged Properties is within an area identified as having special flood hazards or, alternatively, insurance policies insuring each such Mortgaged Property against floods and similar hazards; each in form and substance satisfactory to you and your special counsel. 3.11. Appraisals. You shall have received copies of one or more appraisals of the current value of the Fixed Asset Collateral, all in form and substance satisfactory to you and your special counsel. 24 3.12. Uniform Commercial Code Items. Each of Circle Four, Smithfield-Carroll's Farms, Brown's Farms, Carroll's Realty Partnership and Central Plains shall have executed and delivered, and there shall have been filed, such financing statements as may be necessary or desirable to evidence the Liens granted by each of them pursuant to the Security Documents, all in form and substance satisfactory to you and your special counsel. 3.13. Consents Under the Revolving Credit Agreement. The Company and the Guarantors shall have delivered to you copies of consents (in form and substance satisfactory to you and your special counsel) under each of the Revolving Credit Agreements of the Company and each Subsidiary in effect on the Closing Date permitting the issuance of the Notes and the performance by each of the Company and the Guarantors of their respective obligations hereunder and under the other Financing Documents. 3.14. Intercreditor Agreement. The Company, the Guarantors, the Security Trustee and The Chase Manhattan Bank shall have executed and delivered to you an intercreditor agreement (as amended from time to time, the "Intercreditor Agreement") with respect to the Credit Facility, substantially in the form of Exhibit J. You and the Other Purchasers, by your and their execution of the Note Purchase Agreements, shall be deemed (a) to have authorized the Security Trustee to enter into the Intercreditor Agreement and (b) to have agreed to be bound by the provisions of the Intercreditor Agreement. 3.15. Fees. The Company shall have paid a non-refundable fee (a) in an aggregate amount of three hundred seventy-five thousand dollars ($375,000) to the purchasers of the Series I Notes and the Series J Notes, such fee to be allocated ratably among such purchasers in accordance with the respective principal amount of the Notes purchased by each such purchaser and (b) in an aggregate amount of one hundred eighty-seven thousand five hundred dollars ($187,500) to the purchasers of the Series L Notes. 3.16. Cooperative Membership. The Company shall have purchased and fully paid for two hundred (200) shares of common stock in Cape Fear Farm Credit, ACA representing the Company's voting membership interest in such Purchaser for a total consideration of one thousand dollars ($1,000). 25 3.17. Compliance with this Agreement. Each of the Company and the Guarantors shall have performed and complied with all agreements and conditions contained herein that are required to be performed or complied with by the Company and the Guarantors on or prior to the Closing Date, and such performance and compliance shall remain in effect on the Closing Date. 3.18. Proceedings Satisfactory. All proceedings taken in connection with the sale of the Notes and the other transactions evidenced hereby and all documents and papers relating thereto shall be satisfactory to you and your special counsel. You and your special counsel shall have received copies of such documents and papers as you or they may reasonably request in connection therewith or in connection with your special counsel's closing opinion, all in form and substance satisfactory to you and your special counsel. 4. PAYMENTS 4.1. Interest Payments. (a) Series I Notes. The Series I Notes shall bear interest on the outstanding principal amount thereof at the rate of seven and eighty-nine one-hundredths percent (7.89%) per annum and shall be payable to the holders of the Series I Notes, in arrears, quarterly on the first day of January, April, July and October in each year, commencing on January 1, 2000, until the principal amount of the Series I Notes in respect of which such interest shall have accrued shall become due and payable, and interest shall accrue on any overdue principal (including any overdue prepayment of principal) and (to the extent permitted by applicable law) on any overdue installment of interest, at a rate equal to nine and eighty-nine one- hundredths percent (9.89%) per annum. (b) Series J Notes. The Series J Notes shall bear interest on the outstanding principal amount thereof at a rate per annum equal to the Series J Rate determined in accordance with Section 4.1(f). Such interest shall be payable to the holders of the Series J Notes, in arrears, quarterly on the first day of January, April, July and October in each year commencing on January 1, 2000, until the principal amount of the Series J Notes in respect of which such interest shall have accrued shall become due and payable become due and payable, and interest shall accrue on any overdue principal (including any overdue prepayment of principal) and (to the extent permitted by applicable law) on any overdue installment of interest, at a rate equal to the Series J Variable Rate plus 2% per annum. 26 (c) Series K Notes. The Series K Notes shall bear interest on the outstanding principal amount thereof at the rate of eight and forty-four one-hundredths percent (8.44%) per annum and shall be payable to the holders of the Series K Notes, in arrears, quarterly on the first day of January, April, July and October in each year commencing on January 1, 2000, until the principal amount of the Series K Notes in respect of which such interest shall have accrued shall become due and payable, and interest shall accrue on any overdue principal (including any overdue prepayment of principal), Make-Whole Amount, if any, and (to the extent permitted by applicable law) on any overdue installment of interest, at a rate equal to the lesser of (i) the Maximum Legal Rate of Interest and (ii) ten and forty-four one-hundredths percent (10.44%) per annum. (d) Series L Notes. The Series L Notes shall bear interest on the outstanding principal amount thereof, for each Series L Interest Period, at a rate per annum equal to the Series L Rate determined in accordance with Section 4.1(g) on the Series L Rate Determination Date immediately preceding such Series L Interest Period. Such interest shall be payable to the holders of the Series L Notes, in arrears, on the last day of each Series L Interest Period until the principal amount of the Series L Notes in respect of which such interest shall have accrued shall become due and payable become due and payable, and interest shall accrue on any overdue principal (including any overdue prepayment of principal), Make-Whole Amount, if any, and (to the extent permitted by applicable law) on any overdue installment of interest, at a rate equal to the lesser of (i) the Maximum Legal Rate of Interest and (ii) the Series L Rate plus 2% per annum. (e) Basis of Computation. Interest on the Series I Notes, the Series J Notes and the Series L Notes shall be computed on the basis of a year of three hundred sixty (360) days and paid for the actual number of days elapsed, calculated as to each interest period or other period during which interest accrues from and including the first day thereof to and including the last day thereof. Interest on the Series K Notes shall be computed on the basis of a 360-day year of twelve 30-day months. Interest determined at the Maximum Legal Rate of Interest shall be determined in accordance with Applicable Interest Law. (f) Determination of Series J Rate. (i) Series J Variable Rate. Except as provided in Section 4.1(f)(ii), the Series J Notes shall bear interest on the outstanding principal amount thereof at the Series J Variable Rate. The first applicable Series J Variable Rate shall be 27 determined on the Closing Date and shall be in effect up to and including November 30, 1999. On December 1, 1999, and on the first (1/st/) day of each calendar month thereafter, the Series J Variable Rate shall be redetermined and shall be in effect for all or the applicable portion of such calendar month, until such time, if any, as the Company shall have elected, at its sole option, by written notice to the holders of the Series J Notes, delivered pursuant to Section 4.1(f)(ii), to have the Series J Notes bear interest at one of the Series J Fixed Rates. (ii) Series J Fixed Rates. The Company may, at any time and from time to time, elect to have the then outstanding Series J Notes (in whole but not in part) bear interest at one of the Series J Fixed Rates at such time, by providing written notice of such election on any Business Day to the holders of the Series J Notes, specifying the Series J Fixed Rate that has been selected by the Company. If such notice shall have been received by the holders of the Series J Notes not later than 11:00 a.m., New York City Time, on the date such notice has been delivered, the Series J Notes shall bear interest at the selected Series J Fixed Rate commencing on the day immediately following the date such notice shall have been so received; if such notice shall have been received by the holders of the Series J Notes after 11:00 a.m., New York City Time, on the date such notice has been delivered, the Series J Notes shall bear interest at the selected Series J Fixed Rate commencing on the second (2/nd/) day immediately following the date such notice shall have been so received. The Series J Fixed Rate in respect of any such notice shall be determined on the date such notice shall have been received (regardless of the time of such receipt) by the holders of the Series J Notes. If the Company, as specified in any such notice, shall select (i) the Series J 30-Day Fixed Rate, then the Series J Notes shall bear interest at the Series J 30-Day Fixed Rate for a period of thirty (30) consecutive days, (ii) the Series J 60-Day Fixed Rate, then the Series J Notes shall bear interest at the Series J 60-Day Fixed Rate for a period of sixty (60) consecutive days, and (iii) the Series J 90-Day Fixed Rate, then the Series J Notes shall bear interest at the Series J 90-Day Fixed Rate for a period of ninety (90) consecutive days; provided, in each case, that no such interest period shall continue beyond October 1, 2009. Commencing on the first (1/st/) day immediately following the last day of each such interest period and continuing thereafter, the Series J Notes shall bear interest (1) if the Company shall have provided, on or prior to 11:00 a.m., New York City Time, on the 28 Business Day immediately prior to such date, written notice to the holders of the Series J Notes in accordance with the immediately preceding paragraph, at the Series J Fixed Rate selected by the Company in such notice, or (2) in the event the Company shall not have provided any such notice, at the then applicable Series J Variable Rate for the then-current calendar month and redetermined thereafter in accordance with Section 4.1(f)(i)). (iii) Series J Rate Determination Binding. Each determination of a Series J Rate pursuant to the provisions of this Agreement shall be conclusive and binding on the Company and the holders of the Series J Notes in the absence of manifest error. In the case of manifest error, any holder of a Series J Note or the Company may object to such quoted Series J Rate by written notice delivered to the Company or the holders of the Series J Notes, as the case may be, detailing the reasons for such objection. Upon delivery of any such notice of objection, the holders of the Series J Notes and the Company shall cooperate to promptly determine the correct Series J Rate and such correct Series J Rate shall be the then applicable Series J Rate for the Series J Notes. Each of the holders of the Series J Notes and the Company shall make the required adjustments to the amount of interest payable on the first interest payment date next succeeding the date of the determination of the correct Series J Rate as are necessary to reflect the application of such correct Series J Rate. (iv) Inability to Determine Rate. If, in the reasonable opinion of the holder (or holders) of at least fifty-one percent (51%) in principal amount of the Series J Notes then outstanding (exclusive of Notes then owned by any one or more of the Company, any Subsidiary and any Affiliate), the market for United States dollar deposits in London ceases to function, or it becomes impossible, impractical or illegal to readily, currently and accurately determine the applicable Series J Rate, or the applicable Series J Rate no longer currently and accurately reflects the market level of interest rates for obligations of a similar nature, term and amount, then such holder (or holders) shall forthwith give notice thereof to the Company. Such holder (or holders) shall select a reasonably equivalent substitute interest rate index (in view of the cost of funds of such holder or holders) and applicable margin intended to match, as closely as reasonably possible, the general level of the Series J Rate, and will give the Company notice of such substitution. 29 (v) Reinstatement of Rate. If there has been at any time an interest rate substituted for the Series J Rate in accordance with Section 4.1(f)(iv) and thereafter, in such holder's (or holders') reasonable opinion, the circumstances causing such substitution have ceased, then such holder (or holders) shall promptly notify in writing the Company of such cessation, and on the first (1/st/) Business Day immediately following the date such notice shall have been delivered, the Series J Notes shall bear interest at the Series J Variable Rate (determined on such first (1/st/) Business Day and redetermined thereafter in accordance with Section 4.1(f)(i)) and the Series J Rate shall be determined as originally defined hereby. Nevertheless, the provisions of Section 4.1(f)(iv) shall generally continue to be effective. (vi) Indemnity. In the event any payment or prepayment of the Series J Notes is made, in whole or in part, pursuant to Section 4.3, Section 4.4 or Section 8.2, as the case may be, at any time in which the Series J Notes bear interest at one of the Series J Fixed Rates (other than the last day of the period in which such Series J Fixed Rate is applicable to the Series J Notes), the Company agrees to pay to the holders of the Series J Notes, in addition to, and not in lieu of, any other amount due hereunder, on demand, such amount (the "Indemnification Fee") as shall be sufficient to reimburse and indemnify such holders for any loss (including loss of earnings and anticipated profits), cost or expense (including, without limitation, costs or losses associated with prepaying or redeploying deposits) incurred as a result of such payment or prepayment. Any demand by the holders of the Series J Notes for payment pursuant to this Section 4.1(f)(vi) shall be accompanied by a schedule setting forth in reasonable detail the computation of any such loss, cost or expense. Each such schedule delivered to the Company shall constitute prima facie evidence of the Indemnification Fee payable by the Company, absent manifest error. (vii) Definitions. As used in this Section 4.1(f), the following terms have the meanings set forth below: Series J Variable Rate - means, in respect of any date of determination, the sum of the Series J LIBOR Base Rate as of such date of determination plus one and twenty one-hundredths percent (1.20%) per annum. Series J Thirty 30-Day Fixed Rate - means, in respect of any date of determination, the Series J LIBOR Base Rate as of 30 such date of determination plus one and twenty-five one-hundredths percent (1.25%) per annum. Series J 60-Day Fixed Rate -- means, in respect of any date of determination, the Series J LIBOR Base Rate as of such date of determination plus one and twenty-five one-hundredths percent (1.25%) per annum. Series J 90-Day Fixed Rate -- means, in respect of any date of determination, the Series J LIBOR Base Rate as of such date of determination plus one and twenty-five one-hundredths percent (1.25%) per annum. Series J LIBOR Base Rate -- means, on the date of any determination thereof, the per annum London Interbank Offered Rate (truncated to three decimal places) offered for deposits of United States dollars for a period equal or closest to: (a) with respect to any calculation of the Series J Variable Rate, ninety (90) days; (b) with respect to any calculation of the Series J 90-Day Fixed Rate, ninety (90) days; (c) with respect to any calculation of the Series J 60-Day Fixed Rate, sixty (60) days; and (d) with respect to any calculation of the Series J 30-Day Fixed Rate, thirty (30) days; as published in The Wall Street Journal ----------------------- (i) on the Business Day immediately preceding the Closing Date with respect to the calculation of the Series J Variable Rate applicable to the period from the Closing Date up to and including November 30, 1999; (ii) with respect to the calculation of the Series J Variable Rate applicable to the month of December 1999 and any calendar month thereafter, on the fifteenth (15/th/) day (or if such day is not a Business Day, then the Business Day immediately preceding the fifteenth (15/th/) day) of the month immediately preceding the calendar month in which such Series J Variable Rate shall be in effect, and 31 (iii) on the Business Day immediately preceding the date of any determination thereof with respect to the calculation of any Series J Fixed Rate, or if such rates are no longer published in The Wall Street Journal, ----------------------- such other service as in the reasonable opinion of the holder or holders of at least fifty-one percent (51%) in principal amount of the Series J Notes at the time outstanding (exclusive of Notes then owned by any one or more of the Company, any Subsidiary or any Affiliate) shall provide equivalent information. (g) Determination of Series L Rate. (i) Interest Periods. Each period (each a "Series L Interest Period") in respect of which interest shall be calculated on the Series L Notes (other than the first Series L Interest Period) shall commence on a Series L Rate Adjustment Date and end on the day immediately preceding the then next succeeding Series L Rate Adjustment Date, inclusive. The first Series L Interest Period shall commence on the Closing Date and end on December 31, 1999, inclusive (the "Series L Initial Interest Period"). (ii) Determination of Rate. (A) The Series L Rate for each Series L Interest Period shall be determined by the Reference Institution on the second (2nd) Business Day preceding the Closing Date (for the Series L Initial Interest Period) and on the third (3rd) Business Day (each a "Series L Rate Determination Date") preceding each Series L Rate Adjustment Date after the Closing Date (for the Series L Interest Period commencing on such Series L Rate Adjustment Date), and the Company shall cause the Reference Institution to notify, in writing, the Company, at the address set forth in Section 10.1, and each holder of Series L Notes, at the address set forth on Annex 1 (or at such other address that any such holder shall give the Company in writing) of the Series L Rate on such Series L Rate Determination Date (and, simultaneously with the mailing of such Notice, the Reference Institution shall send a copy of such notice to each holder of Series L Notes via telecopier at the telecopier number indicated on Annex 1 with respect to such notices or such other telecopier number that any such holder shall give the Company in writing). 32 (B) Each determination of a Series L Rate by the Reference Institution, pursuant to the provisions of this Agreement, shall be conclusive and binding on the Company and the holders of the Series L Notes in the absence of manifest error. In the case of manifest error, any holder of a Series L Note or the Company may object to such quoted Series L Rate by written notice delivered to the Company or the holders of the Series L Notes, as the case may be, detailing the reasons for such objection. Upon delivery of any such notice of objection the holders of the Series L Notes and the Company shall cooperate to promptly determine the correct Series L Rate and such correct Series L Rate shall be the applicable Series L Rate for such Series L Interest Period. Each of the holders of the Series L Notes and the Company shall make the required adjustments to the amount of interest payable on the first day of the next succeeding Series L Interest Period as are necessary to reflect the application of such correct Series L Rate for such Series L Interest Period. (iii) Inability to Determine Rate. (A) If, in the reasonable opinion of the holder (or holders) of at least fifty-one percent (51%) in principal amount of the Series L Notes (exclusive of Notes then owned by the Company, any Subsidiary or any Affiliate), the market for United States dollar deposits in London ceases to function, or it becomes impossible, impractical or illegal to readily, currently and accurately determine the applicable Series L Rate, or the applicable Series L Rate no longer currently and accurately reflects the market level of interest rates for obligations of a similar nature, term and amount, then such holder (or holders) shall forthwith give notice thereof to the Company and the Reference Institution. Such holder (or holders) shall select a substitute interest rate and applicable margin intended to match, as closely as reasonably possible, the general level of the Series L Rate, subject to the Company's agreement, which shall not be unreasonably withheld. During the first Series L Interest Period in which such substitute rates have not been agreed upon, the Series L Notes held by such holder shall bear interest at the Alternate Interest Rate, determined by the Reference Institution as of the Series L Rate Determination Date in respect of such Series L Interest Period upon the written request of the Company or such holder. 33 (B) If, prior to the Series L Rate Determination Date occurring during such first Series L Interest Period, a substituted interest rate shall have been agreed upon, and the Reference Institution shall have been notified (by the holder (or holders) of such Series L Notes or the Company) in writing of such substituted interest rate, then such substituted interest rate shall be retroactive to and effective from the first day of such Series L Interest Period and shall replace the Alternate Interest Rate. In such event, each reference herein and in the Series L Notes to the "Series L Rate" shall be deemed thereafter to be a reference as of such Series L Rate Determination Date to such substituted interest rate and, subject to Section 4.1(g)(iv), such substituted interest rate shall thereafter be determined by the Reference Institution in accordance with the terms hereof. (C) If a substituted interest rate shall not have been agreed upon, in writing, prior to such Series L Rate Determination Date, then the Alternate Interest Rate as of such Series L Rate Determination Date shall be substituted for the Series L Rate. In such event, each reference herein and in the Series L Notes to the "Series L Rate" shall be deemed a reference to the Alternate Interest Rate. (D) Each determination of the Alternate Interest Rate or such other substituted interest rate by the Reference Institution, pursuant to the provisions of this Agreement and any such agreement between the holders of Series L Notes and the Company, shall be conclusive and binding on such holders and the Company, in the absence of manifest error. In the case of manifest error, any holder of Series L Notes or the Company may object to such quoted Alternate Interest Rate by written notice delivered to the Company or each holder of Series L Notes, as the case may be, detailing the reasons for such objection. Upon delivery of any such notice of objection the holders of the Series J Notes and the Company shall cooperate to promptly determine the correct Alternate Interest Rate and such correct Alternate Interest Rate shall be the applicable Alternate Interest Rate for such Series L Interest Period. Each of the holders of the Series L Notes and the Company shall make the required adjustments to the amount of interest payable on the first day of the next succeeding Series L Interest Period as are necessary to reflect the 34 application of such correct Alternate Interest Rate for such Series L Interest Period. (iv) Reinstatement of Rate. If there has been at any time an interest rate substituted for the Series L Rate in accordance with Section 4.1(g)(iii) and thereafter, in the reasonable opinion of the holder (or holders) of at least fifty-one percent (51%) in principal amount of the Series L Notes (exclusive of Notes then held by the Company, any Subsidiary or any Affiliate), the circumstances causing such substitution have ceased, then such holder (or holders) shall promptly notify in writing the Company and the Reference Institution of such cessation, and on the then next succeeding Rate Determination Date the Series L Rate shall be determined as originally defined hereby. Nevertheless, the provisions of Section 4.1(g)(iii) shall generally continue to be effective. (v) Reference Institution. The "Reference Institution" shall be John Hancock or, if the holder or holders of at least fifty-one percent (51%) in principal amount of the Series L Notes then outstanding (exclusive of Notes then held by the Company, any Subsidiary or any Affiliate) request by written notice to the Company, the Company shall appoint an Acceptable Financial Institution designated in such notice by the holder or holders of at least fifty- one percent (51%) in principal amount of the Series L Notes then outstanding (exclusive of Notes then held by the Company, any Subsidiary or any Affiliate) that is reasonably satisfactory to the Company. The Company shall maintain at all times the appointment of such Reference Institution and shall pay and be exclusively liable for all fees charged by the Reference Institution in connection herewith. (h) Maximum Rate of Interest. The Company acknowledges and agrees that 12 U.S.C. section 2205 provides that institutions of the Farm Credit System are not subject to any interest rate limitation imposed by any state constitution or statute or other laws, and that any such limitations are preempted, and therefore any interest owing under the Notes, to the extent purchased or held by an institution of the Farm Credit System, is not subject to any ceiling. Accordingly, so long as any of the Notes are held by an institution of the Farm Credit System, there shall be no Maximum Legal Rate of Interest with respect to such Notes. Nonetheless, it is the intention of the Company and holders of the Notes that are not institutions of the Farm Credit System to conform strictly to the Applicable Interest Law. Accordingly, notwithstanding any provisions to the contrary in this Agreement or in any Note, the 35 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 (other than Notes held by holders that are not institutions of the Farm Credit System) 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 such Notes, then in such event (i) the provisions of this Section 4.1(h) 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 such Notes which is in excess of what is allowed by the Applicable Interest Law shall be deemed a mistake and canceled automatically and, if theretofore paid, shall be credited to the outstanding principal amount of such Notes, and (iv) the effective rate of interest on such 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. 4.2. Scheduled Required Prepayments. (a) Series I Notes. In addition to paying the entire then outstanding principal amount and the interest due on the Series I Notes on the maturity date thereof (October 1, 2009), the Company shall prepay, and there shall become due and payable, two million five hundred thousand dollars ($2,500,000) in aggregate principal amount of 36 the Series I Notes on the first day of January, April, July and October in each year, commencing on January 1, 2000 and ending on July 1, 2009, inclusive. Each such prepayment shall be at one hundred percent (100%) of the amount prepaid, together with interest accrued thereon to the date of prepayment. (b) Series J Notes. In addition to paying the entire then outstanding principal amount and the interest due on the Series J Notes on the maturity date thereof (October 1, 2009), the Company shall prepay, and there shall become due and payable, one million two hundred fifty thousand dollars ($1,250,000) in aggregate principal amount of the Series J Notes on the first day of January, April, July and October in each year, commencing on January 1, 2000 and ending on July 1, 2009, inclusive. Each such prepayment shall be at one hundred percent (100%) of the amount prepaid, together with interest accrued thereon to the date of prepayment. (c) Series K Notes. In addition to paying the entire then outstanding principal amount and the interest due on the Series K Notes on the maturity date thereof (October 1, 2009), the Company shall prepay, and there shall become due and payable, five million dollars ($5,000,000) in aggregate principal amount of the Series K Notes on the first day of October in each year, commencing on October 1, 2005 and ending on October 1, 2008, inclusive. Each such prepayment shall be at one hundred percent (100%) of the amount prepaid, together with interest accrued thereon to the date of prepayment. (d) Series L Notes. In addition to paying the entire then outstanding principal amount and the interest due on the Series L Notes on the maturity date thereof (October 1, 2009), the Company shall prepay, and there shall become due and payable, two million five hundred thousand dollars ($2,500,000) in aggregate principal amount of the Series L Notes on the first day of October in each year, commencing on October 1, 2005 and ending on October 1, 2008, inclusive. Each such prepayment shall be at one hundred percent (100%) of the amount prepaid, together with interest accrued thereon to the date of prepayment. 4.3. Offer to Prepay upon Change in Control. (a) Notice and Offer. In the event of either (i) a Change in Control, or (ii) the obtaining of knowledge of a Control Event by any officer of the Company, 37 then the Company will, within three (3) Business Days of (x) such Change in Control or (y) the obtaining of knowledge of such Control Event (including via the receipt of notice of a Control Event from any holder of Notes), as the case may be, give written notice of such Change in Control or Control Event to each holder of Notes and, simultaneously with the sending of such written notice, give telephonic advice of such Change in Control or Control Event to an investment officer or other similar representative or agent of each such holder specified on Annex 1 at the telephone number specified thereon, or to such other Person at such other telephone number as any holder of a Note may specify to the Company in writing. In the event of a Change in Control, such written notice shall contain, and such written notice shall constitute, an irrevocable offer to prepay all, but not less than all, of the Notes of each Series held by such holder on a date specified in such notice (the "Control Prepayment Date") that is not less than thirty (30) days and not more than sixty (60) days after the date of such notice. (If the Control Prepayment Date shall not be specified in such notice, the Control Prepayment Date shall be the thirtieth (30th) day after the date of such notice.) (b) Acceptance and Payment. To accept such offered prepayment, a holder of Notes shall cause a notice of such acceptance (which notice of acceptance may be in respect of one or more Series of Notes held by such holder, but which notice need not treat Notes of all Series held by such holder in the same manner) to be delivered to the Company not later than fourteen (14) days after the date of receipt by such holder of the written offer of such prepayment. If so accepted, such offered prepayment shall be due and payable on the Control Prepayment Date. Such offered prepayment shall be made at one hundred percent (100%) of the principal amount of such Notes, together with (i) an amount equal to the Make-Whole Amount, if any, at the time applicable with respect to the principal amount of the Notes of such Series then being prepaid and (ii) interest on the Notes then being prepaid accrued to the Control Prepayment Date. (c) Officer's Certificate. Each offer to prepay the Notes pursuant to this Section 4.3 will be accompanied by an officer's certificate, executed by a Senior Officer and dated the date of such offer, specifying: (i) the Control Prepayment Date; (ii) the principal amount of each Note offered to be prepaid; 38 (iii) the interest to be paid on each such Note, accrued to the Control Prepayment Date; (iv) the estimated Make-Whole Amount with respect to the Series K Notes due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation; (v) that the conditions of this Section 4.3 have been fulfilled; and (vi) in reasonable detail, the nature and date or proposed date of the Change in Control. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Series K Notes and Series L Notes that has accepted such offer of prepayment a certificate of a Senior Financial Officer specifying the calculation of the Make-Whole Amount in respect of the Notes of such Series as of the specified prepayment date. With respect to any such prepayment of the Series I Notes or the Series J Notes, the holder or holders thereof to receive such prepayment shall use good faith efforts to provide the Company with notice of the Make-Whole Amount (if any) due in respect of such prepayment approximately two Business Days prior to such prepayment (provided, however, that the failure of any such holder to so provide such notice shall not relieve the Company of the obligation to pay such Make-Whole Amount promptly at such later time as such holder shall provide notice to the Company of such amount). (d) Effect of Prepayments. Each prepayment of principal of the Series I Notes or the Series J Notes pursuant to this Section 4.3 shall be applied to reduce the principal amount of the Notes of such Series due in the inverse order of maturity of such Notes of such Series. Each prepayment of principal of the Series K Notes or the Series L Notes pursuant to this Section 4.3 shall be applied to reduce the principal amount of the Notes of such Series due on the maturity date of the Notes of such Series and to reduce each remaining scheduled required prepayment of principal (if any) applicable to each such Series required by Section 4.2, apportioned on a ratable basis (based on the principal amount due on each such date) among all such amounts. 4.4. Optional Prepayments. (a) Optional Prepayments. The Company may at any time after the Closing Date prepay the principal amount of the Notes, in part, 39 in integral multiples of five million dollars ($5,000,000), or in whole, in each case together with: (i) an amount equal to the Make-Whole Amount at such time in respect of the principal amount of the Notes of such Series being so prepaid; and (ii) interest on such principal amount then being prepaid accrued to the prepayment date. (b) Effect of Prepayments. Each prepayment of principal of the Series I Notes or the Series J Notes pursuant to this Section 4.4 shall be applied to reduce the principal amount of the Notes of such Series due in the inverse order of maturity of such Notes of such Series. Each prepayment of principal of the Series K Notes or the Series L Notes pursuant to this Section 4.4 shall be applied to reduce the principal amount of the Notes of such Series due on the maturity date of the Notes of such Series and to reduce each remaining scheduled required prepayment of principal (if any) applicable to each such Series required by Section 4.2, apportioned on a ratable basis (based on the principal amount due on each such date) among all such amounts. 4.5. Notice of Optional Prepayment. The Company will give written notice of any optional prepayment of the Notes to each holder of the Notes not less than thirty (30) days or more than sixty (60) days before the date fixed for prepayment, specifying: (a) such date; (b) that such prepayment is being made pursuant to Section 4.4; (c) the principal amount of such holder's Notes to be prepaid on such date with respect to each Series of Notes held by such holder; and (d) the interest to be paid on each such Note, accrued to the date fixed for prepayment; and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount with respect to the Series I Notes, the Series K Notes and the Series L Notes due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation. 40 Such notice of prepayment shall also certify all facts that are conditions precedent to any such prepayment. Notice of prepayment having been so given, the aggregate principal amount of the Notes specified in such notice, together with the Make-Whole Amount, if any, and accrued interest thereon shall become due and payable on the specified prepayment date. Two Business Days prior to such prepayment, the Company shall deliver to each holder of the Series K Notes and the Series L Notes a certificate of a Senior Financial Officer specifying the calculation of the Make-Whole Amount in respect of the Notes of such Series as of the specified prepayment date. With respect to any such prepayment of the Series I Notes or the Series J Notes, the holder or holders thereof at such time shall use good faith efforts to provide the Company with notice of the Make- Whole Amount (if any) due in respect of such prepayment approximately two Business Days prior to the scheduled date of such prepayment (provided, however, that the failure of any such holder to so provide such notice shall not relieve the Company of the obligation to pay such Make-Whole Amount promptly at such later time as such holder shall provide notice to the Company of such amount). 4.6. Pro Rata Payments. (a) Scheduled Required Prepayments. If, at the time of any required prepayment of the principal of Notes of any Series made pursuant to Section 4.2 there is more than one Note of such Series outstanding, the aggregate principal amount of such required prepayment shall be allocated among the Notes of such Series at the time outstanding pro rata in proportion to the respective unpaid principal amounts of all such outstanding Notes of such Series. (b) Optional Prepayments. (i) Allocation among Series. If, at the time of any optional prepayment of the principal of Notes made pursuant to Section 4.4 there is more than one Series of Notes outstanding, the Company may: (A) prepay the Series J Notes with or without prepaying the Notes of any other Series; (B) prepay the Series L Notes with or without prepaying the Notes of any other Series; or (C) prepay the Series I Notes or the Series K Notes, provided that in the case of any such prepayment, the aggregate principal amount of such optional prepayment shall be allocated between the Series I Notes and the Series 41 K Notes at the time outstanding pro rata in proportion to the respective unpaid principal amounts of each such Series. (ii) Allocation within Series. If, at the time of any optional prepayment of the principal of Notes of any Series made pursuant to Section 4.4 there is more than one Note of such Series outstanding, the aggregate principal amount of such optional prepayment shall be allocated among the Notes of such Series at the time outstanding pro rata in proportion to the respective unpaid principal amounts of all such outstanding Notes of such Series. 4.7. Notation of Notes on Prepayment. Upon any partial prepayment of a Note, such Note may, at the option of the holder thereof, be (a) surrendered to the Company pursuant to Section 5.2 in exchange for a new Note of the same Series, in a principal amount equal to the principal amount remaining unpaid on the surrendered Note, (b) made available to the Company for notation thereon of the portion of the principal so prepaid, or (c) marked by such holder with a notation thereon of the portion of the principal so prepaid. In case the entire principal amount of any Note is prepaid, such Note shall be surrendered to the Company for cancellation and shall not be reissued, and no Note shall be issued in lieu of the prepaid principal amount of any Note. 4.8. No Other Optional Prepayments. Except as provided in Section 4.4, the Company may not make any optional prepayment (whether directly or indirectly by purchase or acquisition) in respect of the Notes. 4.9. Administrative Fee. The Company shall pay to Cape Fear Farm Credit, ACA, in arrears, quarterly on the first day of January, April, July and October in each year, commencing on January 1, 2000, until (and including) the date of maturity, an administrative fee in the amount of seventy-five hundred dollars ($7,500). 5. REGISTRATION; SUBSTITUTION OF NOTES 5.1. Registration of Notes. 42 The Company will cause to be kept at its office, maintained pursuant to Section 6.3, a register for the registration and transfer 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 the register. 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. 5.2. Exchange of Notes. (a) Upon surrender of any Note at the office of the Company maintained pursuant to Section 6.3 duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or its attorney duly authorized in writing, the Company will execute and deliver, at the Company's expense (except as provided below), new Notes of the same Series in exchange therefor, in denominations of at least five hundred thousand dollars ($500,000) (except as may be necessary to reflect any principal amount not evenly divisible by five hundred thousand dollars ($500,000)), 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, shall be of the same Series as the surrendered Note and shall be substantially in the form of the Exhibit in Exhibit A1 through Exhibit A4 corresponding to the Series of the surrendered Note. 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 or other issuance tax or governmental charge imposed in respect of any such transfer of Notes. (b) The Company will pay the cost of delivering to or from such holder's home office or custodian bank from or to the Company, insured to the reasonable satisfaction of such holder, the surrendered Note and any Note issued in substitution or replacement for the surrendered Note. 5.3. 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 (or of ownership by such Institutional Investor's nominee) and such loss, theft, destruction or mutilation), and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to the Company (provided that if the holder of 43 such Note is an Institutional Investor or a nominee of an Institutional Investor, such Institutional Investor's own unsecured letter agreement of indemnity shall be deemed to be satisfactory for such purpose), or (b) in the case of mutilation, upon surrender and cancellation thereof, the Company at its own expense will execute and, within five (5) Business Days after such receipt, deliver, in lieu thereof, a new Note of the same Series, 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. 5.4. Issuance Taxes. The Company will pay all taxes (if any) due in connection with and as the result of the initial issuance and sale of the Notes and/or the execution and delivery of the other Financing Documents and in connection with any modification, amendment or waiver of any Financing Document and shall save each holder of Notes harmless without limitation as to time against any and all liabilities with respect to all such taxes. The obligations of the Company under this Section 5.4 shall survive the payment or prepayment of the Notes and the termination hereof. 6. GENERAL COVENANTS The Company covenants and agrees that on and after the Closing Date and thereafter for so long as any of its obligations under the Note Purchase Agreements and the Notes shall be outstanding: 6.1. Payment of Taxes and Claims. The Company shall, and shall cause each Subsidiary to, pay before they become delinquent, (a) all taxes, assessments and governmental charges or levies imposed upon it or its Property, and (b) all claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons that, if unpaid, might result in the creation of a Lien upon its Property, provided, that items of the foregoing description need not be paid (x) while being contested in good faith and by appropriate proceedings diligently pursued as long as adequate book reserves have been established and 44 maintained and exist with respect thereto, and (y) so long as the title of the Company or the Subsidiary, as the case may be, to, and its right to use, such Property, is not materially adversely affected thereby. 6.2. Maintenance of Properties and Corporate Existence. The Company shall, and shall cause each Subsidiary to, (a) Property -- maintain its Property in good condition, ordinary wear and tear excepted, and make all necessary renewals, replacements, additions, betterments and improvements thereto, and, in addition to the foregoing, the Guarantors shall collectively, during each year, either expend or invest an aggregate amount equal to at least fifteen percent (15%) of Depreciation determined for the then most recently ended fiscal year of the Company on repairs, maintenance or capital improvements to the "Improvements" (as such term is defined in the Deeds of Trust); (b) Insurance -- maintain, with financially sound and reputable insurers accorded a rating by A.M. Best Company of "A" or better and a size rating of "XII" or better (or comparable ratings by any comparable successor rating agency), insurance (including, without limitation, the insurance required by the Security Documents) with respect to its Property and business against such casualties and contingencies, of such types (including, without limitation, insurance with respect to losses arising out of Property loss or damage, public liability, business interruption, larceny, workers' compensation, embezzlement or other criminal misappropriation) and in such amounts as is customary in the case of corporations of established reputations engaged in the same or a similar business and similarly situated; provided that the Company and the Subsidiaries may maintain one or more systems of self-insurance if adequate reserves are maintained with respect thereto and if such systems are implemented and operated in a manner consistent with the sound financial practices of similarly situated corporations of established reputations that maintain similar systems of self-insurance. (c) Financial Records -- maintain sound accounting policies and an adequate and effective system of accounts and internal accounting controls that will safeguard assets, properly record income, expenses and liabilities and assure the production of proper financial statements in accordance with GAAP; (d) Corporate Existence and Rights -- do or cause to be done all things necessary 45 (i) to preserve and keep in full force and effect its existence, rights and franchises, (ii) to ensure that the Company legally and beneficially owns eighty-six percent (86%) of the capital stock of each class of Brown's and one hundred percent (100%) of the capital stock of each of the other Guarantors, and (iii) to maintain each Subsidiary as a Subsidiary, except as otherwise permitted by Section 6.14 and Section 6.15(b); and (e) Compliance with Law -- not be in violation of any law, ordinance or governmental rule or regulation to which it is subject (including, without limitation, any Environmental Protection Law) and not fail to obtain any license, permit, franchise or other governmental authorization necessary to the ownership of its Properties or to the conduct of its business if such violation or failure to obtain could be reasonably expected to have a Material Adverse Effect. 6.3. Payment of Notes and Maintenance of Office. The Company shall punctually pay, or cause to be paid, the principal of and interest (and Make-Whole Amount, if any) to become due in respect of, the Notes, as and when the same shall become due according to the terms hereof and of the Notes, and shall maintain an office at the address of the Company set forth in Section 10.1 where notices, presentations and demands in respect hereof and of the Notes may be made upon it. Such office shall be maintained at such address until such time as the Company shall notify the holders of the Notes of any change of location of such office, which shall in any event be located within the United States of America. 6.4. Current Ratio. The Company shall not at any time permit the ratio of Consolidated Current Assets to Consolidated Current Liabilities to be less than 1.05 to 1.00. 6.5. Consolidated Working Capital. The Company shall not at any time permit Consolidated Working Capital to be less than thirty-five million dollars ($35,000,000). 6.6. Funded Debt. The Company shall not, and shall not permit any Subsidiary to, directly or indirectly, create, assume, incur or Guaranty or otherwise become or be liable in respect of any Funded Debt other than: 46 (a) Funded Debt represented by the Notes; (b) Funded Debt outstanding on the Closing Date and described on Part 2.2(b) of Annex 3; (c) Funded Debt of a Wholly-Owned Subsidiary to the Company or to any other Wholly-Owned Subsidiary; (d) Funded Debt of the Company to a Wholly-Owned Subsidiary; and (e) additional Funded Debt of the Company and the Subsidiaries if, after giving effect thereto and to any concurrent application of the proceeds of such Funded Debt, (i) Consolidated Funded Debt would not exceed sixty-five percent (65%) of Consolidated Total Capitalization and (ii) Consolidated Senior Funded Debt would not exceed fifty-five percent (55%) of the result of (A) Consolidated Total Capitalization minus (B) Senior Subordinated Debt. 6.7. Maintenance of Funded Debt. (a) Consolidated Funded Debt. The Company shall not permit Consolidated Funded Debt, determined as of the end of each fiscal quarter of the Company, to exceed four hundred percent (400%) of Consolidated EBITDA for the period of four (4) consecutive fiscal quarters of the Company ended at such time. (b) Consolidated Senior Funded Debt. The Company shall not permit Consolidated Senior Funded Debt, determined as of the end of each fiscal quarter of the Company, to exceed three hundred twenty percent (320%) of Consolidated EBITDA for the period of four (4) consecutive fiscal quarters of the Company ended at such time. 6.8. Fixed Charges Coverage. The Company shall not at any time permit the ratio of Consolidated Net Income Available for Fixed Charges (calculated in respect of the period of eight (8) consecutive fiscal quarters of the Company then most recently ended) to Consolidated Fixed Charges (calculated in respect of such period) to be less than 1.50 to 1.00. 6.9. Restrictions on Dividends, etc. The Company shall not, and shall not permit any Subsidiary to, create or otherwise cause or suffer to exist or become effective any restriction or 47 encumbrance (other than statutory, regulatory or common law restrictions) on the right or power of any Subsidiary to (a) pay dividends or make any other distributions on such Subsidiary's stock to the Company or any Subsidiary, (b) pay any indebtedness owed by such Subsidiary to the Company or any Subsidiary, (c) make loans or pay advances to the Company or any Subsidiary, or (d) transfer any of its Property to the Company or any Guarantor; provided, however, that a Subsidiary may be subject to restrictions on the payment of dividends or the making of other distributions on its stock to the Company or the other Subsidiaries so long as such restrictions permit the payment of such dividends and the making of such other distributions that are necessary in order to make any and all payments due (including, without limitation, any and all amounts due by way of acceleration, required or optional prepayment or otherwise) in connection with the Notes, the Note Purchase Agreements and the other Financing Documents, and any and all indebtedness used to refinance or repay such indebtedness (without increase as to principal amount or interest rate of such refinancing indebtedness). 6.10. Consolidated Tangible Net Worth. The Company shall not at any time permit Consolidated Tangible Net Worth, determined at such time, to be less than the sum of (a) four hundred fifty million dollars ($450,000,000), plus (b) the sum of the Company Fiscal Year Net Worth Increase Amounts calculated for all fiscal years of the Company ended on or after October 31, 1999. 6.11. Intentionally Left Blank. 6.12. Restricted Payments and Restricted Investments. (a) Limitation on Restricted Payments and Restricted Investments. The Company shall not, and shall not permit any Subsidiary to, at any time declare or make or incur any liability to declare or make any Restricted Payment (other than Restricted Payments comprised solely of Distributions to the Company or a Wholly-Owned Subsidiary in respect of the capital stock of a Subsidiary 48 ("Permitted Distributions")) or make or authorize any Restricted Investment, unless (i) immediately after giving effect to the proposed Restricted Payment or Restricted Investment, the aggregate amount of all Restricted Payments (other than Permitted Distributions) and Restricted Investments in each case made or authorized after February 1, 2000 does not exceed the sum of (A) one hundred million dollars ($100,000,000); plus (B) fifty percent (50%) of the aggregate Consolidated Net Income (or, in case such aggregate Consolidated Net Income shall be a deficit, minus one hundred percent (100%) of such deficit) for the period commencing on February 1, 2000 and ending on the date of such proposed transaction; plus (C) one hundred percent (100%) of the aggregate net cash proceeds received by the Company after March 9, 2000 from the issuance or sale of shares of capital stock of the Company (other than Mandatorily Redeemable Stock); plus (D) the market value of (but in any event not exceeding the Fair Market Value of the assets or stock acquired with) the shares of capital stock issued by the Company in payment for the stock or assets of any Person acquired by the Company or any Subsidiary after March 9, 2000 in an arm's-length transaction; (ii) immediately prior to, and immediately after giving effect to the proposed Restricted Payment or Restricted Investment, the Company would be permitted by Section 6.6(e)(i) and Section 6.6(e)(ii) to incur at least one dollar ($1.00) of additional Funded Debt owed to a Person other than a Subsidiary; and (iii) immediately prior to, and immediately after giving effect to, the proposed Restricted Payment or Restricted Investment, no Default or Event of Default exists or would exist. (b) Time of Payment of Distributions. The Company shall not, and shall not permit any Subsidiary to, authorize a Distribution on 49 its capital stock that is not payable within sixty (60) days of authorization. (c) Subsidiaries. Each corporation that becomes a Subsidiary after the Closing Date shall be deemed to have made, at the time it becomes a Subsidiary, all Restricted Investments of such corporation existing immediately after it becomes a Subsidiary. 6.13. Liens. (a) Negative Pledge. The Company shall not, and shall not permit any Subsidiary to, cause or permit, or agree or consent to cause or permit in the future (upon the happening of a contingency or otherwise), any of their Property, whether now owned or hereafter acquired, to be subject to a Lien except: (i) Liens securing taxes, assessments or governmental charges or levies or the claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons, provided that the payment thereof is not at the time required by Section 6.1 or by any provision of the other Financing Documents; (ii) Liens incurred or deposits made in the ordinary course of business (A) in connection with workers' compensation, unemployment insurance, social security and other like laws, and (B) to secure the performance of letters of credit, bids, tenders, sales contracts, leases, statutory obligations, surety and performance bonds (of a type other than set forth in Section 6.13(a)(iii)) and other similar obligations not incurred in connection with the borrowing of money, the obtaining of advances or the payment of the deferred purchase price of Property; (iii) Liens (A) arising from judicial attachments and judgments, (B) securing appeal bonds, supersedeas bonds, or 50 (C) arising in connection with court proceedings (including, without limitation, surety bonds and letters of credit or any other instrument serving a similar purpose), provided that the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings, and provided further that the aggregate amount so secured shall not at any time exceed one million dollars ($1,000,000); (iv) Liens in the nature of reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other similar title exceptions or encumbrances affecting real Property, provided that such exceptions and encumbrances do not in the aggregate materially detract from the value of such Properties or materially interfere with the use of such Properties in the ordinary conduct of the owning Person's business; (v) (A) Liens (of a type other than set forth in Section 6.13(a)(ix)) in existence on the Closing Date, more specifically described on Part 6.13(a)(v) of Annex 3; and (B) Liens securing renewals, extensions and refinancings of Debt secured by the Liens permitted by clause (A) immediately above, provided that the amount of Debt secured by each such Lien is not increased in excess of the amount of Debt outstanding on the date of such Lien was originally created, and none of such Liens is extended to include any additional Property of the Company or any Subsidiary; (vi) on or prior to the Collateral Release Date, Liens on the Collateral (A) in favor of the Security Trustee for the benefit of the holders of the Notes that secure obligations under any of the Financing Documents, and (B) constituting Permitted Exceptions; (vii) on or prior to the Collateral Release Date, Liens on Property other than the Collateral securing Funded Debt (other than Bank Funded Debt) incurred and permitted to exist in accordance with the provisions of Sections 6.6 and 6.7; 51 (viii) Purchase Money Liens, if, after giving effect thereto and to any concurrent transactions: (A) each such Purchase Money Lien secures Debt in an amount not exceeding the cost of acquisition or construction of the particular Property to which such Debt relates; and (B) no Default or Event of Default would exist; (ix) on or prior to the Collateral Release Date, Liens on Property of the Subsidiaries primarily constituting inventory or accounts that secure obligations arising under Revolving Credit Agreements of the Company or any Subsidiary; and (x) after the Collateral Release Date, Liens securing Debt of the Company or any Subsidiary, provided that at the time of the incurrence thereof and after giving effect thereto and to the concurrent retirement of any other Debt, (A) the aggregate outstanding principal amount of all Debt of the Company and the Subsidiaries secured by Liens (including, without limitation, Liens permitted by Section 6.13(a)(v) and Section 6.13(a)(viii)) would not exceed 15% of Consolidated Tangible Net Worth, determined at such time; and (B) no Default or Event of Default would exist. (b) Collateral. Nothing in this Section 6.13 shall be deemed to permit the Company or any Guarantor to cause or permit, or agree or consent to cause or permit in the future (upon the happening of a contingency or otherwise), any of the Collateral, whether now owned or hereafter acquired, to be subject to a Lien in violation of the terms of the Security Documents. (c) Stock. Notwithstanding anything to the contrary in Section 6.13(a), the Company shall not, and shall not permit any Subsidiary to cause or permit, or agree or consent to cause or permit in the future (upon the happening of a contingency or otherwise), any of the capital stock of any Subsidiary, whether now owned or hereafter acquired, to be subject to a Lien. (d) Equal and Ratable Lien; Equitable Lien. In case any Property not otherwise the subject of a prior perfected Lien in favor of the Security Trustee shall be subjected to a Lien in violation of this 52 Section 6.13, the Company shall forthwith make or cause to be made, to the fullest extent permitted by applicable law, provision whereby the Notes shall be secured equally and ratably with all other obligations secured thereby pursuant to such agreements and instruments as shall be approved by the Required Holders, and the Company shall cause to be delivered to each holder of a Note an opinion of independent counsel to the effect that such agreements and instruments are enforceable in accordance with their terms, and in any such case the Notes shall have the benefit, to the full extent that, and with such priority as, the holders may be entitled thereto under applicable law, of an equitable Lien on such Property securing the Notes. Such violation of this Section 6.13 shall constitute an Event of Default hereunder, whether or not any such provision is made pursuant to this Section 6.13(d). (e) Financing Statements. The Company shall not, and shall not permit any Subsidiary to, sign or file a financing statement under the Uniform Commercial Code of any jurisdiction that names the Company or such Subsidiary as debtor, or sign any security agreement authorizing any secured party thereunder to file any such financing statement, except, in any such case, a financing statement filed or to be filed to perfect or protect a security interest that the Company or such Subsidiary is entitled to create, assume or incur, or permit to exist, under the foregoing provisions of this Section 6.13 or to evidence for informational purposes a lessor's interest in Property leased to the Company or any such Subsidiary. 6.14. Merger; Acquisition. (a) Merger and Consolidation. The Company shall not, and shall not permit any Subsidiary to, merge with or into, consolidate with, or sell, lease as lessor, transfer or otherwise dispose of all or substantially all of its Property to, any other Person or permit any other Person to merge with or into or consolidate with it (except that a Subsidiary other than a Guarantor may merge into, consolidate with, or sell, lease, transfer or otherwise dispose of all or substantially all of its assets to, the Company or a Wholly-Owned Subsidiary other than a Guarantor); provided that the foregoing restriction does not apply to the merger or consolidation of the Company with or into, or the sale, lease, transfer or other disposition by the Company of all or substantially all of its Property to, another corporation, if: (i) the corporation that results from such merger or consolidation or that purchases, leases, or acquires all or substantially all of such Property (the "Surviving Corporation") is organized under the laws of, and has substantially all of its 53 Property located in, the United States of America or any jurisdiction thereof; (ii) the due and punctual payment of the principal of and Make- Whole Amount, if any, and interest on all of the Notes, according to their tenor, and the due and punctual performance and observance of all the covenants herein and in the other Financing Documents to be performed and observed by the Company, are expressly assumed by the Surviving Corporation pursuant to such agreements or instruments as shall be satisfactory to the Required Holders, and the Company shall cause to be delivered to each holder of Notes an opinion of independent counsel (which opinion and counsel are satisfactory to the Required Holders) to the effect that such agreements and instruments are enforceable in accordance with their terms; (iii) immediately prior to, and immediately after the consummation of such transaction, and after giving effect thereto, the Company would be permitted by clause (e)(i) and clause (e)(ii) of Section 6.6 to incur at least one dollar ($1.00) of additional Funded Debt owed to a Person other than a Subsidiary; and (iv) immediately prior to, and immediately after the consummation of such transaction, and after giving effect thereto, no Default or Event of Default exists or would exist. (b) Acquisition of Stock. The Company shall not, and shall not permit any Subsidiary to, acquire any stock of any corporation if upon completion of such acquisition such corporation would be a Subsidiary, or acquire all of the assets of, or such of the assets as would permit the transferee to continue any one or more integral business operations of, any Person unless, immediately after the consummation of such acquisition, and after giving effect thereto, no Default or Event of Default exists or would exist under any provision hereof. 6.15. Transfers of Property; Subsidiary Stock. (a) Transfers of Property. The Company shall not, and shall not permit any Subsidiary to, sell (including, without limitation, any sale and subsequent leasing as lessee of such Property), lease as lessor, transfer, or otherwise dispose of any Property (individually, a "Transfer" and collectively, "Transfers"), except (i) Transfers of inventory, obsolete or worn-out Property or excess equipment no longer useful in the business of the 54 Company or such Subsidiary, in each case in the ordinary course of business of the Company or such Subsidiary; (ii) Transfers from a Subsidiary to the Company or to any Guarantor and Transfers from the Company to any Guarantor; and (iii) any other Transfer (including a Transfer of Property to any Person and the concurrent rental or lease of such transferred Property from such Person) at any time of any Property to a Person, other than an Affiliate, for an Acceptable Consideration, if each of the following conditions would be satisfied with respect to such Transfer: (A) the sum of (I) the current book value of such Property, plus (II) the aggregate book value of all other Property of the Company and the Subsidiaries Transferred (other than in Transfers referred to in the foregoing clause (i) and clause (ii) (collectively, "Excluded Transfers")) during the period beginning on the first day of the then current fiscal year of the Company and ended immediately prior to the date of such Transfer, would not exceed ten percent (10%) of Consolidated Total Assets determined as at the end of the most recently ended fiscal year of the Company prior to giving effect to such Transfer, (B) the sum of (I) the current book value of such Property, plus (II) the aggregate book value of all other Property of the Company and the Subsidiaries Transferred (other than in Excluded Transfers) during the period commencing on October 31, 1999 and ended at the time of such Transfer, would not exceed twenty percent (20%) of Consolidated Total Assets determined as at the end of the most recently ended 55 fiscal year of the Company prior to giving effect to such Transfer, and (C) immediately prior to, and immediately after the consummation of such transaction, and after giving effect thereto, no Default or Event of Default exists or would exist, provided, that all or any portion of the assets which are the subject of any Transfer of Property shall be excluded for purposes of clause (A) and clause (B) of this Section 6.15(a)(iii) if, within three hundred sixty (360) days after such Transfer, the entire proceeds of such Transfer (net of ordinary and reasonable transaction costs and expenses incurred in connection with such Transfer) are applied by the Company or such Subsidiary to: (y) the purchase of operating assets of the Company or any Subsidiary reasonably equal in value to the Property which is the subject of such Transfer, so long as each such investment shall not have been included in the calculation of any other exclusion of any other Transfer proposed to be excluded from the operation of clause (A) or clause (B) of this Section 6.15(a)(iii), or (z) an optional prepayment of Notes pursuant to Section 4.4. Notwithstanding anything to the contrary contained herein, the Company shall not, and shall not permit any Subsidiary to, sell, lease as lessor, transfer or otherwise dispose of any of the Collateral except as expressly permitted by Section 6.15(c). Nothing in this Section 6.15(a) shall be deemed to permit the Company or any Subsidiary to violate any provisions of Section 6.16. (b) Transfers of Subsidiary Stock. The Company shall not, and shall not permit any Subsidiary to, Transfer any shares of the capital stock (or any warrants, rights or options to purchase stock or other Securities exchangeable for or convertible into capital stock) of a Subsidiary (such capital stock, warrants, rights, options and other Securities herein called "Subsidiary Stock"), nor shall any Subsidiary issue, sell or otherwise dispose of any shares of its own Subsidiary Stock, provided that the foregoing restrictions do not apply to: (i) the issuance by a Subsidiary of shares of its own Subsidiary Stock to the Company or a Wholly-Owned Subsidiary; 56 (ii) Transfers by the Company or a Subsidiary of shares of Subsidiary Stock to the Company or a Wholly-Owned Subsidiary; (iii) the issuance by a Subsidiary of directors' qualifying shares; and (iv) the Transfer of all of the Subsidiary Stock of a Subsidiary owned by the Company and the other Subsidiaries if (A) such Transfer satisfies the requirements of Section 6.15(a)(iii); (B) in connection with such Transfer the entire investment (whether represented by stock, Debt, claims or otherwise) of the Company and the other Subsidiaries in such Subsidiary is Transferred to a Person other than the Company or a Subsidiary not simultaneously being disposed of; (C) the Subsidiary being disposed of has no continuing investment in any other Subsidiary not simultaneously being disposed of or in the Company; and (D) immediately prior to, and immediately after the consummation of such Transfer, and after giving effect thereto, no Default or Event of Default exists or would exist. For purposes of determining the book value of Property constituting Subsidiary Stock being Transferred as provided in clause (iv) above, such book value shall be deemed to be the aggregate book value of all assets of the Subsidiary that shall have issued such Subsidiary Stock. Nothing in this Section 6.15(b) shall be deemed to permit the Company or any Subsidiary to (x) sell any shares of capital stock of any Subsidiary in violation of Section 6.2(d)(ii) or (y) violate any of the provisions of Section 6.16. (c) Transfers of Collateral. The Company shall not, and shall not permit any Subsidiary to, sell or otherwise Transfer any Property constituting Collateral, except Transfers for an Acceptable Consideration of obsolete or worn-out equipment constituting Collateral, or excess equipment constituting Collateral, in each case that is no longer useful in the business of the Company or such Subsidiary, if each of the following conditions would be satisfied with respect to such Transfer: (i) the sum of 57 (A) the current book value of such Property, plus (B) the aggregate book value of all other Property of the Company and the Subsidiaries Transferred pursuant to this Section 6.15(c) during the period beginning on the first day of the then current fiscal year of the Company and ended immediately prior to the date of such Transfer, would not exceed five million dollars ($5,000,000), (ii) the sum of (A) the current book value of such Property, plus (B) the aggregate book value of all other Property of the Company and the Subsidiaries Transferred pursuant to this Section 6.15(c) during the period commencing on October 31, 1999 and ended at the time of such Transfer, would not exceed twenty million dollars ($20,000,000) and (iii) immediately prior to, and immediately after the consummation of such transaction, and after giving effect thereto, no Default or Event of Default exists or would exist, provided, that all or any portion of the assets which are the subject of any Transfer of Property shall be excluded for purposes of clause (i) and clause (ii) of this Section 6.15(c) if, within three hundred sixty (360) days after such Transfer, the entire proceeds of such Transfer (net of ordinary and reasonable transaction costs and expenses incurred in connection with such Transfer) are applied by the Company or such Subsidiary to: (y) the purchase of Property of the Company or any Subsidiary reasonably equal in value or use to the Property which is the subject of such Transfer, so long as (1) such Property is subject to a perfected first-priority security interest in favor of the Security Trustee for the benefit of the holders from time to time of the Notes, (2) such Property constitutes Collateral and (3) each such investment shall not have been included in the calculation of any other exclusion of any other Transfer proposed to be excluded from the operation of clause (i) or clause (ii) of this Section 6.15(c), or (z) an optional prepayment of Notes pursuant to Section 4.4. 58 The Company acknowledges and agrees that until applied pursuant to this Section 6.15(c), the net proceeds of any such Transfer of Collateral by the Company or any Subsidiary shall be held in trust by the Security Trustee pursuant to the terms of the Security Documents. 6.16. Trademark Subsidiaries. (a) Generally. The Company shall not, and shall not permit any Subsidiary other than a Trademark Subsidiary to, own any patents, trademarks, service marks, trade names, copyrights and other similar licenses and intangibles used or useful in the conduct of the business of the Company or any Subsidiary. (b) Ownership of Trademark Subsidiaries. The Company (i) shall, at all times, maintain each Trademark Subsidiary as a Wholly-Owned Subsidiary and (ii) shall not permit any of the capital stock of any Trademark Subsidiary to be subject to a Lien. (c) No Sale or Merger. The Company shall not permit any Trademark Subsidiary to merge with or into, consolidate with, or sell, lease, transfer or otherwise dispose of all or substantially all of its Property to, any other Person other than another Trademark Subsidiary, or permit any other Person other than a Trademark Subsidiary to merge with or into or consolidate with it. The Company shall not permit any Trademark Subsidiary to sell, lease as lessor, license as licensor, transfer or otherwise dispose of any patents, trademarks, service marks, trade names, copyrights and licenses. (d) No Debt or Liens. The Company shall not permit any Trademark Subsidiary to cause or permit, or agree or consent 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. The Company shall not at any time permit any Trademark Subsidiary to be or become liable for any Debt or to issue any Mandatorily Redeemable Stock. 6.17. Environmental Compliance. (a) Compliance. The Company shall, and shall cause each Subsidiary to, comply with all Environmental Protection Laws in effect in each jurisdiction where it is doing business and where the failure to comply with which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (b) Liability. The Company shall not, and shall not permit any Subsidiary to, permit itself to be subject to any liability under any 59 Environmental Protection Laws that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 6.18. Line of Business. The Company shall not, and shall not permit any Subsidiary to, engage in any business other than businesses engaged in by the Company and the Subsidiaries on the Closing Date. 6.19. Transactions with Affiliates. The Company shall not, and shall not permit any Subsidiary to, enter into any transaction, including, without limitation, the purchase, sale or exchange of Property or the rendering of any service, with any Affiliate, except in the ordinary course of 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 obtain in a comparable arm's-length transaction with a Person not an Affiliate. 6.20. Tax Consolidation. The Company shall not file or consent to the filing of a consolidated tax return with any Person other than a Subsidiary, or permit the filing of any consolidated tax return by any Subsidiary with any Person other than the Company or another Subsidiary. 6.21. ERISA. (a) Compliance. The Company shall, and shall cause each ERISA Affiliate to, at all times with respect to each Pension Plan, (i) make timely payment of contributions required (A) to meet the minimum funding standard set forth in ERISA or the IRC with respect thereto, or (B) to be paid as provided for by section 515 of ERISA, and (ii) comply with all other applicable provisions of ERISA. (b) Relationship of Vested Benefits to Pension Plan Assets. (i) The Company shall not at any time permit the present value of all employee benefits vested under all Morrell Pension Plans to exceed the assets of such Morrell Pension Plans allocable to such vested benefits at such time by more than fifty-five million 60 dollars ($55,000,000), in each case determined pursuant to Section 6.21(c). (ii) The Company shall not at any time permit the present value of all employee benefits vested under all Pension Plans other than Morrell Pension Plans to exceed the assets of all such Pension Plans other than Morrell Pension Plans allocable to such vested benefits at such time by more than five percent (5%) of Consolidated Total Liabilities, in each case determined pursuant to Section 6.21(c). (c) Valuations. All assumptions and methods used to determine the actuarial valuation of vested employee benefits under Pension Plans and the present value of assets of Pension Plans shall be reasonable in the good faith judgment of the Company and shall comply with all requirements of law. (d) Prohibited Actions. The Company shall not, and shall not permit any ERISA Affiliate to: (i) engage in any "prohibited transaction" (as such term is defined in section 406 of ERISA or section 4975 of the IRC) or "reportable event" (as such term is defined in section 4043 of ERISA) that would result in the imposition of a material tax or penalty; (ii) incur with respect to any Pension Plan any "accumulated funding deficiency" (as such term is defined in section 302 of ERISA), whether or not waived; (iii) terminate any Pension Plan in a manner that could result in (A) the imposition of a Lien on the Property of the Company or any Subsidiary pursuant to section 4068 of ERISA or (B) the creation of any liability under section 4062 of ERISA; (iv) fail to make any payment required by section 515 of ERISA; or (v) be an "employer" (as such term is defined in section 3 of ERISA) required to contribute to any Multiemployer Plan or a "substantial employer" (as such term is defined in section 4001 of 61 ERISA) required to contribute to any Multiple Employer Pension Plan if, at such time, it could reasonably be expected that the Company or any Subsidiary will incur withdrawal liability in respect of such Multiemployer Plan and such liability, if incurred, together with the aggregate amount of all other withdrawal liability as to which there is a reasonable expectation of incurrence by the Company or any Subsidiary under any one or more Multiemployer Plans, could reasonably be expected to have a Material Adverse Effect. (e) Foreign Pension Plans. To the extent that the Company or any Subsidiary is subject to any requirements of any Foreign Pension Plan, the Company shall, and shall cause each such Subsidiary to, comply with such requirements if the failure to so comply would have, either individually or in the aggregate, a Material Adverse Effect. 6.22. Guaranties. (a) The Company shall not, and shall not permit any Subsidiary to, be or become liable in respect of any Guaranty except (i) Guaranties of Debt which constitutes a part of Consolidated Funded Debt; (ii) Guaranties of obligations incurred in the ordinary course of business of the Company and the Subsidiaries; (iii) Guaranties of liabilities which constitute a part of Consolidated Current Liabilities (including, without limitation, Guaranties of obligations of the Company and the Subsidiaries under Revolving Credit Agreements to the extent such Guaranties are not permitted by clause (i) above); and (iv) Guaranties of amounts payable with respect to Operating Rentals constituting a portion of Consolidated Fixed Charges. (b) Notwithstanding the provisions of clause (a) above, the Company shall not permit any Subsidiary to (i) be or become liable for any Guaranty of Debt of the Company, any other Subsidiary or any Affiliate, or (ii) issue any Mandatorily Redeemable Stock, 62 in each case unless such Subsidiary enters into an enforceable and unconditional Guaranty of the obligations of the Company under the Notes, upon terms and conditions satisfactory to the Required Holders. Notwithstanding the foregoing, in no event shall the Company or any Subsidiary be or become liable in respect of any Guaranty if the indebtedness or other liabilities that are the subject of such Guaranty would not be permitted pursuant to Section 6.6 or Section 6.7. 6.23. Private Offering. The Company shall not, and shall not permit any Subsidiary or any Person acting on its behalf to, offer the Notes or any part thereof or any similar Securities for issuance or sale to, or solicit any offer to acquire any of the same from, any Person so as to bring the issuance and sale of the Notes within the provisions of section 5 of the Securities Act. 6.24. Title Opinions. The Company shall cause to be delivered to the holders of the Notes, within sixty (60) days after the Closing Date, title opinions with respect to the Mortgaged Properties listed on Annex 4, each in form and substance reasonably satisfactory to you and your special counsel. 7. INFORMATION AS TO COMPANY AND THE GUARANTORS 7.1. Financial and Business Information. The Company shall deliver to each holder of Notes: (a) Company Quarterly Statements -- as soon as practicable 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), and in any event within forty-five (45) days thereafter, duplicate copies of: (i) consolidated and consolidating balance sheets of the Company and its consolidated subsidiaries, and of the Company and the Subsidiaries, as at the end of such quarter, and (ii) consolidated and consolidating statements of income and cash flows of the Company and its consolidated subsidiaries, and of the Company and the 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, 63 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 as complete and correct, subject to changes resulting from year-end adjustments, by a Senior Financial Officer, accompanied by the certificate required by Section 7.2; (b) Company Annual Statements -- as soon as practicable after the end of each fiscal year of the Company, and in any event within ninety (90) days thereafter, duplicate copies of: (i) a consolidated balance sheet of the Company and its consolidated subsidiaries, and a consolidating balance sheet of the Company and each Guarantor, 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 consolidated subsidiaries, and consolidating statements of income and cash flows of the Company and each Guarantor, for such year, setting forth in each case in comparative form the figures for the immediately preceding fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by (A) in the case of such consolidated financial statements, an audit report thereon of independent certified public accountants of recognized national standing, which opinion shall state, without qualification, 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 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, (B) a certification by a Senior Financial Officer that such consolidated statements are complete and correct, and (C) the certificates required by Section 7.2 and Section 7.3; 64 (c) Audit Reports -- promptly upon receipt thereof, a copy of each other report submitted to the Company or any Subsidiary by independent accountants in connection with any management report, special audit report or comparable analysis prepared by them with respect to the books of the Company or any Subsidiary; (d) SEC and Other Reports -- promptly upon their becoming available, a copy of each financial statement, report (including, without limitation, each Quarterly Report on Form 10-Q, each Annual Report on Form 10-K and each Current Report on Form 8-K), notice or proxy statement sent by the Company or any Subsidiary to stockholders generally and of each regular or periodic report and any registration statement, prospectus or written communication (other than transmittal letters), and each amendment thereto, in respect thereof filed by the Company or any Subsidiary with, or received by, such Person in connection therewith from, the National Association of Securities Dealers, any securities exchange or the Securities and Exchange Commission or any successor agency; (e) ERISA - - (i) promptly (and in any event, within five (5) Business Days) after any officer of the Company becoming aware of any (A) "reportable event" (as defined in section 4043 of ERISA), or (B) "prohibited transaction" (as defined in section 406 of ERISA or section 4975 of the IRC), in connection with any Pension Plan or any trust created thereunder, a written notice specifying the nature thereof, what action the Company is taking or proposes to take with respect thereto and, when known, any action taken by the IRS, the Department of Labor or the PBGC with respect thereto, and (ii) promptly (and in any event, within five (5) Business Days) after any officer of the Company becoming aware thereof, written notice of and, where applicable, a description of (A) any notice from the PBGC in respect of the commencement of any proceedings pursuant to section 4042 of ERISA to terminate any Pension Plan or for the appointment of a trustee to administer any Pension Plan, 65 (B) any distress termination notice delivered to the PBGC under section 4041 of ERISA in respect of any Pension Plan, and any determination of the PBGC in respect thereof, (C) the placement of any Multiemployer Plan in reorganization status under Title IV of ERISA, (D) any Multiemployer Plan becoming "insolvent" (as defined in section 4245 of ERISA) under Title IV of ERISA, or (E) the whole or partial withdrawal of the Company or any ERISA Affiliate from any Multiemployer Plan and the withdrawal liability incurred in connection therewith; (f) Actions, Proceedings -- promptly after 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 probability of an adverse determination and that, if adversely determined, would have a Material Adverse Effect; (g) Certain Environmental Matters -- prompt written notice of and a description of any event or circumstance that, had such event or circumstance occurred or existed prior to the Closing Date, would have been required to be disclosed as an exception to any statement set forth in Section 2.14 and a description of the action that the Company is taking or proposes to take with respect thereto; (h) Notice of Default or Event of Default -- within five (5) Business Days of any Senior Officer becoming aware of the existence of any condition or event that constitutes a Default or an Event of Default, 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; (i) Notice of Claimed Default -- within five (5) Business Days of any Senior Officer becoming aware that the holder of any Note, or of any Debt or any Security of the Company or any Subsidiary, shall have given notice or taken any other action with respect to a claimed Default, Event of Default, default or event of default, a written notice specifying the notice given or action taken by such holder and the nature of the claimed Default, Event of Default, default or event of default and what action the Company is taking or proposes to take with respect thereto; 66 (j) Information Furnished Under Revolving Credit Agreement -- at any time that at least one Revolving Credit Agreement is in effect, at the same time required thereby, a copy of each item required to be furnished by the Company or any Subsidiary pursuant thereto; (k) Other Creditors -- promptly upon the request of any holder of Notes, copies of any statement, report or certificate furnished to any holder of Debt of the Company or any Subsidiary to the extent that the information contained in such statement, report or certificate has not already been delivered to each holder of Notes; (l) Rule 144A -- with reasonable promptness, upon the request of any holder of Notes, information required to comply with 17 C.F.R. (S)230.144A, as amended from time to time; and (m) Requested Information -- with reasonable promptness, such other data and information as from time to time may be reasonably requested by any holder of Notes. 7.2. Officer's Certificates. Each set of financial statements delivered to each holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) 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 Section 6.4 through Section 6.8, inclusive, and Section 6.10 through Section 6.15, inclusive, during the period covered by the income statement then being furnished (including with respect to each such Section, 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 amounts, ratio or percentage then in existence); and (b) Event of Default -- a statement that the signer has reviewed the relevant terms of the Financing Documents and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and the Subsidiaries from the beginning of the accounting period covered by the income statements being delivered therewith to the date of the certificate and that such review shall not have 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, specifying the 67 nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto. 7.3. Accountants' Report. Each set of annual financial statements delivered pursuant to Section 7.1(b) shall be accompanied by a certificate of the accountants who certify such financial statements, stating that they have reviewed this Agreement and stating further, whether, in making their audit, such accountants have become aware of any condition or event that then constitutes a Default or an Event of Default, and, if such accountants are aware that any such condition or event then exists, specifying the nature and period of existence thereof. 7.4. Inspection. The Company shall permit the representatives of each holder of Notes (at the expense of the Company) to visit and inspect any of the 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, employees and independent public accountants (former and present) (and by this provision the Company authorizes all such accountants to discuss the finances and affairs of the Company and the Subsidiaries), all at such reasonable times and as often as may be reasonably requested. 8. EVENTS OF DEFAULT 8.1. Nature of Events. An "Event of Default" shall exist if any of the following occurs and is continuing: (a) Principal and Make-Whole Amount Payments -- the Company shall fail to make any payment of principal or Make-Whole Amount on any Note on or before the date such payment is due; or (b) Interest Payments -- the Company shall fail to make any payment of interest on any Note on or before the date such payment is due; or (c) Warranties or Representations -- any warranty, representation or other material statement by or on behalf of the Company or any Subsidiary contained herein or in any instrument furnished in compliance with or in reference hereto or any of the other Financing Documents shall have been false or misleading when made or deemed made; or 68 (d) Particular Covenant Defaults -- the Company or any Subsidiary shall fail to perform or observe any covenant contained in Section 6.4 through Section 6.18, inclusive, Section 6.20, Section 6.22, Section 7.1(h) or Section 7.1(i); or (e) Other Defaults -- the Company or any Subsidiary shall fail to comply with any other provision hereof, and such failure continues for more than thirty (30) days after such failure shall first become known to any officer of the Company; or (f) Default on Debt or Other Security -- (i) the Company or any Subsidiary shall fail to make any payment on any Debt when due; (ii) any event shall occur or any condition shall exist in respect of any Debt or any Security of the Company or any Subsidiary, or under any agreement securing or relating to such Debt or Security, that immediately or with the passage of time or the giving of notice or both: (A) causes (or permits any one or more of the holders thereof or a trustee therefor to cause) such Debt or Security, or a portion thereof, to become due prior to its stated maturity or prior to its regularly scheduled date or dates of payment; (B) permits any one or more of the holders thereof or a trustee therefor to elect any of the directors on the Board of Directors of the Company or such Subsidiary; or (C) permits any one or more of the holders thereof or a trustee therefor to require the Company or any Subsidiary to repurchase such Debt or Security from such holder; provided that the aggregate amount of all obligations in respect of all such Debt and Securities referred to in this clause (f) exceeds at such time ten million dollars ($10,000,000); or (iii) an "Event of Default" shall have occurred under, and as defined in, any of the other Financing Documents and be continuing; or (g) Involuntary Bankruptcy Proceedings - - 69 (i) a receiver, liquidator, custodian or trustee of the Company or any Subsidiary, or of all or any of the Collateral or any material Property of the Company or any Subsidiary, shall be appointed by court order and such order remains in effect for more than thirty (30) days; or an order for relief shall be entered with respect to the Company or any Subsidiary, or the Company or any Subsidiary, shall be adjudicated insolvent; (ii) any of the Collateral or any material Property of the Company or any Subsidiary shall be sequestered by court order and such order remains in effect for more than thirty (30) days; or (iii) a petition shall be filed against the Company or any Subsidiary under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, and shall not be dismissed within thirty (30) days after such filing; or (h) Voluntary Petitions -- the Company or any Subsidiary shall file a petition in voluntary bankruptcy or seeking relief under any provision of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, or shall consent to the filing of any petition against it under any such law; or (i) Assignments for Benefit of Creditors, etc. -- the Company or any Subsidiary shall make an assignment for the benefit of its creditors, or shall admit in writing its inability, or shall fail, to pay its debts generally as they become due, or shall consent to the appointment of a receiver, liquidator or trustee of the Company or any Subsidiary or of all or any part of the Property of them; or (j) Undischarged Final Judgments -- final judgment or judgments for the payment of money aggregating in excess of two million five hundred thousand dollars ($2,500,000) is or are outstanding against one or more of the Company and the Subsidiaries and any one of such judgments shall have been outstanding for more than thirty (30) days from the date of its entry and shall not have been discharged in full or stayed; or (k) Certain Obligations -- the undertakings of any Guarantor under the Joint and Several Guaranty shall at any time cease to constitute the legal, valid and binding obligation of such Guarantor, or any Guarantor or any Person acting by or on behalf of any Guarantor shall deny or disaffirm such Guarantor's obligations under the Joint and Several Guaranty or any undertaking of the Company hereunder shall at 70 any time cease to constitute the legal, valid and binding obligation of the Company, enforceable against the Company. If any action, condition, event or other matter would, at any time, constitute an Event of Default under any provision of this Section 8.1, then an Event of Default shall exist, regardless of whether the same or a similar action, condition, event or other matter is addressed in a different provision of this Section 8.1 and would not constitute an Event of Default at such time under such different provision. 8.2. Default Remedies. (a) Acceleration on Event of Default. If an Event of Default specified in clause (g), (h) or (i) of Section 8.1 shall exist, all of the Notes at the time outstanding shall automatically become immediately due and payable together with interest accrued thereon and, to the extent permitted by law, the Make-Whole Amount at such time with respect to the principal amount of such Notes, and all other amounts due under the Financing Documents, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and, if any other Event of Default shall exist, the holder or holders of at least twenty-five percent (25%) in principal amount of the Notes then outstanding (exclusive of Notes then owned by any one or more of the Company, any Subsidiary and any Affiliate) may exercise any right, power or remedy permitted to such holder or holders by law, and shall have, in particular, without limiting the generality of the foregoing, the right to declare the entire principal of, and all interest accrued on, all the Notes then outstanding to be, and such Notes shall thereupon become, forthwith due and payable, without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, and the Company shall forthwith pay to the holder or holders of all the Notes then outstanding the entire principal of, and interest accrued on, the Notes and, to the extent permitted by law, the Make-Whole Amount at such time with respect to such principal amount of the Notes. (b) Acceleration on Payment Default. During the existence of an Event of Default described in Section 8.1(a) or Section 8.1(b), and irrespective of whether the Notes then outstanding shall have been declared to be due and payable pursuant to Section 8.2(a), any holder of Notes who or that shall have not consented to any waiver with respect to such Event of Default may, at its option, by notice in writing to the Company, declare the Notes then held by such holder to be, and such Notes shall thereupon become, forthwith due and payable together with all interest accrued thereon, without any presentment, demand, protest 71 or other notice of any kind, all of which are hereby expressly waived, and the Company shall forthwith pay to such holder the entire principal of and interest accrued on such Notes and, to the extent permitted by law, the Make-Whole Amount at such time with respect to such principal amount of the Notes and all other amounts due under the Financing Documents. (c) Valuable Rights. The Company acknowledges, and the parties hereto agree, that the right of each holder to maintain its investment in the Notes, or otherwise have its loan to the Company outstanding, free from repayment by the Company (except as herein specifically provided for) is a valuable right and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes of any Series are prepaid or are accelerated as a result of an Event of Default is intended to provide compensation for the deprivation of such right under such circumstances. (d) Other Remedies. During the existence of an Event of Default and irrespective of whether the Notes then outstanding shall have been declared to be due and payable pursuant to Section 8.2(a) or Section 8.2(b) and irrespective of whether any holder of Notes then outstanding shall otherwise have pursued or be pursuing any other rights or remedies, but subject to the terms and conditions of the Trust Agreement, any holder of Notes may proceed to protect and enforce its rights hereunder, under such Notes and under the other Financing Documents by exercising such remedies as are available to such holder in respect thereof under applicable law, either by suit in equity or by action at law, or both, whether for specific performance of any agreement contained herein or in aid of the exercise of any power granted herein, provided that the maturity of such holder's Notes may be accelerated only in accordance with Section 8.2(a) and Section 8.2(b). (e) Nonwaiver and Expenses. No course of dealing on the part of any holder of Notes nor any delay or failure on the part of any holder of Notes to exercise any right shall operate as a waiver of such right or otherwise prejudice such holder's rights, powers and remedies. If the Company shall fail to pay when due any principal of, or Make-Whole Amount or interest on, any Note, or shall fail to comply with any other provision of the Financing Documents, the Company shall pay to each holder of Notes, to the extent permitted by law, such further amounts as shall be sufficient to cover the costs and expenses, including but not limited to reasonable attorneys' fees, incurred by such holder in collecting any sums due on such Notes or in otherwise assessing, analyzing or enforcing any rights or remedies that are or may be available to it. 72 8.3. Annulment of Acceleration of Notes. If a declaration is made pursuant to Section 8.2(a), then and in every such case, the holders of seventy-six percent (76%) in aggregate principal amount of the Notes then outstanding (exclusive of Notes then owned by any one or more of the Company, any Subsidiary and any Affiliate) may, by written instrument filed with the Company, rescind and annul such declaration, and the consequences thereof, provided that at the time such declaration is annulled and rescinded: (a) no judgment or decree shall have been entered for the payment of any moneys due on or pursuant hereto or the Notes; (b) all arrears of interest upon all the Notes and all other sums payable hereunder and under the Notes (except any principal of, or interest or Make-Whole Amount on, the Notes that shall have become due and payable by reason of such declaration under Section 8.2(a)) shall have been duly paid; and (c) each and every other Default and Event of Default shall have been waived pursuant to Section 10.5 or otherwise made good or cured; and provided further that no such rescission and annulment shall extend to or affect any subsequent Default or Event of Default or impair any right consequent thereon. 9. INTERPRETATION OF THIS AGREEMENT 9.1. Terms Defined. As used herein, the following terms have the respective meanings set forth below or set forth in the Section following such term: Acceptable Bank - means any commercial bank (a) that is organized under the laws of the United States or any state thereof, (b) that has capital, surplus and undivided profits aggregating at least five hundred million dollars ($500,000,000), and (c) whose long-term unsecured debt obligations (or the long-term unsecured debt obligations of the bank holding company owning all of the capital stock of such bank) shall be rated "A3" or higher by Moody's or "A-" or higher by Standard & 73 Poor's (or comparable ratings by any comparable successor agency). Acceptable Consideration -- means, with respect to any Transfer of any Property of the Company or any Subsidiary, cash consideration, promissory notes or such other consideration (or any combination of the foregoing) as is, in each case, determined by the Board of Directors of the Company or such Subsidiary, in its good faith opinion, to be in the best interests of the Company and to reflect the Fair Market Value of such Property. Acceptable Financial Institution - means an Acceptable Bank or other financial institution which meets the requirements set forth in clauses (a), (b) and (c) of the definition of Acceptable Bank. Acceptable Rating -- means a rating of at least Baa2 by Moody's and, in addition, a rating of at least BBB by Standard & Poor's. Affiliate -- means, at any time, a Person (other than a Subsidiary) (a) that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Company, (b) that beneficially owns or holds five percent (5%) or more of any class of the Voting Stock of the Company, or (c) five percent (5%) or more of the Voting Stock (or in the case of a Person that is not a corporation, five percent (5%) or more of the equity interest) of which is beneficially owned or held by the Company or a Subsidiary, at such time. As used in this definition: Control -- means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Agreement, this -- means this agreement, as it may be amended or restated from time to time. Alternate Interest Rate -- means, on any date with respect to any Series L Note, (a) the per annum rate of interest of Morgan Guaranty Trust Company of New York (or its successor) publicly announced in 74 New York City as its prime rate on such date, plus (b) the Applicable Margin with respect to such Series L Note. Each change in such prime rate that is announced by Morgan Guaranty Trust Company of New York (or its successor) will be effective as of the effective date of such announcement or, if no such effective date is specified, as of the date of such announcement. Applicable Interest Law -- means any present or future law (including, without limitation, the law of the United States of America) that has application to the interest and other charges imposed pursuant to this Agreement and the Notes. Bank Funded Debt Amount -- means, at any time, the smallest average daily principal amount of all Debt of the Company and the Subsidiaries under all Revolving Credit Agreements of the Company and the Subsidiaries which is outstanding during any period of thirty (30) consecutive days selected by the Company falling within the three hundred sixty-five (365) day period ending on (and including) such date. Board of Directors -- means, at any time with respect to any Person, the board of directors of such Person, or any committee thereof which, in the instance, shall have the lawful power to exercise the power and authority of such board of directors. Brown's -- means Brown's of Carolina, Inc., a North Carolina corporation, and its successors and assigns. Brown's Farms -- means Brown's Farms, LLC, a Delaware limited liability company, and its successors and assigns. Brown's Farms Properties -- means each of the real Properties of Brown's Farms listed in Part 2.5(e) of Annex 3 as being owned by it. Business Day -- means (a) with respect to any payment to be made to the holder of any Note under any of the Financing Documents, a day other than a Saturday, a Sunday or a day on which the bank designated by such holder to receive for such holder's account payments on such Note is required by law (other than a general banking moratorium or holiday for a period exceeding four (4) consecutive days) to be closed, and (b) for all other purposes, a day other than a Saturday, a Sunday or a day on which the national banks located in New York City, New York, are required by law (other than a general banking 75 moratorium or holiday for a period exceeding four (4) consecutive days) to be closed. Capital Lease -- means a lease with respect to which the lessee is required to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP, or for which the amount of the asset and the liability thereunder, as if so capitalized, should be disclosed in a note to such balance sheet. Capital Lease Obligation -- means, with respect to any Person and a Capital Lease, the amount of the obligation of such Person as the lessee under such Capital Lease that would appear as a liability on a balance sheet of such Person prepared in accordance with GAAP. Carroll's Realty Partnership -- means Carroll's Realty Partnership, a North Carolina general partnership, and its successors and assigns. Carroll's Realty Partnership Properties -- means each of the real Properties of Carroll's Realty Partnership listed in Part 2.5(e) of Annex 3 as being owned by it. Central Plains -- means Central Plains Farms, Inc., a Delaware corporation, and its successors and assigns. Central Plains Properties -- means each of the real Properties of Central Plains listed in Part 2.5(e) of Annex 3 as being owned by it. Change in Control -- means the acquisition at any time after the Closing Date by any Person or group of related Persons of beneficial ownership of more than fifty percent (50%) of the Voting Stock of the Company outstanding (excluding for such purpose Persons who own shares through any employee benefit plan of the Company or any trust in connection therewith) at such time. Circle Four -- means Circle Four Corporation, a North Carolina corporation, and its successors and assigns. Circle Four Properties -- means each of the real Properties of Circle Four listed in Part 2.5(e) of Annex 3 as being owned by it. Closing -- Section 1.2(b). Closing Date -- Section 1.2(b). Collateral -- shall have the meaning assigned to such term in the Trust Agreement. 76 Collateral Release Conditions - means, at any time: (a) the Acceptable Rating is in full force and effect, not having been withdrawn by Moody's or Standard & Poor's; (b) any and all Liens on Property of the Company or any Guarantor securing Debt incurred under or pursuant to each Revolving Credit Agreement of the Company or any Subsidiary have been released or will be released on or prior to the Collateral Release Date; (c) the aggregate principal amount of all Debt of the Company and the Subsidiaries secured by Liens permitted solely by Section 6.13(a)(x) does not exceed fifteen percent (15%) of Consolidated Tangible Net Worth, determined at such time; (d) the Company and the holders of the Notes shall have entered into an amendment to the Note Purchase Agreements, in form and substance satisfactory to all holders of the Notes, which provides for an amendment to the covenants set forth in Section 6.4 through 6.15, inclusive, such that the Company's obligations concerning its financial condition and results of operations are established in a manner which, if complied with, would result in the Company at all times maintaining an Acceptable Rating for its long term, senior unsecured debt; and (e) no Default or Event of Default exists; in each case as of such time. Collateral Release Date -- Section 1.6. Colorado Deed of Trust - Section 3.9(f). Company -- has the meaning specified in the introductory sentence. Company Fiscal Year Net Worth Increase Amount -- means, for any fiscal year of the Company, the greater of (i) fifty percent (50%) of Consolidated Net Income for such fiscal year and (ii) zero dollars ($0). Consolidated Current Assets -- means, at any time, the aggregate amount at which the current assets of the Company and the 77 Subsidiaries would be shown on a consolidated balance sheet for such Persons at such time. Consolidated Current Liabilities -- means, at any time, the aggregate amount of current liabilities of the Company and the Subsidiaries as would be shown on a consolidated balance sheet for such Persons at such time including, without limitation, all liabilities of the Company and the Subsidiaries under the Revolving Credit Facilities (other than the Bank Funded Debt Amount) at such time. Consolidated EBITDA -- means, with respect to any fiscal period, the sum of (a) Consolidated Net Income, plus (b) the aggregate amount of all interest expense, depreciation, amortization and income taxes, (to the extent, and only to the extent, that such aggregate amount was deducted in the computation of Consolidated Net Income), in each case accrued for such period by the Company. Consolidated Fixed Charges -- means, with respect to any fiscal period, the sum of (a) the amount payable in respect of such fiscal period with respect to interest due on, or with respect to, Debt (including, without limitation, the Notes) owing by or guaranteed by any one or more of the Company and the Subsidiaries and including, without limitation, amortization of debt discount and expense and imputed interest in respect of Capital Lease Obligations of the Company and the Subsidiaries, plus (b) the amount payable in respect of such fiscal period with respect to Operating Rentals payable by any one or more of the Company and the Subsidiaries, determined on a consolidated basis for the Company and the Subsidiaries for such period. Consolidated Funded Debt -- means, at any time, the aggregate amount of Funded Debt of the Company and the Subsidiaries, determined on a consolidated basis for such Persons at such time. 78 Consolidated Intangible Assets -- means, at any time, the aggregate amount of Intangible Assets of the Company and the Subsidiaries, determined on a consolidated basis at such time. Consolidated Net Income -- means, with respect to any fiscal period, net earnings (or loss) after income taxes of the Company and the Subsidiaries determined on a consolidated basis for such Persons for such period, provided there shall be excluded: (a) any net income or gain (or net loss) during such period from any extraordinary items, and (b) the income (or loss) of any Person (other than a Subsidiary) in which the Company or any Subsidiary has an ownership interest, except to the extent that any such income has been actually received by the Company or such Subsidiary in the form of cash dividends or similar cash distributions. Consolidated Net Income Available for Fixed Charges -- means, with respect to any fiscal period, the sum of (a) Consolidated Net Income, plus (b) the aggregate amount of (i) income taxes, and (ii) Consolidated Fixed Charges, (to the extent, and only to the extent, that such aggregate amount was reflected in the computation of Consolidated Net Income), in each case accrued for such period by the Company and the Subsidiaries, determined on a consolidated basis for such Persons. Consolidated Senior Funded Debt -- means, at any time, the result of (a) Consolidated Funded Debt at such time minus (b) Senior Subordinated Debt at such time. Consolidated Shareholders' Equity -- means, at any time, the aggregate amount of shareholders' equity of the Company and the Subsidiaries as would be shown on a consolidated balance sheet of such Persons at such time. 79 Consolidated Tangible Net Worth -- means, at any time, the result of (a) Consolidated Shareholders' Equity, minus (b) Consolidated Intangible Assets, determined in each case at such time. Consolidated Total Assets -- means, at any time, the aggregate amount at which all assets of the Company and the Subsidiaries would be shown on a consolidated balance sheet for such Persons at such time. Consolidated Total Capitalization -- means, at any time, the sum of (a) Consolidated Shareholders' Equity, plus (b) Consolidated Funded Debt, determined in each case at such time. Consolidated Total Liabilities -- means, at any time, the aggregate amount at which all liabilities of the Company and the Subsidiaries (including, without limitation, (a) all Guaranties of Debt by such Persons and (b) all amounts attributable to Mandatorily Redeemable Stock of the Company and the Subsidiaries to the extent that such Mandatorily Redeemable Stock is redeemable within one year of such time) would be shown on a consolidated balance sheet for such Persons at such time. Consolidated Working Capital -- means, at any time, the result of (a) Consolidated Current Assets, minus (b) Consolidated Current Liabilities, determined in each case at such time. 80 Control Event -- means (a) the execution by the Company, any Subsidiary or any Affiliate of any letter of intent with respect to any proposed transaction or event or series of transactions or events that, individually or in the aggregate, could reasonably be expected to result in a Change in Control, (b) the execution of any written agreement that, when fully performed by the parties thereto, would result in a Change in Control, or (c) the making of any written offer by any Person to the holders of Voting Stock of the Company which offer, if accepted by the requisite number of such holders, would result in a Change in Control. Control Prepayment Date -- Section 4.3(a). Credit Facility -- means that certain Credit Agreement among the Company, certain of the Subsidiaries, The Chase Manhattan Bank as administrative agent and the lenders party thereto, providing for an aggregate amount of up to six hundred fifty million dollars ($650,000,000) in loans to the Company, as amended from time to time. Debt -- means, at any time, with respect to any Person, without duplication: (a) all obligations of such Person for borrowed money (including, without limitation, all obligations of such Person evidenced by any debenture, bond, note, commercial paper or Security, but also including all such obligations for borrowed money not so evidenced); (b) all obligations of such Person to pay the deferred purchase price of Property or services, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreements, provided that accounts payable incurred in the ordinary course of business of such Person shall be excluded from this clause (b); (c) all Capital Lease Obligations of such Person; (d) all obligations for borrowed money secured by any Lien existing on Property owned by such Person (whether or not 81 such obligations have been assumed by such Person or recourse in respect thereof is available against such Person); and (e) any Guaranty of such Person of any obligation or liability of another Person of a type described in any of clause (a) through clause (d), inclusive, of this definition. Debt of a Person shall include all obligations of such Person of the character described in clause (a) through clause (e) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. Deeds of Trust -- means, collectively, the Utah Deed of Trust, the Virginia Deed of Trust, the South Carolina Deeds of Trust, the North Carolina Deeds of Trust and the Colorado Deed of Trust. Default -- means an event or condition the occurrence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. Depreciation -- means, for any fiscal year of the Company, the aggregate amount of depreciation attributable to the "Improvements" (as such term is defined in the Deeds of Trust) which would be included in the total amount of depreciation that would be shown on a statement of income prepared in respect of the Company and the Subsidiaries on a consolidated basis for such fiscal year. Distribution -- means (a) any dividend or other distribution, direct or indirect, on account of capital stock of the Company or any Subsidiary (except dividends payable solely in shares of capital stock other than Mandatorily Redeemable Stock of the Company or such Subsidiary), and (b) any redemption, retirement, purchase or other acquisition, direct or indirect, of any capital stock of the Company or any Subsidiary, or of any warrants, rights or other options to acquire any shares of such capital stock. Environmental Indemnification Agreement -- Section 3.10(b). Environmental Protection Law -- means any federal, state, county, regional or local law, statute, or regulation (including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act, the 82 Superfund Amendments and Reauthorization Act, all amendments to any of the foregoing and all rules and regulations issued in connection therewith) enacted in connection with or relating to the protection or regulation of the environment, including, without limitation, those laws, statutes, and regulations regulating the disposal, removal, production, storing, refining, handling, transferring, processing, or transporting of Hazardous Substances, and any regulations, issued or promulgated in connection with such statutes by any Governmental Authority and any orders, decrees or judgments issued by any court of competent jurisdiction in connection with any of the foregoing. ERISA -- means the Employee Retirement Income Security Act of 1974, as amended from time to time. ERISA Affiliate -- means any corporation or trade or business that (i) is a member of the same controlled group of corporations (within the meaning of section 414(b) of the IRC) as the Company, or (ii) is under common control (within the meaning of section 414(c) of the IRC) with the Company. Event of Default -- Section 8.1. Exchange Act -- means the Securities Exchange Act of 1934, as amended from time to time. Excluded Transfers -- Section 6.15(a)(iii). Fair Market Value -- means, at any time, with respect to any Property, the sale value of such Property that would be realized in an arm's-length sale at such time between an informed and willing buyer, and an informed and willing seller, under no compulsion to buy or sell, respectively. Financing Documents -- means the Note Purchase Agreements, the Notes, the Joint and Several Guaranty, the Joinder Agreement, the Security Documents, the Intercreditor Agreement, the Environmental Indemnification Agreement and the other agreements and instruments to be executed pursuant to the terms of each of such Financing Documents, as each may be amended from time to time. 83 Fixed Asset Collateral -- means each of the Mortgaged Properties and fixtures and other Property located thereon and used in connection therewith, as more particularly described in the Security Documents. Foreign Pension Plan -- means any plan, fund or other similar program (a) established or maintained outside of the United States of America by any one or more of the Company or the Subsidiaries primarily for the benefit of the employees (substantially all of whom are aliens not residing in the United States of America) of the Company or such Subsidiaries which plan, fund or other similar program provides for retirement income for such employees or results in a deferral of income for such employees in contemplation of retirement, and (b) not otherwise subject to ERISA. Funded Debt -- means, at any time, with respect to any Person, without duplication: (a) all Debt of such Person (including, without limitation, the current portion thereof) that by its terms or by the terms of any instrument or agreement relating thereto matures, or that is otherwise payable or unpaid, more than one (1) year from, or is directly or indirectly renewable or extendible at the option of such Person to a date more than one (1) year (including, without limitation, an option of the debtor under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of more than one (1) year) from, the date of the creation of such Debt (notwithstanding that such Debt may be under certain contingencies payable on demand or within one (1) year after such date of creation), provided, however, that, with respect to the Company and the Subsidiaries, such Debt shall include, without duplication, only the Bank Funded Debt Amount and no other portion of any Debt outstanding under the Credit Facility; (b) all Capital Lease Obligations of such Person; and (c) all Debt of such Person of the type specified in clause (e) of the definition of "Debt," provided that such Debt of such Person is in respect of or in support of Funded Debt of another Person. 84 GAAP -- means generally accepted accounting principles as set forth from time to time in the statements, opinions and pronouncements of the American Institute of Certified Public Accountants and the Financial Accounting Standards Board or in such statements, opinions and pronouncements of such other entities as shall be approved by a significant segment of the accounting profession in the United States of America. Governmental Authority -- means (a) the government of (i) the United States of America and any state or other political subdivision thereof, or (ii) any jurisdiction (A) in which the Company or any Subsidiary conducts all or any part of its business or (B) that asserts jurisdiction over the conduct of the affairs or Properties of the Company or any Subsidiary, or (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. Guarantor -- means each of the Original Guarantors, each of the New Guarantors and each other Person that becomes a "Guarantor" pursuant to the Joint and Several Guaranty. Guaranty -- means, with respect to any Person (for the purposes of this definition, the "Subject Guarantor"), any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person (the "Primary Obligor") in any manner (including, without limitation, obligations that arise as a matter of law or otherwise as a result of such Person's status as a general partner in a partnership or a holder of equity or other Property interest in a corporation, partnership, limited liability company or other business operation commonly referred to as a "joint venture"), whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by the Subject Guarantor: (a) to purchase such indebtedness or obligation or any Property or assets constituting security therefor; (b) to advance or supply funds 85 (i) for the purpose of payment of such indebtedness or obligation, or (ii) to maintain working capital or other balance sheet condition or any income statement condition of the Primary Obligor or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation; (c) to lease Property or to purchase Securities or other Property or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of the Primary Obligor to make payment of the indebtedness or obligation; or (d) otherwise to assure the owner of the indebtedness or obligation of the Primary Obligor against loss in respect thereof. For purposes of computing the amount of any Guaranty, in connection with any computation of indebtedness or other liability, it shall be assumed that the indebtedness or other liabilities that are the subject of such Guaranty are direct obligations of the Subject Guarantor. Hazardous Substances -- means any and all pollutants, contaminants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, radon gas, urea formaldehyde foam insulation, polychlorinated biphenyls, radioactive materials, petroleum and petroleum derivatives and by-products). Indemnification Fee -- Section 4.1(f)(vi). Institutional Investor -- means the Purchasers, any affiliate of any of the Purchasers, and any holder of Notes that is an "accredited investor" as defined in Section 2(15) of the Securities Act. Intangible Assets - means, with respect to any Person at any time, the following: (a) patents, copyrights, trademarks, trade names, service marks, brand names, franchises, goodwill, experimental expenses and other similar intangibles; 86 (b) deferred assets (other than prepaid taxes, prepaid insurance, prepaid contract payments, prepaid license fees and other prepaid expenses which are refundable); (c) unamortized debt discount and expense; and (d) all other Property which would be considered to be intangible under GAAP. Intercreditor Agreement -- Section 3.14. Investment -- means any investment, made in cash or by delivery of Property, by the Company or any Subsidiary: (a) in any Person, whether by acquisition of stock, indebtedness or other obligation or Security, or by loan, Guaranty, advance, capital contribution or otherwise; or (b) in any Property. IRC - means the Internal Revenue Code of 1986, together with all rules and regulations promulgated pursuant thereto, as amended from time to time. IRS -- means the Internal Revenue Service and any successor agency. John Hancock -- John Hancock Mutual Life Insurance Company. Joinder Agreement - means that Joinder Agreement, dated as of June 9, 2000, entered into by each of the New Guarantors, relating to the Joint and Several Guaranty. Joint and Several Guaranty -- Section 3.8. Lien -- means any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and including but not limited to the security interest lien arising from a mortgage, deed of trust, encumbrance, pledge, conditional sale or trust receipt or a lease, consignment or bailment for security purposes, and the filing of any financing statement under the Uniform Commercial Code of any jurisdiction, or an agreement to give any of the foregoing. The term "Lien" includes reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances (including, with respect to stock, stockholder agreements, voting trust agreements, buy-back 87 agreements and all similar arrangements) affecting Property. For the purposes of this definition, each of the Company and the Subsidiaries is deemed to be the owner of any Property that it shall have acquired or holds subject to a conditional sale agreement, Capital Lease or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person for security purposes, and such retention or vesting is deemed a Lien. The term "Lien" does not include negative pledge clauses in agreements relating to the borrowing of money. Make-Whole Amount -- means, at any time, (a) with respect to a principal amount of Series I Notes and/or Series K Notes being prepaid (in whole or in part) or accelerated, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of the Notes of such Series over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero; (b) with respect to a principal amount of Series J Notes being prepaid (in whole or in part) or accelerated, an amount sufficient to compensate the holder of such Series J Notes for its loss of yield, if any, determined in accordance with the mark-to-market conventions then used by such holder; and (c) with respect to a principal amount of Series L Notes being prepaid (in whole or in part) or accelerated, an amount equal to the applicable percentage set out below of the principal amount of the Notes being prepaid or outstanding at the time of such acceleration, as the case may be: 88
------------------------------------------------------------------- If prepayment or acceleration Percentage of the Principal occurs during the period Amount to be Paid ------------------------------------------------------------------- Closing Date through September 30, 2002 4.5% ------------------------------------------------------------------- November 1, 2002 through October 31, 2003 3.5% ------------------------------------------------------------------- November 1, 2003 through October 31, 2004 2.5% ------------------------------------------------------------------- November 1, 2004 and at all times thereafter 0% -------------------------------------------------------------------
For purposes of determining the Make-Whole Amount of the Series I Notes and the Series K Notes, the following terms have the following meanings: Called Principal -- means, with respect to any Series I Notes or Series K Notes, the principal of such Note that is to be prepaid pursuant to Section 4.3 or Section 4.4, or has become immediately due and payable pursuant to Section 8.2, as the context requires. Discounted Value - means, with respect to the Called Principal of any Series I Note or Series K Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Series I Notes or Series K Notes, as applicable, is payable) equal to the Reinvestment Yield with respect to such Called Principal. Reinvestment Yield - means, with respect to the Called Principal of any Series I Note or any Series K Note, one-half percent (0.50%) over the yield to maturity implied by (a) the yields reported, as of 10:00 a.m. (New York City time) on the second (2/nd/) Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as "Page 678" on Bridge Telerate (or such other display as may replace "Page 678" on Bridge Telerate) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such 89 Called Principal as of such Settlement Date, or (b) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable (including by way of interpolation), the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second (2/nd/) Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (i) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (ii) interpolating linearly between (x) the actively traded U.S. Treasury security with duration closest to and greater than the Remaining Average Life and (y) the actively traded U.S. Treasury security with the duration closest to and less than the Remaining Average Life. Remaining Average Life - means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth (1/12/th/) year) obtained by dividing (x) such Called Principal into (y) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth (1/12/th/) year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. Remaining Scheduled Payments - means, with respect to the Called Principal of any Series I Note or Series K Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Series I Notes or Series K Notes, as applicable, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 4.3, Section 4.4 or Section 8.2, as the case may be. 90 Settlement Date - means, with respect to the Called Principal of any Series I Note or Series K Note, the date on which such Called Principal is to be prepaid or paid pursuant to Section 4.3, Section 4.4 or Section 8.2, as the case may be. Mandatorily Redeemable Stock -- means, with respect to any Person, each share of such Person's capital stock to the extent that it is (a) redeemable, payable or required to be purchased or otherwise retired or extinguished, or convertible into Debt of such Person (i) at a fixed or determinable date, whether by operation of a sinking fund or otherwise, (ii) at the option of any Person other than such Person or (iii) upon the occurrence of a condition not solely within the control of such Person, such as redemption required to be made out of future earnings or (b) convertible into other Mandatorily Redeemable Stock of such Person. Margin Security -- means "margin stock" within the meaning of Regulations T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II, as amended from time to time. Material Adverse Effect -- means, with respect to any event or circumstance (either individually or in the aggregate with all other events and circumstances), an effect caused thereby or resulting therefrom that would be materially adverse as to, or in respect of (a) the business, prospects, profits, Properties or condition (financial or otherwise) of the Company (individually) or the Company and the Subsidiaries (taken as a whole), (b) the ability of the Company to perform its obligations set forth herein and in the Notes or the ability of any Guarantor to perform its obligations under the Joint and Several Guaranty, or (c) any of the rights or remedies of the holders of the Notes under any Financing Document or the enforceability of any Financing Document against the Company or any Guarantor. Maximum Legal Rate of Interest -- means, with respect to any Note, the maximum rate of interest that the holder of such Note may from time to time legally charge the Company by agreement and in regard to which the Company would be prevented successfully from raising the claim or defense of usury under the Applicable Interest Law as now or hereafter construed by courts having appropriate jurisdiction. The Company acknowledges and agrees that 12 U.S.C. section 2205 provides that institutions of the Farm Credit System are not subject to any interest rate limitation imposed by any state constitution or statute or other laws, and that any such limitations are preempted, and 91 therefore any interest owing under the Notes, to the extent purchased or held by an institution of the Farm Credit System, is not subject to any ceiling. Moody's -- means Moody's Investors Service, Inc. Morrell - means John Morrell & Co., a Delaware corporation, and its successors and assigns. Morrell Pension Plans -- means, collectively, the defined benefit Pension Plan administered for salaried employees of Morrell and the defined benefit Pension Plan administered for hourly employees of Morrell, in each case as maintained on the Closing Date by Morrell. Mortgaged Properties -- Section 3.10(a). Multiemployer Plan -- means any multiemployer plan (as defined in Section 3(37) of ERISA) in respect of which the Company or any ERISA Affiliate is an "employer" (as such term is defined in Section 3(5) of ERISA). Multiple Employer Pension Plan -- means any employee benefit plan within the meaning of Section 3(3) of ERISA (other than a Multiemployer Plan), subject to Title IV of ERISA, to which the Company or any ERISA Affiliate and an employer (as such term is defined in Section 3 of ERISA) other than an ERISA Affiliate or the Company contribute. New Guarantors - means Murphy Farms, Inc. and Smithfield Packing Real Estate, LLC. North Carolina Deeds of Trust -- Section 3.9(e). Note -- Section 1.1. Note Purchase Agreements -- Section 1.2(c). Obligors - means the Company and the Guarantors. Operating Lease -- means any lease other than a Capital Lease. Operating Rentals -- means, at any time, all fixed and contingent payments (other than amounts constituting the purchase price payable by the lessee to acquire title to the Property which is the subject of a lease) that the lessee is required to make by the terms of any Operating Lease. 92 Original Guarantors - means Gwaltney of Smithfield, Ltd., Morrell, The Smithfield Packing Company, Incorporated, SFFC, Inc., Patrick Cudahy Incorporated, Carroll's Foods, Inc., Carroll's Realty, Inc., Carroll's Realty Partnership, North Side Foods Corp., Lykes Meat Group, Inc., Circle Four, Brown's, Brown's Farms, Carroll's Foods of Virginia, Inc., Smithfield-Carro ll's Farms and Central Plains. Other Purchasers -- Section 1.2(c). PBGC - means the Pension Benefit Guaranty Corporation and any successor corporation or governmental agency. Pension Plan -- means, at any time, any "employee pension benefit plan" (as such term is defined in Section 3(2) of ERISA) maintained at such time by the Company or any ERISA Affiliate for employees of the Company or such ERISA Affiliate, excluding any Multiemployer Plan, but including, without limitation any Multiple Employer Pension Plan. Permitted Distributions -- Section 6.12(a). Permitted Exceptions - means each of the items constituting a "Permitted Exception" in each of the Deeds of Trust. Person -- means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof. Property -- means any interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible. Purchase Money Lien -- means: (a) a Lien held by any Person (whether or not the seller of such Property) on tangible Property (or a group of related items of Property the substantial portion of which are tangible) acquired or constructed by the Company or any Subsidiary, which Lien secures all or a portion of the related purchase price or construction costs of such Property, provided that such Lien (i) is created contemporaneously with, or within one hundred eighty (180) days of, such acquisition or construction, 93 (ii) encumbers only Property purchased or constructed after the Closing Date and acquired with the proceeds of the Debt secured thereby, and (iii) is not thereafter extended to any other Property; and (b) any Lien existing on Property of any corporation at the time it becomes a Subsidiary, provided that (i) no such Lien shall extend to or cover any Property other than the Property subject to such Lien at the time of any such transaction, and (ii) such Lien was not created in contemplation of any such transaction. Purchaser -- means the Persons listed as purchasers of Notes on Annex 1 hereto. Reference Institution -- Section 4.1(g)(v). Required Holders -- means, at any time, the holder or holders of at least seventy-five percent (75%) in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by any one or more of the Company, any Subsidiary or any Affiliate), without regard to Series of such outstanding Notes. Restricted Investments -- means, at any time, all Investments except the following: (a) Investments in existence on the Closing Date and described on Part 9.1(RI) of Annex 3; (b) Investments in certificates of deposit, repurchase agreements and banker's acceptances issued by an Acceptable Bank, provided that such obligations mature within one (1) year from the date of acquisition thereof; (c) Investments in commercial paper that (i) is rated either "P- 1" or higher by Moody's or "A-1" or higher by Standard & Poor's (or comparable ratings by any comparable successor agency) and (ii) mature not more than two hundred seventy (270) days from the date of creation thereof; (d) Investments in direct obligations of the United States of America, or any agency thereof, or obligations unconditionally 94 guaranteed by the United States of America, provided that such obligations mature within one (1) year from the date of acquisition thereof; (e) Investments in Property to be used in the ordinary course of business of the Company and the Subsidiaries; (f) Investments in one or more Subsidiaries or in any corporation that concurrently with such Investment becomes a Subsidiary; and (g) Investments in one or more joint ventures that are engaged in the businesses engaged in by the Company and the Subsidiaries on the Closing Date, provided that the Company and/or one or more of the Subsidiaries maintains significant control over the business operations of such joint venture. Restricted Payment -- means (a) any Distribution, and (b) any Subordinated Payment. Revolving Credit Agreement -- means, with respect to the Company or any Subsidiary, a credit or loan agreement to which the Company or such Subsidiary is a party and pursuant to which the Company or such Subsidiary is entitled to obtain working capital loans or other loans from the commercial bank or commercial banks party thereto, and shall include, without limitation, the Credit Facility. Securities Act -- means the Securities Act of 1933, as amended. Security -- means "security" as defined by Section 2(1) of the Securities Act. Security Agreements - Section 3.9(g). Security Documents -- means the Trust Agreement, the Deeds of Trust, the Security Agreements and the other agreements and instruments to be executed pursuant to the terms of each of such Security Documents, as each may be amended from time to time. Security Trustee -- shall have the meaning assigned to such term in the Trust Agreement. 95 Senior Financial Officer -- means the chief financial officer, the principal accounting officer, the controller or the treasurer of the Company. Senior Officer -- means the chairman of the Board of Directors, the chief executive officer, the chief operating officer, the president, the chief financial officer, the general counsel or any vice president of the Company. Senior Subordinated Debt -- means, at any time, the aggregate principal amount of the Company's Senior Subordinated Notes due 2008 outstanding at such time and any additional Debt of the Company outstanding at such time which has subordination provisions and other terms and conditions acceptable to the Required Holders. Series -- means any one or more of the Series I Notes, Series J Notes, Series K Notes or Series L Notes. Series I Notes -- Section 1.1(a). Series J Fixed Rate -- means any one of the following: the Series J 30-Day Fixed Rate, the Series J 60-Day Fixed Rate or the Series J 90-Day Fixed Rate. Series J LIBOR Base Rate - Section 4.1(f)(vii). Series J Notes -- Section 1.1(b). Series J Rate -- means, at any time, the interest rate applicable to the Series J Notes at such time, as determined in accordance with this Section 4.1(f). Series J 30-Day Fixed Rate - Section 4.1(f)(vii). Series J 60-Day Fixed Rate -- Section 4.1(f)(vii). Series J 90-Day Fixed Rate -- Section 4.1(f)(vii). Series J Variable Rate -- Section 4.1(f)(vii). Series K Notes -- Section 1.1(c). Series L Initial Interest Period -- Section 4.1(g)(i). Series L Interest Period -- Section 4.1(g)(i). 96 Series L LIBOR Base Rate -- means, on any date, the per annum London Interbank Offered Rate for three-month United States dollar deposits (truncated to two decimal places) as published in the "Money Rates" column of the Wall Street Journal (or a comparable listing in the Wall Street ------------------- ----------- Journal) on the Business Day immediately preceding such date. If, for any ------- reason, such rate is not available, then "LIBOR" shall mean the rate per annum at which, as determined by the holders of at least fifty-one percent (51%) in principal amount of the Series L Notes at the time outstanding (exclusive of Notes then owned by any one or more of the Company, any Subsidiary or any Affiliate), dollars in the amount of $5,000,000 are being offered to leading banks at approximately 11:00 a.m. London time, two (2) Business Days prior to such date, for settlement in immediately available funds by leading banks in the London interbank market for a period of three months. Series L Notes -- Section 1.1(d). Series L Rate -- means (a) for the Series L Initial Interest Period, 7.70%, and (b) for each Series L Interest Period thereafter, the sum of the Series L LIBOR Base Rate determined with respect to such Series L Interest Period plus one and fifty one-hundredths percent (1.50%) per annum. Series L Rate Adjustment Date -- means the first (1st) day of each January, April, July and October in each year, or if such day is not a Business Day, then the then next succeeding Business Day. Series L Rate Determination Date -- Section 4.1(g)(ii). Smithfield-Carroll's Farms - means Smithfield-Carroll's Farms, a Virginia general partnership, and its successors and assigns. Smithfield-Carroll's Farms Properties -- means each of the real Properties of Smithfield-Carroll's Farms listed in Part 2.5(e) of Annex 3 as being owned by it. South Carolina Deeds of Trust - Section 3.9(d). Standard & Poor's -- means Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc. Subordinated Payment -- means payments of interest on, or payments or prepayments of principal of, or the setting apart of money for a sinking or other analogous fund for the purchase, redemption, retirement or other acquisition of any principal or interest on (a) Debt of the Company (including, without limitation, Senior Subordinated Debt) 97 or any Guarantor which is subordinate or junior in right of payment or otherwise to the Debt evidenced by the Notes or the Joint and Several Guaranty or (b) Debt owing to any Affiliate. Subsidiary -- means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Company. Subsidiary Stock -- Section 6.15(b). Surviving Corporation -- Section 6.14(a)(i). Trademark Subsidiary -- means a Subsidiary that has no material assets other than: (a) patents, trademarks, service marks, trade names, copyrights and other similar licenses and intangibles used or useful in the conduct of the business of the Company or any Subsidiary; (b) intercompany obligations in its favor obtained in respect of the granting of rights to the Company and the other Subsidiaries with respect to the patents, trademarks, service marks, trade names, copyrights and other similar licenses and intangibles held by it; and (c) in the case of SF Investments, Inc., certain other assets (including, without limitation, the capital stock of Smithfield Companies, Inc.) that are material but in any event whose primary assets are of the type described in clauses (a) and (b) above. Transfer -- Section 6.15(a). Trust Agreement -- Section 3.9(a). 98 Utah Deed of Trust -- Section 3.9(b). Virginia Deed of Trust -- Section 3.9(c). Voting Stock -- means capital stock of any class or classes of a corporation having power under ordinary circumstances to vote for the election of members of the board of directors, or Persons performing similar functions (irrespective of whether or not at the time stock of any of the class or classes shall have or might have special voting power or rights by reason of the happening of any contingency). Wholly-Owned Subsidiary -- means, at any time, any Subsidiary one hundred percent (100%) of all of the equity Securities (except directors' qualifying shares) and voting Securities of which are owned by any one or more of the Company and the other Wholly-Owned Subsidiaries at such time. 9.2. GAAP. Where the character or amount of any asset or liability or item of income or expense, or any consolidation or other accounting computation is required to be made for any purpose hereunder, it shall be done in accordance with GAAP as in effect on the date of, or at the end of the period covered by, the financial statements from which such asset, liability, item of income, or item of expense, is derived, or, in the case of any such computation, as in effect on the date as of which such computation is required to be determined, provided, that if any term defined herein includes or excludes amounts, items or concepts that would not be included in or excluded from such term if such term were defined with reference solely to GAAP, such term will be deemed to include or exclude such amounts, items or concepts as set forth herein. 9.3. 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 actions taken by or on behalf of any partnership in which such Person is a general partner. 9.4. Section Headings, Table of Contents and Construction. The titles of the Sections and the Table of Contents 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 Agreement as a whole and not to any particular Section or other subdivision. Unless otherwise specified, references to Sections are to Sections 99 of this Agreement, references to Annexes are to Annexes to this Agreement, references to Attachments are to Attachments to this Agreement and references to Exhibits are to Exhibits to this Agreement. 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. 9.5. Governing Law. EXCEPT AS SUPERCEDED BY APPLICABLE FEDERAL LAW, THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL VIRGINIA LAW, EXCLUDING CHOICE-OF-LAW PROVISIONS OF SUCH COMMONWEALTH THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH COMMONWEALTH. 10. MISCELLANEOUS 10.1. Communications. (a) Method; Address. All communications hereunder or under the Notes shall be in writing and sent by telecopy with receipt thereof confirmed, or by registered or certified mail with return receipt requested (postage prepaid), or by overnight courier, and shall be addressed, (i) if to the Company, Smithfield Foods, Inc. 200 Commerce Street Smithfield, Virginia 23430 Attention: Mr. C. Larry Pope Fax: (757) 365-3023 or at such other address as the Company shall have furnished in writing to all holders of the Notes at the time outstanding, (ii) if to any Guarantor c/o Smithfield Foods, Inc. 200 Commerce Street Smithfield, Virginia 23430 Attention: Mr. C. Larry Pope Fax: (757) 365-3023 100 or at such other address as such Guarantor shall have furnished in writing to all holders of the Notes at the time outstanding, (iii) if to any of the holders of the Notes, (A) if such holders are the Purchasers, at their respective addresses set forth on Annex 1, and further including any parties referred to on Annex 1 that are required to receive notices in addition to such holders of the Notes, and (B) if such holders are not the Purchasers, at their respective addresses set forth in the register for the registration and transfer of Notes maintained pursuant to Section 5.1, or to any such party at such other address as such party may designate by notice duly given in accordance with this Section 10.1 to the Company and the Guarantor (which other address shall be entered in such register). (b) When Given. Any communication so addressed and deposited in the United States mail, postage prepaid, by registered or certified mail (in each case, with return receipt requested) shall be deemed to be received on the third (3rd) succeeding Business Day after the day of such deposit (not including the date of such deposit). Any communication so addressed and delivered otherwise shall be deemed to be received when actually received at the address of the addressee. 10.2. Reproduction of Documents. This Agreement and the other Financing Documents, and all documents relating hereto and thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the closing of your purchase of the Notes (except the Notes themselves) and (c) financial statements, certificates and other information previously or hereafter furnished to you or any other holder of Notes, may be reproduced by any holder of Notes by any photographic, photostatic, microfilm, micro-card, miniature photographic, digital or other similar process and each holder of Notes may destroy any original document so reproduced. The Company and the Guarantors agree and stipulate that 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 such holder of Notes in the regular course of 101 business) and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. 10.3. Survival. All warranties, representations, certifications and covenants made by the Company and the Guarantors herein and in the other Financing Documents or in any certificate or other instrument delivered by the Company or the Guarantors or on their behalf pursuant to any of the Financing Documents shall be considered to have been relied upon by you and shall survive the delivery to you of the Notes regardless of any investigation made by you or on your behalf. All statements in any such certificate or other instrument shall constitute warranties and representations by the Company and the Guarantors hereunder. 10.4. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto. The provisions hereof are intended to be for the benefit of all holders, from time to time, of Notes, and shall be enforceable by any such holder, whether or not an express assignment to such holder of rights hereunder shall have been made by you or your successor or assign. 10.5. Amendment and Waiver. (a) Requirements. This Agreement may be amended, and the observance of any term hereof may be waived, with (and only with) the written consent of the Company and the Required Holders; provided that no such amendment or waiver of any of the provisions of Section 1 through Section 4 hereof, inclusive, shall be effective as to any holder of Notes unless consented to by such holder in writing; and provided further that no such amendment or waiver shall, without the written consent of the holders of all Notes (exclusive of Notes held by the Company or any Subsidiary) at the time outstanding, (i) subject to Section 8.2, change the amount or time of any prepayment or payment of principal or Make-Whole Amount or the rate or time of payment of interest, (ii) amend Section 8, (iii) amend this Section 10.5, or (iv) release any Guarantor from its obligations set forth in the Joint and Several Guaranty. 102 The holder of any Note may specify that any such written consent executed by it shall be effective only with respect to a portion of the Notes held by it (in which case it shall specify, by dollar amount, the aggregate principal amount of Notes with respect to which such consent shall be effective) and in the event of any such specification such holder shall be deemed to have executed such written consent only with respect to the portion of the Notes so specified. (b) Solicitation of Noteholders. (i) Solicitation. The Company will not negotiate with any holder of the Notes with respect to a material matter, nor will it solicit, request or negotiate in writing with respect to any proposed waiver or amendment of any of the provisions hereof or the Notes or any other Financing Document, unless each holder of the Notes (irrespective of the amount of Notes then owned by it) shall be informed thereof by the Company with sufficient information to enable it to make an informed decision with respect thereto. Executed or true and correct copies of any waiver or consent effected pursuant to the provisions of this Section 10.5 shall be delivered by the Company to each holder of outstanding Notes forthwith following the date on which the same shall have been executed and delivered by all holders of outstanding Notes required to consent or agree to such waiver or consent. (ii) Payment. The Company shall 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 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 the holders of all Notes then outstanding. (iii) Scope of Consent. Any consent made pursuant to this Section 10.5 by a holder of Notes that has transferred or has agreed to transfer its Notes to the Company, any Subsidiary or any Affiliate and has provided or has agreed to provide such written consent as a condition to such transfer shall be void and of no force and effect except solely as to such holder, and any amendments effected or waivers granted or to be effected or granted that would not have been or would not be so effected or granted but for such consent (and the consents of all other holders of Notes that were acquired under the same or similar 103 conditions) shall be void and of no force and effect, retroactive to the date such amendment or waiver initially took or takes effect, except solely as to such holder. (c) Binding Effect. Except as provided in Section 10.5(b), any amendment or waiver consented to as provided in this Section 10.5 shall apply equally to all holders of Notes and shall be binding upon them and upon each future holder of any Note and upon the Company whether or not such Note shall have been marked to indicate such amendment or waiver. No such amendment or waiver shall extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. 10.6. Payments, When Received. (a) Payments Due on Holidays. If any payment due on, or with respect to, any Note shall fall due on a day other than a Business Day, then such payment shall be made on the first Business Day following the day on which such payment shall have so fallen due; provided that if all or any portion of such payment shall consist of a payment of interest, for purposes of calculating such interest, such payment shall be deemed to have been originally due on such first following Business Day, and such interest shall accrue and be payable to (but not including) the actual date of payment. (b) Payments, When Received. Any payment actually received by you before 11:00 a.m., New York time, by federal funds wire transfer on any Business Day, shall be deemed to have been received by you on such day. Any payment actually received by you at or after 11:00 a.m., New York time, by federal funds wire transfer on any Business Day, shall be deemed to have been received on the next following Business Day. All payments received by you on a day other than a Business Day, or in a manner other than by federal funds wire transfer, shall be deemed to have been received by you on the Business Day such amounts actually become available to you prior to 11:00 a.m., New York time. 10.7. Entire Agreement. This Agreement constitutes the final written expression of all of the terms hereof and is a complete and exclusive statement of those terms. 10.8. Duplicate Originals, Execution in Counterpart. Two or more duplicate originals hereof may be signed by the parties, each of which shall be an original but all of which together shall constitute one 104 and the same instrument. This Agreement may be executed in one or more counterparts and shall be effective when at least one counterpart shall have been executed by each party hereto, and each set of counterparts which, collectively, show execution by each party hereto shall constitute one duplicate original. [Remainder of page intentionally blank; next page is signature page.] 105 If this Agreement is satisfactory to you, please so indicate by signing the acceptance at the foot of a counterpart hereof and returning such counterpart to the Company, whereupon this Agreement shall become binding among us in accordance with its terms. Very truly yours, SMITHFIELD FOODS, INC. By________________________________ Name: Title: Accepted: [NAME OF PURCHASER] By________________________________ Name: Title: 106 ANNEX 1 INFORMATION AS TO PURCHASERS
================================================================================================================ Purchaser Name CAPE FEAR FARM CREDIT, ACA - ---------------------------------------------------------------------------------------------------------------- Name in Which Note is Registered CAPE FEAR FARM CREDIT, ACA - ---------------------------------------------------------------------------------------------------------------- Series; Note Registration Series I; RI-1; $100,000,000 Number; Principal Amount Series J; Series RJ-1; $50,000,000 - ---------------------------------------------------------------------------------------------------------------- Payment on Account of Note Method Federal Funds Wire Transfer Account Information Federal Reserve: Richmond ABA #053905974 Account Name: AgFirst Farm Credit Bank Short Name: AGFIRST FCB Customer Name: Smithfield Foods, Inc. - ---------------------------------------------------------------------------------------------------------------- Accompanying Information Name of Company: SMITHFIELD FOODS INC. Description of Security: 7.89% Series I Senior Secured Notes Due October 1, 2009 PPN Number: 832248 C# 3 Description of Security: Variable Rate Series J Senior Secured Notes Due October 1, 2009 PPN: 832248 D* 6 Due Date and Application (as among principal, premium and interest) of the payment being made: - ---------------------------------------------------------------------------------------------------------------- Address for Notices Related to Payments C. Royce Edwards, Vice President Cape Fear Farm Credit, ACA 208 West Main Street Clinton, NC 28329 Tel: (910) 592-4527 Fax: (910) 592-2618 - ---------------------------------------------------------------------------------------------------------------- Address for All other Notices C. Royce Edwards, Vice President Cape Fear Farm Credit, ACA 208 West Main Street Clinton, NC 28329 Tel: (910) 592-4527 Fax: (910) 592-2618 - ---------------------------------------------------------------------------------------------------------------- Other Information: CAPE FEAR FARM CREDIT, ACA By:________________________________ Name: Title: ================================================================================================================
Annex 1-1
================================================================================================================ Purchaser Name CAPE FEAR FARM CREDIT, ACA - ---------------------------------------------------------------------------------------------------------------- Address for Delivery of Securities: C. Royce Edwards, Vice President Cape Fear Farm Credit, ACA 208 West Main Street Clinton, NC 28329 Tel: (910) 592-4527 Fax: (910) 592-2618 ================================================================================================================
Annex 1-2
================================================================================================================ Purchaser Name JOHN HANCOCK LIFE INSURANCE COMPANY - ---------------------------------------------------------------------------------------------------------------- Name in Which Note is Registered JOHN HANCOCK LIFE INSURANCE COMPANY - ---------------------------------------------------------------------------------------------------------------- Series; Note Registration Number; Series K; RK-1; $11,000,000 Principal Amount Series K; RK-2; $4,500,000 Series L; RL-1; $10,500,000 Series L; RL-2; $4,500,000 - ---------------------------------------------------------------------------------------------------------------- Payment on Account of Note Method Federal Funds Wire Transfer Account Information Bank One, Illinois ABA # 071100269 For the Account of: John Hancock Collection Account Account No. 617423884 On the Order of: Smithfield Foods, Inc./[Description of Security] - ---------------------------------------------------------------------------------------------------------------- Accompanying Information Name of Company: SMITHFIELD FOODS, INC. Description of Security: 8.44% Series K Senior Secured Notes Due October 1, 2009 PPN Number: 832248 D@ 4 Description of Security: Libor Rate Series L Senior Secured Notes Due October 1, 2009 PPN Number: 832248 D# 2 Due Date and Application (as among principal, premium and interest) of the payment being made: - ---------------------------------------------------------------------------------------------------------------- Address for notices related to payments: John Hancock Life Insurance Company 201 Knollwood Drive, Suite A Champaign, IL 61820-7594 Attn: Accounting Fax: (217) 356-1031 with a copy to: John Hancock Life Insurance Company 200 Clarendon Street Boston, MA 02117 Attn: Bond & Corporate Finance Group, T-57 Fax: (617) 572-1605 and: John Hancock Life Insurance Company 200 Clarendon Street Boston, MA 02117 Attn: Investment Law Division, T-50 Fax: (617) 572-9268 ================================================================================================================
Annex 1-3
================================================================================================================ Purchaser Name JOHN HANCOCK LIFE INSURANCE COMPANY - ---------------------------------------------------------------------------------------------------------------- Address for notices relating to John Hancock Life Insurance Company financial statements and 200 Clarendon Street certificates of compliance with Boston, MA 02117 financial covenants: Attn: Bond & Corporate Finance Group, T-57 Fax: (617) 572-1605 - ---------------------------------------------------------------------------------------------------------------- Addresses for notices relating to John Hancock Life Insurance Company a change in issuer name, address 200 Clarendon Street or principal place of business Boston, MA 02117 or location of collateral and Attn: Investment Law Division, T-50 copies of legal opinions Fax: (617) 572-9268 - ---------------------------------------------------------------------------------------------------------------- Other Information: JOHN HANCOCK LIFE INSURANCE COMPANY By:_________________________________ Name: Title: - ---------------------------------------------------------------------------------------------------------------- Address for Delivery of John Tisdale, Esq. Securities: John Hancock Life Insurance Company 200 Clarendon Street, 50th Floor Boston, MA 02117 Tel: (617) 572-9217 Fax: (617) 572-9268 - ---------------------------------------------------------------------------------------------------------------- Tax Identification Number 04-1414660 ================================================================================================================
Annex 1-4
================================================================================================================ Purchaser Name JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY - ---------------------------------------------------------------------------------------------------------------- Name in Which Note is Registered JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY - ---------------------------------------------------------------------------------------------------------------- Series; Note Registration Number; Series K; RK-3; $1,000,000 Principal Amount Series L; RL-3; $1,000,000 - ---------------------------------------------------------------------------------------------------------------- Payment on Account of Note Method Federal Funds Wire Transfer Account Information Bank One, Illinois ABA # 071100269 For the Account of: John Hancock Collection Account Account No. 617423884 On the Order of: Smithfield Foods, Inc./[Description of Security] - ---------------------------------------------------------------------------------------------------------------- Accompanying Information Name of Company: SMITHFIELD FOODS, INC. Description of Security: 8.44% Series K Senior Secured Notes Due October 1, 2009 PPN Number: 832248 D@ 4 Description of Security: Libor Rate Series L Senior Secured Notes Due October 1, 2009 PPN Number: 832248 D# 2 Due Date and Application (as among principal, premium and interest) of the payment being made: - ---------------------------------------------------------------------------------------------------------------- Address for notices related to John Hancock Life Insurance Company payments: 201 Knollwood Drive, Suite A Champaign, IL 61820-7594 Attn: Accounting Fax: (217) 356-1031 with a copy to: John Hancock Life Insurance Company 200 Clarendon Street Boston, MA 02117 Attn: Bond & Corporate Finance Group, T-57 Fax: (617) 572-1605 and: John Hancock Life Insurance Company 200 Clarendon Street Boston, MA 02117 Attn: Investment Law Division, T-50 Fax: (617) 572-9268 - ---------------------------------------------------------------------------------------------------------------- Address for notices relating to John Hancock Life Insurance Company financial statements and 200 Clarendon Street certificates of compliance with Boston, MA 02117 financial covenants: Attn: Bond & Corporate Finance Group, T-57 Fax: (617) 572-1605 =================================================================================================================
Annex 1-5
================================================================================================================ Purchaser Name JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY - ---------------------------------------------------------------------------------------------------------------- Addresses for notices relating to John Hancock Life Insurance Company a change in issuer name, address 200 Clarendon Street or principal place of business Boston, MA 02117 or location of collateral and Attn: Investment Law Division, T-50 copies of legal opinions Fax: (617) 572-9268 - ---------------------------------------------------------------------------------------------------------------- Other Information: JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY By:_______________________________________ Name: Title: - ---------------------------------------------------------------------------------------------------------------- Address for Delivery of John Tisdale, Esq. Securities: John Hancock Life Insurance Company 200 Clarendon Street, 50th Floor Boston, MA 02117 Tel: (617) 572-9217 Fax: (617) 572-9268 - ---------------------------------------------------------------------------------------------------------------- Tax Identification Number 04-2664016 ================================================================================================================
Annex 1-6
====================================================================================================================== Purchaser Name INVESTORS PARTNER LIFE INSURANCE COMPANY - ---------------------------------------------------------------------------------------------------------------------- Name in Which Note is Registered INVESTORS PARTNER LIFE INSURANCE COMPANY - ---------------------------------------------------------------------------------------------------------------------- Series; Note Registration Number; Series K; RK-4; $500,000 Principal Amount Series L; RL-4; $500,000 - ---------------------------------------------------------------------------------------------------------------------- Payment on Account of Note Method Federal Funds Wire Transfer Account Information Bank One, Illinois ABA # 071100269 For the Account of: John Hancock Collection Account Account No. 617423884 On the Order of: Smithfield Foods, Inc./[Description of Security] - ---------------------------------------------------------------------------------------------------------------------- Accompanying Information Name of Company: SMITHFIELD FOODS, INC. Description of Security: 8.44% Series K Senior Secured Notes Due October 1, 2009 PPN Number: 832248 D@ 4 Description of Security: Libor Rate Series L Senior Secured Notes Due October 1, 2009 PPN Number: 832248 D# 2 Due Date and Application (as among principal, premium and interest) of the payment being made: - ---------------------------------------------------------------------------------------------------------------------- Address for notices related to John Hancock Life Insurance Company payments: 201 Knollwood Drive, Suite A Champaign, IL 61820-7594 Attn: Accounting Fax: (217) 356-1031 with a copy to: John Hancock Life Insurance Company 200 Clarendon Street Boston, MA 02117 Attn: Bond & Corporate Finance Group, T-57 Fax: (617) 572-1605 and: John Hancock Life Insurance Company 200 Clarendon Street Boston, MA 02117 Attn: Investment Law Division, T-50 Fax: (617) 572-9268 --------------------------------------------------------------------------------------------------------------------- Address for notices relating to John Hancock Life Insurance Company financial statements and 200 Clarendon Street certificates of compliance with Boston, MA 02117 financial covenants: Attn: Bond & Corporate Finance Group, T-57 Fax: (617) 572-1605 =====================================================================================================================
Annex 1-7
==================================================================================================================== Purchaser Name INVESTORS PARTNER LIFE INSURANCE COMPANY - --------------------------------------------------------------------------------------------------------------------- Addresses for notices relating to John Hancock Life Insurance Company a change in issuer name, address 200 Clarendon Street or principal place of business Boston, MA 02117 or location of collateral and Attn: Investment Law Division, T-50 copies of legal opinions Fax: (617) 572-9268 - --------------------------------------------------------------------------------------------------------------------- Other Information: INVESTORS PARTNER LIFE INSURANCE COMPANY (f.k.a. John Hancock Life Insurance Company of America) By:____________________________________________ Name: Title: Address for Delivery of John Tisdale, Esq. Securities: John Hancock Life Insurance Company 200 Clarendon Street, 50th Floor Boston, MA 02117 Tel: (617) 572-9217 Fax: (617) 572-9268 - --------------------------------------------------------------------------------------------------------------------- Tax Identification Number 13-3072894 =====================================================================================================================
Annex 1-8
===================================================================================================================== Purchaser Name COMMONWEALTH OF PENNSYLVANIA STATE EMPLOYEES' RETIREMENT SYSTEM - --------------------------------------------------------------------------------------------------------------------- Name in Which Note is Registered SERS & CO. - --------------------------------------------------------------------------------------------------------------------- Series; Note Registration Number; Series K; RK-5; $2,000,000 Principal Amount Series L; RL-5;$1,000,000 - --------------------------------------------------------------------------------------------------------------------- Payment on Account of Note Method Federal Funds Wire Transfer Account Information Bank One, Illinois ABA # 071100269 For the Account of: John Hancock Collection Account Account No. 617423884 On the Order of: Smithfield Foods, Inc./[Description of Security] - --------------------------------------------------------------------------------------------------------------------- Accompanying Information Name of Company: SMITHFIELD FOODS, INC. Description of Security: 8.44% Series K Senior Secured Notes Due October 1, 2009 PPN Number: 832248 D@ 4 Description of Security: Libor Rate Series L Senior Secured Notes Due October 1, 2009 PPN Number: 832248 D# 2 Due Date and Application (as among principal, premium and interest) of the payment being made: - --------------------------------------------------------------------------------------------------------------------- Address for notices related to John Hancock Life Insurance Company payments: 201 Knollwood Drive, Suite A Champaign, IL 61820-7594 Attn: Accounting Fax: (217) 356-1031 with a copy to: John Hancock Life Insurance Company 200 Clarendon Street Boston, MA 02117 Attn: Bond & Corporate Finance Group, T-57 Fax: (617) 572-1605 and: John Hancock Life Insurance Company 200 Clarendon Street Boston, MA 02117 Attn: Investment Law Division, T-50 Fax: (617) 572-9268 =====================================================================================================================
Annex 1-9
===================================================================================================================== Purchaser Name COMMONWEALTH OF PENNSYLVANIA STATE EMPLOYEES' RETIREMENT SYSTEM - --------------------------------------------------------------------------------------------------------------------- Address for notices relating to John Hancock Life Insurance Company financial statements and 200 Clarendon Street certificates of compliance with Boston, MA 02117 financial covenants: Attn: Bond & Corporate Finance Group, T-57 Fax: (617) 572-1605 - --------------------------------------------------------------------------------------------------------------------- Addresses for notices relating to John Hancock Life Insurance Company a change in issuer name, address 200 Clarendon Street or principal place of business Boston, MA 02117 or location of collateral and Attn: Investment Law Division, T-50 copies of legal opinions Fax: (617) 572-9268 - --------------------------------------------------------------------------------------------------------------------- Other Information: COMMONWEALTH OF PENNSYLVANIA STATE EMPLOYEES' RETIREMENT SYSTEM By: John Hancock Life Insurance Company, as Investment Advisor By:____________________________________________ Name: Title: Authorized John Hancock Officer - --------------------------------------------------------------------------------------------------------------------- Address for Delivery of Mellon Securities Trust Company Securities: 120 Broadway - 13th Floor Teller Window New York, NY 10271 Attn: Robert A. Ferraro Ref: Commonwealth of Pennsylvania State Employees' Retirement System Account No. CPZFFD01302 - --------------------------------------------------------------------------------------------------------------------- Tax Identification Number 23-1732438 =====================================================================================================================
Annex 1-10
===================================================================================================================== Purchaser Name JOHN HANCOCK LIFE INSURANCE COMPANY (PRIVATE PLACEMENT SEPARATE ACCOUNT 1Z) - --------------------------------------------------------------------------------------------------------------------- Name in Which Note is Registered JOHN HANCOCK LIFE INSURANCE COMPANY - --------------------------------------------------------------------------------------------------------------------- Series; Note Registration Number; Series K; RK-6; $1,000,000 Principal Amount Series L; RL-6; $1,000,000 - --------------------------------------------------------------------------------------------------------------------- Payment on Account of Note Method Federal Funds Wire Transfer Account Information Bank One, Illinois ABA # 071100269 For the Account of: John Hancock Collection Account Account No. 617423884 On the Order of: Smithfield Foods, Inc./[Description of Security] - --------------------------------------------------------------------------------------------------------------------- Accompanying Information Name of Company: SMITHFIELD FOODS, INC. Description of Security: 8.44% Series K Senior Secured Notes Due October 1, 2009 PPN Number: 832248 D@ 4 Description of Security: Libor Rate Series L Senior Secured Notes Due October 1, 2009 PPN Number: 832248 D# 2 Due Date and Application (as among principal, premium and interest) of the payment being made: --------------------------------------------------------------------------------------------------------------------- Address for notices related to John Hancock Life Insurance Company payments: 201 Knollwood Drive, Suite A Champaign, IL 61820-7594 Attn: Accounting Fax: (217) 356-1031 with a copy to: John Hancock Life Insurance Company 200 Clarendon Street Boston, MA 02117 Attn: Bond & Corporate Finance Group, T-57 Fax: (617) 572-1605 and: John Hancock Life Insurance Company 200 Clarendon Street Boston, MA 02117 Attn: Investment Law Division, T-50 Fax: (617) 572-9268 ====================================================================================================================
Annex 1-11
===================================================================================================================== Purchaser Name JOHN HANCOCK LIFE INSURANCE COMPANY (PRIVATE PLACEMENT SEPARATE ACCOUNT 1Z) - --------------------------------------------------------------------------------------------------------------------- Address for notices relating to John Hancock Life Insurance Company financial statements and 200 Clarendon Street certificates of compliance with Boston, MA 02117 financial covenants: Attn: Bond & Corporate Finance Group, T-57 Fax: (617) 572-1605 - --------------------------------------------------------------------------------------------------------------------- Addresses for notices relating to John Hancock Life Insurance Company a change in issuer name, address 200 Clarendon Street or principal place of business Boston, MA 02117 or location of collateral and Attn: Investment Law Division, T-50 copies of legal opinions Fax: (617) 572-9268 - --------------------------------------------------------------------------------------------------------------------- Other Information: JOHN HANCOCK LIFE INSURANCE COMPANY (on behalf of Private Placement Separate Account 1Z) By:____________________________________________ Name: Title: - --------------------------------------------------------------------------------------------------------------------- Address for Delivery of John Tisdale, Esq. Securities: John Hancock Life Insurance Company 200 Clarendon Street, 50th Floor Boston, MA 02117 Tel: (617) 572-9217 Fax: (617) 572-9268 --------------------------------------------------------------------------------------------------------------------- Tax Identification Number 04-1414660 =====================================================================================================================
Annex 1-12 ========================================================================================================================= Purchaser Name MELLON BANK, N.A., AS TRUSTEE FOR BELL ATLANTIC MASTER TRUST - ------------------------------------------------------------------------------------------------------------------------- Name in Which Note is Registered MELLON BANK, N.A., TRUSTEE FOR THE BELL ATLANTIC MASTER TRUST - ------------------------------------------------------------------------------------------------------------------------- Series; Note Registration Number; Series K; RK-7; $1,000,000 Principal Amount Series L; RL-7; $1,000,000 - ------------------------------------------------------------------------------------------------------------------------- Payment on Account of Note Method Federal Funds Wire Transfer Account Information Bank One, Illinois ABA # 071100269 For the Account of: John Hancock Collection Account Account No. 617423884 On the Order of: Smithfield Foods, Inc./[Description of Security] - ------------------------------------------------------------------------------------------------------------------------- Accompanying Information Name of Company: SMITHFIELD FOODS, INC. Description of Security: 8.44% Series K Senior Secured Notes Due October 1, 2009 PPN Number: 832248 D@ 4 Description of Security: Libor Rate Series L Senior Secured Notes Due October 1, 2009 PPN Number: 832248 D# 2 Due Date and Application (as among principal, premium and interest) of the payment being made: - ------------------------------------------------------------------------------------------------------------------------- Address for notices related to payments: John Hancock Life Insurance Company 201 Knollwood Drive, Suite A Champaign, IL 61820-7594 Attn: Accounting Fax: (217) 356-1031 with a copy to: John Hancock Life Insurance Company 200 Clarendon Street Boston, MA 02117 Attn: Bond & Corporate Finance Group, T-57 Fax: (617) 572-1605 and: John Hancock Life Insurance Company 200 Clarendon Street Boston, MA 02117 Attn: Investment Law Division, T-50 Fax: (617) 572-9268 =========================================================================================================================
Annex 1-13 ========================================================================================================================= Purchaser Name MELLON BANK, N.A., AS TRUSTEE FOR BELL ATLANTIC MASTER TRUST - ------------------------------------------------------------------------------------------------------------------------- Address for notices relating to John Hancock Life Insurance Company financial statements and 200 Clarendon Street certificates of compliance with Boston, MA 02117 financial covenants: Attn: Bond & Corporate Finance Group, T-57 Fax: (617) 572-1605 - ------------------------------------------------------------------------------------------------------------------------- Addresses for notices relating to John Hancock Life Insurance Company a change in issuer name, address 200 Clarendon Street or principal place of business Boston, MA 02117 or location of collateral and Attn: Investment Law Division, T-50 copies of legal opinions Fax: (617) 572-9268 - ------------------------------------------------------------------------------------------------------------------------- Other Information: MELLON BANK, N.A., AS TRUSTEE FOR BELL ATLANTIC MASTER TRUST By:___________________________________ Name: Title: Address for Delivery of Securities: Mellon Securities Trust Company 120 Broadway - 13th Floor Teller Window New York, NY 10271 Attn: Robert A. Ferraro Ref: Bell Atlantic Master Trust Account No. NYXF1783332 - ------------------------------------------------------------------------------------------------------------------------- Tax Identification Number 25-1448208 =========================================================================================================================
Annex 1-14 ========================================================================================================================= Purchaser Name THE NORTHERN TRUST COMPANY, AS TRUSTEE OF THE LUCENT TECHNOLOGIES INC. MASTER PENSION TRUST - ------------------------------------------------------------------------------------------------------------------------- Name in Which Note is Registered BOOTH & CO. - ------------------------------------------------------------------------------------------------------------------------- Series; Note Registration Number; Series K; RK-8; $2,000,000 Principal Amount Series L; RL-8; $1,000,000 - ------------------------------------------------------------------------------------------------------------------------- Payment on Account of Note Method Federal Funds Wire Transfer Account Information Bank One, Illinois ABA # 071100269 For the Account of: John Hancock Collection Account Account No. 617423884 On the Order of: Smithfield Foods, Inc./[Description of Security] - --------------------------------------------------------------------------------------------------------------------------- Accompanying Information Name of Company: SMITHFIELD FOODS, INC. Description of Security: 8.44% Series K Senior Secured Notes Due October 1, 2009 PPN Number: 832248 D@ 4 Description of Security: Libor Rate Series L Senior Secured Notes Due October 1, 2009 PPN Number: 832248 D# 2 Due Date and Application (as among principal, premium and interest) of the payment being made: - --------------------------------------------------------------------------------------------------------------------------- Address for notices related to John Hancock Life Insurance Company payments: 201 Knollwood Drive, Suite A Champaign, IL 61820-7594 Attn: Accounting Fax: (217) 356-1031 with a copy to: John Hancock Life Insurance Company 200 Clarendon Street Boston, MA 02117 Attn: Bond & Corporate Finance Group, T-57 Fax: (617) 572-1605 and: John Hancock Life Insurance Company 200 Clarendon Street Boston, MA 02117 Attn: Investment Law Division, T-50 Fax: (617) 572-9268 ===========================================================================================================================
Annex 1-15 ========================================================================================================================= Purchaser Name THE NORTHERN TRUST COMPANY, AS TRUSTEE OF THE LUCENT TECHNOLOGIES INC. MASTER PENSION TRUST - ------------------------------------------------------------------------------------------------------------------------- Address for notices to financial John Hancock Life Insurance Company statements and certificates of 200 Clarendon Street compliance with financial covenants: Boston, MA 02117 Attn: Bond & Corporate Finance Group, T-57 Fax: (617) 572-1605 - --------------------------------------------------------------------------------------------------------------------------- Addresses for notices relating to John Hancock Life Insurance Company a change in issuer name, address 200 Clarendon Street or principal place of business Boston, MA 02117 or location of collateral and Attn: Investment Law Division, T-50 copies of legal opinions Fax: (617) 572-9268 -------------------------------------------------------------------------------------------------------------------------- Other Information: THE NORTHERN TRUST COMPANY, AS TRUSTEE OF THE LUCENT TECHNOLOGIES INC. MASTER PENSION TRUST By: John Hancock Life Insurance Company, as Investment Manager By:_____________________________________________ Its:____________________________________________ - --------------------------------------------------------------------------------------------------------------------------- Address for Delivery of The Northern Trust Company Securities: 40 Broad Street, 8th Floor New York, NY 10004 Ref: Northern Account No. 22-51971/Lucent - --------------------------------------------------------------------------------------------------------------------------- Tax Identification Number 22-3463644 ===========================================================================================================================
Annex 1-16
========================================================================================================================= Purchaser Name MERRILL LYNCH INTERNATIONAL (SIGNATURE 4) - ------------------------------------------------------------------------------------------------------------------------- Name in Which Note is Registered HARE & CO. - ------------------------------------------------------------------------------------------------------------------------- Series; Note Registration Number; Series K; RK-9; $10,000,000 Principal Amount - ------------------------------------------------------------------------------------------------------------------------- Payment on Account of Note Method Federal Funds Wire Transfer Account Information Bank One, Illinois ABA # 071100269 For the Account of: John Hancock Collection Account Account No. 617423884 On the Order of: Smithfield Foods, Inc./[Description of Security] - ------------------------------------------------------------------------------------------------------------------------- Accompanying Information Name of Company: SMITHFIELD FOODS, INC. Description of Security: 8.44% Series K Senior Secured Notes Due October 1, 2009 PPN Number: 832248 D@ 4 Due Date and Application (as among principal, premium and interest) of the payment being made: - ------------------------------------------------------------------------------------------------------------------------- Address for notices related to payments: John Hancock Life Insurance Company 201 Knollwood Drive, Suite A Champaign, IL 61820-7594 Attn: Accounting Fax: (217) 356-1031 with a copy to: John Hancock Life Insurance Company 200 Clarendon Street Boston, MA 02117 Attn: Bond & Corporate Finance Group, T-57 Fax: (617) 572-1605 and: John Hancock Life Insurance Company 200 Clarendon Street Boston, MA 02117 Attn: Investment Law Division, T-50 Fax: (617) 572-9268 - ------------------------------------------------------------------------------------------------------------------------- Address for notices relating to financial John Hancock Life Insurance Company statements and certificates of compliance 200 Clarendon Street with financial covenants: Boston, MA 02117 Attn: Bond & Corporate Finance Group, T-57 Fax: (617) 572-1605 =========================================================================================================================
Annex 1-17
========================================================================================================================= Purchaser Name MERRILL LYNCH INTERNATIONAL (SIGNATURE 4) - ------------------------------------------------------------------------------------------------------------------------- Addresses for notices relating to a change John Hancock Life Insurance Company in issuer name, address or principal 200 Clarendon Street place of business or location of collateral Boston, MA 02117 and copies of legal opinions Attn: Investment Law Division, T-50 Fax: (617) 572-9268 - ------------------------------------------------------------------------------------------------------------------------- Other Information: MERRILL LYNCH INTERNATIONAL By: John Hancock Life Insurance Company, as Manager under that certain Bond Purchase and Asset Management Agreement dated as of June 22, 1999 By:____________________________________________ Name: Title: Authorized John Hancock Officer - ------------------------------------------------------------------------------------------------------------------------- Address for Delivery of Securities: Investors Bank & Trust Company, as Trustee for Merrill Lynch International, Account No. 77587 200 Clarendon Street, JHK 44 Boston, MA 02116 Attn: Dennis Fritchman, Director =========================================================================================================================
Annex 1-18
=============================================================================================================================== Purchaser Name SIGNATURE 1A (CAYMAN), LTD. - ------------------------------------------------------------------------------------------------------------------------------- Name in Which Note is Registered BARNETT & CO. - ------------------------------------------------------------------------------------------------------------------------------- Series; Note Registration Number; Series L; RL-9; $3,500,000 Principal Amount - ------------------------------------------------------------------------------------------------------------------------------- Payment on Account of Note Method Federal Funds Wire Transfer Account Information Bankers Trust Company ABA #021-001-033 Account #99-911-145 For further credit to: Bankers Trust Company, as Indenture Trustee for Signature 1A (Cayman), Ltd., Account #98016 - ------------------------------------------------------------------------------------------------------------------------------- Accompanying Information Name of Company: SMITHFIELD FOODS, INC. Description of Security: Libor Rate Series L Senior Secured Notes Due October 1, 2009 PPN Number: 832248 D# 2 Due Date and Application (as among principal, premium and interest) of the payment being made: - ------------------------------------------------------------------------------------------------------------------------------- Address for notices related to payments: John Hancock Life Insurance Company 200 Clarendon Street Boston, MA 02117 Attn: Manager, Investment Accounting Division, B-3 Fax: (617) 572-0268 and: John Hancock Life Insurance Company 200 Clarendon Street Boston, MA 02117 Attn: Investment Law Division, T-50 Fax: (617) 572-9268 - ------------------------------------------------------------------------------------------------------------------------------- Address for notices relating to financial John Hancock Life Insurance Company, Portfolio Advisor statements and certificates of compliance 200 Clarendon Street with financial covenants: Boston, MA 02117 Attn: George H. Braun Bond and Corporate Finance Group, T-57 Fax: (617) 572-1605 - ------------------------------------------------------------------------------------------------------------------------------- Addresses for notices relating to a change John Hancock Life Insurance Company in issuer name, address or principal 200 Clarendon Street place of business or location of collateral Boston, MA 02117 and copies of legal opinions Attn: Investment Law Division, T-50 Fax: (617) 572-9268 ===============================================================================================================================
Annex 1-19
============================================================================================================== Purchaser Name SIGNATURE 1A (CAYMAN), LTD. - -------------------------------------------------------------------------------------------------------------- Other Information: SIGNATURE 1A (CAYMAN), LTD. By: John Hancock Life Insurance Company, Portfolio Advisor By:____________________________________________ Name: Title: Authorized John Hancock Officer - -------------------------------------------------------------------------------------------------------------- Address for Delivery of Securities: Bankers Trust Company, as Indenture Trustee for Signature 1A (Cayman), Ltd., Account No. 98016 14 Wall Street, 4th Floor, Window 62 New York, NY 10005 ==============================================================================================================
Annex 1-20
=================================================================================================================================== Purchaser Name MELLON BANK, N.A., AS TRUSTEE FOR THE LONG-TERM INVESTMENT TRUST - ----------------------------------------------------------------------------------------------------------------------------------- Name in Which Note is Registered MELLON BANK, N.A., TRUSTEE UNDER THE LONG-TERM INVESTMENT TRUST DATED OCTOBER 1, 1996 - ----------------------------------------------------------------------------------------------------------------------------------- Series; Note Registration Number; Series K; RK-10; $2,000,000 Principal Amount Series L; RL-10; $1,000,000 - ----------------------------------------------------------------------------------------------------------------------------------- Payment on Account of Note Method Federal Funds Wire Transfer Account Information Bank One, Illinois ABA # 071100269 For the Account of: John Hancock Collection Account Account No. 617423884 On the Order of: Smithfield Foods, Inc./[Description of Security] - ----------------------------------------------------------------------------------------------------------------------------------- Accompanying Information Name of Company: SMITHFIELD FOODS, INC. Description of Security: 8.44% Series K Senior Secured Notes Due October 1, 2009 PPN Number: 832248 D# 4 Description of Security: Libor Rate Series L Senior Secured Notes Due October 1, 2009 PPN Number: 832248 D# 2 Due Date and Application (as among principal, premium and interest) of the payment being made: - ------------------------------------------------------------------------------------------------------------------------------------ Address for notices related to payments: John Hancock Life Insurance Company 201 Knollwood Drive, Suite A Champaign, IL 61820-7594 Attn: Accounting Fax: (217) 356-1031 with a copy to: John Hancock Life Insurance Company 200 Clarendon Street Boston, MA 02117 Attn: Bond & Corporate Finance Group, T-57 Fax: (617) 572-1605 and: John Hancock Life Insurance Company 200 Clarendon Street Boston, MA 02117 Attn: Investment Law Division, T-50 Fax: (617) 572-9268 ===================================================================================================================================
Annex 1-21
=================================================================================================================================== Purchaser Name MELLON BANK, N.A., AS TRUSTEE FOR THE LONG-TERM INVESTMENT TRUST - ----------------------------------------------------------------------------------------------------------------------------------- Address for notices relating to financial John Hancock Life Insurance Company statements and certificates of compliance 200 Clarendon Street with financial covenants: Boston, MA 02117 Attn: Bond & Corporate Finance Group, T-57 Fax: (617) 572-1605 - ------------------------------------------------------------------------------------------------------------------------------------ Addresses for notices relating to a change in John Hancock Life Insurance Company issuer name, address or principal place of 200 Clarendon Street business or location of collateral and copies Boston, MA 02117 of legal opinions Attn: Investment Law Division, T-50 Fax: (617) 572-9268 - ------------------------------------------------------------------------------------------------------------------------------------ Other Information: MELLON BANK, N.A., solely in its capacity as Trustee for the Long-Term Investment Trust (as directed by John Hancock Life Insurance Company), and not in its individual capacity By:____________________________________________ Its:____________________________________________ - ------------------------------------------------------------------------------------------------------------------------------------ Address for Delivery of Securities: Mellon Securities Trust Company 120 Broadway - 13th Floor Teller Window New York, NY 10271 Attn: Robert A. Ferraro Ref: The Long-Term Investment Trust Account No. ATTF 1791682 - ------------------------------------------------------------------------------------------------------------------------------------ Tax Identification Number 04-1414660 ====================================================================================================================================
Annex 1-22
==================================================================================================================================== Purchaser Name THE VARIABLE ANNUITY LIFE INSURANCE COMPANY - ------------------------------------------------------------------------------------------------------------------------------------ Name in Which Note is Registered THE VARIABLE ANNUITY LIFE INSURANCE COMPANY - ------------------------------------------------------------------------------------------------------------------------------------ Series; Note Registration Number; Series K; RK-11; $10,000,000 Principal Amount - ------------------------------------------------------------------------------------------------------------------------------------ Payment on Account of Note Method Federal Funds Wire Transfer Account Information State Street Bank and Trust Company Boston, MA 02101 ABA # 011000028 AC-0125-821-9 Re: The Variable Annuity Life Insurance Company Fund Number PA 54 OBI=PPN# and description of payment - ------------------------------------------------------------------------------------------------------------------------------------ Accompanying Information Name of Company: SMITHFIELD FOODS, INC. Description of Security: 8.44%% Series K Senior Secured Notes Due October 1, 2009 PPN: 832248 D@ 4 Due Date and Application (as among principal, premium and interest) of the payment being made: - ------------------------------------------------------------------------------------------------------------------------------------ Address for Notices Related to Payments The Variable Annuity Life Insurance Company and PA 54 c/o State Street Bank Corporation Insurance Services WES2S 801 Pennsylvania Kansas City, MO 64105 Fax: (816) 691-3619 with a copy to: The Variable Annuity Life Insurance Company and PA 54 c/o American General Corporation Attn: Investment Research Department, A37-01 P.O. Box 3247 Houston, TX 77253-3247 Overnight Address: 2929 Allen Parkway, A37-01, Houston, TX 77019-2155 Fax: (713) 831-1366 - ------------------------------------------------------------------------------------------------------------------------------------ Address for All other Notices The Variable Annuity Life Insurance Company and PA 54 c/o American General Corporation Attn: Investment Research Department, A37-01 P.O. Box 3247 Houston, TX 77253-3247 Overnight Address: 2929 Allen Parkway, A37-01, Houston, TX 77019-2155 Fax: (713) 831-1366 ====================================================================================================================================
Annex 1-23
=================================================================================================================================== Purchase Name THE VARIABLE ANNUITY LIFE INSURANCE COMPANY - ----------------------------------------------------------------------------------------------------------------------------------- Other Information: THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AMERICAN GENERAL LIFE INSURANCE COMPANY By:__________________________________________________ Name: Title: - ----------------------------------------------------------------------------------------------------------------------------------- Address for Delivery of Securities: State Street Bank and Trust Company Securities Services 225 Franklin Street Boston, MA 02105 Attn: Mr. Eduardo Chave - Receive and Deliver confirmation of receipt and copies of securities to: Carolyn Lee American General Investment Management, L.P. 2929 Allen Parkway, A36-01 Houston, TX 77019 with a copy to: David G. Castano, Esq. American General Investment Management, L.P. 2929 Allen Parkway, A36-01 Houston, TX 77019 - ------------------------------------------------------------------------------------------------------------------------------------ Tax Identification Number 74-1625348 ====================================================================================================================================
Annex 1-24
==================================================================================================================================== Purchaser Name AMERICAN GENERAL LIFE INSURANCE COMPANY - ------------------------------------------------------------------------------------------------------------------------------------ Name in Which Note is Registered AMERICAN GENERAL LIFE INSURANCE COMPANY Series; Note Registration Number; Series K; RK-12; $5,000,000 Principal Amount - ------------------------------------------------------------------------------------------------------------------------------------ Payment on Account of Note Method Federal Funds Wire Transfer Account Information State Street Bank and Trust Company Boston, MA 02101 ABA # 011000028 AC-0125-880-5 Re: American General Life Insurance Company Fund Number PA 40 OBI=PPN# and description of payment - ------------------------------------------------------------------------------------------------------------------------------------ Accompanying Information Name of Company: SMITHFIELD FOODS, INC. Description of Security: 8.44% Series K Senior Secured Notes Due October 1, 2009 PPN Number: 832248 D@ 4 Due Date and Application (as among principal, premium and interest) of the payment being made: Address for Notices Related to Payments American General Life Insurance Company and PA 40 c/o State Street Bank Corporation Insurance Services WES2S 801 Pennsylvania Kansas City, MO 64105 Fax: (816) 691-3619 with a copy to: American General Life Insurance Company and PA 40 c/o American General Corporation Attn: Investment Research Department, A37-01 P.O. Box 3247 Houston, TX 77253-3247 Overnight Address: 2929 Allen Parkway, A37-01, Houston, TX 77019-2155 Fax: (713) 831-1366 - ------------------------------------------------------------------------------------------------------------------------------------ Address for All other Notices American General Life Insurance Company and PA 40 c/o American General Corporation Attn: Investment Research Department, A37-01 P.O. Box 3247 Houston, TX 77253-3247 Overnight Address: 2929 Allen Parkway, A37-01, Houston, TX 77019-2155 Fax: (713) 831-1366 ====================================================================================================================================
Annex1-25
=================================================================================================================================== Purchase Name AMERICAN GENERAL LIFE INSURANCE COMPANY - ----------------------------------------------------------------------------------------------------------------------------------- Other Information: THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AMERICAN GENERAL LIFE INSURANCE COMPANY By:_______________________________________________ Name: Title: - ----------------------------------------------------------------------------------------------------------------------------------- Address for Delivery of Securities: State Street Bank and Trust Company Securities Services 225 Franklin Street Boston, MA 02105 Attn: Mr. Eduardo Chave - Receive and Deliver confirmation of receipt and copies of securities to: Carolyn Lee American General Investment Management, L.P. 2929 Allen Parkway, A36-01 Houston, TX 77019 with a copy to: David G. Castano, Esq. American General Investment Management, L.P. 2929 Allen Parkway, A36-01 Houston, TX 77019 - ------------------------------------------------------------------------------------------------------------------------------------ Tax Identification Number 25-0598210 ====================================================================================================================================
Annex 1-26 ANNEX 2 COMPANY WIRE TRANSFER INSTRUCTIONS Bank of America Dallas, Texas ABA # 111000012 Ben: Smithfield Packing Company, Inc. Account No. 3750513035 Annex 2-1 EX-4.8B 6 0006.txt JOINT AND SEVERAL GUARANTY EXHIBIT 4.8(b) JOINT AND SEVERAL GUARANTY THIS JOINT AND SEVERAL GUARANTY, dated as of October 27, 1999 (as amended or restated from time to time, this "Guaranty"), by each of Gwaltney of Smithfield, Ltd., John Morrell & Co., The Smithfield Packing Company, Incorporated, SFFC, Inc., Patrick Cudahy Incorporated, Brown's of Carolina, Inc., Carroll's Foods, Inc., Carroll's Realty, Inc., Carroll's Realty Partnership, North Side Foods Corp., Lykes Meat Group, Inc., Circle Four Corporation, Brown's Farms, LLC, Carroll's Foods of Virginia, Inc., Smithfield- Carroll's Farms, and Central Plains Farms, Inc. (together with their respective successors and assigns, each, individually, a "Guarantor" and collectively, the "Guarantors"), in favor of each of the Noteholders (as such term is hereinafter defined). 1. PRELIMINARY STATEMENT. Smithfield Foods, Inc. (together with its successors and assigns, the "Company"), a Virginia corporation, has authorized, pursuant to those certain Note Purchase Agreements (collectively, as may be amended or restated from time to time, the "Note Purchase Agreement"), each dated as of October 27, 1999, entered into separately between the Company and, respectively, each of the purchasers of the Notes named on Annex 1 to the Note Purchase Agreement (the "Purchasers"), the issuance of: (a) $100,000,000 in aggregate principal amount of its 7.89% Series I Senior Secured Notes due October 1, 2009 (as said notes may be amended, restated or otherwise modified from time to time, together with any notes given in substitution for or replacement of said notes, the "Series I Notes"); (b) $50,000,000 in aggregate principal amount of its Variable Rate Series J Senior Secured Notes due October 1, 2009 (as said notes may be amended, restated or otherwise modified from time to time, together with any notes given in substitution for or replacement of said notes, the "Series J Notes"); (c) $50,000,000 in aggregate principal amount of its 8.44% Series K Senior Secured Notes due October 1, 2009 (as said notes may be amended, restated or otherwise modified from time to time, together with any notes given in substitution for or replacement of said notes, the "Series K Notes"); and (d) $25,000,000 in aggregate principal amount of its LIBOR Rate Series L Senior Secured Notes due October 1, 2009 (as said notes may be amended, restated or otherwise modified from time to time, together with any notes given in substitution for or replacement of said notes, the "Series L Notes"); The Series I Notes, the Series J Notes, the Series K Notes and the Series L Notes are herein referred to, individually, as a "Note," and collectively, as the "Notes." 1.1 In order to induce the Purchasers to purchase the Notes, the Company has agreed, pursuant to the Note Purchase Agreement, that the Guarantors will be required to guaranty unconditionally all of the obligations of the Company under and in respect of the Notes and the Note Purchase Agreement pursuant to the terms and provisions hereof. 1.2 The Guarantors and the Company are operated as part of one consolidated business entity and are directly dependent upon each other for and in connection with their respective business activities and their respective financial resources. Each Guarantor will receive direct and indirect economic, financial and other benefits from the indebtedness incurred under the Note Purchase Agreement and the Notes by the Company, and under this Guaranty by such Guarantor, and the incurrence of such indebtedness is in the best interests of such Guarantor. The Company and the Guarantors have explicitly induced the Purchasers to purchase the Notes based on and in reliance on the consolidated financial condition of the Company and its subsidiaries, including the Guarantors. 1.3 All acts and proceedings required by law and by the certificates or articles of incorporation, as the case may be, and bylaws (or other organizational or constitutive documents) of each Guarantor necessary to constitute this Guaranty 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 by each Guarantor. 2. GUARANTY AND OTHER RIGHTS AND UNDERTAKINGS 2.1 Guarantied Obligations. Each Guarantor, in consideration of the execution and delivery of the Note Purchase Agreement by the Purchasers and the purchase of the Notes and/or exchange of certain promissory notes previously issued by certain of the Guarantors for the Notes, hereby irrevocably, unconditionally, absolutely, jointly 2 and severally guarantees, on a continuing basis, to each Noteholder, as and for such Guarantor's own debt, until final and indefeasible payment has been made: (a) the due and punctual payment by the Company of the principal of, and interest, and the Make-Whole Amount (if any) 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 the Noteholders under the Note Purchase Agreement and the Notes, 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 hereof and thereof; it being the intent of each Guarantor that the guaranty set forth herein shall be a continuing 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 Note Purchase Agreement and the Notes. All of the obligations set forth in subsection (a) and subsection (b) of this Section 2.1 are referred to herein as the "Guarantied Obligations" and the guaranty thereof contained herein is referred to herein as the "Unconditional Guaranty". This Unconditional Guaranty is a primary, original and immediate 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 until the full, final and indefeasible payment of the Guarantied Obligations. 2.2 Performance Under the Note Purchase Agreement. In the event the Company fails to pay, perform, keep, observe, or fulfill any Guarantied Obligation in the manner provided in the Notes or in the Note Purchase Agreement, 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 and the Notes. 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 maturity of the Notes, forthwith become due and payable without notice, regardless of whether the acceleration of the maturity of the Notes shall be stayed, enjoined, delayed or otherwise prevented. 3 2.3 Undertakings in Note Purchase Agreement. Each of the Guarantors will comply with each of the undertakings of the Company in the Note Purchase Agreement in respect of which the Company undertakes to cause the Guarantors (in their capacity as Guarantors and as Subsidiaries) to comply with such undertakings, as if such undertakings (as they apply to the Guarantors) were set forth at length herein as the undertakings of each such Guarantor. 2.4 Releases. Each of the Guarantors consents and agrees that, without any notice whatsoever to or by the Guarantors and without impairing, releasing, abating, deferring, suspending, reducing, terminating or otherwise affecting the obligations of any of the Guarantors hereunder, each Noteholder, by action or inaction, may: (a) compromise or settle, 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 this Guaranty, the Notes, the Note Purchase Agreement, any other guaranty or agreement or instrument related thereto or hereto; (b) assign, sell or transfer, or otherwise dispose of, any one or more of the Notes; (c) grant waivers, extensions, consents and other indulgences of any kind whatsoever to the Company or any other guarantor in respect of any one or more of this Guaranty, the Notes, the Note Purchase Agreement, any other guaranty or any agreement or instrument related thereto or hereto; (d) amend, modify or supplement in any manner whatsoever and at any time (or from time to time) any one or more of the Notes, the Note Purchase Agreement, any other guaranty or any agreement or instrument related hereto; (e) release or substitute any one or more of the endorsers or guarantors of the Guarantied Obligations, whether parties hereto or not; and 4 (f) sell, exchange, release, surrender or enforce, by action or inaction, any Property at any time pledged or granted as security in respect of the Guarantied Obligations in accordance with the terms and conditions of the agreements and instruments pursuant to which such Property was pledged or granted (as such agreements and instruments may be amended from time to time, and without any requirement of notice of such amendment to any Guarantor), whether so pledged or granted by the Company, any Guarantor or another guarantor of the Company's obligations under the Note Purchase Agreement, the Notes, any other guaranty or any agreement or instrument related hereto. 2.5 Waivers. To the fullest extent permitted by law, each of the Guarantors does hereby waive: (a) any notice of (i) acceptance of this Unconditional Guaranty; (ii) any purchase of the Notes under the Note Purchase Agreement, or the creation, existence or acquisition of any of the Guarantied Obligations, or the amount of the Guarantied Obligations, subject to the Guarantors' right to make inquiry of each Noteholder to ascertain the amount of the Guarantied Obligations owing to such Noteholder at any reasonable time, provided that the Guarantors will look solely to the Company for the determination of the identities of the Noteholders; (iii) any transfer of Notes from one holder to another; (iv) any adverse change in the financial condition of the Company or any other fact that might increase, expand or affect any of the Guarantors' risk hereunder; (v) presentment for payment, demand, protest, and notice thereof as to the Notes or any other instrument; (vi) any Default or Event of Default; and (vii) any kind or nature whatsoever to which any of the Guarantors might otherwise be entitled, other than those 5 specifically required to be given to each of such Guarantors pursuant to the terms of this Guaranty; (b) the right by statute or otherwise to require any Noteholder to institute suit against the Company, any Guarantor, or any other guarantor or to exhaust the rights and remedies of any Noteholder against the Company, any Guarantor or any other guarantor, including, specifically (but not limited to) any rights such Guarantor might otherwise have had under Virginia Code Sections 49-25 and 49-26, et. seq. and R.C.G.S. Sections 26-7, et. seq. -- --- -- --- (and any successor statute); (c) the benefit of any stay (except in connection with a pending appeal), valuation, appraisal, redemption or extension law now or at any time hereafter in force which, but for this waiver, might be applicable to any sale of Property of any Guarantor made under any judgment, order or decree based on this Guaranty, and each 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 such law; (d) any defense or objection to the absolute, primary, continuing nature, or the validity, enforceability or amount, of this Unconditional Guaranty, including, without limitation, any defense based on (and the primary, continuing nature, and the validity, enforceability and amount, of this Unconditional Guaranty shall be unaffected by), any of the following: (i) any change in future conditions; (ii) any change of law; (iii) any invalidity or irregularity with respect to the issuance or assumption of any obligations (including, without limitation, the Note Purchase Agreement, the Notes or any agreement or instrument related hereto) by the Company or any other Person; (iv) the execution and delivery of any agreement at any time hereafter (including, without limitation, the Note Purchase Agreement, the Notes or any agreement or instrument related hereto) of the Company or any other Person; (v) the genuineness, validity, regularity or enforceability of any of the Guarantied Obligations; 6 (vi) any default, failure or delay, willful or otherwise, in the performance of any obligations by the Company or any Guarantor; (vii) any creditors' rights, bankruptcy, receivership or other insolvency proceeding of the Company or any Guarantor, or sequestration or seizure of any Property of the Company or any Guarantor, or any merger, consolidation, reorganization, dissolution, liquidation or winding up or change in corporate constitution or corporate identity or loss of corporate identity of the Company or any Guarantor; (viii) any disability or other defense of the Company or any Guarantor to payment and performance of all Guarantied Obligations other than the defense that the Guarantied Obligations shall have been fully and finally performed and indefeasibly paid; (ix) the cessation from any cause whatsoever of the liability of the Company or any Guarantor in respect of the Guarantied Obligations; (x) impossibility or illegality of performance on the part of the Company or any Guarantor under the Note Purchase Agreement, the Notes or this Guaranty; (xi) any change in the circumstances of the Company, any Guarantor or any other Person, whether or not foreseen or foreseeable, whether or not imputable to the Company or any Guarantor, including, without limitation, impossibility of performance through fire, explosion, accident, labor disturbance, floods, droughts, embargoes, wars (whether or not declared), civil commotions, acts of God or the public enemy, delays or failure of suppliers or carriers, inability to obtain materials, economic or political conditions, or any other causes affecting performance, or any other force majeure, whether or not beyond the control of the Company or any Guarantor and whether or not of the kind hereinbefore specified; (xii) any attachment, claim, demand, charge, Lien, order, process, encumbrance or any other happening or event or reason, similar or dissimilar to the foregoing, or any withholding or diminution at the source, by reason of any taxes, assessments, expenses, indebtedness, obligations or liabilities of any character, foreseen or unforeseen, and whether or not valid, incurred by or against any Person, or any claims, demands, charges, Liens or encumbrances of any nature, foreseen or unforeseen, incurred by any Person, or against any sums payable under the Note Purchase Agreement or the Notes or any agreement or instrument related 7 hereto so that such sums would be rendered inadequate or would be unavailable to make the payment as herein provided; (xiii) any change in the ownership of the equity securities of the Company, any Guarantor or any other Person liable in respect of the Notes; or (xiv) any other action, happening, event or reason whatsoever that shall delay, interfere with, hinder or prevent, or in any way adversely affect, the performance by the Company or any Guarantor of any of its obligations under the Note Purchase Agreement, the Notes or this Guaranty. 2.6 Certain Waivers of Subrogation, Reimbursement and Indemnity. Until the Guarantied Obligations have been finally and indefeasibly paid, none of the Guarantors shall have any right of subrogation, reimbursement, or indemnity whatsoever in respect of the Guarantied Obligations, and no right of recourse to or with respect to any assets or Property of the Company or any other Guarantor. 2.7 Invalid Payments. To the extent 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 or officer under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, state or federal law, or any common law or equitable cause, then to the extent of such payment or repayment, the obligation or part thereof intended to be satisfied shall be revived and continued in full force and effect as if said payment had not been made and each Guarantor shall be primarily liable for such obligation. 2.8 Marshaling. Neither any Noteholder nor any Person acting for the benefit of any Noteholder shall be under any obligation to marshal any assets in favor of any of the Guarantors or against or in payment of any or all of the Guarantied Obligations. 8 2.9 Subordination. In the event that, for any reason whatsoever, the Company or a Person obligated in respect of the Guarantied Obligations pursuant to another agreement, is now or hereafter becomes indebted to any Guarantor in any manner (such indebtedness referred to as an "Affiliate Obligation"), the amount of such Affiliate Obligation, interest thereon, and all other amounts due with respect thereto, shall, at all times during the existence of a Default or an Event of Default, be subordinate as to time of payment and in all other respects to all the Guarantied Obligations, and such Guarantor shall not be entitled to enforce or receive payment thereof until all sums then due and owing to the Noteholders in respect of the Guarantied Obligations shall have been paid in full, except that such Guarantor may enforce (and shall enforce, at the request of the Required Holders, and at such Guarantor's expense) any obligations in respect of any such Affiliate Obligation owing to such Guarantor from the Company or such indebted Person so long as all proceeds in respect of any recovery from such enforcement shall be held by such Guarantor in trust for the benefit of the Noteholders, to be paid to the Noteholders as promptly as reasonably possible. If any other payment, other than pursuant to the immediately preceding sentence, shall have been made to any Guarantor by the Company or such indebted Person on any such Affiliate Obligation during any time that a Default or an Event of Default exists and there are Guarantied Obligations outstanding, such Guarantor shall hold in trust all such payments for the benefit of the Noteholders, to be paid to the Noteholders as promptly as reasonably possible. 2.10 Setoff, Counterclaim or Other Deductions. Except as otherwise required by law, each payment by any one or more of the Guarantors shall be made without setoff, counterclaim or other deduction. 2.11 Election by Guarantors to Perform Obligations. Any election by any one or more of the Guarantors to pay or otherwise perform any of the obligations of the Company under the Notes, the Note Purchase Agreement or any agreement or instrument related hereto shall not release the Company, any of the Guarantors or any other guarantor from such obligations or any of such Person's other obligations under the Notes, the Note Purchase Agreement or any agreement or instrument related hereto. 2.12 No Election of Remedies by Noteholders. To the extent provided in the Note Purchase Agreement, each Noteholder shall, individually or collectively, have the right to seek recourse against each of the Guarantors to the fullest extent provided for herein for such Guarantor's 9 obligations under this Guaranty in respect of the Guarantied Obligations. 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 any Noteholder against the Company or any Guarantor under any document or instrument evidencing obligations of the Company or any Guarantor to such Noteholder shall serve to diminish the liability of any Guarantor under this Guaranty, except to the extent that such Noteholder finally and unconditionally shall have realized payment by such action or proceeding. 2.13 Separate Action; Other Enforcement Rights. Each of the rights and remedies granted under this Guaranty to each Noteholder in respect of the Notes held by such Noteholder may be exercised by such Noteholder without notice by such Noteholder to, or the consent of or any other action by, any other Noteholder. Each Noteholder may proceed to protect and enforce this Unconditional Guaranty 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. 2.14 Noteholder Setoff. Each Noteholder shall have, to the fullest extent permitted by law and this Guaranty, a right of set-off against any and all credits and any and all other Property of each or all of the Guarantors, now or at any time whatsoever, with or in the possession of, such Noteholder, or anyone acting for such Noteholder, to ensure the full performance of any and all obligations of the Guarantors hereunder. 2.15 Delay or Omission; No Waiver. No course of dealing on the part of any Noteholder and no delay or failure on the part of any such Person to exercise any right hereunder shall impair such right or operate as a waiver of such right or otherwise prejudice such Person's rights, powers and remedies hereunder. Every right and remedy given by this Unconditional Guaranty or by law to any Noteholder may be exercised from time to time as often as may be deemed expedient by such Person. 10 2.16 Restoration of Rights and Remedies. If any Noteholder shall have instituted any proceeding to enforce any right or remedy under this Unconditional Guaranty or under any Note held by such Noteholder, and such proceeding shall have been dismissed, 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 each of the Guarantors shall, except as may be limited or affected by any determination (including, without limitation, any determination in connection with any such dismissal) in such proceeding, be restored severally and respectively to its respective former positions hereunder and thereunder, and thereafter, subject as aforesaid, the rights and remedies of such Noteholders shall continue as though no such proceeding had been instituted. 2.17 Cumulative Remedies. No remedy under this Guaranty, the Note Purchase Agreement or the Notes 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 pursuant to this Guaranty, the Note Purchase Agreement, the Notes or the other Financing Documents. 2.18 Limitation on Guarantied Obligations. Notwithstanding anything in Section 2.1 or elsewhere in this Guaranty or any other Financing Document to the contrary, the obligations of each Guarantor under this Guaranty shall at each point in time be limited to an aggregate amount equal to the greatest amount that would not result in such obligations being subject to avoidance, or otherwise result in such obligations being unenforceable, at such time under applicable law (including, without limitation, to the extent, and only to the extent, applicable to each Guarantor, Section 548 of the Bankruptcy Code of the United States of America and any comparable provisions of the law of any other jurisdiction, any capital preservation law of any jurisdiction and any other law of any jurisdiction that at such time limits the enforceability of the obligations of such Guarantor under this Guaranty). 2.19 Maintenance of Offices. Each Guarantor will maintain an office at its address set forth in Section 5.3 where notices, presentations and demands in respect of this Guaranty may be made upon it. Each Guarantor will maintain its office at such address until 11 such time as such Guarantor shall notify the Noteholders of any change of location of such office. 2.20 Further Assurances. Each Guarantor will cooperate with the Noteholders and execute such further instruments and documents as the Required Holders shall reasonably request to carry out, to the reasonable satisfaction of the Required Holders, the transactions contemplated by the Note Purchase Agreements, the Notes, this Guaranty and the documents and instruments related thereto. 3. INTERPRETATION OF THIS GUARANTY 3.1 Terms Defined. As used in this Guaranty, capitalized terms have the meaning specified in the Note Purchase Agreement unless otherwise specified below or set forth in the section of this Guaranty 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): Affiliate Obligation -- Section 2.9. Company -- Section 1.1. Cudahy -- has the meaning assigned to such term in the first paragraph hereof. Guaranteeing Subsidiaries -- Section 4.3. Guarantied Obligations -- Section 2.1. Guarantor -- has the meaning assigned to such term in the first paragraph hereof. Guaranty, this -- has the meaning assigned to such term in the first paragraph hereof. Note Purchase Agreement -- Section 1.1. Noteholder -- means, at any time, each Person that is the holder of any Note at such time. 12 Notes -- Section 1.1. Purchasers -- Section 1.1. Series I Notes -- Section 1.1. Series J Notes -- Section 1.1. Series K Notes -- Section 1.1. Series L Notes -- Section 1.1. Unconditional Guaranty -- Section 2.1. 3.2 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 as a whole and not to any particular Section or other subdivision. Unless otherwise specified, references to Sections are to Sections of this Agreement and references to Annexes are to Annexes to this Agreement. (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. 4. WARRANTIES AND REPRESENTATIONS Each Guarantor represents and warrants to each Purchaser, as of the date hereof, as follows: 4.1 Generally. (a) Such Guarantor is fully aware of the financial condition of the Company and is delivering this Guaranty based solely upon its own independent investigation and in no part upon any representation or statement of any Noteholder with respect thereto. Such Guarantor is in a position to obtain, and hereby assumes full responsibility for obtaining, any additional information concerning the financial condition of the Company as such Guarantor may deem material to its obligations hereunder, and such Guarantor is not relying upon, 13 nor expecting, any Noteholder to furnish it any information concerning the financial condition of the Company. (b) As of the date of the execution and delivery of this Guaranty, the fair salable value of the assets of such Guarantor, taken as a whole, exceeds its liabilities, taken as a whole; such Guarantor is able to pay and discharge all of its debts (including, without limitation, its current liabilities) as they become due and after giving effect to the transactions contemplated by this Guaranty, such Guarantor will not become unable to pay and discharge such debts as they become due; there are no presently pending material court or administrative proceedings or undischarged judgments against the Guarantor; and no tax Liens have been filed or threatened against such Guarantor, nor is such Guarantor in default or claimed default under any agreement for borrowed money. (c) Such Guarantor is a corporation duly organized and validly existing and in good standing under the laws of its jurisdiction of incorporation. Such Guarantor has the corporate power to own its Properties and carry on its business as it is now being conducted. Such Guarantor has the valid authority and the corporate power to enter into and perform, and has taken all necessary action to authorize the entry into, and the performance and delivery of, this Guaranty and the transactions contemplated hereby. (d) This Guaranty has been duly authorized by all necessary action on the part of such Guarantor, has been duly executed and delivered by duly authorized officers of such Guarantor, and constitutes a legal, valid and binding obligation of such Guarantor. (e) The entry into and performance of this Guaranty and the transactions contemplated hereby do not and will not conflict with any applicable law or regulation or official or judicial order, conflict with the articles or certificate of incorporation, or bylaws, of such Guarantor, conflict with any agreement or document to which such Guarantor is a party or that is binding upon it or any of its Properties, or result in the creation or imposition of any Lien on any of its Properties pursuant to the provisions of any agreement or document. 4.2 Nature of Business of Company and Subsidiaries. The Company, the Guarantors, and all of the other Subsidiaries are, and will be, as to financing and capital raising activities, operated as part of one consolidated business entity and each Guarantor is directly or indirectly dependent upon each other Guarantor and each other Subsidiary and the 14 Company for and in connection with its business activities and its financial resources. The Company and the Subsidiaries have sought and obtained the sale of the Notes and the related transactions based on their consolidated financial position and the Company and the Subsidiaries understand that the Purchasers are relying on the consolidated financial condition of the Company and the Subsidiaries in purchasing the Notes. 15 4.3 Solvency. The fair value of the business and assets of each of the Company and each of the Guarantors will be 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 after giving effect to the transactions contemplated by this Guaranty and the other the Financing Documents. Neither the Company nor any Guarantor, after giving effect to the transactions contemplated by the Financing Documents, will be engaged in any business or transaction, or about to engage in any business or transaction, for which such Person has unreasonably small assets or capital (within the meaning of applicable law, including, without limitation, Section 548 of the United States Bankruptcy Code), and neither the Company nor any Guarantor has any intent to (a) hinder, delay or defraud any entity to which it is, or will become, on or after the Closing Date, indebted, or (b) incur debts that would be beyond its ability to pay as they mature. 5 MISCELLANEOUS 5.1 Successors and Assigns. (a) Whenever any Guarantor or any of the parties to the Note Purchase Agreement 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 by or on behalf of any 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. (b) Each of the Guarantors agrees to take such action as may be reasonably requested by any Noteholder in connection with the transfer of the Notes of such Noteholder in accordance with the requirements of the Note Purchase Agreement in connection with providing an executed copy of this Guaranty to the new Noteholder or Noteholders of such Notes, provided that no additional obligations of the Guarantors shall thereby be created but rather that the existing obligations of the Guarantors shall be more particularly stated in respect of one or more future Noteholders that are the subject of this Guaranty. 16 5.2 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. 5.3 Communications. (a) Method; Address. All communications hereunder shall be in writing, shall be delivered in the manner required by the Note Purchase Agreement, and shall be addressed, if to the Guarantors, in care of the Company at its address as set forth in the Note Purchase Agreement, and if to any of the Noteholders (i) if such Noteholder is a Purchaser, at the address set forth on Schedule A to the Note Purchase Agreement for such Noteholder, and further including any parties referred to on such Schedule A which are required to receive notices in addition to such Noteholder, and (ii) if such Noteholder is not a Purchaser, at the address set forth in the register for the registration and transfer of Notes maintained pursuant to Section 5.1 of the Note Purchase Agreement for such Noteholder, or to any such party at such other address as such party may designate by notice duly given in accordance with this Section 5.3. (b) When Given. Any communication so addressed and deposited in the United States mail, postage prepaid, by registered or certified mail (in each case, with return receipt requested) shall be deemed to be received on the third (3rd) succeeding Business Day after the day of such deposit (not including the date of such deposit). Any communication so addressed and delivered otherwise shall be deemed to be received when actually received at the address of the addressee. 5.4 Governing Law. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL VIRGINIA LAW, EXCLUDING CHOICE-OF-LAW PROVISIONS OF SUCH JURISDICTION THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH JURISDICTION. 17 5.5 Effective Date. This Guaranty shall be effective as of the date hereof. 5.6 Benefits of Guaranty Restricted. Nothing express or implied in this Guaranty is intended or shall be construed to give to any Person other than the Guarantors, the Noteholders and the Security Trustee any legal or equitable right, remedy or claim under or in respect hereof or any covenant, condition or provision herein contained; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Guarantors, the Noteholders and the Security Trustee. 5.7 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. 5.8 Expenses. (a) The Guarantors shall pay when billed the reasonable costs and expenses (including reasonable attorneys' fees) incurred by the Noteholders and the Security Trustee in connection with the consideration, negotiation, preparation or execution of any amendments, waivers, consents, standstill agreements and other similar agreements with respect hereto (whether or not any such amendments, waivers, consents, standstill agreements or other similar agreements are executed). (b) At any time when any one or more of the Company or the Guarantors and the Noteholders are conducting restructuring or workout negotiations in respect hereof, or a Default or Event of Default exists, the Guarantors shall pay when billed the reasonable costs and expenses (including reasonable attorneys' fees and the reasonable fees of professional advisors) incurred by the Noteholders in connection with the assessment, analysis or enforcement of any rights or remedies that are or may be available to the Noteholders. (c) If any of the Guarantors shall fail to pay when due any principal of, or Make-Whole Amount or interest on, any Note, each of the Guarantors shall pay to each Noteholder, to the extent permitted by law, such amounts as shall 18 be sufficient to cover the costs and expenses, including but not limited to reasonable attorneys' fees, incurred by such Noteholder in collecting any sums due on the Notes. 5.9 Amendment. This Guaranty may be amended only in a writing executed by each Guarantor and the Required Holders. 5.10 Survival. So long as the Guarantied Obligations and all payment obligations of the Guarantors hereunder shall not have been fully and finally performed and indefeasibly paid, the obligations of the Guarantors hereunder shall survive the transfer and payment of any Note and the payment in full of all the Notes. 5.11 Entire Agreement. This Guaranty constitutes the final written expression of all of the terms hereof and is a complete and exclusive statement of those terms. 5.12 Duplicate Originals, Execution in Counterpart. Two or more duplicate originals hereof may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. This Guaranty may be executed in one or more counterparts and shall be effective when at least one counterpart shall have been executed by each party hereto, and each set of counterparts that, collectively, show execution by each party hereto shall constitute one duplicate original. [Remainder of page intentionally blank. Next page is signature page.] 19 IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed on its behalf by a duly authorized officer of such Guarantor. [GUARANTORS] By________________________________ Name: Title: EX-4.8C 7 0007.txt JOINDER AGREEMENT EXHIBIT 4.8(c) JOINDER AGREEMENT June 9, 2000 To each of the Noteholders (as defined in the Joint and Several Guaranty hereinafter referred to) Ladies and Gentlemen: Reference is made to the Joint and Several Guaranty, dated as of October 27, 1999 (as amended, restated or otherwise modified from time to time, the "Guaranty Agreement"), by each of the Guarantors (individually, a "Guarantor" and collectively, the "Guarantors") a party thereto, in favor of each of the holders, from time to time, of (a) $100,000,000 in aggregate principal amount of the 7.89% Series I Senior Secured Notes due October 1, 2009 of Smithfield Foods, Inc., a Virginia corporation (the "Company"), (b) $50,000,000 in aggregate principal amount of the Company's Variable Rate Series J Senior Secured Notes due October 1, 2009, (c) $50,000,000 in aggregate principal amount of the Company's 8.44% Series K Senior Secured Notes due October 1, 2009, and (d) $25,000,000 in aggregate principal amount of the Company's LIBOR Rate Series L Senior Secured Notes due October 1, 2009. Capitalized terms used herein and not otherwise defined have the meanings ascribed to such terms in the Guaranty Agreement. Each of the undersigned subsidiaries of the Company (each a "New Guarantor", and, collectively, the "New Guarantors"), agrees with you as follows: 1. Guaranty. Each New Guarantor hereby unconditionally and expressly agrees to become, by execution and delivery of this Joinder Agreement does become, and assumes each and every one of the obligations of, a "Guarantor" under and as defined in the Guaranty Agreement. In addition, each New Guarantor makes, as of the date hereof, each and every representation and warranty of a Guarantor set forth or incorporated in the Guaranty Agreement. Without limitation of the foregoing or of anything in the Guaranty Agreement, by such execution and delivery hereof each New Guarantor does become fully liable, as a Guarantor, for the payment of the Guarantied Obligations as further provided in Section 2 of the Guaranty Agreement. The Guaranty Agreement is hereby amended, without any further action, to add each New Guarantor as a Guarantor thereunder as if each New Guarantor had been an original party to the Guaranty Agreement. 2. Further Assurances. Each New Guarantor agrees to cooperate with the Noteholders and execute such further instruments and documents as the Required Holders shall reasonably request to effect, to the reasonable satisfaction of the Required Holders, the purposes of this Joinder Agreement. 3. Binding Effect. This Agreement shall be binding upon each New Guarantor and shall inure to the benefit of the Noteholders and their respective successors and assigns. 4. Governing Law. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL VIRGINIA LAW, EXCLUDING CHOICE-OF-LAW PROVISIONS OF SUCH JURISDICTION THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH JURISDICTION. [Remainder of page intentionally blank. Next page is signature page.] 2 IN WITNESS WHEREOF, each of the New Guarantors has caused this Joinder Agreement to be executed on its behalf by one of its duly authorized officers. MURPHY FARMS, INC. By: --------------------------------------------- Name: Title: SMITHFIELD PACKING REAL ESTATE, LLC, By: The Smithfield Packing Company, Incorporated, its manager and sole member By: --------------------------------------------- Name: Title: [Signature Page to Joinder Agreement] EX-4.9A 8 0008.txt NOTE PURCHASE AGREEMENT EXHIBIT 4.9(A) MURPHY FARMS, INC. 8.25% SENIOR UNSECURED FIXED RATE NOTES DUE MARCH 2,2006 PPN: 62667# AA 8 SENIOR UNSECURED LIBOR RATE NOTES DUE MARCH 2,2002 PPN: 62667# AB 6 NOTE PURCHASE AGREEMENT ______________________________________________________________________________ Dated as of March 2, 1999 ============================================================================== TABLE OF CONTENTS NOTE PURCHASE AGREEMENT NOTE PURCHASE AGREEMENT, dated as of March 2,1999, between MURPHY FARMS, INC., a North Carolina corporation (together with its successors and assigns, the "Company") and the institutional investors identified on Annex I (whether one or more, the "Purchasers"). RECITALS WHEREAS, the Company wishes to sell to the Purchasers and the Purchasers are willing to purchase upon and subject to the terms and conditions of this Agreement, Seventy-Five Million ($75,000,000) Dollars in aggregate original principal amount of the Company's 8.25% Senior Unsecured Fixed Rate Notes to be due March 2, 2006 and Twenty-Five Million ($25,000,000) Dollars in aggregate original principal amount of the Company's Senior Unsecured LIBOR Rate Notes to be due March 2, 2002; and WHEREAS, the Company and the Purchasers wish to enter into this Agreement to govern the terms of such Notes; AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth herein, the parties to this Agreement hereby agree as follows: 1. AUTHORIZATION; RANKING. 1A. Authorization of Issue of the Notes. The Company will authorize the issue and sale of its (i) 8.25% Senior Unsecured Fixed Rate Notes in the aggregate principal amount of $75,000,000 to be dated the date of issue, to mature March 2, 2006 and to bear interest as provided herein, which Notes shall be in the form of Exhibit A(l) (the "Fixed Rate Notes"); and (ii) Senior Unsecured LIBOR Rate Notes in the aggregate principal amount of $125,000,000 to be dated the date of issue, to mature March 2, 2002 and to bear interest as provided herein, which Notes shall be in the form of Exhibit A(2) (the "LIBOR Rate Notes", and collectively with the Fixed Rate Notes, the "Notes"). Certain capitalized terms used in this Agreement are defined in paragraph 10; references to a "Schedule", "Annex" or an "Exhibit are, unless otherwise specified, to a Schedule, Annex or an Exhibit attached to this Agreement. 1B. Ranking. The Notes will constitute the direct senior obligations of the Company and will rank not less than pari passu in priority of payment with each other and with all other outstanding Debt of the Company, present or future, except for Debt which is preferred as a result of being secured (to the extent such security is not prohibited by paragraph 6 B(i) and then only to the extent of such security). 1C. Interest on the Notes. The Company shall pay to the Holders interest on the unpaid principal amount of the Notes owing to each Holder at the rates, time and manner set forth below. (i) Rate of Interest; Post-Default Interest. (a) Each Fixed Rate Note shall bear interest on the unpaid principal amount thereof from the date issued through maturity (whether by prepayment, acceleration or otherwise) at the rate of 8.25% per annum. (b) Each LIBOR Rate Note shall bear interest on the unpaid principal amount thereof from the date issued through maturity (whether by prepayment, acceleration or otherwise) at the then applicable LIBOR Rate, as reset for each LIBOR Interest Period on the first Business Day of March, June, September and December of each year, plus the Applicable Margin. (ii) Interest Payments. (a) Interest on each Fixed Rate Note shall be payable in arrears on June 2nd, September 2nd, December 2nd and March 2nd of each year, commencing on the first of such dates to follow the Closing Date, upon any prepayment of such Fixed Rate Note (to the extent accrued on the amount being prepaid) and at maturity, whether by acceleration or otherwise, of such Fixed Rate Note. (b) Interest on each LIBOR Rate Note shall be payable in arrears at the end of each LIBOR Interest Period, commencing on the first of such dates to follow the Closing Date, upon any prepayment of such LIBOR Rate Note (to the extent accrued on the amount being prepaid) and at maturity, whether by acceleration or otherwise, of such LIBOR Rate Note. (iii) Post-Maturity Interest. Any principal payments on the Notes not paid when due and, to the extent permitted by applicable law, any interest payment or Make Whole Amount on the Notes not paid when due, in each case whether at stated maturity, by notice of pre-payment, by acceleration or otherwise, shall thereafter bear interest payable upon demand at a rate per annum (the "Default Rate") equal to the lesser of. (a) the highest rate allowed by applicable law; or (b) the annual interest rate then applicable to principal outstanding under such Note and not then overdue plus 2%. 2 (iv) Computation of Interest. Interest on the Notes shall be computed on the basis of a 360-day year and twelve 30-day months. In computing interest on the Notes, the date of the issuance of the Notes shall be included and the date of payment shall be excluded. 2. PURCHASE AND SALE OF THE NOTES; CLOSING. 2A. Purchase and Sale of the Notes. Subject to the terms and conditions of this agreement, the Company shall sell to each Purchaser, and each Purchaser shall purchase from the Company, Notes of the class and in the principal amount specified below such Purchaser's name in Annex 1, at a price equal to 100% of such principal amount, registered in such Purchaser's name or that of the Purchasers nominee or nominees as specified in Annex 1. Notwithstanding the foregoing, each Purchaser's obligations under this Agreement are several and not joint obligations and no Purchaser shall have any obligation or liability for the performance or non-performance by any other Purchaser of such other Purchaser's obligations under this Agreement. 2B. Closing. The purchase and sale of the Notes shall take place at the offices of Sullivan & Worcester LLP, One Post Office Square, Boston, 02109, at a closing (the "Closing") to be held on March 2, 1999 or on such other Business Day as the Purchasers and the Company may agree (the "Closing Date"). At the Closing, the Company will deliver to each Purchaser, the Notes to be purchased by it, against payments of the purchase price therefor by transfer of immediately available funds to the Company in accordance with the wiring instructions set forth on Annex 2. If at the Closing, the Company fails to tender any Notes to any Purchaser as provided in this paragraph 2B, or if any of the conditions specified in paragraph 3 shall not have been fulfilled to a Purchaser's satisfaction, such Purchaser may, at its election, be relieved of all further obligations under this Agreement, without thereby waiving any rights such Purchaser may have by reason of such failure or non-fulfillment. 3. CONDITIONS OF CLOSING. Each Purchaser's obligation to purchase and pay for its Notes is subject to the fulfillment to its satisfaction or its written waiver, on or before the Closing Date, of the following conditions: 3A. Charter and Proceedings. On or before the Closing Date, all corporate and other proceedings taken or to be taken in connection with the Transactions and all documents incidental hereto and thereto shall be reasonably satisfactory in form and substance to the Purchasers, and the Purchasers shall have received the following items, each of which shall be in form and substance reasonably satisfactory to the Purchasers and, unless otherwise noted, dated the Closing Date, and in sufficient copies (except for the Notes), for each Purchaser: (i) Certified copies of resolutions of the board of directors of the Company approving this Agreement, the Notes, and other Transaction Documents, to which it is or is to be a party, and of all documents evidencing other necessary corporate action and governmental and other third party approvals and consents, if any, with respect to this Agreement, the Notes, and each other Transaction Document. 3 (ii) A copy of the charter of the Company and each amendment thereto, certified (as of a date reasonably near the date of the Closing Date) by the Secretary of State of the jurisdiction of its incorporation as being a true and correct copy thereof. (iii) A copy of a certificate of the Secretary of State of the jurisdiction of the Company's incorporation, dated within 10 Business Days prior to the date of the Closing Date listing the charter of the Company and each amendment thereto on file in its office and certifying that (a) such amendments are the only amendments to the Company's charter on file in its office, (b) the Company has paid all franchise taxes to the date of such certificate and (c) the Company is duly incorporated and in good standing under the laws of the State of the jurisdiction of its incorporation. (iv) A copy of a certificate of the Secretary of State of each State listed on Schedule 8A, dated reasonably near the date of the Closing Date, stating that the Company is duly qualified and in good standing as a foreign corporation in such State and has filed all annual reports required to be filed to the date of such certificate. (v) A certificate of the Company signed on behalf of the Company by a Senior Officer and the Secretary or an Assistant Secretary of the Company, dated the date of the Closing Date (and the statements made in such certificate shall be true on and as of the date of the Closing Date) certifying as to (a) the absence of any amendments to the charter of the Company since the date of the Secretary of State's certificate referred to in clause (iii) above, (b) a true and correct copy of the by-laws of the Company as in effect on the date of the Closing Date, (c) the absence of any proceeding for the dissolution or liquidation of the Company, (d) as to the matters set forth in paragraph 3D, and (e) the absence of any event occurring and continuing, or resulting from the Closing, that constitutes a Default or an Event of Default. (vi) A certificate of the Secretary or an Assistant Secretary of certifying the names and true signatures of the officers of the Company authorized to sign this Agreement, the Notes, each other Transaction Document to which it is or is to be a part, and the other documents to be delivered hereunder and thereunder. (vii) Originals of this Agreement and the Notes to be issued to each Purchaser in the respective principal amounts set forth below such Purchaser's name on Annex I executed by a Senior Officer. (viii) A certificate signed on behalf of the Company by a Senior Officer, in form and substance reasonably satisfactory to the Purchasers, attesting to the Solvency of the Company immediately before and immediately after giving effect to consummation of the Transactions. 3B. Opinion of Company Counsel. The Purchasers shall have received a favorable opinion, dated the Closing Date and addressed to them, from The Sanford Holshouser Law Firm PLLC, counsel to the Company, covering the matters set forth in Exhibit B and such other matters as any Purchaser or Special Counsel may reasonably request and otherwise in form and 4 substance reasonably acceptable to the Purchasers. To the extent that the opinion referred to in this paragraph 3B is rendered in reliance upon the opinion of any other counsel, the Purchasers shall have received a copy of the opinion of such other counsel, dated the Closing Date and addressed to them, or a letter from such other counsel, dated the Closing Date and addressed to them, authorizing them to rely on such other counsel's opinion. The opinions of counsel to the Company and any such other counsel shall be in form and substance reasonably satisfactory to the Purchasers and Special Counsel. 3C. Opinion of Purchasers' Special Counsel. The Purchasers shall have received from Special Counsel an opinion satisfactory to them as to such matters incident to the transactions contemplated by this Agreement as they may reasonably request. 3D. Representations and Warranties and Compliance. The representations and warranties contained in paragraph 8 shall be true on and as of the Closing Date after giving effect to the issue and sale of the Notes (and application of the proceeds as contemplated by paragraph 51); no Default or Event of Default shall have, occurred or be continuing; and 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 at or prior to the Closing. The Company shall not have entered into any transaction since the date of the most recent of the Financial Statements that would have been prohibited by paragraph 6B had this Agreement been in effect since such date. 3E. Purchase Permitted by Applicable Laws. The offering, issuance, purchase and sale of and payment for, the Notes on the Closing Date on the terms and conditions of this Agreement (including the use of the proceeds of such sale) shall be permitted by the laws and regulations of each jurisdiction to which a Purchaser is subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by life insurance companies without restriction as to the character of the particular investment, shall not violate any applicable law or governmental regulation (including, without limitation, section 5 of the Securities Act or Regulation T, U or X of the Board of Governors of the Federal Reserve System and shall not subject any Purchaser to any tax, penalty, liability or other condition adverse to it under or pursuant to any applicable law or governmental regulation, and the Purchasers shall have received such certificates or other evidence as to matters of fact as they may reasonably request to enable them to determine whether such purchase is so permitted. 3F. Private Placement Numbers. A Private Placement Number shall have been assigned to the Fixed Rate Notes and to the LIBOR Rate Notes by Standard & Poor's CUSIP Service Bureau. 3G. Sale of all Notes. The Company shall have sold to each other Purchaser, and each other Purchaser shall have purchased, the Notes to be purchased by it as set forth in Annex 1. 5 3H. Consent of Other Persons. The Company shall have received all authorizations, consents and approvals necessary in connection with the transactions contemplated hereby including those identified in Schedule 8L, in form and substance to the Purchasers. 3I. Continuation of Appointment of Agent for Service of Process. The Purchasers shall have received written evidence satisfactory to them that CT Corporation Systems, Inc. has been appointed by the Company as its agent for service of process in the Commonwealth of Massachusetts and that CT Corporation Systems, Inc. has agreed to provide the Purchasers with not less than 30 days prior notice of any termination of such appointment. 3J. Payment of Special Counsel Fees. Without limiting the provisions of paragraph 11 A, the Company shall have paid the reasonable fees, charges and disbursements of Special Counsel (which may include a reasonable reserve for anticipated fees and expenses) to the extent reflected in a statement of Special Counsel rendered to the Company at or before the Closing. 3K. Changes in Corporate Structure. The Company shall not have changed its jurisdiction of incorporation or shall have been a party to any merger or consolidation or shall have succeeded to all or any substantial part, of the liabilities of any other Person, at any time, after the date of its most recent Financial Statement. 3L. Amendment of Revolving Credit Agreement. Contemporaneously with the Closing, (i) the Revolving Credit Agreement shall be amended and restated to reduce the maximum aggregate commitment thereunder to $75,000,000 and on other terms and conditions satisfactory to the Purchasers and (ii) the Purchasers shall have received evidence satisfactory to them that, effective upon application of the proceeds of the Notes and the New Farm Credit Term Loan, the aggregate amount outstanding under the Revolving Credit Agreement will not exceed $75,000,000. 3M. Amendment of Farm Credit Agreement. Contemporaneously with the Closing, the Farm Credit Agreement shall be amended and restated to provide for an additional, unsecured, term loan for $25,000,000 in original principal amount (the "New Farm Credit Term Loan") on terms and conditions satisfactory to the Purchasers and the Proceeds of the New Farm Credit Term Loan shall have been used solely to repay amounts outstanding under the Revolving Credit Agreement and for working capital and general corporate purposes. 3N. Intercreditor Agreement. The Company and the Bank Lenders shall have entered into an Intercreditor Agreement with the Purchasers in the form of Exhibit D (the "Intercreditor Agreement). 4. PREPAYMENT AND REPAYMENT OF NOTES. The Notes may be prepaid only under the circumstances set forth in paragraph 4A and shall be repaid in accordance with paragraph 4C and 4D and upon any acceleration of final maturity as provided in paragraph 7B. 6 4A. Optional Prepayment of Notes at Any Time. (i) The Company may prepay the Fixed Rate Notes in full, or in part in multiples of $1,000,000 on any date on which interest is required to be paid on such Notes pursuant to paragraph IC, together with (a) interest accrued on the principal amount being prepaid to the Settlement Date and (b) the Fixed Rate Make Whole Amount; and (ii) After March 2, 2000, the Company may prepay the LIBOR Rate Notes in full, or in part in multiples of $1,000,000 on any date on which interest is required to be paid on such Notes pursuant to paragraph IC, together with (a) interest accrued on the principal amount being prepaid to the Settlement Date and (b) the LIBOR Rate Make Whole Amount. 4B. Notice of Optional Prepayment.. The Company shall give each Holder irrevocable written notice of any prepayment to be made pursuant to paragraph 4A at least 30 days and not more than 60 days prior to the Settlement Date specifying: (i) the Settlement Date and the Called Principal of the Notes held by each such Holder; (ii) that such prepayment is to be made pursuant to paragraph 4A; and (iii) an estimate of the Make Whole Amount payable on the Called Principal of such Holder's Notes (calculated as if the date of such notice were the date of prepayment), together with the details of such computation. Upon the giving of such notice, the Called Principal of the Notes together with interest accrued thereon to the Settlement Date and the Make Whole Amount shall become due and payable on the Settlement Date. Not later than the close of business on the second Business Day prior to the Settlement Date, the Company shall deliver to each Holder an Officers' Certificate setting forth in detail the calculations used in determining whether a Make Whole Amount is payable on such prepayment and the amount of such Make Whole Amount. 4C. Scheduled Repayment of Notes. Subject to paragraph 4E below, the Company shall: (i) on the 2nd day of March of each year, commencing March 2, 2002, repay $15,000,000.00 of principal of the Fixed Rate Notes and in any event, on March 2, 2006 shall repay in full all unpaid principal of the Fixed Rate Notes; and (ii) on March 2, 2002 repay in full all unpaid principal of the LIBOR Rate Notes. 4D. Prepayment of Notes Upon a Change of Control. The Company shall give written notice (a "Change of Control Notice") to each Holder not less than 30 nor more than 60 7 day 3 prior to the occurrence of any event which may result in a Change of Control, or if the Company does not have knowledge that such an event is to occur until less than 30 days prior thereto, or until after the occurrence thereof, then as promptly as practicable, but: in no event more than 5 days after the Company first acquires knowledge that such art event is to occur or has occurred. The Change of Control Notice shall identify the event, the reason why such event may result in or has resulted in a Change of Control and the Persons involved, -and shall include such financial and other information as is available to the Company or which may be obtained by the Company with reasonable effort that would be reasonably necessary for a Holder to make an informed decision ;as to whether to elect to require prepayment of its Notes under this paragraph 4D and shall set forth the proposed effective date for, or if the Change of Control has occurred, the actual date, of such Change of Control. Any Holder, by giving written notice to the Company of such election (an "Election Notice") not later than 5 Business Days prior to the effective date of such Change of Control, if the Change of Control Notice is given at least 30 days prior to such effective date, and otherwise not later-than 30 days after the Change of Control Notice is given, shall have the option to require the Company to prepay all of its Notes at 1 00% of the principal amount thereof plus interest accrued thereon to the Settlement Date and the Make Whole Amount. Once given, any Election Notice may be revoked, by notice, given at any time up to the last date an Election Notice could have been given with respect to the Change of Control Notice. If the proposed terms of a Change of Control change substantially, or if any other event which may result in a Change of Control may or has occurred, the Company shall give each Holder a revised Change of Control Notice and each Holder shall then have another opportunity to elect to require prepayment of its Notes under this paragraph 41) by delivering to the Company a new Election Notice or to revoke, by written notice to the Company, any prior Election Notice, not later than 30 days following the date such revised Change of Control Notice is given. 'The prepayment of a Holder's Notes pursuant to this paragraph 4D shall occur on the later of (a) the effective date of Such Change of Control or (b) 5 Business Days following the date such Holder's Election Notice is given. Notwithstanding the foregoing, no prepayment or early redemption shall be required pursuant to this paragraph 4D unless a Change of Control occurs or has occurred. Not later than the close of business on the second Business Day prior to the Settlement Date of a prepayment under this paragraph 4D, the Company shall deliver to the Holder of each Note to be prepaid an Officers' Certificate starting whether a Make Whole Amount is payable in connection with such prepayment and setting forth in detail the calculations used in making such determination. If the Company fails to give a Change of Control Notice and -a Change of Control Occurs, or fails to give a proper Change of Control Notice as to a Change of Control which has occurred, any Holder may, at any time after the occurrence of such Change of Control, without waiver of any right on the part of the Holder to accelerate its Notes pursuant to paragraph 7B, require the Company, on demand pursuant to this paragraph 4D, to prepay all of such Holder's Notes at 100% of the principal amount thereof plus accrued interest to the Settlement Date and the Make Whole Amount. 4E. Payments Pro Rata; Application of Payments. Upon any partial prepayment of the Notes pursuant to paragraph 4A and any scheduled repayment of the Notes pursuant to 8 paragraph 4C, the principal amount so prepaid or repaid plus the interest accrued thereon and the Make Whole Amount shall be allocated among the Holders in proportion to respective outstanding principal amounts of the class of Notes held by them to which such prepayment or scheduled repayment applies. All partial prepayments of principal made to the Holders in respect of the Fixed Rate Notes shall be applied to the obligations of the Company to make the scheduled payments required by paragraph 4C in inverse order of maturity. 4F. Retirement of Notes. The Company shall not, and shall not permit any of its Affiliates to, prepay or otherwise retire any Note in whole or in part, prior to its stated maturity (other than by prepayment pursuant to paragraph 4A or 4D, scheduled repayment pursuant to paragraph 4C or upon acceleration of final maturity pursuant to paragraph 7B), or purchase or otherwise acquire, directly or indirectly, any Note held by any Holder unless the Company or such Affiliate shall have offered to prepay or otherwise retire, purchase, redeem or otherwise acquire, as the case may be, the same proportion of the aggregate outstanding principal amount of Notes of the same class held by each other Holder at the time outstanding upon the same terms and conditions. Any such offer shall provide each Holder with sufficient information to enable it to make an informed decision with respect to such offer, and shall remain open for at least 10 Business Days. If the Required Holders accept such offer, the Company shall promptly notify the remaining Holders of such fact and the expiration date for the acceptance by Holders of such offer shall be extended by the number of days necessary to give each such Holder at least 10 Business Days from its receipt of such notice to accept such offer. No Notes so prepaid or otherwise retired or purchased or otherwise acquired by the Company or any of its Affiliates shall thereafter be reissued or deemed to be outstanding for any purpose under this Agreement. 4G. Manner of Payment. (i) Manner of Payment. The Company shall pay all amounts payable with respect to each Note (without any presentment of such Notes and without any notation of such payment being made thereon) by crediting, by federal funds bank wire transfer, the account of the Holder thereof in any bank in the United States of America as may be designated in writing by such Holder, or in such other manner or to such other address in the United States of America as may be reasonably designated in writing by such Holder. Absent subsequent notice from a Purchaser, Annex I shall be deemed to constitute designation by the Purchasers to the Company with respect to payments to be made to the Purchasers on their Notes. In the absence of a written designation by a Holder, all amounts payable with respect to each Note held by such Holder shall be paid by check mailed and addressed to the applicable Holder at such Holder's Home Office. All payments of principal and interest and fees hereunder and under the Notes by the Company shall be made without defense, set-off or counterclaim. (ii) Payments Due on Holidays. If any payment due on, or with respect to, any Note shall fall due on a day other than a Business Day, then such payment shall be made on the first Business Day following the day on which such payment was due; provided that if ;all or any portion of such payment shall consist-of a payment of interest, for purposes of calculating such interest, such payment shall be deemed to have been originally due on such first following Business Day, such interest shall accrue., and be 9 payable to (but not including) the actual date of payment, and the amount of the next succeeding interest payment shall be adjusted accordingly. (iii) Payments When Received. Any payment to be made to the Holders hereunder or under the Notes shall be deemed to have been made on the Business Day such payment actually becomes available at such Holder's bank prior to the close of business of such bank, provided that interest for one -------- (1) day at the non-default interest rate of the Notes shall be due on the amount of any such payment that actually becomes available to such Holder at such Holder's bank after 1:00 p.m. (local time of such bank). 4H. Taxes. (i) Any and all payments by the Company hereunder or under the Notes shall be made free and clear of and without deduction for any and all present or future Taxes and all liabilities with respect thereto, excluding, (i) in the case of each Holder, net income taxes that are imposed by the United States and net income taxes (or franchise taxes imposed in lieu thereof that are imposed on such Holder- by the state or foreign jurisdiction under the laws of which such Holder is organized or any political subdivision thereof, (ii) in the case of each Holder, net income taxes (or franchise taxes imposed in lieu thereof that are imposed on such Holder by the state or foreign jurisdiction of such Holder's applicable Home Office or any political subdivision thereof and (iii) in the case of any Holder that becomes a party after the Closing Date, any taxes imposed by the United States solely by reason of the organization or incorporation of such Holder outside the United States (all such non- excluded Taxes and liabilities being referred to as "Covered Taxes"). If the Company shall be required by law to deduct any Covered Taxes from or in respect of any sum payable hereunder or under any Note to any Holder, (i) 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 paragraph 4H) such Holder receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Company shall make such deductions and (iii) the Company shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (ii) In addition, the Company shall pay any present or future stamp, documentary, excise, property or similar Taxes that arise from or in connection with or as a result of' the issuance of the Notes, any payment made hereunder or under the Notes or the execution, delivery or registration of, performing under, or otherwise with respect to, this Agreement or the Notes, or any modification, waiver or amendment of this Agreement, the Notes or any other Transaction Document (hereinafter referred to as "Other Taxes"). (iii) The Company shall indemnify each Holder for the full amount of Taxes and Other Taxes, and for the full amount of Covered Taxes imposed by any jurisdiction on amounts payable under this paragraph 4H, imposed on or paid by such Holder and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto, whether or not such Covered Taxes were correctly or legally imposed. This indemnification shall be made within thirty (30) days from the date such 10 Holder makes written demand on the Company specifying in reasonable detail the basis therefor. (iv) Within thirty (30) days after the date of any payment of Covered Taxes or Other Taxes, the Company shall furnish to the subject Holder a copy of the original receipt, certified as true and correct by a Senior Officer. If the Company determines that no Covered Taxes or Other Taxes are payable in respect thereof, the Company shall furnish, or shall cause such payor to furnish, to the Company an opinion of counsel stating that such payment is exempt from Covered Taxes or Other Taxes. (v) Each Holder, to the extent it lawfully may, agrees, at the expense of the Company, to cooperate with the Company and to take such steps as the Company shall reasonably request to contest, solely in the name of the Company, the applicability of any Covered Taxes to such Holder or to recover Covered Taxes paid which were incorrectly or illegally imposed; provided in no event shall such Holder be obliged to file any tax forms or certifications in the name of such Holder or to disclose any information which it considers confidential to it or which it has an obligation of confidentiality or to take any action which in its reasonable judgment could expose it to additional liability unless it has received indemnification therefor satisfactory to it in its sole discretion. 4I. Make Whole Amount. The Company acknowledges that the Make Whole Amount due at any optional or required prepayment of Notes (including any prepayment required pursuant to any provision of this paragraph 4 or paragraph 7B) has been negotiated with the Purchasers to provide a bargained for rate of return on the Purchasers' investment in the Notes and is not a penalty. 5. AFFIRMATIVE COVENANTS. 5A. Financial and Other Reporting by the Company. The Company will deliver to each Holder: (i) as soon as practicable, and in any event not more than 45 days after the end of each fiscal quarter (except the last quarter of each Fiscal Year), the unaudited consolidated balance sheet of the Consolidated Group as at the end of such quarterly period and the related unaudited consolidated statements of income and retained earnings and of cash flows of the Consolidated Group for such period and for the Fiscal Year to date, setting forth, in each case in comparative form, figures for the corresponding period(s) in the preceding Fiscal Year, all in reasonable detail and in accordance with GAAP, and certified by the chief accounting officer or chief financial officer of the Company as fairly presenting the financial condition of the Consolidated Group as at the dates indicated and the results of its operations and cash flows, in each case for the periods indicated, in conformity with GAAP (except as disclosed in such certificate), with any changes in accounting policies discussed in reasonable detail, subject to changes resulting from year-end adjustments not material in scope or amount; 11 (ii) as soon as practicable, and in any event not more than 90 days, after the end of (each Fiscal Year of the Company, the consolidated balance sheet of the Consolidated Group as of the end of such year and the related consolidated statements of income and retained earnings and of cash flows of the Consolidated Group for such year, and setting forth in each case in comparative form, corresponding figures for the preceding Fiscal Year, all in reasonable detail and in accordance with GAAP, and accompanied by an opinion thereon of the Approved Auditor, which opinion shall be without limitation as to the scope of the audit and shall state that such financial statements present fairly in all material respects, the consolidated financial condition of the Consolidated Group as at the dates indicated and the results of their consolidated operations and cash flows for the periods indicated in conformity with GAAP (except as otherwise specified in such report) and that the audit by such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards and provides a reasonable basis for such opinion; (iii) together with each delivery of financial statements of the Consolidated Group pursuant to subparagraphs (i) and (ii) of this paragraph 5A, a certificate of the chief financial officer of the Company (a) stating that the signer has reviewed the terms of the Transaction Documents and has made, or caused -to be made under the signer's supervision, a review in reasonable detail of the transactions and condition of the Consolidated Group during the fiscal period covered by such financial statements and that such review has not disclosed the existence during or at the end of such fiscal period, of any Default or Event of Default or, if any such Default or Event of Default existed or exists, specifying the nature and period of existence thereof and what action the Company has taken or is taking or propose to take with respect thereto; (b) demonstrating (if applicable, with computations in reasonable detail) compliance by the Company with the provisions of paragraphs 6A and 6B(l), 6B(3), 6B(6) and 6B(7); ,and (c) analyzing the principal changes in the results of operations of the Consolidated Group for such Fiscal Year or quarter from the results of operations of the Consolidated Group for the immediately preceding Fiscal Year or quarter; (iv) together with each delivery of financial statements pursuant to subparagraph (ii) of this paragraph 6A, a certificate by the Approved Auditor stating (a) that their audit examination has included a review of the terms of the Transaction Documents as they relate to accounting matters and that such review is sufficient to enable them to make the statement referred to in clause (c) of this subparagraph (iv), (b) whether, in the course of their audit examination, there has been disclosed the existence during the fiscal year covered by such financial statements (and whether they have knowledge of the existence as of the (late of such accountants' certificate) of any condition or event which constitutes a Default or Event of Default under paragraphs 6A or 6B and if during their audit examination there has been disclosed (or if they have knowledge of such a condition or event, specifying the nature and period of existence thereof (it being understood, however, that such accountants shall not be liable to any Person by reason of their failure to obtain knowledge of any Default or Event of Default which would not be obtained in the course of an audit conducted in accordance with generally accepted auditing standards), and (c) that based on their annual examination 12 nothing came to their, attention which causes them to believe that the information contained in the certificate of the Company's chief financial officers delivered therewith pursuant to subparagraph (iii) of this paragraph 5A is not correct or that the matters set forth in such certificate are not stated in accordance with the terms of this Agreement; (v) promptly after receipt thereof by the Company, copies of all material reports submitted to the Company by independent public accountants or consultants in connection with each annual, interim or special audit of the books of the Consolidated Group; (vi) promptly after any Senior Officer obtains actual knowledge (a) of any Default or Event of Default, (b) that any Holder has given notice to the Company or taken any other action with respect to a claimed Default or Event of Default under this Agreement, or (c) that any Person has given any notice to the Company or any Subsidiary or taken any other action with respect to a claimed default or event or condition of the type referred to in subparagraph (iii) of paragraph 7A, an Officers' Certificate specifying the nature and period of existence of any such Default or Event of Default, or specifying the notice given or action taken by such Holder or Person and the nature of such claimed Default, Event of Default, event or condition, and what action the Company has taken, is taking or proposes to take with respect thereto; (vii) promptly, and in any event within 5 days after an, Senior Officer obtains knowledge of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or any ERISA Affiliate proposes to take with respect thereto: (a) with respect to any Plan, any "reportable event" (as defined in section 4043(b) of ERISA) for which notice thereof has not been waived pursuant to regulations of the DOL or "prohibited transaction" (as such term is defined in section 406 of ERISA or section 4975 of the IRC) in connection with any Plan or any trust created thereunder; or (b) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERI.13;A for the termination of, or the appointment of a trustee to administer, any Plan, and any distress termination notice delivered to the PBGIC under section 4041 of ERISA in respect of any Plan, and any determination of the PBGC in respect thereof; (c) the placement of any Multiemployer Plan in reorganization status under Title IV of ERISA, any Multiemployer Plan becoming "insolvent" (as such term is defined in section 4245 of ERISA) under Title IV of ERISA, or the whole or partial withdrawal of the Company or any ERISA Affiliate from any Multiemployer Plan and the withdrawal liability incurred in connection therewith; or 13 (d) any event, Transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate, or 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 the penalty or excise tax provisions of the Code relating to employee benefit plans, 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; (viii) if at any time the Company shall have public stockholders or debtholders, (a) promptly after transmission thereof, copies of all such financial statements, proxy statements, notices and reports as the Company shall send or make available to Such stockholders or debtholders and copies of all registration statements (with exhibits), prospectuses and all periodic reports which it files with the SEC or any stock exchange and of all press releases and other statements made available generally by the Company to the public concerning material developments and (b) promptly after receipt thereof, copies of any reports, statements and notices the Company may receive in accordance with Section 13(d) or 14(d) of the Exchange Act or the rules and regulations of any stock exchange; (ix) promptly after transmission thereof, copies of all such financial statements, notices; certificates and reports as the Company shall send to any other lender or group of lenders, if the aggregate amount of Debt outstanding by the Consolidated Group to such lender or group of lenders exceeds $1,000,000; (x) promptly after the commencement 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, a notice specifying the nature and period of existence thereof and what action the Company has taken, is taking or proposes to take with respect thereto; and (xi) With reasonable promptness, such other information and data with respect to the Company, the Consolidated Group or its Contract Growers or relating to the ability of the Company to perform its obligations under the Transaction Documents as may from time to time be reasonably requested by any Holder. 5B. Information Required by Rule 144A. The Company will, upon the request of any Holder, provide to such Holder, and any Qualified Institutional Buyer designated by such, Holder, such financial and other information as such Holder may reasonably determine to be necessary in order to permit compliance with the information requirements of Rule 144A in connection with a resale or proposed resale of any Note. 5C. Inspection of Property. The Company will permit the representatives of any Holder to visit and inspect any of the properties of the Company or any of its Subsidiaries, including any such property in the possession or custody of its Contract Growers, to examine) all 14 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, employees and independent public accountants (and by this provision the Company authorizes said accountants to discuss the finances and affairs of the Company and the Subsidiaries) all at such reasonable time and as often as may The reasonably requested. At all times during which there exists a Default or Event of Default, any reasonable out-of- pocket expenses incurred by the Holders in connection with this paragraph 5C shall be paid in accordance with paragraph 11A. 5D. Corporate Existence, Etc. Except as otherwise specifically permitted by this Agreement, the:, Company will, and will cause each Subsidiary to, at all times preserve and keep in full force and effect its corporate existence, and rights and franchises material to its business, and qualify and maintain its qualification to do business and good standing in any jurisdiction where the failure to do so individually or in the aggregate would have a Material Adverse Effect. 5E. Payment of Taxes and Claims. (i) The Company will, and will cause each Subsidiary -to, file all Tax returns required to be filed in any jurisdiction and pay all Taxes shown to be due and payable on such returns and all other Taxes imposed upon it or any of its properties or assets or in respect of any of its franchises, business, income, sales and services, or profits when the same become due and payable, but in any event before any penalty or interest accrues thereon, and all claims (including, without limitation, claims for labor, services, materials and supplies) for sums which have become due and payable and which have or might become a Lien upon any of its properties or assets, provided, that no such Tax or claim need be paid if (a) it is being -------- actively contested in good faith by appropriate proceedings and if reasonable reserves or other appropriate Provision, if any, as shall be required by GAAP shall have been made therefor, and (b) the failure to pay such Tax or claim is not expected, if such contest were adversely determined, to have a Material Adverse Effect. (ii) The Company will not consent to or- permit the filing of or be a party to any consolidated income tax return on its behalf or on behalf of any of its Subsidiaries with any Person (other than a consolidated return that includes solely the Company and its Subsidiaries). 5F. Compliance with Laws, Etc. The Company will, and will cause each Subsidiary to, comply with all applicable laws, rules, regulations and orders of any Governmental Authority to which it is subject, and obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of its properties or to the conduct of its businesses, in each case to the extent necessary to reasonably ensure that noncompliance with such laws, ordinances or governmental rules or- regulations or failures to obtain or maintain in effect such licenses, permits, franchises and other governmental authorizations in the aggregate do not, and could not reasonably be expected to, have a Material Adverse Effect. 15 5G. Maintenance of Properties and Leases. The Company will, and will cause each Subsidiary to, maintain, in good repair and working order and condition (other than ordinary wear and tear and obsolescence excepted) all properties used in the (Consolidated Group's business (except to the extent the failure -to so maintain, repair and keep in good working order does not, and is not expected to, have a Material Adverse Effect), and from time to time make or cause to be made all appropriate repairs, renewals, replacements, additions and improvements thereof as needed and comply in all material respects with the provisions of all leases or licenses under which it leases or licenses any such properties. 5H. Insurance. The Company will, and will cause each Subsidiary to, maintain, with financially sound and reputable insurers, insurance with respect to its properties and business of such types and in such forms and amounts (including deductibles, coinsurance and self-insurance if adequate reserves are maintained with respect thereto) and against such risks as is reasonable and prudent in the circumstances and as are customarily insured against by Persons of established reputation engaged in the same or similar business and similarly situated. 5I. Use of Proceeds. The Company will use the proceeds of the sale of the Notes only to repay amounts outstanding under the Revolving Credit Agreement and for working capital and general corporate purposes, and not for any purpose which would violate any applicable law or governmental regulation or which is otherwise prohibited under paragraph 8J. 5J. Environmental Compliance and Indemnification. (i) The Company will, and will cause each Subsidiary to, (a) obtain and maintain all permits, licenses, and other, authorizations that are required of it under all Environmental Laws other than those which the failure to obtain or maintain individually or in the aggregate do not, and could not reasonably be expected to have, a Material Adverse Effect, and (b) comply with all terms and conditions of all such permits, licenses, and authorizations arid with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules, and timetables contained in all Environmental Laws or in any regulation, ordinance or code applicable to it any, plan, order, decree, judgment, injunction, notice, or demand letter issued, entered, promulgated, or approved thereunder directly applicable to it, except to the extent of noncompliance which, in the aggregate,, does not, and could not reasonably be expected to, have a Material Adverse Effect, and (c) operate all property owned or leased by it such that no claims or obligations, including clean-up obligations, which in the aggregate, have, or could reasonably be expected to have, a Material Adverse Effect, shall arise under any Environmental Law, and if any claim is made against it or any such obligation shall arise under any Environmental Law, it shall at its own cost and expense, timely satisfy such claim or obligation, provided no such claim or obligation need be satisfied for so long as (1) it is being actively contested in good faith by appropriate proceedings and (2) such reserves or- other appropriate provision, if any, as shall be required by GAAP shall have been made therefor. (ii) The Company agrees to defend, indemnify and hold the Purchasers, each Holder and their respective affiliates, employees, agents, officers and directors from and 16 against any claims, demand, 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 Company, its Subsidiaries or the operations; of any Contract Grower (whether or not such noncompliance constitutes a violation of the Company's other covenants set forth in this paragraph SJ) or any orders, requirements or demands of any Governmental Authority related thereto, including, with limitation, reasonable attorney's and consultants' fees, investigation and laboratory fees, response costs, court cost.-3 and litigation expenses, except to the extent that any of the foregoing directly result from the gross negligence or willful misconduct of the party seeking indemnification therefor. 5K. Maintenance of Books and Records. The Company, will, and will cause each Subsidiary to,: (i) keep proper records and books of account with respect to its business activities in which proper entries are made in the ordinary course of all dealings or transactions of or in relation to its business and affairs; (ii) set up on its books adequate reserves with respect to all Taxes, assessments, charges, levies and claims; and (iii) set up on its books reserves against doubtful accounts receivable, advances and all other proper reserves (including reserves for depreciation, obsolescence or amortization of its property). All determinations Pursuant to this paragraph SK shall be made in accordance with, or as required by, GAAP in order to fairly reflect all of the Consolidated Group's financial transactions. Notwithstanding the foregoing, the Company and its Subsidiaries may make adjustments and changes in the manner in which their books and records are kept, provided, that: (a) all such adjustments and changes shall be required or permitted by GAAP, but need not conform with the prior accounting practice of the Company or such Subsidiary or its predecessor; (b) each Holder shall be given written notice of all such changes or adjustments together with the financial statements required by paragraph 6A(i) for the quarter in which such change occurred, and together with the financial statements required by paragraph 5A(ii), a year-end listing and description of all such changes and adjustments and the effect: thereof by the chief financial officer of the Company; (c) the financial covenants and ratios set forth in paragraph 6A shall continue to be calculated without regard to such adjustments or changes unless and until the Required Holders have consented thereto; and (d) the Company may not change its Fiscal Year unless and until the Required Holders have consented thereto. 5L. Subsidiary Guaranties. The Company will cause each Subsidiary hereafter existing to guaranty the obligations of the Company hereunder and under the Notes by executing and delivering to each Holder contemporaneously with the organization or acquisition of such Subsidiary, a Guaranty in the form of Exhibit C (such Guaranties, the "Subsidiary Guaranties") 17 accompanied by copies of the organizational documents of such Subsidiary and corporate resolutions (or equivalent) authorizing such transaction, in each case certified as true and correct by an appropriate officer of such Subsidiary and such opinions of counsel with respect thereto as the Required Holders reasonably request. 5M. Year 2000 Compatibility. The Company will, and will cause each Subsidiary to, take all action necessary to assure that its computer-based systems, hardware and software are able to operate and effectively receive, transmit, process, store, retrieve or retransmit data including dates on and after January 1, 2000 without any Material Adverse Effect, and, at the request of the Required Holders, the Company shall provide evidence to the satisfaction of the Required Holders of such year 2000 compatibility. 5N. Post-Closing Amendments to Farm Credit Security Documents. Within 30 days following the Closing, the Company shall provide the Holders with evidence satisfactory to them that the Security Agreement dated February __, 1996 by the Company and Farm Credit and each mortgage and deed of trust in effect as of the Closing by the Company in favor of Farm Credit (collectively the "Farm Credit Security Documents") has been amended to provide that the collateral granted under such Security Documents secures only the obligations of the Company under the "First Term Loan Note" issued and outstanding under the Farm Credit Agreement and such amendments have been recorded in such jurisdictions as may be required to give full effect thereto. 6. NEGATIVE COVENANTS. 6A. Financial Covenants. The Company shall not permit: 6A(l). Consolidated Debt to Consolidated Total Capitalization. As of the last day of any fiscal quarter, Consolidated Debt to be more than the percentage of Consolidated Total Capitalization set forth below:
- ------------------------------------------------------------------------------ Date of Determination Percentage --------------------- ---------- - ------------------------------------------------------------------------------ Closing Date through 70% including the 70% third fiscal quarter of Fiscal Year 1999 - ----------------------------------------------------------------------------- Fourth fiscal quarter of Fiscal Year 1999 75% - ----------------------------------------------------------------------------- First fiscal quarter of Fiscal Year 2000 70% through and including the fourth fiscal quarter of Fiscal Year 2000 - ----------------------------------------------------------------------------- First fiscal quarter of Fiscal Year 2001 60% through and including the fourth fiscal quarter of Fiscal Year 2001 - ----------------------------------------------------------------------------- Any fiscal quarter thereafter 50% - -----------------------------------------------------------------------------
18 6A(2). Current Ratio. At any time, the ratio of Consolidated Current Assets to Consolidated Current Liabilities to be less than 2.75 to 1.00. 6A(3). Working Capital. At any time, Working Capital to be less than $75,000,000. 6A(4). Limitation on Consolidated Total Liabilities. As of-the last day of any fiscal quarter, the ratio of Consolidated Total Liabilities to Consolidated Tangible Net Worth to be more than the ratio set forth below:
- ----------------------------------------------------------------------------- Date of Determination Ratio --------------------- ----- - ----------------------------------------------------------------------------- Closing Date through and including the 2.50 to 1.00 fourth fiscal quarter of Fiscal Year 1999 - ----------------------------------------------------------------------------- First fiscal quarter of Fiscal Year 2000 2.25 to 1.00 through and including the third fiscal quarter of Fiscal Year 2000 - ----------------------------------------------------------------------------- The fourth fiscal quarter of Fiscal Year 2.10 to 1.00 2000 - ----------------------------------------------------------------------------- The first fiscal quarter of Fiscal Year 2001 1.60 to 1.00 through and including the fourth fiscal quarter of Fiscal Year 2001 - ----------------------------------------------------------------------------- Any fiscal quarter thereafter 1.50 to 1.00 - -----------------------------------------------------------------------------
6A(5). Consolidated Tangible Net Worth. As of any Fiscal Year end, Consolidated Tangible Net Worth to be less than the sum of (i) $157,190,000 minus (ii) the amount of Consolidated Net Losses for the Company's Fiscal Year 1999, if any, plus (iii) if a positive number, 50% of Consolidated Net Earnings for Fiscal Year 2000 and each Fiscal Year thereafter. 6B. Liens and Other Restrictions. The Company will not, and will not permit any Subsidiary to: 6B(l). Liens. Create, assume or suffer to exist any Lien on its properties or assets, whether now owned or hereafter acquired, or upon any income or profits therefrom or proceeds of dispositions thereof, or transfer any property for the purpose of subjecting the same to the payment of obligations in priority to the payment of its general creditors, except for: (i) Liens on property acquired, constructed or improved after the Closing Date; provided, however, that (a) each such Lien is confined solely to the property so acquired, improvements thereto and proceeds thereof, (b) each such Lien secures only the purchase price for, or cost of construction or improvements of, such property and the Debt secured by such Lien does not exceed the lesser of the fair market value or the 19 purchase price or cost of construction or improvement, (c) the Debt secured by such Lien is incurred at the time of the acquisition, construction or improvement or within 120 days following such date, (d) no Event of Default or Default exists immediately before or immediately after the creation of such Lien or could reasonably be anticipated to result therefrom, (e) after giving effect thereto, the tests set forth in paragraphs 6A, calculated on the basis of-the most recently available financial information, would be satisfied on a pro forma basis, and (f) in no event shall the aggregate amount of all outstanding Debt secured by Liens permitted by this paragraph 6B(l)(i) at, any time exceed $25,000,000; (ii) Liens existing as of the Closing Date of this Agreement and described on Schedule 6B(l) provided, in the case of Liens under the Farm Credit Security Documents, such Liens are amended within 30 days of the Closing Date as provided in paragraph 5N; (iii) any Lien resulting from renewing, extending or refinancing of the Debt secured by the Liens permitted by clauses (i) and (ii) above, provided that (a) the maturity thereof is not accelerated and the principal amount of the Debt then secured thereby is not increased, (b) such Lien does not extend to any other property, and (c) immediately after such extension, renewal or refunding, no Default or Event of Default would exist or would be reasonably anticipated to result therefrom; (iv) Liens, and other charges incidental to the conduct of its business, or the ownership of its property (including charges for Taxes or Otherwise arising by operation of law, mechanics', carriers', workers', repairmen's, warehousers' or other similar Liens), which are not incurred in connection with the borrowing of money or the securing of Debt, provided that, in each case, the obligation secured is not overdue or is being contested in good faith by appropriate actions or procedures promptly instituted and diligently conducted and such reserves as shall be required by GAAP shall have been made therefor and such Liens and charges in the aggregate do not have a Material Adverse Effect; (v) Liens arising as a result of any judicial proceeding with respect to which it shall then, in good faith be actively prosecuting appeal or other appropriate proceedings for review and Liens arising from judgments or decrees not constituting a Default or Event of Default unless, in either case, such Lien remains undischarged, unstayed pending appeal, unbonded or undismissed for a period of 60 consecutive days and provided, in either case, such reserves as shall be required by GAAP shall have been made therefor and such Liens in the aggregate do not have a Material Adverse Effect; (vi) deposits or pledges to secure worker's compensation, unemployment insurance, old age benefits or other social security obligations or retirement benefits; (vii) Liens arising out of deposits in connection with, or given to secure the performance of, bids, tenders, trade contracts not for the payment of money, or leases, or to secure statutory obligations or surety or appeal bonds, performance bonds or other pledges or deposits for purposes of like nature in the ordinary course of business; 20 (viii) survey exceptions or encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real properties, which are necessary for the conduct of its activities or which customarily exist on properties of Persons engaged in similar activities and similarly situated and which do not in the aggregate have a Material Adverse Effect or materially interfere with the use of such real properties in the operation of the business of the Consolidated Group in the ordinary course; and (ix) Liens securing Debt under the Revolving Credit Agreement and/or the New Farm Credit Term Loan provided the obligations of the Company and its Subsidiaries under the Transaction Documents are equally and ratably secured thereby. 6B(2). Sales of Equity Interests. (i) The Company will not permit any Subsidiary to issue, sell or otherwise dispose of, or part with control of, any of such Subsidiary's own Equity Interest (other than directors' qualifying shares) either directly or indirectly by the issuance of rights, options for securities convertible into or exchangeable for Equity Interests other than to the Company or a Wholly-Owned Subsidiary. (ii) The Company will not, and will not permit any Subsidiary to, sell transfer or otherwise dispose of any outstanding Equity Interest of another Subsidiary other than: (a) to the Company or a Wholly-Owned Subsidiary; or (b)(1) if in connection with such sale, transfer or other disposition, the entire Investment (whether represented by Equity Interest, Debt, claims or otherwise) of the Company and its Subsidiaries in such Subsidiary is sold, transferred or otherwise disposed of to a Person not a Related Party, and the Subsidiary being disposed of has no continuing Investment in any other Subsidiary not being simultaneously disposed of or in the Company and (2) such disposition is otherwise permitted under paragraph 6B(3). (iii) The Company will not issue any Redeemable Preferred Stock or any Equity Interest convertible or exchangeable into Debt of the Company. 6B(3) Merger and Sale of Assets. Merge or consolidate with any other Person or sell, lease or transfer or otherwise dispose of its respective assets to any Person or Persons, except that: (i) Any Subsidiary of the Company may merge or consolidate with or sell, lease, transfer or otherwise dispose of all or any of its assets to the Company or a Wholly-Owned Subsidiary of the Company provided, (a) that -------- the Company or such Wholly-Owned Subsidiary shall be the continuing or surviving corporation and (b) the acquiring or surviving entity is a corporation organized under the laws of, and having its principal place of business in, a state of the United States of America or -the District of Columbia; (ii) the Company may merge or consolidate with any other Person, provided, that (a) the Company shall be the continuing or surviving corporation, and (b) 21 immediately after and giving effect thereto, the Company would be able to incur $1 of additional Debt and on a pro forma basis based on the most recently available financial information, the financial tests set forth in paragraph 6A(4) would be satisfied; (iii) the Company and its Subsidiaries may sell inventory and obsolete equipment in the ordinary course of business; (iv) the Company may sell or cause Grower Loans to be refinanced in the ordinary course of its business provided, any Guaranties entered into -------- in connection with any such sale or refinancing are permitted pursuant to paragraph 6(C)(iii); (v) the Company and its Subsidiaries may sell, transfer or otherwise dispose of same or all of their respective properties or assets in a transaction not otherwise permitted pursuant to this paragraph 6B(3) (a "Disposition") if: (i) the Company (or the Subsidiary, as the case may be) receives consideration at the time of such Disposition at least equal to the fair market value of the assets or properties issued or sold or otherwise disposed of and (ii) at least 85% of the consideration therefor received by the Company or such Subsidiary is in the form of cash or Cash Equivalents; provided, (A) that immediately after and giving effect to any -------- such Disposition, (1) the greater of (x) aggregate book value, as reflected on the most recent consolidated balance sheet of the Consolidated Group furnished to the Holders pursuant to paragraph 6A(i) or SA(ii), as the case may be or (y) the aggregate net proceeds (with any non-cash proceeds being valued at its fair market value) of all such properties and assets so sold by the Company and its Subsidiaries ("Assets Sold") during the then current Fiscal Year, less the aggregate amount of Qualifying Reinvestments then made by the Company and its Subsidiaries during the Fiscal Year does not exceed 10% of Consolidated Total Assets Fiscal Year end, and (2) the greater of (x) aggregate book value of all Assets Sold since the Closing Date, as reflected on the consolidated balance sheets of the Consolidated Group for the year of Disposition -furnished to the Holders pursuant to paragraph SA(ii) (or paragraph 5A(i) if none have yet been provided pursuant to paragraph 5A(ii), and (y) the aggregate net proceeds (with any non-cash proceeds being valued at its fair market value of all such Assets Sold since the Closing Date, less the aggregate amount of Qualifying Reinvestments made by the Company and its Subsidiaries since the Closing Date does not exceed 20% of Consolidated Total Assets, for the immediately preceding Fiscal Year end, and (B) in the case of a Disposition of the Equity Interest of a Subsidiary, such Disposition otherwise complies with paragraph 13B(2); provided, further, that, in each case other than the sales pursuant to - -------- subparagraph (iii) or (iv) above, no Default or Event of Default exists immediately before or immediately after giving effect to such Disposition or such merger or consolidation or is expected to result therefrom. For purposes of subparagraph (v) of this paragraph 6B(3), a "Qualifying Reinvestment" is the use of the proceeds, or of funds expended in anticipation of the proceeds, of Assets Sold not more than 90 days prior to or more than 180 days after the date of a Disposition, to purchase (x) tangible, depreciable assets or equipment or real property or depreciable improvements thereon usable in any business permitted by paragraph 6E, or (y) either (1) all of the outstanding 22 Equity Interests of a Person which, immediately after such purchase, is a Wholly-Owned Subsidiary of the Company and is engaged in a business permitted by paragraph 6E, or (2) all or substantially all of the assets and business of a Person which is engaged in a business permitted by paragraph 6E; provided, that -------- if the Assets Sold are subject to a Lien in favor of the Holders at the time of sale or other disposition, the assets, equipment, real property, improvements, capital stock or other equity interests purchased with the proceeds of such Assets Sold shall not constitute Qualifying Reinvestments unless promptly made subject to a Lien in favor of the Holders with the same priority and otherwise substantially the same terms and conditions as the Liens on the Assets Sold in favor of the Notes. 6B(4). Subsidiary Dividend and Other Restrictions. Enter into, or be otherwise subject to, any contract or, agreement (including its charter) which limits the amount of, or otherwise imposes restrictions on the payment of, dividends by, or distributions on any securities of, any Subsidiary to the Company. 6B(5). Transactions with Related Parties. Except as set forth on Schedule 6B(5), directly or indirectly, engage in any transaction or group of transactions (including, without limitation, the purchase, sale or exchange of assets or the payment of salary, bonuses and other compensation for services rendered) with any Related Party, except in the ordinary course of business pursuant to the reasonable requirements of its business and upon commercially reasonable terms which are no less favorable to it than those which might be obtained at arms' length with a Person not a Related Party. 6B(6). Restricted Payments. Make or- declare any Restricted Payments except for: (i) dividends by the Company on its common stock; provided, that (a) no Default or Event of Default shall exist immediately before or immediately after such payment or could reasonably be anticipated to result therefrom; (b) after giving effect to such payment, the financial tests set forth in paragraph 6A, calculated on the basis of the most recently available financial information, would be satisfied on a pro forma basis, and (c) immediately after giving effect thereto, the aggregate amount of all such dividends made or declared by the Consolidated Group in the current Fiscal Year does not exceed 50% of Consolidated Net Earnings (if positive) for the immediately preceding Fiscal Year; and (ii) Permitted Tax Distributions. 6B(7). Loans, Advances and Investments. Make or permit to remain outstanding any loan or advance to, or extension of credit to, or own, purchase or acquire any stock, obligations or securities of, or any, other interest (including without limitation any Equity Interest in any partnership, association, joint venture or other organization, whether or not a legal entity) in, or make any capital contribution to, any Person (each an "Investment'), except that the Company or any Subsidiary may: (i) acquire and own stock, obligations or securities received in settlement of debts (created in the ordinary course of business) owing to it, provided, that, any such 23 stock is of a class publicly traded on a national securities exchange and after any such acquisition, the aggregate amount of all such stock owned by the Consolidated Group represents less than 5% of the equity interest or the voting rights in the issuer of such stock; (ii) own, purchase or acquire Cash Equivalents; (iii) endorse negotiable instruments for collection and own its accounts receivable in the ordinary course of business; (iv) make, in the case of the Company, Investments in the ordinary course of business in any Wholly-Owned Subsidiary and, in the case of its Subsidiaries, Investments in the ordinary course of business in the Company or another Wholly-Owned Subsidiary; (v) permit to remain outstanding, Investments existing as of the Closing Date and listed on Schedule 6B(7)(1) (excluding Related Party Advances); (vi) make additional Grower Loans (other than to a Related Party) or convert Grower Advances into Grower Loans (other than Grower Advances to Related Parties) in the ordinary course of business after the Closing Date provided that (i) the aggregate principal amount of Grower Loans to Persons other than Related Parties outstanding in any Fiscal Year (including principal outstanding under such Grower Loans permitted to be outstanding pursuant to clause (v) of this paragraph 6B(7) and Grower Advances converted into such Grower Loans) does not exceed an amount equal to twenty-five (25%) of Consolidated Net Worth for the immediately preceding Fiscal Year; (ii) no new Grower Loans may be made at any time when more than $1 0,000,000 in the aggregate of outstanding Grower Loans (including any Grower Loans sold or refinanced by the Company and Guaranteed by the Company) are non-performing as reasonably determined by the Company (but in any event, any Grower Loan that is more than 90 days past due (whether in respect of principal or interest) shall be deemed non-performing; (vii) extend credit to Contract Growers in the ordinary course of business pursuant to the reasonable requirements of their business and upon commercially reasonable terms for the purchase of supplies and incidental related equipment ("Grower Advances"); provided, that each such Grower Advance is repaid within 180 days after the making of such Grower Advance or converted into a Grower Loan; (viii) subject to compliance with Paragraph 6B(5), make and/or permit to remain outstanding Related Party Advances (including any Grower Advance to a Related Party which has not been repaid within 180 days after the making of such Grower, Advance and any Grower Loan to a Related Party) provided, (a) the aggregate amount of such Related Part)(Advances permitted pursuant to this clause (viii) at any time outstanding shall not exceed $13,000,000 through March 2, 2002 and thereafter, shall not exceed $15,000,000; (b) the aggregate amount of Related Party Advances permitted 24 pursuant to this clause (viii) at any time outstanding to Duplin Land shall not exceed $2,500,000; (c) all Related Party Advances existing on the Closing Date which are to be deemed permitted under this clause (viii) are set forth on Schedule 6B(7)(2); and (d) all Related Party Advances arising after the Closing Date, which are to be deemed permitted under this clause (viii) shall be set forth on an updated Schedule 6B(7)(2) to be supplied by, the Company from time to time upon request by the Required Holders; (ix) Subject to compliance with paragraph 6B(S), permit to remain outstanding Related Party Advances to Duplin Land existing as of the Closing Date and listed on Schedule 6B(7)(3) and make additional Related Party Advances to, Duplin Land not otherwise permitted pursuant to clause (viii) of this paragraph 6B(7), provided (a) the aggregate amount of such -------- additional Related Party Advances made from and after the Closing Date through March 2, 2002 shall not exceed $6,000,000 in original amount and thereafter, the aggregate amount of such additional Related Party, advances made from and after the Closing Date shall not exceed $9,000,000 in original amount; and (b) all Related Party Advances made to Duplin Land after the Closing Date which are to be deemed permitted under this clause (ix) shall be set forth on an updated Schedule 6B(7)(3) to be supplied by the Company from time to time upon request by the Required Holders; provided, further in no event shall any amount prepaid, paid or repaid in -------- ------- respect of any Related Party Advances to Duplin Land permitted under this clause (ix) be reloaned or readvanced to Duplin Land unless such amounts could be loaned or advanced to Duplin Land under clause (vii) of this Paragraph 6B(7) or as a new loan or advance under this clause (ix); and (x) Investments not otherwise permitted pursuant to clauses (i) through (ix) of this paragraph 6B(7), provided the aggregate amount of such Investments, made in any twelve consecutive months does not exceed $500,000. 6C. Debt; Guaranties of Debt. (i) The Company will not issue any Redeemable Preferred Stock or any Equity Interest convertible or exchangeable into Debt of the Company or any Subsidiary nor will the Company create, incur or assume any Debt after the Closing Date unless immediately before and immediately after giving effect thereto, no Default or Event of Default shall exist or be reasonably expected to result therefrom and on a pro forma basis, the financial covenants set forth in paragraph SA would be satisfied. (ii) Except as permitted by clause (iii) of' this paragraph 6C, the Company will not permit any Subsidiary to create, incur, assume or otherwise become or remain directly or indirectly liable with respect to any Debt or issue or permit the issuance of any Preferred Stock constituting Debt or any Equity Interest convertible or exchangeable into Debt of the Company or any Subsidiary. (iii) The Company will not, and will not permit any Subsidiary to, enter into any Guaranty of or otherwise become liable for any Debt of any other Person other than (but subject to compliance with clause (i) of this paragraph 6C) (a) Debt of the Company 25 or another Wholly-Owned Subsidiary of the Company, (b) the Subsidiary Guaranties, and (c) in the case of the Company, Guaranties of Growers Loans provided the aggregate amount of Debt represented by such Guaranties (calculated without regard to the exclusion in clause (viii) of the definition of Debt) does not exceed $15,000,000. 6D. Compliance with ERISA. The Company will not and will not permit any ERISA Affiliate to: (i) engage in any transaction in connection with which the Company or any ERISA Affiliate could be subject to either a civil penalty assessed pursuant to section 5(:12(i) of ERISA or a tax imposed by section 4975 of the Code, terminate or withdraw from any Plan (other than a Multiemployer Plan) in a manner, or take any other action with respect to any such Plan (including, without limitation, a substantial cessation of business operations or an amendment of a Plan within the meaning of section 4041 (e) of ERISA, which could result in any liability to the PBGC, to a Plan, to a Plan participant, to the Department of Labor or to a trustee appointed under section 4042(b) or (c) of ERISA), incur any liability to the PBGC or a Plan on account of a withdrawal from or a termination of a Plan under section 4063 or 4064 of ERISA, incur any liability for post-retirement benefits under any and all welfare benefit plans (as defined in section 3(l) of ERISA), fail to make full payment when due of all amounts which, under the provisions of any Plan or applicable law, it is required to pay as contributions thereto, or permit to exist any accumulated funding deficiency, Whether or not waived, with respect to any Plan (other than a Multiemployer Plan) other than such penalties, taxes, liabilities, failures or deficiencies which individually and in the aggregate do not, and are not reasonably expected to have in the future, a Material Adverse Effect; (ii) act any time permit the termination of any defined benefit pension plan intended to be qualified under section 401 (a) and section 501 (a) of the Code unless such plan is funded so that the value of all benefit liabilities upon the termination date does not exceed the then current value of all assets in such plan by an amount the payment of which would have a Material Adverse Effect; or (iii) at any time permit the aggregate complete or partial withdrawal liability under Title IV of ERISA with respect to Multiemployer Plans incurred by the Consolidated Group and any ERISA Affiliate, or the aggregate liability under Title IV of EIRISA incurred by the Consolidated Group and any ERISA Affiliate, to exceed an amount the payment of which would have a Material Adverse Effect. For the purposes c)f subparagraph (iii) of this paragraph 6D, the amount of the withdrawal liability if the Consolidated Group and ER,ISA Affiliates at any date shall be the aggregate present value of the amounts claimed, to have been incurred less any portion thereof as to which the Company reasonably believes, after appropriate consideration of possible adjustments arising under subtitle E of Title IV of ERISA, that neither the Company nor any ERISA Affiliate shall have any liability, provided, that the Company shall promptly obtain written advice from independent actuarial consultants supporting such determination. The Company will (x) once in each calendar year, beginning in 1999, request and obtain a current statement of withdrawal 26 liability from each Multiemployer Plan to which it or any ERISA Affiliate is or has been obligated to contribute and (y) transmit a copy of such statement Ito each Holder, within 15 days after the Company, receives the same. As used in this paragraph 6D, the term "accumulated funding deficiency" has the meaning specified in section 302 of ERISA and section 412 of the Code, the terms "present value" and "current value" have the meanings specified in section 3 of ERISA, the term "benefit liabilities" has the meaning specified in section 4001(a)(16) of ERISA and the term "amount of unfunded liabilities" has the meaning specified in section 4001(18) of ERISA. 6E. Line of Business. The Company will riot, and will not permit any Subsidiary to, engage in any business other than the animal livestock industry and other businesses reasonably related thereto. 7. EVENTS OF DEFAULT. 7A. Events of Default. If any of the following events shall occur or conditions shall exist and be Continuing for any reason whatsoever, and whether such occurrence or condition shall be voluntary or involuntary or come about or be effected by operation of law or otherwise such occurrence or condition and continuance shall constitute an "Event of Default": (i) the Company defaults in the payment of any principal of any Note when the same shall become due and payable, whether by the terms thereof or otherwise as provided by the terms of this Agreement; or (ii) the Company defaults in the payment of interest or Make Whole Amount on any Note, whether by the terms thereof or otherwise as provided by the terms of the Agreement and such default shall continue for 3 Business Days after the same shall become due and payable; or (iii) The Company or any Subsidiary (a) defaults (whether as primary obligor or guarantor or surety) in any payment of principal of, premium, if any, or interest on any Debt, the outstanding principal amount of which exceeds $1,000,000 in the aggregate, beyond any period of grace provided with respect thereto, or (b) fails to perform or observe any other agreement, term or condition contained in any agreement under which such Debt is created (or if any other event thereunder or under any such agreement shall occur and be continuing) and the effect of such default or other event is to cause such Debt to become, or to cause the holder or holders of such Debt (or a trustee on behalf of such holder or holders) to declare such Debt to be, due and payable or required to be redeemed or repurchased prior to any stated maturity or regularly scheduled dates of payment, or (c) 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 Debt to Convert such Debt into equity, interests), the Company or any Subsidiary has, become obligated to purchase or repay or redeem an aggregate outstanding principal amount of $1,000,000 or more of Debt before its regular maturity or before its regularly scheduled dates of payment or redemption; 27 (iv) any, representation or warranty made by the Company or any Subsidiary in any Transaction Document or in any writing furnished pursuant to a Transaction Document shall be false, incorrect or misleading in any material respect; or (v) the Company or any Subsidiary fails to perform or observe or comply with any covenant contained in paragraph 5D, 5I, SN, 6A(2), 6A(3), 6A(5), 6B, 6C or 6F; or (vi) the Company fails to perform or observe or comply with any covenant contained in paragraph 6A(1) or 6A(4) as of the fourth fiscal quarter of any Fiscal Year or fails to comply with any covenant contained in paragraph 6A(1) or 6A(4) as of the first through the third fiscal quarter of any Fiscal Year and such failure shall not have been remedied by the end of the fourth fiscal quarter of such Fiscal Year; or (vii) the Company or any Subsidiary fails to perform or observe or comply with any other agreement, term or condition of any of the Transaction Documents and such failure shall not be remedied within 30 days of such failure; or (viii) the Company or any Subsidiary voluntarily or involuntarily suspends or discontinues operation or liquidates all or substantially all of its assets (other than, in the case of a Subsidiary, as permitted by paragraph 6B(3)); or (ix) the Company or any Subsidiary admits in writing that it is not able to pay its debts as such debts become due or otherwise becomes insolvent; or 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 or insolvency law of any jurisdiction; or makes an assignment for the benefit of its creditors; or 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; or takes corporate action for the purpose of any of the foregoing; or (x) a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation, dissolution or winding up of the Company or any Subsidiary or for 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 to take advantage of any bankruptcy or insolvency law of any jurisdiction is filed against the Company or any Subsidiary without its consent or other acquiescence and such petition is not dismissed within 60 days or any holder of a Lien on all or substantially all of the assets of the Company or any Subsidiary take any action to foreclose on such Lien and such action remains unstayed and in effect for 60 days; or (xi) a Governmental Authority enters an order appointing 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 its property, 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 28 any Subsidiary without its consent of and such order remains unstayed and in effect for 60 days; or (xii) a final judgment or judgments for the payment of money aggregating in excess of $5,000,000 is rendered against one or more of the Company or any Subsidiary and within 45 days the entry thereof such judgment or judgments are not bonded or discharged or execution thereof stayed pending appeal, or within 45 days after the expiration of any such stay, such judgment or judgments are not discharged; or (xiii) (a) any Subsidiary Guaranty shall cease to be in full force and effect or shall be declared by a court or other Governmental Authority of competent jurisdiction to be void, voidable or unenforceable against such Subsidiary or (b) the validity or enforceability of any Subsidiary Guaranty against such Subsidiary shall be contested by such Subsidiary, the Company or any Related Party, or (c) any Subsidiary, the Company or any Related Party shall deny that such Subsidiary has any further liability or obligation under its Subsidiary Guaranty. 7B. Acceleration on Event of Default. (i) Automatic. If any Event of Default specified in clauses (ix), (x) or (xi) of paragraph 7A shall exist, all of the Notes at the time outstanding shall automatically become immediately due and payable together with interest accrued thereon and the Make Whole Amount without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived. (ii) By Action of Holders. Subject to paragraph 7C, if any Event of Default other than those specified in clauses (ix), (x) or (xi) of paragraph 7A shall exist, the Required Holders may exercise any right, power or remedy permitted to, such Holder or Holders by law, and shall have, in particular, without limiting the generality of the foregoing, the right, upon written notice to the Company to declare the entire principal of, and all interest accrued and Make Whole Amount on, all the Notes then outstanding to be immediately due and payable, without any presentiment, demand, protest or other notice of any kind, all of which are hereby expressly waived. (iii) Acceleration on Payment Default. During the existence of an Event of Default described in clauses (i) or (ii) of paragraph 7A and irrespective of whether the Notes then outstanding shall have become due and payable pursuant to clause (ii) of this paragraph 7B, any Holder who or which shall have not consented to any waiver with respect to such Event of Default may, at its option, by notice in writing to, the Company, declare the Notes then held by such Holder to be, and such Notes shall thereupon become, forthwith due and payable together with all interest accrued thereon and the Make Whole Amount thereon, without any presentment, demand, protest or other notice of any kind, all of which ;are hereby expressly waived. 7C. Rescission of Acceleration. At any time after any Note shall have been declared immediately due and payable pursuant to clause (ii) or (iii) of paragraph 7B, the Holders of at 29 least two-thirds of the principal amount of Notes at the time outstanding may, by written notice to the Company, rescind and annul any such declaration with respect to the Notes if (i) the Company shall have paid all interest, principal and Make Whole Amount payable with respect to any Note which have become due otherwise than by reason of such declaration, including any interest on any such overdue interest, principal and Make Whole Amount, at the amount specified therein or otherwise in this Agreement, (ii) the Company shall not have paid any amounts which have become due solely by reason of such declaration, (iii) all Events of Default and Defaults, other than non-payment of amounts which have become due solely by reason of such declaration, shall have been cured or waived pursuant to paragraph I 1 B, and (iv) no judgment or decree shall have been entered for the payment of any amounts due pursuant to the Transaction Documents solely by reason of such declaration. No such rescission or annulment shall extend to or affect any subsequent Default or Event of Default or impair any right arising therefrom. 7D. Notice of Acceleration or Rescission. Whenever any Note shall be declared immediately due and payable pursuant to clause (ii) or (iii) of paragraph 7B, or any such declaration shall be rescinded a-id annulled pursuant to paragraph 7C, the Company shall forthwith give written notice thereof to each other Holder at the time outstanding, provided, the failure to give such notice shall not affect the validity of any such declaration, recision or annulment. 7E. Other Remedies, No Waivers or Election of Remedies. If any one or more Events of Default shall occur and be continuing, irrespective of whether any Notes have become or have been declared immediately due and payable, any Holder may proceed to protect and enforce its rights under the Transaction Documents by exercising such remedies as are available to such Holder in respect thereof under applicable law, either by suit in equity or by action at law or by any other appropriate proceeding, whether for specific performance of any covenant or other agreement contained in any Transaction Document or in aid of the exercise of any power granted in a Transaction Document, in such order as the Holder may determine in its sole discretion; provided, however, that the maturity of a Holder's Notes may be accelerated only in accordance with paragraph 7B. No remedy conferred in a Transaction Document upon any Holder is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to every other remedy conferred herein or now or hereafter existing at law or in equity or by statute or otherwise. No course of dealing or failure or delay by any Holder in exercising any right, power or remedy under a Transaction Document or any other document executed in connection therewith shall operate as a waiver thereof or otherwise prejudice such Holder's rights, powers or remedies, nor shall any single or partial exercise of any such right or remedy preclude any other right or remedy hereunder or thereunder. 8. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants that: 8A. Organization, Etc. (i) It is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and is qualified and in good standing 30 in each jurisdiction in which it is required to be qualified to do business (other than those jurisdictions in which the failure to be so qualified, individually and in aggregate, could not reasonably be expected to have a Material Adverse Effect) and has all requisite corporate and other power and authority to own, operate and lease its property and to carry on its business as now being conducted and which it proposes to conduct. It has all requisite power and authority to execute, deliver and perform each Transaction Document to which it is a party and to issue and sell the Notes. Schedule 8A identifies the Company's correct legal name, the jurisdiction of organization, the jurisdictions in which qualified to do business and its officers and directors. (ii) Each Transaction Document has been duly authorized by all necessary corporate action on the part of the Company and has been (or will have been as of the Closing Date) duly executed and delivered by authorized officers of the Company and constitutes (or will constitute upon execution thereof by the Company) the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its terms, except as affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and general equitable principles (whether considered in a proceeding in equity or at law). 8B. Stock Ownership. (i) The authorized capital stock, or other Equity Interests, of the Company is as described on Schedule 8B. All of the outstanding capital stock, or other Equity Interests, of the Company is validly issued, fully paid and non- assessable and is now owned and will be owned immediately prior to the Closing, of record and beneficially, in the amounts and by the Persons as set forth in Schedule 8B free and clear of any Lien of any kind. (ii) As of the Closing Date, the Company has no Subsidiaries. (iii) Except as set forth in Schedule 8B, the Company does not have any outstanding rights, options, warrants or other agreements which would require it to issue any additional shares of its capital stock or other Equity Interests after the Closing Date. 8C. Financial Statements. The Company has furnished the Purchasers its audited balance sheets dated as of November 1, 1997 and October 31, 1998 and the related statements of income, retained earnings and cash flows for the 12 months ended on such dales (the "Audited Financial Statements") and the unaudited balance sheet of the Company as of January 30, 1999 and the related statement of income, retained earnings and cash flows for the 3 months ended on such date (the "Unaudited Financial Statement" and collectively with the Audited Financial Statements, the "Financial Statements"). 'The Audited Financial Statements fairly present in all material respects the financial condition of the Company and the results of its operations and cash flows for the respective periods specified thereby and the Unaudited Financial Statement fairly presents in all material respects the assets and liabilities of the Company as of the date thereof. The Financial Statements have been prepared in accordance with GAAP, consistently 31 applied throughout the periods involved except as set forth in the notes thereto. Except as disclosed in the Unaudited Financial Statement, since October 31, 1998, there have been no developments or changes affecting the business, assets, liabilities, condition (financial or otherwise) of the Company which in the aggregate have had, or could reasonably be expected to have, a Material Adverse Effect. 8D. Actions Pending. There are no actions, suits, investigations or proceedings pending, or to the knowledge of the Company threatened, against the Company, or any of its properties or rights, by or before any court, arbitrator or administrative body or other Governmental Authority other than those which in the aggregate do not and could not reasonably be expected to have a Material Adverse Effect. 8E. Title to Properties. (i) The Company has good and marketable title to the real estate of which it is the record owner and good title to all of its other properties and assets, including the properties and assets reflected in the most recent balance sheet included in the Financial Statements or purported to have been acquired by the Company sifter such date (other than properties and assets disposed of since such date in the ordinary course of business), subject to no Lien of any kind except Liens permitted by paragraph 6B(i). (ii) The Company enjoys peaceful and undisturbed possession under all leases necessary in any material respect for the conduct of its businesses and all such leases are valid and subsisting and are in full force and effect; (iii) The Company owns or has the right to use (under agreements or licenses which are in full force and effect) all Intellectual Property necessary for it to conduct its business as currently conducted, without any known conflict with the rights of others. To the knowledge of the Company, none of its products infringes in any material respect upon any Intellectual Property owned by any other Person; and (iv) To the knowledge of the Company, there is no material violation by any Person of any right of the Company with respect to any Intellectual Property owned or used by the Company. 8F. Affiliates and Investments in Others. Except as set forth on Schedule 8F, the Company has no Affiliates nor Investments in any Person other than Investments permitted under paragraph 6B(7). 8G. Tax Returns and Payments. The Company has filed all Federal, State, local and foreign income tax returns, franchise tax returns, real and personal property tax returns and other tax returns required by law to be filed by or on its behalf, or with respect to its properties or assets, and all Taxes, assessments and other governmental charges imposed upon the Company or any of its properties, assets, income or franchises which Eire due and payable have been paid, other than those presently payable without penalty or interest, those presently being actively contested in good faith and for which such reserves or other appropriate provisions, if any, as 32 may be required by GAAP have been made and those, the non-payment or non-filing of which, in the aggregate, do not, and could not reasonably be expected to, have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company in respect of any Taxes for all fiscal periods are adequate and the Company knows of no unpaid assessment for additional Taxes for any period or any basis for any such assessment that in the aggregate could reasonably be expected to have a Material Adverse Effect. No charges or Taxes will be imposed by any Governmental Authority on the Company on the execution or delivery of the Transaction Documents and the issue and sale of the Notes. 8H. Conflicting Agreements and Other Matters. (i) The Company is not in violation of any term of its charter or by-laws or other organizational documents, or in violation or breach of any term of any agreement (including any agreement with stockholders), instrument, order, judgment, decree, statute, law, rule or regulation (including any Environmental Law) to which it is a party or to which it is subject other than defaults or violations, in which in the aggregate, do not have and could not reasonably be expected to have, a Material Adverse Effect. (ii) The execution and delivery of the Transaction Documents and the offering, issuance and sale of 'the Notes and fulfillment of and compliance with the terms and provisions of the Transaction Documents do not and will not conflict with the provisions of, or constitute a default under, or result in any violation of, or result in the creation of any Lien upon any of the properties or assets of the Company pursuant to its charter or by- laws or other organizational documents, any award of any arbitrator or any agreement (including any agreement with stockholders or other equity holders), instrument, order, judgment, decree, statute, law, rule or regulation to which it is subject. (iii) Other than this Agreement and the Bank Agreements, the company is not a party to, or otherwise subject to any provision contained in, any instrument evidencing Debt, any agreement relating thereto or any other contract or agreement (including its charter) which limits the amount of, or otherwise imposes restrictions on the incurring of, Debt by the Company or its Subsidiaries. 8I. Offering of Notes. Neither the Company nor any agent acting on its behalf has, directly or indirectly, offered the Notes for sale to, or solicited any offers to buy any of the Notes from, or otherwise approached or negotiated with respect thereto with, any Person other than the Purchasers, each of which has been offered the Notes at a private sale for investment. Neither the Company nor any agent acting on its behalf has taken or will take any action which would subject the issuance or sale of the Notes to the provisions of Section 5 of the Securities Act or to the registration provisions of any securities or Blue Sky law of any applicable jurisdiction. As of the Closing Date, the Notes will not be of the same class as securities of the Company listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system, within the meaning of Rule 144A. 8J. Regulation U, Etc. The Company does not own or have any present intention of acquiring any "margin stock" as defined in Regulation U (12 CFR Part 221) of the Board of 33 Governors of the Federal Reserve System ("margin stock"). None of the proceeds of this sale of the Notes will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any margin stock or for the purpose of maintaining, reducing or retiring any indebtedness which was originally incurred to purchase or carry any stock that is currently a margin stock or for any other purpose which might constitute tons transaction a "purpose credit" within the meaning of such Regulation U. Neither the Company nor any agent acting on its behalf has taken or will take any action which might cause this Agreement or the Notes to violate Regulation T, Regulation U, Regulation X or any other regulation of the Board of Governors of the Federal Reserve System or to violate the Exchange Act, in each case as in effect now or hereafter in effect. 8K. ERISA. (i) The Company and each ERISA Affiliate has operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and are not 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 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 that in the aggregate could not reasonably be expected to have a Material Adverse Effect. (ii) The present value of the aggregate benefit liabilities under each of the Plans that is subject to Title IV of ERISA (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. (iii) The Company and its 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 in the aggregate could reasonably be expected to have a Material Adverse Effect. (iv) 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 could not reasonably be expected to have a Material Adverse Effect. 34 (v) The execution and delivery of the Transaction Documents, the issuance and sale of the Notes and the consummation of the transactions contemplated by the Agreement will not'. involve a transaction which is subject to the prohibitions of section 405 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 in the preceding sentence is made in reliance upon and subject to the accuracy of the Purchasers' representations in paragraph 9(ii) as to the source of the funds to be used to pay the purchase price of the Notes. 8L. Governmental and Other Consents. Except as set forth in Schedule 8L, neither the nature of the Company, nor any of its businesses or properties, nor any relationship between the Company and any other Person, nor any circumstance in connection with the execution and delivery of any Transaction Document or the offering, issuance, sale or delivery of the Notes is such as to require any authorization, consent, approval, exemption or any action by or notice to or filing with any Governmental Authority or any other Person in connection with the execution and delivery of the Transaction Documents or the offering, issuance, sale or delivery of the Notes or fulfillment of or compliance with the terms and provisions of the Transaction Documents. 8M. Environmental Matters. (i) The Company has not received any notice of any claim, and no proceeding has been instituted raising any claim, against it or any of its real properties or other assets now or formerly owned, leased or operated by them, alleging any damage to the environment or violation of any Environment Laws, except those that, in the aggregate, do not, and could not reasonably be expected to, result in a Material Adverse Effect. (ii) To the knowledge of the Company, there are no 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 or other assets now or formerly owned, leased or operated by it or any Contract Grower or their use, except those that, in the aggregate do not, and could not reasonably be expected to, result in a Material Adverse Effect. (iii) The Company has not stored any Hazardous Materials on real properties row or formerly owned, leased or operated by any of them or disposed of or released any Hazardous Materials in violation of any Environmental Laws, except such that, in the aggregate do not and could not reasonably be expected to result in a Material Adverse Effect. (iv) All buildings on all real properties now owned, leased or operated by the Company are in compliance with applicable Environmental Laws, except where failures to comply in the aggregate do not, and could not reasonably be expected to, result in a Material Adverse Effect. 35 (v) The Company has obtained all permits, licenses and other authorizations and has made all filings, registrations and other submittals which are required of it under all Environmental Laws (except to the extent such failures to have any such permits, licenses or authorizations or to have made any such filings, registrations or submittals in the aggregate do not, and could not reasonably be expected to, result in a Material Adverse Effect) and the Company is in compliance with all Environmental Laws and with the terms and conditions of all such permits, licenses, authorizations, filings, registrations and submittals or not in compliance with all applicable orders, decrees, judgments and injunctions, issued, entered, promulgated or approved under any Environmental Law (except to the extent failures in the aggregate do not, and could not reasonably be expected to, result in a Material Adverse Effect). 8N. Labor Relations. There is not now pending, or to the knowledge of the Company, threatened, any strike, work stoppage, work slow down, or material grievance or other material dispute between the Company and any bargaining unit or significant number of its respective Employees. To the knowledge of the Company, there is no existing or imminent labor disturbance by the employees of any of the principal suppliers, contractors or customers that in the aggregate have had, or could reasonably be expected to have, a Material Adverse Effect. 8O. Financial Condition. After giving effect to the transactions contemplated hereby the Company will be Solvent. 8P. Disclosure. The Transaction Documents, the Financial Statements and any other document, certificate or statement furnished to the Purchasers by or on behalf of the Company in connection herewith do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein and therein, in light of the circumstances under which they were made, not misleading. To the knowledge of the Company, there is no fact with respect to its business which could reasonably be expected to have a Material Adverse Effect and which has not been described in this Agreement or otherwise disclosed in writing to the Purchasers by the Company. 8Q. Status Under Certain Federal Statutes. The Company is not subject to regulation under the Investment Company Act of 1940, as amended, or the Public Utility Holding Company Act of 1935, as amended. Neither the sale of the Notes hereunder nor the use of the proceeds thereof 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. 8R. Existing Indebtedness; Future Liens. Schedule 8R lists all Debt (including Guaranties) of the Company as of the Closing Date in excess of $1,000,000 to any one lender or related group of lenders, and provides the following information with respect to each item of such Debt: the obligor, each guarantor thereof and each other Person similarly liable in respect thereof, the holder thereof, the aggregate amount of all commitments thereunder (and the allocation of such commitments, if any, as among revolving credit Debt, term notes or similar Debt and other credits such as letter of credit or banker's acceptance facilities), the approximate outstanding amount thereunder and under each individual facility thereunder, the approximate 36 current portion of the outstanding amount, the final maturity, required sinking fund payments, and a description of the collateral securing such Debt. The Company is not in default and no waiver of default is currently in effect, in the payment of any principal or interest on any such Debt and no event or condition exists with respect to any Debt that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Debt to become due and payable before its stated maturity or before its regularly scheduled dates of payment. 8S. Bank Agreements. The Company has provided the Purchasers with complete, true and correct copies of the Bank Agreements as in effect both immediately prior to and immediately after the Closing Date. Except for the Bank Agreements and the lntercreditor Agreement, there are no other written agreements or understandings or material oral agreements or understandings between the Company and any Bank Lender relating to the Bank Agreements and extensions of credit thereunder by any Bank Lender to the Company. As of the Closing Date, the Bank Agreements shall be in full force and effect without any amendment thereof except as contemplated by this Agreement. 8T. Compliance with Laws, Etc. Except as set forth on Schedule 8T, the Company is in compliance with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority (including, without limitation, the Occupational Safety and Health Act of 1970, as amended, ERISA and any Environmental Laws), and has in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of its properties or to the conduct of its businesses, in each case to the extent necessary to reasonably ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to have in affect such licenses, permits, franchises and other governmental authorizations do riot, and could not reasonably be expected to, in the aggregate, have a Material Adverse Effect. 8U. Brokers. No broker, finder or other Person performing a similar function has represented the Company or has acted on behalf of the Company in connection with the transactions contemplated hereby. 9. REPRESENTATIONS OF THE PURCHASERS. Each Purchaser represents that: (i) It is an Institutional Investor and is purchasing its Notes for its own account or for one or more separate accounts maintained by it or for the account of one or more pension or trust funds, in each case for investment and not with a view to the distribution thereof or with any present intention of distributing or selling any of its Notes, provided that the disposition of such Purchaser's property shall at all times be within its control, subject to compliance with applicable law. The Company acknowledges that a Purchaser's sale of all or a portion of its Notes to one or more Qualified Institutional Buyers in compliance with Rule 144A would not be a breach of this representation. 37 (ii) With respect to each source of funds to be used by it to pay the purchase price of its Notes (respectively, the "Source"), at least one of the following statements is accurate as of the Closing Date: (a) the Source is an "insurance company general account" within the-meaning of Department of Labor Prohibited Transaction Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no "employee benefit plan" (within the meaning of section 3(3) or ERISA or section 4975(e)(1) of the Code and treating as a single plan all plans maintained by the same employer or employee organization) with respect to which the amount of the general account reserves and liabilities for all contracts held by or on behalf of such plan exceed 10% of the total reserves and liabilities of such general account (exclusive of separate account liabilities) plus surplus, as set forth in the NAIC Annual Statement filed with the state of domicile of the Purchaser and, as a result, the purchase is within the terms of such exemption; (b) the Source is either (i)i an insurance company pooled separate account and the purchase is exempt in accordance with PTE 90- 1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of PTE 91-38 (issued July 21, 1991) and, except as such Purchaser has disclosed to the Company in writing pursuant to this clause (b), 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 pooled separate account or collective investment fund and, as a result, the purchase is within the terms of one of such exemptions; or (c) the Source constitutes assets of an "investment fund" (within the meaning of Part V of the OPAM 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 l(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) if applicable, 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 clause (c); or (d) the Source is a "governmental plan" as defined in Title 1, section 3(32) of ERISA; or 38 (e) the Source is one or more plans or a separate account or trust fund comprised of one or more plans each of which has been identified to the Company in writing pursuant to this clause (e); or (f) 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 paragraph 9, the terms "employee benefit plan", "governmental plan", "party in interest" and "separate account" shall have the respective meanings assigned to such terms in section 3 of ERISA.. 10. DEFINITIONS. For the purposes of this Agreement, the following terms shall have the respective meanings specified with respect thereto: 10A. Prepayment and Make Whole Amount Terms. "Average Remaining Life" means the number of years (calculated to the nearest one-twelfth year) obtained by dividing (a) the sum of the products obtained by multiplying (i) the principal component of each Remaining Schedule Payment with respect to such Called Principal by (ii) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment by (b) the Called Principal. "Called Principal" means, as the context requires, with respect to any Note the principal of such Note which is to be prepaid pursuant to paragraph 4A or 4D or is declared to be immediately due and payable pursuant to paragraph 7B. "Discounted Value" means, with respect to the Called Principal of any Fixed Rate Note, the amount obtained by discounting all Remaining Scheduled Payments from their respective scheduled due dates, in accordance with accepted financial practice and at a discount factor (applied on a semi-annual basis) equal to the Discount Rate with respect to such Called Principal. "Discount Rate" means, with respect to the Called Principal of any Fixed Rate Note, the yield to Maturity of the Called Principal implied by (a) (i) the yield reported as of 1 0:00 A.M. (New York City time) on the date which is two Business Days prior to the Settlement Date with respect to such Called Principal, on the display designated as "Page 5" on the Telerate Service (or such other display as may replace Page 5 of the Telerate Service) for actively traded U.S. Treasury securities having a maturity equal to the Average Remaining Life of such Called Principal as of such Settlement Date, or (ii)if such yields shall not be reported as of such time or the yields reported as of such time shall not be ascertainable, the Treasury Constant Maturity Series Yields reported for the latest day for which such yields shall have been so reported as of the Business Day next preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15(519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity, equal to the Average Remaining Life of such Called Principal as of such Settlement Date, plus, in either case, 50 basis points. Such implied yield shall be determined, if necessary, by (x) converting U.S. Treasury 39 securities quotations to bond-equivalent yields in accordance with accepted financial practice and (y) interpolating linearly between (1) the actively traded U.S. Treasury security with the duration closest to and greater than the Average Remaining Life and (2) the actively traded U.S. Treasury security with the duration closest to and less than the Average Remaining Life. "Fixed Rate Make Whole Amount" means as to any Fixed Rate Note, the amount equal to the excess, if any, of (x) the Discounted Value over (y) the sum of (i) such Called Principal plus (ii) interest accrued and unpaid thereon, as of and due on the Settlement Date with respect to such Called Principal. The Fixed Rate Make Whole Amount shall in no event be less than zero. "LIBOR Rate Make Whole Amount" means as to any LIBOR Rate Note to be prepaid pursuant to paragraph 4A or 4D or declared to be immediately due and payable pursuant to paragraph 7B, (i) prior to March 2, 2001, an amount equal to 2% of the Called Principal of such LIBOR Rate Note and (ii) on or after March 2, 2001, zero. "Make Whole Amount" means with respect to any Fixed Rate Note, the Fixed Rate Make Whole Amount, and as to any LIBOR Rate Note, the LIBOR Make Whole Amount. "Remaining Scheduled Payments" means, with respect to the Called Principal of any Fixed Rate Note, all payments of such Called Principal and interest that would be due or dividends that would accrue thereon, as the case may be, after the Settlement Date with respect to such Called Principal, if no payment of Called Principal were made prior to its scheduled due date, provided, that if such Settlement Date is not a date on which interest payments are scheduled to be made, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued or dividend accrued to such Settlement Date and required to be paid on such Settlement Date. "Settlement Date" means, with respect to any Note the date on which such Note is to be prepaid pursuant to paragraph 4A or paragraph 4D or is declared to be immediately due and payable pursuant to paragraph 7B. 10B. Other Terms. "Affiliate" means, at any time and as to the Company, any other Person directly or indirectly (i) controlling, controlled by, or under common control with, the Company or (ii) beneficially owning or holding 10% or more of the Equity Interest o- any class of Voting Stock of the Company, as well as, in the case of an individual which is an Affiliate, such individual's spouse, issue, parents, siblings and issue of siblings (in each case by blood, adoption or marriage); provided, in no event shall Radical Roots be deemed an Affiliate. A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Agreement" means this Note Purchase Agreement as it may from time to time be amended in accordance with paragraph 11B. 40 "Applicable Margin" means 250 basis points (or 2.50%). "Approved Auditor" means Deloitte & Touche, Arthur Andersen LLP, Ernst & Young LLP, KPMG Peat Marwick or PricewaterhouseCoopers or such other firm of certified public accountants of national reputation reasonably acceptable to the Required Holders. "Assets Sold" has the meaning specified in paragraph 6B(3)(v). "Bank Agreements" means the Revolving Credit Agreement, the Grower Loan Program Agreement and the Farm Credit Agreement. "Bank Lenders" means the lenders under the Bank Agreements. "Business Day" means any day other than a Saturday, a Sunday or a day on which the Federal Reserve is required or authorized to be closed. "Capital Stock" means any class of preferred, common or other capital stock, share capital or similar equity interest of a Person including, without limitation, any partnership interest in any partnership or limited partnership and any membership interest in any limited liability company. "Capitalized Lease" means any lease of property (whether real, personal or mixed), as to which the lessee is required, in accordance with GAAP, to record such lease as the acquisition of an asset and the incurrence of a liability. "Capitalized Lease Obligation" means any rental obligation under a Capitalized Lease, taken at the amount thereof that is accounted for as indebtedness (net of Interest Expense) in accordance with GAAP. "Cash Equivalents" means (i) securities issued or directly and fully and unconditionally guaranteed or insured by the United States of America, or securities of any agency thereof which are backed by the full faith and credit of the United States of America, and in either case, maturing within one year from the date of acquisition; (ii) demand deposits in banks in the ordinary course of business (not for investment purposes); (iii) time deposits or certificates of deposit denominated in United States dollars maturing within one year from the date of acquisition issued by commercial banks which are members of the Federal Reserve System and chartered under the laws of the United States of America or any state or the District of Columbia, whose short-term securities are rated at least A-1 (or then existing equivalent) by Standard & Poor's Corporation and at least P-1 (or then existing equivalent) by Moody's Investors Service, Inc. and having capital and surplus in excess of $100,000,000; (iv) tax exempt auction rate securities and municipal preferred stock, in each case with a reset of not more than 35 days and rated at least AA (or then existing equivalent) by Standard & Poor's Corporation; and (v), prime commercial paper maturing no more than 270 days from the date of acquisition, having as at any date a rating of at least A-1 (or the existing equivalent) from Standard & Poor's Corporation or at 41 least P-1 (or then existing equivalent) from Moody's Investors Service, Inc. and issued by a corporation organized in any state of the United States of America or the District of Columbia. "Change of Control" means the current members of the Murphy family who are stockholders of the Company as of the date of this Agreement, together with their respective spouses, issue (whether by blood, adoption or marriage) and spouses of issue, cease to own, as a group, with the power to vote, at least 51% of the Voting Stock of the Company on a fully diluted basis. "Change of Control Notice" has the meaning specified in paragraph 4D. "Closing" and "Closing Date" have the meanings specified in paragraph 2B. "Code" means the Internal Revenue Code of 1986, as amended from time to time and the rules and regulations promulgated thereunder as from time to time in effect. "Company" has the meaning specified in the first paragraph of this Agreement. "Competitor" means any Person whose primary business is in the hog industry (whether pork production or slaughter) provided in no event shall any Institutional Investor be deemed a Competitor. "Confidential Information" has the meaning specified in paragraph II F. "Consolidated Current Assets" means, as of any date the amount of which is to be determined, the aggregate amount of current assets of the Consolidated Group determined on a consolidated basis in accordance with GAAP. "Consolidated Current Liabilities" means, as of any date the amount of which is to be determined, the aggregate amount of current liabilities of the Consolidated Group determined on a consolidated basis in accordance with GAAP; provided principal amounts outstanding under revolving credit or swingline loans under the Revolving Credit Agreement shall not be included in Current Liabilities. "Consolidated Debt" means, as of any date the amount of which is to be determined, the aggregate Debt of the Consolidated Group determined on a consolidated basis in accordance with GAAP. "Consolidated Group" means, without duplication, the Company and each of its Subsidiaries and if the context so requires, the Company and its Subsidiaries, taken as a whole. "Consolidated Net Earnings" means, for any period the amount of which is to be determined, the Net Income of the Consolidated Group determined on a consolidated basis in accordance with GAAP. 42 "Consolidated Net Losses" means, for any period in which Consolidated Net Earnings is a loss, the amount of such loss, expressed as a positive number. "Consolidated Shareholders Equity" means, as of any date the amount of which is to be determined, the total stockholders' equity (exclusive of Redeemable Preferred Stock and minority interests) of the Consolidated Group determined on a consolidated basis in accordance with GAAP. "Consolidated Tangible Net Worth" means, as of any date the amount of which is to be determined, Consolidated Shareholders' Equity less Intangibles determined in accordance with GAAP. "Consolidated Total Assets" means, as of any date the amount of which is to be determined, the total assets of the Consolidated Group determined on a consolidated basis in accordance with GAAP. "Consolidated Total Capitalization" means, as of any date the amount of which is to be determined, Consolidated Tangible Net Worth plus Consolidated Debt. "Consolidated Total Liabilities" means, as of any date the amount of which is to be determined, all liabilities of the Consolidated Group (including Guaranties) determined on a consolidated basis in accordance with GAAP. "Contract Growers" means the independent farmers with whom the Company has written contracts under which such farmers provide facilities and labor to complete a stage of production of Company-owned swine. "Covered Taxes" has the meaning specified in paragraph 4H. "Debt" means, as applied to any Person without duplication, obligations of such Person: (i) for borrowed money, (ii) evidenced by bonds, debentures, notes or other similar instruments, (iii) for deferred purchase price of property or service other than Trade Payables arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property, (iv) for Capitalized Lease Obligations, (v) to reimburse any other Person in respect of amounts paid under letters of credit, bankers acceptances or similar instruments serving a similar function issued or accepted by banks and other financial institutions for the account of such Person whether 43 or not representing obligations for borrowed money), other than undrawn trade letters of credit in the ordinary course of business, (vi) for Hedging Obligations other than commodity hedging agreement entered into in the ordinary course of the Company's business and settled on a daily basis pursuant to the rules of the Chicago Board of Trade, (vii) for or with respect to obligations secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) a Lien on any asset of such Person, whether or not such obligation is assumed by such Person, the amount of such obligation being deemed to be the lessor of the fair market value of such asset or the amount of the obligation so secured, and (x) under Guaranties, exclusive, however, in the case of the Company and its Subsidiaries, of Guaranties of the Company or any Subsidiary in respect of Grower Loans of $8,600,000 in aggregate principal amount. "Default" means any occurrence or condition which with the giving of notice or the passage of time, or both, and remaining uncured after the expiration of any applicable grace period would be an Event of Default. "Default Rate" has the meaning specified in paragraph 1C(iii). "Disposition" has the meaning specified in paragraph 6B(3)(v). "DOL" means the United States Department of Labor and any successor agency. "Duplin Land" means Duplin Land Development, Inc., a North Carolina corporation. "Election Notice" has the meaning specified in paragraph 4D. "Environmental Laws" means any and all Federal, state and local statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder, as from time to time, in effect. "ERISA Affiliate", for Plan purposes, means, with respect to any Person, any trade or business, whether or not incorporated, which, is treated as a single employer together with such Person under section 414 of the Code. 44 "Event of Default" has the meaning specified in paragraph 7A. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time and the rules and regulations promulgated thereunder, as from time to time in effect. "Expenses" has the meaning specified in paragraph 11A. "Equity Interest" means, in any Person, any and all shares, interests, participations, rights or other equivalents (however designated) of any Capital Stock or other ownership of any profit interest, and any and all warrants, rights, options, obligations or other equity securities, of or in such Person, and rights to acquire any of the foregoing, including, without limitation, partnership interests and joint venture (whether general or limited) and any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership or joint venture, but excluding Debt for borrowed money other than Debt that is convertible into, or exchangeable for, any of the foregoing equity interests. "Farm Credit" means Cape Fear Farm Credit, ACA. "Farm Credit Agreement" means prior to the Closing, the Loan Agreement dated as of October 26, 1995 by and between the Company and Farm Credit, as amended through the date of this Agreement and after the Closing, as amended and restated in accordance with paragraph 3M. "Farm Credit Security Documents" has the meaning specified in paragraph 5N. "Financial Statements" has the meaning specified in paragraph 8C. "Fiscal Year" means the fiscal year of the Company ending in the Saturday closest to October 31 of each year. "Fixed Rate Notes" has the meaning specified in paragraph 1A. "GAAP" means generally accepted accounting principles as in effect from time to time in the United States. "Governmental Authority" means (a) the governments of (i) the United States of America and its states and political subdivisions, and (ii) any other jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company or any Subsidiary, and (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government or jurisdiction. "Grower Advances" has the meaning specified in paragraph 6B(7)(vii). "Grower Loans" means loans made by the Company in the ordinary course of its business to its Contract Growers for construction, maintenance, improvement or purchase of 45 buildings, facilities and equipment required to care for Company-owned swine and secured by a perfected security interest or mortgage on such buildings, facilities or equipment and Grower, Advances which have been outstanding for more than 180 days and with respect to which the Contract Grower has delivered to the Company a promissory note and adequate security for the repayment of such Grower Advance. "Grower Loan Program Agreement" means the Transfer and Administration Agreement dated as of October 15, 1997 among the Company, Enterprise Funding Corporation, Murphy Funding, Inc. and NationsBank, N.A., as amended, modified or supplemented from time to time other than any amendment, modification or supplement which increases the aggregate amount of Grower Loans to be purchased under such agreement or requires the Company to supply a Guaranty or additional credit enhancement. "Guaranty", as applied to any Person, means any direct or indirect liability, contingent or otherwise, of such Person with respect to any Debt of another, including, without limitation, any such obligation directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business) or discounted or sold with recourse by such Person, or in respect of which such Person is otherwise directly or indirectly liable, including, without limitation, any such obligation in effect guaranteed by such Person through any agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to advance to or provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock, purchases, capital contributions or otherwise), or to maintain the working capital, equity capital, net worth, solvency or any balance sheet or other financial condition of the obligor of such obligation, or, to make payment for any securities, products, materials or supplies or for any transportation or services without regard to the non-delivery or nonfurnishing thereof, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected against loss in respect thereof. The amount of any Guaranty shall be deemed to be equal to the lower of (a) the amount of the obligation guaranteed and (b) the maximum amount for which such Person may be contingently liable pursuant to the terms of the instrument evidencing such Guaranty, unless such guaranteed obligation and the amount for which such Person may be liable are not stated or, determinable, in which case the amount of such Guaranty shall be the maximum reasonable anticipated liability for which such Person is contingently liable in respect thereof as determined by the Company in good faith (but in any event not less than the amount which is, or would otherwise be required, in accordance with GAAP, to be reflected in such Person's balance sheet or the notes thereto) as the amount of such obligation. A Person shall have "Guaranteed" an obligation if such Person has entered into a Guaranty of such obligation. "Hazardous Materials", at any time, shall mean any substance: (a) the presence of which at such time requires notification, investigation, monitoring or remediation under any Environmental Law; (b) which at such time is defined as a "hazardous waste", "hazardous material", "hazardous substance", "toxic substance", "pollutant" or "contaminant" under any Environmental Law, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) and any applicable local statutes -- --- and the regulations promulgated thereunder; or (c) without limitation, which contains gasoline, diesel fuel or other petroleum products, asbestos or polychlorinated biphenyls. 46 "Hedging Obligations" means, with respect to any Person, the obligations of such Person under any one or more of the following agreements entered into by such Person with one or more financial institutions: interest rate protection agreements, interest rate swaps and/or other types of interest rate hedging agreements obligating such Person to make payments, whether periodically or upon the happening of a contingency except that, if any agreement relating to such obligations of such Person provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person, then in each such case, the amount of a Person's Hedging Obligations thereunder shall be the net amount hereof. The aggregate net Hedging Obligations of a Person at any time shall be the aggregate amount thereof assuming all such Hedging Obligations had been terminated by such Person as of the end of its then most recently ended fiscal quarter; provided if such net aggregate obligation shall be an amount owing to such Person, then the amount shall be deemed to be Zero ($0) Dollars. "Holder" means any Person at the time shown as the holder of a Note on the register referred to in paragraph 11N. "Home Office" means, with respect to any Holder, the office of such Holder specified as its Home Office on Annex 1, or such other office of such Holder as such Holder may from time to time specify to the Company. "Intangibles" means all Intellectual Property, goodwill and all other assets or property classified as intangibles in accordance with GAAP. "Intellectual Property" means all patents, copyrights, trademarks, trade names, service marks or other intellectual or industrial property rights. "Intercreditor Agreement" has the meaning specified in paragraph 3N. "Institutional Investor" means any bank, savings institution, trust company, insurance company, investment company, pension or profit sharing trust or other financial institution or institutional buyer within the meaning of Section 402(b)(8) of the Massachusetts Uniform Securities Act; and an "Accredited Investor within the meaning of Rule 501(a)(1) of the Securities Act, in each case, regardless of legal form. "Investment" has the meaning specified in paragraph 6B(7). "Knowledge of the Company" means the actual knowledge of any Senior Officer of the Company. "LIBOR Interest Period" means a period of three consecutive months provided, (i) the first LIBOR Interest Period shall commence on the Closing Date and each successive LIBOR Interest Period shall commence on the date on which the next preceding LIBOR Interest Period expires; 47 (ii) if any LIBOR Interest Period would otherwise expire on a day that is not a Business Day, such LIBOR Interest Period shall expire on the next succeeding Business Day; provided, that if any LIBOR Interest Period 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 LIBOR Interest Period shall expire on the next preceding Business Day; (iii) any LIBOR Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such LIBOR Interest Period) shall end on the last Business Day of the relevant calendar month at the end of such LIBOR Interest Period; and (iv) no LIBOR Interest Period shall extend beyond March 2, 2002. "LIBOR Rate" means the London Interbank Offered Rate for three-month United States dollar deposits (truncated to three decimal points) as published in the "Money Rates" column of the Wall Street Journal (or a comparable listing in the ------------------- Wall Street Journal) on the first Business Day of March, June, September and - ------------------- December of each year. If, for any reason, such rate is not available, then "LIBOR" shall mean the rate per annum at which, as determined by the Required Holders, Dollars in the amount of $5,000,000 are being offered to leading banks at approximately 11:00 a.m. London time, two (2) Business Days prior to the commencement of the applicable LIBOR Interest Period for settlement in immediately available funds by leading banks in the London Interbank market for a period equal to the LIBOR Interest Period. "LIBOR Rate Notes" has the meaning specified in paragraph 1A. "Lien" means any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute, court decision or contract, and including, without limitation, any mortgage, pledge, security interest, lease, encumbrance, lien, purchase option, call or right, or charge of any kind (including any agreement to give or permit any of the foregoing), any conditional sale or other title retention agreement, any Capitalized Lease, and the filing of, or agreement to give or permit the filing on its behalf, of any financing statement under the Uniform Commercial Code or personal property security legislation of any jurisdiction. "Material Adverse Effect" means, (i) any material adverse effect on the Company's business, assets, liabilities, financial condition or results of operations, (ii) any material adverse effect on the Consolidated Group's business, assets, liabilities, financial condition or results of operations on, where appropriate, a consolidated basis in accordance with GAAP, and (iii) any adverse effect, WHETHER OR NOT MATERIAL, on the binding nature, validity or enforceability of any Transaction Document as the obligation of the Company or any Subsidiary a party thereto and (iv) any material adverse effect on the ability of the Company or any Subsidiary to perform its obligations under any Transaction Document. 48 "Multiemployer Plan" means any plan which is a "multiemployer plan" as such term is defined in section 4001(a)(3) of ERISA. "New Farm Credit Term Loan" has the meaning specified in paragraph 3M. "Net Income" means for any period for which the amount thereof is to be determined, the net income (or loss) of a Person for such period determined in accordance with GAAP; provided, that there shall be excluded from net income any gain or loss of an extraordinary nature for such period. "Notes" has the meaning specified in paragraph IA. "Officers' Certificate" means a certificate signed in the name of the Company by any two Senior Officers. "Other Taxes" has the meaning specified in paragraph 4H. "PBGC" means the Pension Benefit Guaranty Corporation or any other Governmental Authority succeeding to any of its functions. "Permitted Tax Distribution" means, for any Fiscal Year in which the Company is taxed as a pass-through entity under the Code, the amount by which the aggregate current tax liability of the Company's shareholders arising out of or relating to the income of the Company during such Fiscal Year exceeds the amount of dividends permitted to be made in under subparagraph (i) of paragraph 6B(6) in respect of Consolidated Net Earnings such Fiscal Year. "Person" means and includes an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust and any other form of business organization (whether or not a legal entity), or any Governmental Authorities. "Plan" means an "employee pension benefit plan" (as defined in Section 3 of ERISA) which is or within the preceding five years has been established or maintained, or to which contributions are or have been made, by the Company or any ERISA Affiliate, or for which the Consolidated Group or any ERISA Affiliate may have any liability. "Preferred Stock" means as to any Person, any Redeemable Preferred Stock and any other class or series of capital stock of such Person that has a priority as to the payment of any dividends or distributions over the holders of the most junior class of capital stock of such Person. "PTE" has the meaning specified in paragraph 9(ii)(a). "Purchaser" and "Purchasers" have the meaning specified in paragraph 2A. "QPAM Exemption" means Prohibited Transaction Class Exemption 84-14 issued by the United States Department of Labor. 49 "Qualified Institutional Buyer" means a qualified institutional buyer, as defined in Rule 144A. "Qualifying Reinvestment" has the meaning specified in paragraph 6B(3). "Radical Roots" mean Radical Roots, LLC, a North Carolina limited liability company. "Redeemable Preferred Stock" means any class or series of capital stock which has fixed payment or redemption obligations due and payable prior to the final scheduled due date for the repayment of principal of the Notes or is redeemable at the option of the holder, unless such fixed payment obligations or repurchase obligations on exercise of such redemption option can be satisfied, at the election of the issuer, through the issuance of shares of its; common stock. "Related Party" means, as to the Company, the Company's Affiliates, holders of its Equity Interests, its Senior Officers and directors. "Related Party Advances" means any loan or advance or other extension of credit to, or the purchase or assumption of any note or other obligation from, any Related Party. "Required Holders" means the Holder or Holders of at least 51% of the aggregate principal amount of the Notes at the time outstanding. "Restricted Payments" means and includes: (i) any dividend or other distribution, direct or indirect, on account of any shares of any Equity Interest of the Company, now or hereafter outstanding, except a dividend payable solely in shares of common stock of the Company; or (ii) any dividend or other distribution, direct or indirect, on account of any shares of any Equity Interest of any Subsidiary, now or hereafter outstanding, except: (a) a dividend payable solely in shares of common stock of such Subsidiary; or (b) to the extent that such dividend or distribution is payable solely to the Company or a Wholly-Owned Subsidiary; (iii) any payment, whether in respect of principal, premium, interest, fees, expenses or otherwise, in respect of, or any redemption, retirement, purchase or other acquisition, direct or indirect, of, any Debt that is by its terms subordinated in right of payment to the Debt represented by the Notes. (iv) any redemption, retirement, purchase or other acquisition, direct or indirect, of any shares of Equity Interest of the Company now or hereafter outstanding, 50 other than the exercise or conversion thereof for and into common stock of the Company; and (v) any redemption, retirement, purchase or other acquisition, direct or indirect, of any shares of Equity Interest of any Subsidiary now or hereafter outstanding, except to the extent that such redemption, retirement, purchase or other acquisition is made from, and the payment in respect of such redemption, retirement, purchase or other acquisition is paid solely to the Company or a Wholly-Owned Subsidiary. "Revolving Credit Agreement" means prior to the Closing, the Credit Agreement dated as of July 16, 1997 by and among the Company, the lenders named therein, First Union National Bank, as Agent and Caisse Nationale de Credit Agricole and NationsBank, N.A. as Co-Agents, as amended as of January 31, 1999 and, after the Closing, as amended and restated in accordance with paragraph 3L. "Rule 144A" means Rule 144A promulgated under the Securities Act and including any successor rule thereto, as such rule may be amended from time to time. "SEC" means the United States Securities and Exchange Commission, or any Governmental Authority succeeding to the functions of such Commission in the administration of the Securities Act and/or the Exchange Act. "Securities Act" means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder, as from time to time in effect. "Senior Officer" means the (chairman of the board, the president, chief executive officer, chief financial officer, treasurer, or principal accounting officer of the Company. "Special Counsel" means the law firm of Sullivan & Worcester LLP or such other firm of legal counsel as the Purchasers may from time to time designate as their Special Counsel for the purposes of this Agreement or any matters related hereto. "Solvent" and "Solvency" means with respect to any Person (i) the fair value of the property of such Person exceeds its total liabilities (including, without limitation, contingent liabilities), (ii) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay its probable liability on its debts as they become absolute and matured, (iii) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond its ability to pay as such debts and liabilities mature and (iv) such Person is not engaged, and is not about to engage, in business or a transaction for which its property would constitute an unreasonably small capital. "Subsidiary" means (i) a corporation of which such Person owns, directly or indirectly, more than fifty percent (50%) (by number of votes) of each class of Voting Stock, or (ii) any other Person of which such Person owns, directly or indirectly, more than fifty percent (50%) of the rights to profits and losses of such other Person; provided, in no event will Radical Roots 51 be deemed a Subsidiary. Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Company. "Subsidiary Guaranties" has the meaning specified in paragraph 5L. "Taxes" means any and all present or future taxes, assessments, stamps, duties, fees, levies, imposts, deductions, withholdings or other governmental charges of any nature whatsoever and any liabilities with respect thereto, including any surcharge, penalties, additions to tax, fines or interest thereon, now or hereafter imposed, levied, collected, withheld or assessed by any government or taxing authority of any country or political subdivision of any country, or any international taxing authority. "Trade Payables" means amounts payable to suppliers of goods and services in the ordinary course of a Person's business. "Transaction Documents" means this Agreement, the Notes, the Intercreditor Agreement and the Subsidiary Guaranties (if, as and when executed and delivered pursuant to paragraph SL). "Transferee" means; any direct or indirect transferee of all or any part of the Notes. "Voting Stock" means any securities of any class of a Person whose holders are entitled under ordinary circumstances to vote for the election of directors of such Person (or Persons performing similar functions) (irrespective of whether at the time securities of any other class or classes shall have or might have voting power by reason of the happening of any contingency). "Wholly-Owned Subsidiary" means, at any time, any Subsidiary one hundred percent (100%) of all of the Equity Interests (except directors' qualifying shares) and Voting Stock (except directors' qualifying shares) of which are owned by any one or more of the Company and the Company's other Wholly-Owned Subsidiaries at such time. "Working Capital" means as of any date the amount of which is to be determined, Consolidated Current Assets minus Consolidated Current Liabilities. 11. MISCELLANEOUS. 11A. Expenses. Whether or not the transactions provided for hereby shall be consummated, the Company will pay on demand and upon receipt of an invoice therefor, and save each Purchaser and its Transferees harmless against liability for the payment of, all reasonable out-of-pocket expenses arising in connection with such transactions and in connection with any subsequent modification of, or consent under, the Transaction Documents, whether or not such transactions are consummated or modification shall be effected or consent granted ("Expenses"), including (i) the reasonable fees and expenses of Special Counsel and its agents and of any other special or local counsel or other special advisers engaged by the Purchasers in connection with the transactions contemplated by this Agreement and the Amendment, (ii) the costs of obtaining the private placement numbers from Standard & Poor's Ratings Group for the Notes and (iii) the 52 costs and expenses, including reasonable attorneys' fees and the fees of any other special or financial advisers, incurred in evaluating, monitoring or enforcing any rights under the Transaction Documents (including, without limitation, any costs, expenses or fees incurred in connection with perfecting or maintaining perfection of any Lien hereafter existing in favor of the Purchasers or any of their transferees as security for the obligations of the Company or any Subsidiary under the Transaction Documents or maintaining or protecting the collateral which is the subject of such Lien) or in responding to any subpoena or other legal process issued in connection with the Transaction Documents or the transactions provided for hereby or thereby or by reason of a Purchaser or any Transferee having acquired any of its Notes (other than those issued solely as a result of (a) such Purchaser or Transferee being engaged in business in a regulated industry or (b) such Purchaser's or Transferee's actions or omissions in connection with a transfer of a Note), including without limitation costs and expenses incurred in connection with any bankruptcy or insolvency of the Company or any Subsidiary or in connection with any workout or restructuring of any of the transactions contemplated by the Transaction Documents. The obligations of the Company under this paragraph llA and the obligations of the Company under paragraph 4H and paragraph 5J(ii) shall survive the transfer of any of its Notes or any interest therein by a Purchaser or any Transferee and the payment of any Notes. 11B. Consent to Amendments. (i) No Transaction Document may be amended, and the Company may not take any action herein prohibited, or omit to perform any act herein required to be performed by it, without the written consent of the Required Holders, except that: (a) no decrease in the interest rate of, or Make Whole Amount payable on, the Notes or change to the mandatory repayment of the Notes as provided in paragraph 4C; (b) no amendment or waiver of the provisions of paragraph 7B or paragraph 7C, or amendment or waiver of any defined term to the extent used therein; and (c) no amendment or waiver of the definition of "Required Holders" or other amendment of the percentage of Notes required to be held by Holders consenting to any action under this Agreement; may be made or granted without the written consent of all Holders. (ii) Any Holder may specify that any such written consent executed by it shall be effective only with respect to a portion of the Notes held by it (in which case it shall specify, by dollar amount, the aggregate principal amount of Notes with respect to which such consent shall be effective) and in the event of any such specifications; such Holder shall be deemed to have executed such written consent only with respect to the portion of Notes so specified. 53 (iii) Each Holder at the time or thereafter shall be bound by any amendment or waiver authorized by the Required Holders in accordance with this paragraph 11B whether or not its Notes are marked to reflect 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. (iv) No course of dealing between the Company or any Subsidiary and any Holder nor any delay in exercising any rights under any Transaction Document shall operate as a waiver of any rights of any Holder. (v) Any amendment or waiver made pursuant to this paragraph 11B by a Holder that has transferred or has agreed to transfer its Notes to the Company, any Subsidiary or any Affiliate and has provided or has agreed to provide such amendment or waiver as a condition to such transfer shall be void and of no force and effect except solely as to such Holder, and any amendments effected or waivers granted that would not have been or would not be so effected or granted but for such amendment or waiver (and the amendments or waivers of all other Holders that were acquired under the same or similar conditions) shall be void and of no force and effect, retroactive to the date such amendment or waiver initially took car takes effect, except solely as to such Holder. 11C. Persons Deemed Owners; Participations. The Company may treat the Person at the time shown on the register referenced in paragraph 11N in whose name any Note, is issued as the owner and holder of such Note for the purpose of receiving payment on or in respect of such Note and for all other purposes whatsoever, and the Company shall not be affected by notice to the contrary. Subject to the preceding sentence, a Holder may from time to time grant participations in all or any part of its Notes to any Person on such terms and conditions as may be determined by such Holder in its sole and absolute discretion, subject to its compliance with applicable law. 11D. Survival of Representations and Warranties; Entire Agreement. All representations and warranties contained in any Transaction Document or made in any other writing by or on behalf of the Company in connection herewith shall survive the execution and delivery of such Transaction Document or other writing, the transfer by a Purchaser of any Notes or portion thereof or interest therein and the payment of any Notes and may be relied upon by any Transferee, regardless of any investigation made at any time by or on behalf of the Purchasers or any Transferee. All representations and warranties contained in any certificate or other instrument delivered by or on behalf of the Company pursuant tic) any Transaction Document shall be deemed representation and warranties of the Company under this Agreement and not of the individuals executing such certificates or other instruments on behalf of the Company. Subject to the preceding sentence, the Transaction Documents embody the entire agreement and understanding between the Purchasers and the Company and supersede all prior agreements and understandings relating to the subject matter hereof and thereof. 11E. Successors and Assigns. All covenants and other agreements in this Agreement contained by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of such party (including, without limitation, any Transferee) 54 whether so expressed or riot; provided the Company may not delegate the performance of any of its obligations hereunder. 11F. Confidential Information. For the purposes of this paragraph, "Confidential Information" means information delivered to a Purchaser by or on behalf of the Company in connection with the transactions contemplated by or otherwise pursuant to this Agreement, whether in the past, present or future, that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by the Purchaser as being confidential information of the Company, provided that such term does not include information that (a) was publicly known or otherwise known to the Purchaser prior to the time of such disclosure or (b) subsequently becomes publicly known through no act or omission by the Purchaser. Each Purchaser will maintain the confidentiality of such Confidential Information in accordance with the procedures adopted by it in good faith to protect confidential information of third parties delivered to it. Notwithstanding the foregoing, a Purchaser may deliver copies of any Confidential Information to (i) such Purchaser's and its Subsidiaries' directors, officers, employees, and to its agents and professional consultants, (ii) any other Purchaser, (iii) any Person to whom such Purchaser offers to sell any of its Notes or any part thereof or to whom such Purchaser sells or offers to sell a participation in all or any part of its Notes, (iv) any federal or state regulatory authority having jurisdiction over such Purchaser and which requires such disclosure, (v) any Person from which a Purchaser offers to purchase any security of the Company or a Subsidiary, (vi) the National Association of Insurance Commissioners or any rating agency which generally require access to information about a Purchaser's investment portfolio or any similar organization, (vii) Standard & Poor's Ratings Group (in connection with obtaining a private placement number for the Notes) or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (a) in compliance with any law, rule, regulation or order applicable to such Purchaser, (b) in response to any subpoena or other legal process, provided, however, that each Holder agrees to use its reasonable best efforts to inform the Company of the service upon it of such subpoena or legal process, and to reasonably cooperate with the Company should the Company wish (at the Company's expense) to seek a protective order or similar relief relating to such disclosure; or (c) at any time after the acceleration of such Purchaser's Notes upon the occurrence of Event of Default (if such acceleration has not then been rescinded in accordance with paragraph 7C) to the extent that such Purchaser determines disclosure is necessary or appropriate in the enforcement of or for the protection of its rights and remedies under the Transaction Documents. Each Holder, by its acceptance of its Notes, will be deemed to have agreed to be bound by and to be entitled to the benefits of this paragraph 11F as though it were a party to this Agreement. 11G. Notices. (i) All notices and other written communications provided for hereunder shall be given in writing and delivered in person or sent by recognized overnight delivery service (with charges prepaid) or by facsimile transmission, if the original of such facsimile transmission is sent on the same day by a recognized overnight delivery service (with charges prepaid); and 55 (a) if to a Purchaser or its nominee, addressed to such Person at the address or fax number specified for such communications to such Purchaser in Annex 1, or at such other address or fax number as such Person shall have specified to the Company in writing, (b) if to any other Holder, addressed to such other Holder at such address or fax number- as is specified for such Holder in the Note register referenced in paragraph 11N, and (c) if to the Company, or any Guarantor at the address or fax number specified in Annex 2 or at such other address or fax number as the Company, shall have specified to each Holder in writing given in accordance with this paragraph 11G. (ii) Any communication addressed and delivered as herein provided shall be deemed to be received when actually delivered to the address of the addressee (whether or not delivery is accepted) or received by the telecopy machine of the recipient. Any communication not so addressed and delivered shall be ineffective. (iii) Notwithstanding the foregoing provisions of this paragraph 11G, service of process in any suit, action or proceeding arising out of or relating to this Agreement or any document, agreement or transaction contemplated hereby, or any action or proceeding to execute or otherwise enforce any judgment in respect of any breach hereunder or under any document or agreement contemplated hereby, shall be delivered in the manner provided in paragraph 11L. 11H. Descriptive Headings. The descriptive headings of the several paragraphs of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 11I. Solicitation of Holders. The Company will provide each Holder 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 requested under any Transaction Document. The Company will deliver executed or true and correct copies of each such amendment, waiver or consent effected to each Holder promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the Required Holders. Neither the Company nor any Person acting on its behalf will directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee, expense (other than such Holders Expenses) or otherwise, to any Holder for or in connection with any consent by such Holder in its capacity as a Holder to any waiver or amendment of any of the terms of the Transaction Documents unless such remuneration is concurrently paid, on the same terms, ratably to all Holders whether or riot such Holder consented to the waiver or amendment. 11J. Reproduction of Documents. Any Transaction Document and all related documents, including (a) consents, waivers and modifications which may subsequently be 56 executed, (b) documents received by the Purchasers on the purchase of the Notes (except the Notes) an6 (c) financial statements, certificates and other information previously or subsequently furnished to the Purchasers, may be reproduced by the Purchasers by any photographic, photostatic, microfilm, micro- card, miniature photographic or other similar process and the Purchasers may destroy any original document so reproduced. 'The Company agrees and stipulates that any such reproduction shall, to the extent permitted by applicable law, 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 the reproduction was made by a Purchaser in the regular course of business, and to the extent not prohibited by applicable law, that any enlargement, facsimile or further reproduction of the reproduction shall likewise be admissible in evidence. 11K. Governing Law. THIS AGREEMENT IS TO BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT GIVING EFFECT TO ANY LAWS OR RULES RELATING TO CONFLICTS OF LAWS THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE COMMONWEALTH OF MASSACHUSETTS). 11L. Consent to Jurisdiction and Service. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY HEREBY ABSOLUTELY AND IRREVOCABLY CONSENTS AND SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS AND OF ANY FEDERAL COURT LOCATED IN SAID JURISDICTION IN CONNECTION WITH ANY ACTIONS OR PROCEEDINGS BROUGHT AGAINST IT BY ANY HOLDER ARISING OUT OF OR RELATING TO ANY OF THE TRANSACTION DOCUMENTS AND HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. THE COMPANY HEREBY WAIVES AND AGREES NOT TO ASSERT IN ANY SUCH ACTION OR PROCEEDING, IN EACH CASE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (A) IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, (B) IT IS IMMUNE FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO IT OR ITS PROPERTY, (C) ANY SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, OR (D) SUCH TRANSACTION DOCUMENT MAY NOT BE ENFORCED IN OR BY ANY SUCH COURT. IN ANY SUCH ACTION OR PROCEEDING, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY HEREBY ABSOLUTELY AND IRREVOCABLY WAIVES TRIAL BY JURY AND PERSONAL IN HAND SERVICE OF ANY SUMMONS, COMPLAINT, DECLARATION OR OTHER PROCESS AND HEREBY ABSOLUTELY AND IRREVOCABLY AGREES THAT THE SERVICE MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO IT AT ITS ADDRESS SET FORTH IN OR FURNISHED PURSUANT TO THE PROVISIONS OF THIS AGREEMENT, OR BY ANY OTHER MANNER PROVIDED BY LAW. THE COMPANY HEREBY IRREVOCABLY APPOINTS AND AGREES TO MAINTAIN THE 57 APPOINTMENT OF CT CORPORATION SYSTEM, INC. WITH OFFICES AS OF THE DATE OF THIS AGREEMENT AT 2 OLIVER STREET, BOSTON, MASSACHUSETTS 02109 (PROVIDED IF CT CORPORATION SYSTEM, INC. IS NO LONGER ABLE TO ACT AS SUCH AN AGENT, THEN OF ANOTHER CORPORATE AGENT OF NATIONAL STANDING WITH OFFICES WITHIN THE COMMONWEALTH OF MASSACHUSETTS IF THE COMPANY HAVE GIVEN EACH HOLDER PRIOR WRITTEN NOTICE OF THE NAME AND ADDRESS OF SUCH NEW CORPORATE AGENT), AS ITS AGENT TO RECEIVE FOR AND ON ITS BEHALF, SERVICES OF PROCESS IN THE COMMONWEALTH OF MASSACHUSETTS AND THE FEDERAL COURTS LOCATED THEREIN IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE TRANSACTION DOCUMENTS AND THE COMPANY AGREES THAT SUCH SERVICE SHALL BE DEEMED COMPLETED UPON THE DATE 10 DAYS AFTER DELIVERY TO SUCH AGENT WHETHER OR NOT SUCH AGENT GIVES NOTICE THEREOF TO THE COMPANY. ANYTHING HEREINBEFORE TO THE CONTRARY NOTWITHSTANDING, ANY HOLDER MAY SUE THE COMPANY IN ANY OTHER APPROPRIATE JURISDICTION AND ANY PARTY MAY SUE ANY OTHER PARTY ON A JUDGMENT RENDERED BY ANY COURT PURSUANT TO THE PROVISIONS OF THE FIRST SENTENCE OF THIS PARAGRAPH II L IN THE COURTS OF ANY COUNTRY, STATE OF THE UNITED STATES OR PLACE WHERE SUCH OTHER PARTY OR ANY OF ITS PROPERTY OR ASSETS MAY BE FOUND OR IN ANY OTHER APPROPRIATE JURISDICTION. 11M. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. 11N. Registration, Transfer, Exchange and Replacement of Notes. 11N(l). Registration. The Notes are to be issued and are transferable in whole or in part as registered Notes without coupons in denominations of at least $1,000,000, except as may be necessary to reflect any principal amount less than $1,000,000 and may be exchanged for one or more Notes of any authorized denomination and like class and aggregate outstanding principal amount. The Company shall keep at the principal executive office of the Company a register in which the Company shall record the registrations of the Notes by class of Note and the names and addresses of the Holders from time to time and all transfers thereof. The Company shall provide any Holder who is a Purchaser or an Institutional Investor or who otherwise holds not less than 10% of the aggregate principal amount of the Notes then outstanding, promptly upon request, a complete and correct copy of the names and addresses of the then Holders. 11N(2). Transfer and Exchange. Upon surrender of a Note to the Company for registration of transfer or exchange endorsed or accompanied by a written instrument of transfer duly executed by the registered Holder or its attorney duly authorized in writing and accompanied by the address for notices, the Company shall at its expense (except as provided below), execute and deliver one or more replacement Notes of like tenor and class and of a like aggregate amount, registered in the name of such Transferee or Transferees. Each new Note will bear interest from the date to which interest shall have been paid ion the surrendered Note or the 58 date of surrender 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. If a transfer of a Note is not made pursuant to an effective registration statement under the Securities Act, the Company may require the transferor to deliver, prior to such transfer, an opinion of counsel, which may be counsel to such transferor, reasonably satisfactory to the Company, that such Note may be sold without registration under the Act. Notwithstanding anything contained herein to the contrary, each Purchaser agrees that it will not knowingly transfer its Note(s) to a Competitor unless at such time an Event of Default specified in clause (i) of paragraph 7A shall exist or such Note(s) have been accelerated pursuant to paragraph 7B and such acceleration has not been rescinded pursuant to paragraph 7C. 11N(3). Replacement. Upon receipt of written notice from a Holder of the loss, theft, destruction or mutilation of a Note and, in the case of any such loss, theft or destruction, upon receipt of an indemnification agreement of such Holder (and, in the case of a Holder which is not a Qualified Institutional Buyer, with such security as may be reasonably requested by the Company) satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Note, the Company will make and deliver a new Note, at its expense, of like tenor and class, in lieu of the lost, stolen, destroyed or mutilated Note, and each new Note will bear interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or if no interest has been paid thereon, the date of issue of such lost, stolen, destroyed or mutilated Note. 11O. Compliance by Subsidiaries. The Company, as the shareholder of its Subsidiaries, shall cause such meetings to be held, votes to be cast, resolutions to be passed, by-laws to be made and confirmed, documents to be executed and all other things and acts to be done to ensure that, at all times, the provisions of this Agreement relating to its Subsidiaries are complied with. 11P. Severability. If any provision of this Agreement shall be held or deemed to be, or shall in fact be, invalid, inoperative, illegal or unenforceable as applied to any particular case in any jurisdiction because of the conflict of such provision with any constitution or statute or rule of public policy or for any other reason, such circumstance shall not have the effect of rendering the provision or provisions in question invalid, inoperative, illegal or unenforceable in any other jurisdiction or in any other case or circumstance or of rendering any other provision or provisions herein contained invalid, inoperative, illegal or unenforceable to the extent that such other provisions are not themselves actually in conflict with such constitution, statute or rule of public policy, but this Agreement shall be reformed and construed in any such jurisdiction or case as if such invalid, inoperative, illegal or unenforceable provision had never been contained herein and such provision reformed so that it would be valid, operative and enforceable to the maximum extent permitted in such jurisdiction or in such case. 11Q. Termination. This Agreement and the rights of the Holders and the obligations of the Company hereunder shall not terminate until each of the Notes, including all principal, interest, including interest on overdue interest and Make Whole Amount has been indefeasibly paid in full and all Expenses and all other amounts owed to any Purchaser or any Holder pursuant to the terms of any Transaction Document has been indefeasibly paid in full. 59 11R. 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 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. 60 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed and delivered by one of its duly authorized officers;. COMPANY: MURPHY FARMS, INC. By: ----------------------------------- Title: Vice President of Finance and Chief Financial Officer PURCHASERS: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: ----------------------------------- Title: Investment Officer MELLON BANK, N.A., solely in its capacity as Trustee for the Long-Term Investment Trust (as directed by John Hancock Mutual Life Insurance Company), and not in its individual capacity By: ----------------------------------- Title: Unreadable LUCENT TECHNOLOGIES INC. MASTER PENSION TRUST By: John Hancock Mutual Life Insurance Company, as Investment Advisor By: ----------------------------------- Title: Investment Officer 61 INVESTORS PARTNER LIFE INSURANCE COMPANY By: ----------------------------------- Title: Investment Officer JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY By: ----------------------------------- Title: Investment Officer SIGNATURE 1A (CAYMAN), LTD. By: John Hancock Mutual Life Insurance Company, as Portfolio Advisor By: ------------------------------------- Title: Investment Officer 62 EX-4.9B 9 0009.txt GUARANTY EXHIBIT 4.9(b) GUARANTY THIS GUARANTY, dated as of January 24, 2000 (as amended or restated from time to time, this "Guaranty"), by Smithfield Foods, Inc., a Virginia corporation (together with its successors and assigns, the "Guarantor"), in favor of each of the Noteholders (as such term is hereinafter defined). 1. PRELIMINARY STATEMENT. 1.1 Murphy Farms, Inc., a North Carolina corporation (together with its successors and assigns, the "Company"), is a party to a certain Note Purchase Agreement, dated as of March 2, 1999 (the "Existing Note Purchase Agreement," and as amended by the Amendment and Consent referred to below and as further amended or restated from time to time, the "Note Purchase Agreement"), entered into with each of the institutional investors listed on Annex 1 thereto (together with their respective successors and assigns, the "Noteholders"), pursuant to which the Company issued to the Noteholders (i) $75,000,000 in aggregate original principal amount of its 8.25% Senior Unsecured Fixed Rate Notes (the "Fixed Rate Notes") and (ii) $25,000,000 in aggregate original principal amount of its Senior Unsecured LIBOR Rate Notes (such Senior Unsecured LIBOR Rate Notes, collectively with the Fixed Rate Notes, are herein referred to as the "Notes"). Capitalized terms used herein and not otherwise defined shall have the meanings assigned thereto in the Note Purchase Agreement. 1.2 Pursuant to a certain Stock Acquisition and Plan of Reorganization dated as of November 15, 1999 (the "Acquisition Agreement"), entered into by the Guarantor with Wendell H. Murphy and other stockholders of the Company and certain of its affiliates, the Guarantor has agreed to acquire the stock of the Company and certain of its affiliates. 1.3 The Company and the Guarantor have requested the Noteholders to enter into that certain Amendment to Note Purchase Agreement and Consent, dated as of the date hereof (the "Amendment and Consent"), with the Company for the purpose of consenting to the transactions contemplated by the Acquisition Agreement and amending certain provisions of the Existing Note Purchase Agreement, and in order to induce the Noteholders to enter into the Amendment and Consent, the Guarantor has agreed to enter into this Guaranty. 1.4 All acts and proceedings required by law and by the articles of incorporation and by-laws of the Guarantor necessary to constitute this Guaranty 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 by the Guarantor. 2. GUARANTY AND OTHER RIGHTS AND UNDERTAKINGS 2.1 Guarantied Obligations. The Guarantor, in consideration of the execution and delivery of the Amendment and Consent by the Noteholders, hereby irrevocably, unconditionally and absolutely guarantees, on a continuing basis, to each Noteholder, as and for its own debt, until final and indefeasible payment has been made: (a) the due and punctual payment by the Company of the principal of, and interest, and the Make Whole Amount (if any) 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 the Noteholders under the Note Purchase Agreement and the Notes, 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 hereof and thereof; it being the intent of the Guarantor that the guaranty set forth herein shall be a continuing 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 Note Purchase Agreement and the Notes. All of the obligations set forth in clause (a) and clause (b) of this Paragraph 2.1 are referred to herein as the "Guarantied Obligations" and the guaranty thereof contained herein is referred to herein as the "Unconditional Guaranty". This Unconditional Guaranty is a primary, original and immediate obligation of the Guarantor and is an absolute, unconditional, continuing and irrevocable guaranty of payment and performance and shall remain in full force and effect until the full, final and indefeasible payment of the Guarantied Obligations. 2.2 Performance Under the Note Purchase Agreement. In the event the Company fails to pay, perform, keep, observe, or fulfill any Guarantied Obligation in the manner provided in the Notes or in the Note 2 Purchase Agreement, the Guarantor 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 and the Notes. 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 maturity of the Notes, forthwith become due and payable without notice, regardless of whether the acceleration of the maturity of the Notes shall be stayed, enjoined, delayed or otherwise prevented. 2.3 Releases. The Guarantor consents and agrees that, without any notice whatsoever to or by it and without impairing, releasing, abating, deferring, suspending, reducing, terminating or otherwise affecting its obligations hereunder, each Noteholder, by action or inaction, may: (a) compromise or settle, 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 this Guaranty, the Notes, the Note Purchase Agreement, any other guaranty or agreement or instrument related thereto or hereto; (b) assign, sell or transfer, or otherwise dispose of, any one or more of the Notes; (c) grant waivers, extensions, consents and other indulgences of any kind whatsoever to the Company or any other guarantor in respect of any one or more of this Guaranty, the Notes, the Note Purchase Agreement, any other guaranty or any agreement or instrument related thereto or hereto; (d) amend, modify or supplement in any manner whatsoever and at any time (or from time to time) any one or more of the Notes, the Note Purchase Agreement, any other guaranty or any agreement or instrument related hereto; (e) release or substitute any one or more of the endorsers or guarantors of the Guarantied Obligations, whether parties hereto or not; and 3 (f) sell, exchange, release, surrender or enforce, by action or inaction, any property at any time pledged or granted as security in respect of the Guarantied Obligations in accordance with the terms and conditions of the agreements and instruments pursuant to which such property was pledged or granted (as such agreements and instruments may be amended from time to time, and without any requirement of notice of such amendment to the Guarantor), whether so pledged or granted by the Company, the Guarantor or another guarantor of the Company's obligations under the Note Purchase Agreement, the Notes, any other guaranty or any agreement or instrument related hereto. 2.4 Waivers. To the fullest extent permitted by law, the Guarantor does hereby waive: (a) any notice of (i) acceptance of this Unconditional Guaranty; (ii) any purchase of the Notes under the Note Purchase Agreement, or the creation, existence or acquisition of any of the Guarantied Obligations, or the amount of the Guarantied Obligations, subject to the Guarantor's right to make inquiry of each Noteholder to ascertain the amount of the Guarantied Obligations owing to such Noteholder at any reasonable time, provided that the Guarantor will look solely to the Company for the determination of the identities of the Noteholders; (iii) any transfer of Notes from one holder to another; (iv) any adverse change in the financial condition of the Company or any other fact that might increase, expand or affect the Guarantor's risk hereunder; (v) presentment for payment, demand, protest, and notice thereof as to the Notes or any other instrument; (vi) any Default or Event of Default; and (vii) any kind or nature whatsoever to which the Guarantor might otherwise be entitled, other than those specifically required to be given to the Guarantor pursuant to the terms of this Guaranty; 4 (b) the right by statute or otherwise to require any Noteholder to institute suit against the Company, the Guarantor, or any other guarantor or to exhaust the rights and remedies of any Noteholder against the Company or any other guarantor, including, specifically (but not limited to) any rights the Guarantor might otherwise have had under Virginia Code Sections 49-25 and 49-26, et. seq. and R.C.G.S. Sections 26-7, et. seq. (and any -- --- -- --- successor statute); (c) the benefit of any stay (except in connection with a pending appeal), valuation, appraisal, redemption or extension law now or at any time hereafter in force which, but for this waiver, might be applicable to any sale of property of the Guarantor made under any judgment, order or decree based on this Guaranty, and the 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 such law; (d) any defense or objection to the absolute, primary, continuing nature, or the validity, enforceability or amount, of this Unconditional Guaranty, including, without limitation, any defense based on (and the primary, continuing nature, and the validity, enforceability and amount, of this Unconditional Guaranty shall be unaffected by), any of the following: (i) any change in future conditions; (ii) any change of law; (iii) any invalidity or irregularity with respect to the issuance or assumption of any obligations (including, without limitation, the Note Purchase Agreement, the Notes or any agreement or instrument related hereto) by the Company or any other Person; (iv) the execution and delivery of any agreement at any time hereafter (including, without limitation, the Note Purchase Agreement, the Notes or any agreement or instrument related hereto) of the Company or any other Person; (v) the genuineness, validity, regularity or enforceability of any of the Guarantied Obligations; 5 (vi) any default, failure or delay, willful or otherwise, in the performance of any obligations by the Company or any other guarantor; (vii) any creditors' rights, bankruptcy, receivership or other insolvency proceeding of the Company or the Guarantor, or sequestration or seizure of any property of the Company or the Guarantor, or any merger, consolidation, reorganization, dissolution, liquidation or winding up or change in corporate constitution or corporate identity or loss of corporate identity of the Company or the Guarantor; (viii) any disability or other defense of the Company or the Guarantor to payment and performance of all Guarantied Obligations other than the defense that the Guarantied Obligations shall have been fully and finally performed and indefeasibly paid; (ix) the cessation from any cause whatsoever of the liability of the Company or the Guarantor in respect of the Guarantied Obligations; (x) impossibility or illegality of performance on the part of the Company under the Note Purchase Agreement or the Notes or of the Guarantor under this Guaranty; (xi) any change in the circumstances of the Company, the Guarantor or any other Person, whether or not foreseen or foreseeable, whether or not imputable to the Company or the Guarantor, including, without limitation, impossibility of performance through fire, explosion, accident, labor disturbance, floods, droughts, embargoes, wars (whether or not declared), civil commotions, acts of God or the public enemy, delays or failure of suppliers or carriers, inability to obtain materials, economic or political conditions, or any other causes affecting performance, or any other force majeure, whether or not beyond the control of the Company or the Guarantor and whether or not of the kind hereinbefore specified; (xii) any attachment, claim, demand, charge, Lien, order, process, encumbrance or any other happening or event or reason, similar or dissimilar to the foregoing, or any withholding or diminution at the source, by reason of any taxes, assessments, 6 expenses, indebtedness, obligations or liabilities of any character, foreseen or unforeseen, and whether or not valid, incurred by or against any Person, or any claims, demands, charges, Liens or encumbrances of any nature, foreseen or unforeseen, incurred by any Person, or against any sums payable under the Note Purchase Agreement or the Notes or any agreement or instrument related hereto so that such sums would be rendered inadequate or would be unavailable to make the payment as herein provided; (xiii) any change in the ownership of the equity securities of the Company, the Guarantor or any other Person liable in respect of the Notes; or (xiv) any other action, happening, event or reason whatsoever that shall delay, interfere with, hinder or prevent, or in any way adversely affect, the performance by the Company of any of its obligations under the Note Purchase Agreement or the Notes or of the Guarantor under this Guaranty. 2.5 Certain Waivers of Subrogation, Reimbursement and Indemnity. Until the Guarantied Obligations have been finally and indefeasibly paid, the Guarantor shall have no right of subrogation, reimbursement, or indemnity whatsoever in respect of the Guarantied Obligations, and no right of recourse to or with respect to any assets or property of the Company. 2.6 Invalid Payments. To the extent 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 or officer under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, state or federal law, or any common law or equitable cause, then to the extent of such payment or repayment, the obligation or part thereof intended to be satisfied shall be revived and continued in full force and effect as if said payment had not been made and the Guarantor shall be primarily liable for such obligation. 7 2.7 Marshaling. Neither any Noteholder nor any Person acting for the benefit of any Noteholder shall be under any obligation to marshal any assets in favor of the Guarantor or against or in payment of any or all of the Guarantied Obligations. 2.8 Subordination. In the event that, for any reason whatsoever, the Company or a Person obligated in respect of the Guarantied Obligations pursuant to another agreement, is now or hereafter becomes indebted to the Guarantor in any manner (such indebtedness referred to as an "Affiliate Obligation"), the amount of such Affiliate Obligation, interest thereon, and all other amounts due with respect thereto, shall, at all times during the existence of a Default or an Event of Default, be subordinate as to time of payment and in all other respects to all the Guarantied Obligations, and the Guarantor shall not be entitled to enforce or receive payment thereof until all sums then due and owing to the Noteholders in respect of the Guarantied Obligations shall have been paid in full, except that the Guarantor may enforce (and shall enforce, at the request of the Required Holders, and at the Guarantor's expense) any obligations in respect of any such Affiliate Obligation owing to the Guarantor from the Company or such indebted Person so long as all proceeds in respect of any recovery from such enforcement shall be held by the Guarantor in trust for the benefit of the Noteholders, to be paid to the Noteholders as promptly as reasonably possible. If any other payment, other than pursuant to the immediately preceding sentence, shall have been made to the Guarantor by the Company or such indebted Person on any such Affiliate Obligation during any time that a Default or an Event of Default exists and there are Guarantied Obligations outstanding, the Guarantor shall hold in trust all such payments for the benefit of the Noteholders, to be paid to the Noteholders as promptly as reasonably possible. 2.9 Setoff, Counterclaim or Other Deductions. Except as otherwise required by law, each payment by the Guarantor shall be made without setoff, counterclaim or other deduction. 2.10 Election by Guarantor to Perform Obligations. Any election by the Guarantor to pay or otherwise perform any of the obligations of the Company under the Notes, the Note Purchase Agreement or any agreement or instrument related hereto shall not release the Company, the Guarantor or any other guarantor from such obligations or any of such Person's 8 other obligations under the Notes, the Note Purchase Agreement or any agreement or instrument related hereto. 2.11 No Election of Remedies by Noteholders. To the extent provided in the Note Purchase Agreement, each Noteholder shall, individually or collectively, have the right to seek recourse against the Guarantor to the fullest extent provided for herein for the Guarantor's obligations under this Guaranty in respect of the Guarantied Obligations. 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 any Noteholder against the Company or the Guarantor under any document or instrument evidencing obligations of the Company or the Guarantor to such Noteholder shall serve to diminish the liability of the Guarantor under this Guaranty, except to the extent that such Noteholder finally and unconditionally shall have realized payment by such action or proceeding. 2.12 Separate Action; Other Enforcement Rights. Each of the rights and remedies granted under this Guaranty to each Noteholder in respect of the Notes held by such Noteholder may be exercised by such Noteholder without notice by such Noteholder to, or the consent of or any other action by, any other Noteholder. Each Noteholder may proceed to protect and enforce this Unconditional Guaranty 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. 2.13 Noteholder Setoff. Each Noteholder shall have, to the fullest extent permitted by law and this Guaranty, a right of set-off against any and all credits and any and all other property of the Guarantor, now or at any time whatsoever, with or in the possession of, such Noteholder, or anyone acting for such Noteholder, to ensure the full performance of any and all obligations of the Guarantor hereunder. 9 2.14 Delay or Omission; No Waiver. No course of dealing on the part of any Noteholder and no delay or failure on the part of any such Person to exercise any right hereunder shall impair such right or operate as a waiver of such right or otherwise prejudice such Person's rights, powers and remedies hereunder. Every right and remedy given by this Unconditional Guaranty or by law to any Noteholder may be exercised from time to time as often as may be deemed expedient by such Person. 2.15 Restoration of Rights and Remedies. If any Noteholder shall have instituted any proceeding to enforce any right or remedy under this Unconditional Guaranty or under any Note held by such Noteholder, and such proceeding shall have been dismissed, 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 Guarantor shall, except as may be limited or affected by any determination (including, without limitation, any determination in connection with any such dismissal) in such proceeding, be restored severally and respectively to its respective former positions hereunder and thereunder, and thereafter, subject as aforesaid, the rights and remedies of such Noteholders shall continue as though no such proceeding had been instituted. 2.16 Cumulative Remedies. No remedy under this Guaranty, the Note Purchase Agreement or the Notes 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 pursuant to this Guaranty, the Note Purchase Agreement or the Notes. 2.17 Limitation on Guarantied Obligations. Notwithstanding anything in Paragraph 2.1 or elsewhere in this Guaranty to the contrary, the obligations of the Guarantor under this Guaranty shall at each point in time be limited to an aggregate amount equal to the greatest amount that would not result in such obligations being subject to avoidance, or otherwise result in such obligations being unenforceable, at such time under applicable law (including, without limitation, to the extent, and only to the extent, applicable to the Guarantor, Section 548 of the Bankruptcy Code of the United States of America and any comparable provisions of the law of any other jurisdiction, any capital preservation law of any jurisdiction and any other law of any jurisdiction that at such time limits the enforceability of the obligations of the Guarantor under this Guaranty). 10 2.18 Maintenance of Offices. The Guarantor will maintain an office at its address set forth in Paragraph 5.3 where notices, presentations and demands in respect of this Guaranty may be made upon it. The Guarantor will maintain its office at such address until such time as the Guarantor shall notify the Noteholders of any change of location of such office. 2.19 Further Assurances. The Guarantor will cooperate with the Noteholders and execute such further instruments and documents as the Required Holders shall reasonably request to carry out, to the reasonable satisfaction of the Required Holders, the transactions contemplated by the Note Purchase Agreement, the Notes, this Guaranty and the documents and instruments related thereto. 3. INTERPRETATION OF THIS GUARANTY 3.1 Terms Defined. As used in this Guaranty, capitalized terms have the meaning specified in the Note Purchase Agreement unless otherwise specified below or set forth in the paragraph of this Guaranty 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): Acquisition Agreement -- Paragraph 1.2. Affiliate Obligation -- Paragraph 2.8. Amendment and Consent -- Paragraph 1.3. Company -- Paragraph 1.1. Existing Note Purchase Agreement -- Paragraph 1.1. Fixed Rate Notes -- Paragraph 1.1. Guarantied Obligations -- Paragraph 2.1. Guarantor -- has the meaning assigned to such term in the first paragraph hereof. 11 Guaranty, this -- has the meaning assigned to such term in the first paragraph hereof. Note Purchase Agreement -- Paragraph 1.1. Noteholders -- Paragraph 1.1. Notes -- Paragraph 1.1. Unconditional Guaranty -- Paragraph 2.1. 3.2 Paragraph Headings and Construction. (a) Paragraph Headings, etc. The titles of the Paragraphs 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 as a whole and not to any particular Paragraph or other subdivision. Unless otherwise specified, references to Paragraphs are to Paragraphs of this Guaranty. (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. 4. WARRANTIES AND REPRESENTATIONS The Guarantor represents and warrants to each Noteholder, as of the date hereof, as follows: 4.1 Generally. (a) The Guarantor is fully aware of the financial condition of the Company and is delivering this Guaranty based solely upon its own independent investigation and in no part upon any representation or statement of any Noteholder with respect thereto. The Guarantor is in a position to obtain, and hereby assumes full responsibility for obtaining, any 12 additional information concerning the financial condition of the Company as the Guarantor may deem material to its obligations hereunder, and the Guarantor is not relying upon, nor expecting, any Noteholder to furnish it any information concerning the financial condition of the Company. (b) As of the date of the execution and delivery of this Guaranty, the fair salable value of the assets of the Guarantor, taken as a whole, exceeds its liabilities, taken as a whole; the Guarantor is able to pay and discharge all of its debts (including, without limitation, its current liabilities) as they become due and after giving effect to the transactions contemplated by this Guaranty, the Guarantor will not become unable to pay and discharge such debts as they become due; there are no presently pending material court or administrative proceedings or undischarged judgments against the Guarantor; and no tax Liens have been filed or threatened against the Guarantor, nor is the Guarantor in default or claimed default under any agreement for borrowed money. (c) The Guarantor is a corporation duly organized and validly existing and in good standing under the laws of its jurisdiction of incorporation. The Guarantor has the corporate power to own its properties and carry on its business as it is now being conducted. The Guarantor has the valid authority and the corporate power to enter into and perform, and has taken all necessary action to authorize the entry into, and the performance and delivery of, this Guaranty and the transactions contemplated hereby. (d) This Guaranty has been duly authorized by all necessary action on the part of the Guarantor, has been duly executed and delivered by one or more duly authorized officers of the Guarantor, and constitutes a legal, valid and binding obligation of the Guarantor. (e) The entry into and performance of this Guaranty and the transactions contemplated hereby do not and will not conflict with any applicable law or regulation or official or judicial order, conflict with the articles of incorporation or by-laws of the Guarantor, conflict with any agreement or document to which the Guarantor is a party or that is binding upon it or any of its properties, or result in the creation or imposition of any Lien on any of its properties pursuant to the provisions of any agreement or document. 13 4.2 Solvency. The fair value of the business and assets of each of the Company and the Guarantor will be 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 after giving effect to the transactions contemplated by this Guaranty, the Amendment and Consent and the Stock Acquisition Agreement. Neither the Company nor the Guarantor, after giving effect to the transactions contemplated by this Guaranty, the Amendment and Consent and the Acquisition Agreement, will be engaged in any business or transaction, or about to engage in any business or transaction, for which such Person has unreasonably small assets or capital (within the meaning of applicable law, including, without limitation, Section 548 of the United States Bankruptcy Code), and neither the Company nor the Guarantor has any intent to (a) hinder, delay or defraud any entity to which it is, or will become, on or after the date hereof, indebted, or (b) incur debts that would be beyond its ability to pay as they mature. 5. MISCELLANEOUS 5.1 Successors and Assigns. (a) Whenever the Guarantor or any of the parties to the Note Purchase Agreement 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 by or on behalf of the Guarantor shall bind its successors and assigns 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. (b) The Guarantor agrees to take such action as may be reasonably requested by any Noteholder in connection with the transfer of the Notes of such Noteholder in accordance with the requirements of the Note Purchase Agreement in connection with providing an executed copy of this Guaranty to 14 the new Noteholder or Noteholders of such Notes, provided that no additional obligations of the Guarantor shall thereby be created but rather that its existing obligations shall be more particularly stated in respect of one or more future Noteholders that are the subject of this Guaranty. 5.2 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. 5.3 Communications. (a) Method; Address. All communications hereunder shall be in writing, shall be delivered in the manner required by the Note Purchase Agreement, and shall be addressed (i) if to the Guarantor, at Smithfield Foods, Inc. 200 Commerce Street Smithfield, Virginia 23430 Attention: Mr. C. Larry Pope Fax: (757) 365-3023, (ii) if to a Purchaser, at the address set forth on Annex 1 to the Note Purchase Agreement for such Noteholder, and further including any parties referred to on such Annex 1 which are required to receive notices in addition to such Noteholder, and (ii) if to a Noteholder that is not a Purchaser, at the address set forth in the register for the registration and transfer of Notes maintained pursuant to Paragraph 11N(1) of the Note Purchase Agreement for such Noteholder, or to any such party at such other address as such party may designate by notice duly given in accordance with this Paragraph 5.3. (b) When Given. Any communication addressed and delivered as provided by Paragraph 5.3(a) shall be deemed to be received when actually delivered to the address of the addressee (whether or not delivery 15 is accepted) or received by the telecopy machine of the recipient. Any communication not so addressed and delivered shall be ineffective. 5.4 Governing Law. THIS GUARANTY IS TO BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND SHALL BE GOVERNED BY, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT GIVING EFFECT TO ANY LAWS OR RULES RELATING TO CONFLICTS OF LAWS THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE COMMONWEALTH OF MASSACHUSETTS). 5.5 Effective Date. This Guaranty shall be effective as of the date hereof. 5.6 Benefits of Guaranty Restricted. Nothing express or implied in this Guaranty is intended or shall be construed to give to any Person other than the Guarantor and the Noteholders any legal or equitable right, remedy or claim under or in respect hereof or any covenant, condition or provision herein contained; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Guarantor and the Noteholders. 5.7 Survival of Representations and Warranties; Entire Agreement. All representations and warranties contained herein or made in writing by the Guarantor in connection herewith shall survive the execution and delivery hereof. 5.8 Expenses. (a) The Guarantor shall pay when billed the reasonable costs and expenses (including reasonable attorneys' fees) incurred by the Noteholders in connection with the consideration, negotiation, preparation or execution of any amendments, waivers, consents, standstill agreements and other similar agreements with respect hereto (whether or not any such amendments, waivers, consents, standstill agreements or other similar agreements are executed). 16 (b) At any time when any one or more of the Company or the Guarantor and the Noteholders are conducting restructuring or workout negotiations in respect hereof, or a Default or Event of Default exists, the Guarantor shall pay when billed the reasonable costs and expenses (including reasonable attorneys' fees and the reasonable fees of professional advisors) incurred by the Noteholders in connection with the assessment, analysis or enforcement of any rights or remedies that are or may be available to the Noteholders. (c) If the Guarantor shall fail to pay when due any principal of, or Make Whole Amount or interest on, any Note, the Guarantor shall pay to each Noteholder, to the extent permitted by law, such amounts as shall be sufficient to cover the costs and expenses, including but not limited to reasonable attorneys' fees, incurred by such Noteholder in collecting any sums due on the Notes. 5.9 Amendment. This Guaranty may be amended only in a writing executed by the Guarantor and the Required Holders. 5.10 Survival. So long as the Guarantied Obligations and all payment obligations of the Guarantor hereunder shall not have been fully and finally performed and indefeasibly paid, the obligations of the Guarantor hereunder shall survive the transfer and payment of any Note and the payment in full of all the Notes. 5.11 Entire Agreement. This Guaranty constitutes the final written expression of all of the terms hereof and is a complete and exclusive statement of those terms. 17 5.12 Duplicate Originals, Execution in Counterpart. Two or more duplicate originals hereof may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. This Guaranty may be executed in one or more counterparts and shall be effective when at least one counterpart shall have been executed by each party hereto, and each set of counterparts that, collectively, show execution by each party hereto shall constitute one duplicate original. [Remainder of page intentionally blank. Next page is signature page.] 18 IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed on its behalf by a duly authorized officer of the Guarantor. SMITHFIELD FOODS, INC. By________________________________ Name: Title: EX-21 10 0010.txt SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Set forth below is a list of each of the subsidiaries of Smithfield Foods, Inc. (other than subsidiaries whose names have been omitted in accordance with Regulation S-K Item 601(b)(21)(ii)) and their respective jurisdictions of organization. NAME OF SUBSIDIARY JURISDICTION OF ORGANIZATION ------------------ ---------------------------- Animex S.A. Poland Animpol S.A. Poland B&G Farms LLC North Carolina Brown's of Carolina, Inc. North Carolina Carroll's Capital, Inc. North Carolina Carroll's Foods, Inc. North Carolina Carroll's Foods of Brazil, LLC North Carolina Carroll's Foods of Mexico, Inc. North Carolina Carroll's Foods of Virginia, Inc. North Carolina Carroll's Realty Inc. North Carolina Central Plains Farms, Inc. Delaware Charcuterie Roy Inc. Ontario Charcuteries Imperator S.A. France Circle Four Corporation d/b/a Circle Four Farms North Carolina Consolidated Food Brands Inc. Ontario Esskay Investments, Inc. Delaware Gwaltney of Smithfield, Ltd. Delaware Gwaltney Transportation Co., Inc. Delaware Hancock's Old Fashioned Country Ham, Inc. Delaware Jasan Sp. z o.o. Poland Jean d' Erguet S.A. France J. M. Schneider Inc. Ontario John Morrell & Co. Delaware JonMor Investments, Inc. Delaware LMG Investments, Inc. Delaware LMJ Distribution Center, Inc. Georgia Lykes Meat Group, Inc. Delaware Murphy Farms, Inc. North Carolina Murphy Funding, Inc. North Carolina North Side Foods Corp. Delaware North Side Investments, Inc. Delaware NPD Investments, Inc. Delaware Patrick Cudahy Incorporated Delaware PatCud Investments, Inc. Delaware Premium Pork, Inc. Georgia Prochowickie Zaklady Drobiarskie Sp. z o.o. Poland Quarter M Farms, Inc. North Carolina Schneider Corporation Ontario Schneider Foods Inc. Ontario SF Investments, Inc. Delaware SFDS Global Holdings B.V. Netherlands SFFC, Inc. Delaware Smithfield Canada, Ltd. Ontario Smithfield Foods de Mexico de R.L. de C.V. Mexico Smithfield Inn Corporation Delaware Smithfield International, Inc. Delaware Smithfield International Investments, Inc. Delaware Smithfield Transportation Co., Inc. Virginia Societe Bretonne de Salaisons France Societe Financiere de Gestion et de Participation S.A. France Sunnyland, Inc. Georgia Suwalskie Zaklady Drobiarskie Sp. z o.o. Poland The Smithfield Packing Company, Incorporated Virginia Smithfield Packing Transportation Co., Inc. Delaware Zaklady Miesne "Agryf" Sp. z o.o. Poland Zaklady Miesne "Mazury" w Elku Sp. z o.o. Poland Zaklady Miesne "Przylep" S.A. w Przylepoe Poland EX-23 11 0011.txt ACCOUNTANTS CONSENT Exhibit 23 [ARTHUR ANDERSEN LOGO] Report of Independent Public Accountants To the Shareholders of Smithfield Foods, Inc.: We have audited the accompanying consolidated balance sheets of Smithfield Foods, Inc. (a Virginia corporation), and subsidiaries as of April 30, 2000, and May 2, 1999, and the related consolidated statements of income, cash flows, and shareholders' equity for each of the three years in the period ended April 30, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Smithfield Foods, Inc., and subsidiaries as of April 30, 2000, and May 2, 1999, and the results of their operations and their cash flows for each of the three years in the period ended April 30, 2000, in conformity with accounting principles generally accepted in the United States. /s/ Arthur Andersen LLP Richmond, Virginia June 7, 2000 EX-27 12 0012.txt FINANCIAL DATA SCHEDULE
5 1,000 12-MOS MAY-02-1999 APR-30-2000 49,882 0 394,936 4,899 665,143 1,232,726 1,612,043 398,469 3,129,613 622,869 1,187,770 0 0 27,353 875,556 3,129,613 5,150,469 5,150,469 4,456,403 4,456,403 0 0 71,944 119,987 44,875 75,112 0 0 0 75,112 1.54 1.52
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