-----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, HzZzq5q+jjWiKWXjV95J4xCjjvtTWchkghtqK3eMrDJfvESaLWuuRFpN9UZNh02p onc+NM48PPpVqhHhkZcJlg== 0000786617-96-000009.txt : 19961219 0000786617-96-000009.hdr.sgml : 19961219 ACCESSION NUMBER: 0000786617-96-000009 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19960928 FILED AS OF DATE: 19961218 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUDSON FOODS INC CENTRAL INDEX KEY: 0000786617 STANDARD INDUSTRIAL CLASSIFICATION: POULTRY SLAUGHTERING AND PROCESSING [2015] IRS NUMBER: 710427616 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09050 FILM NUMBER: 96682722 BUSINESS ADDRESS: STREET 1: 1225 HUDSON RD CITY: ROGERS STATE: AR ZIP: 72757 BUSINESS PHONE: 5016361100 MAIL ADDRESS: STREET 1: P O BOX 777 CITY: ROGER STATE: AR ZIP: 72757 10-K 1 1996 FISCAL YEAR 10K 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 September 28, 1996 [ ] 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: 1-9050 Hudson Foods, Inc. (Exact name of registrant as specified in its charter) Delaware 71-0427616 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1225 Hudson Road Rogers, Arkansas 72756 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (501) 636-1100 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Name of Each Exchange on Title of Each Class Which Registered Class A Common Stock, $.01 par value New York Stock Exchange, Inc. SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None 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 [ ] 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 in Part III of this Form 10-K or any amendment of this Form 10-K. [ ] On December 2, 1996, there were outstanding 20,540,493 shares of the registrant's Class A common stock, $.01 par value, and 9,602,522 shares of the registrant's Class B common stock, $.01 par value. The Class B common stock is not registered or publicly traded, and its transferability is restricted. The aggregate market value of the 19,644,372 shares of Class A common stock held by non-affiliates of the registrant as of December 2, 1996 was $363,420,882. The aggregate market value of the 2,522 shares of Class B common stock held by non-affiliates of the registrant on December 2, 1996 was $46,657, assuming that each share of Class B common stock has a market value equal to a share of Class A common stock. DOCUMENTS INCORPORATED BY REFERENCE Hudson Foods, Inc. Annual Report for fiscal year ended September 28, 1996 (certain portions incorporated by reference into part II) Proxy Statement for Annual Meeting of Stockholders, February 14, 1997 and Adjournments (certain portions incorporated by reference into Part III) PART I ITEM 1. BUSINESS GENERAL DEVELOPMENT OF BUSINESS Hudson Foods, Inc. ("Hudson" or the "Company") was organized as a privately held company in 1972 by James T. Hudson to purchase a broiler processing plant in Noel, Missouri and other related assets from the Ralston Purina Company. In February 1986, the Company completed an initial public stock offering of 2 million shares of its Class A common stock. The Company issued an additional 2.5 million shares of Class A common stock in November 1994. The Company's poultry operations have grown since 1972 through expansions of existing plants and a series of acquisitions including an integrated turkey operation in 1979 and a major poultry company in 1986 which doubled Hudson's size. In 1994, the Company began construction of a fully integrated broiler complex near Henderson, Kentucky, which began processing in July 1996. Between 1987 and 1990 the Company broadened its product lines to include luncheon meat with the acquisition of three luncheon meat processing plants and the related brand names. In 1990, the Company added another product line, frozen portioned entrees, through the acquisition of Pierre Frozen Foods, Inc. and expanded those operations in 1992 with the purchase of an additional processing plant in Caryville, Tennessee. Most recently, the Company began producing beef products when its newly constructed beef processing plant in Columbus, Nebraska began production in February 1995. The Company sold its Topeka and Wichita, Kansas luncheon meat plants and related brand names during fiscal 1996.The two plants produced ham, bacon and a variety of luncheon meats. The Company continues to produce luncheon meat products at its plant in Albert Lea, Minnesota. NARRATIVE DESCRIPTION OF BUSINESS General The Company was established as a regional fully integrated poultry producer selling commodity-type products in the United States. As a fully integrated producer, the Company controls the breeding, hatching, growing, processing, packaging, marketing and distribution of its product lines. The Company has changed dramatically since 1972 and is now a fully integrated producer of further-processed poultry and a processor of other meat products. The Company's products are produced at plants in several U.S. locations and sold domestically and internationally. According to industry statistics, the Company was the fifth largest poultry company, ranked by annual sales dollars, out of 57 companies that were surveyed./1/ - --------------- /1/ Information contained in the October/November 1996 issue of "Poultry Marketing and Technology." The Company has achieved sales growth through acquisitions, expansions, product line diversification, new product development and the development of an international customer base. The Company has also tried to stabilize its profit margins by shifting production to further-processed products and increasing sales to targeted large customers under supply and pricing arrangements. Consistent with that strategy, Hudson entered into a five-year, cost-plus agreement with Boston Chicken, Inc., a franchiser and operator of Boston Market foodservice stores specializing in complete meals featuring rotisserie roasted chicken. The original agreement, dated October 12, 1994, provided for two Hudson processing plants (one in Dexter, Missouri and one being built near Henderson, Kentucky) to be cost-plus facilities for Boston Chicken. Subsequent to the original agreement, Boston Market significantly expanded the protein options on its menu. As a result, Hudson and Boston Chicken entered into an amended purchase and supply agreement dated April 1, 1996. That amended agreement allows Hudson to expand the products which it supplies to Boston Market. In addition to chicken, the Company may also supply turkey, meat loaf and ham, all with guaranteed minimum quantities. Hudson is currently the major supplier for Boston Market's turkey requirements, with meat loaf and ham shipments to start soon. Due to Boston Market's need for other proteins beyond chicken and strong demand from other Hudson customers for additional chill-pack and individually frozen chicken products, it was agreed that the Henderson, Kentucky facility would be dedicated to the production of those products. The Henderson facility began production in July 1996 and was processing approximately 300,000 birds per week at the end of fiscal 1996. The parties agreed that the facility would be producing 1.3 million birds per week by July 1997 and will increase production consistent with commercially reasonable business practices. Under the agreement, the Company may be reimbursed for certain expenses of the Henderson facility. The Dexter, Missouri facility remains in place as a facility producing chicken products for Boston Chicken. Also, the Company entered into a supply agreement dated April 26, 1994 with Restaurant Services, Inc., as purchasing agent for the Burger King system. The Burger King system has committed to purchase, for a multi-year period, approximately one-third of the capacity of the Company's beef plant and has an option to buy more. Sales to the Burger King system are made based on a formula price plus raw material costs. In addition, the Company is a minority co-investor with Burger King Corporation and SBS Processing, Inc. in a similar beef processing plant in Petersburg, Virginia. Products, Marketing and Customers The following table sets forth, for the periods indicated, the net sales for each of the Company's major product lines and the respective percentage of total sales.
Fiscal Year Ended -------------------------------------------------------------------------------------------------------- September 28, 1996 September 30, 1995 October 1, 1994 Percentage Percentage Percentage Net Sales of Total Sales Net Sales of Total Sales Net Sales of Total Sales --------------- ---------------- --- --------------- --------------- --- --------------- --------------- (In millions) Chicken ................. $ 788.9 57.2% $ 648.3 54.0% $ 533.4 51.2% Turkey .................. 182.6 13.2 145.1 12.1 113.2 10.9 Portioned entrees........ 175.4 12.7 171.4 14.3 175.5 16.9 Beef .................... 90.3 6.6 37.3 3.1 -- -- Luncheon meats .......... 94.2 6.8 159.0 13.2 164.7 15.8 Other /1/................ 47.1 3.5 39.4 3.3 54.0 5.2 --------- ------ -------- ------ -------- ------ Totals......... $1,378.5 100.0% $1,200.5 100.0% $1,040.8 100.0% ========= ====== ======== ====== ======== ====== - --------------- /1/ Primarily includes sales of liquid and dried egg products, live birds, feed, transportation and miscellaneous product sales .
The following table sets forth for the periods indicated the net sales to each of the Company's customer groups and the respective percentage of total sales.
Fiscal Year Ended ------------------------------------------------------------------------------------------------- September 28, 1996 September 30, 1995 October 1, 1994 Percentage Percentage Percentage Net Sales of Total Sales Net Sales of Total Sales Net Sales of Total Sales ------------- --------------- --- -------------- ----------------- -- --------------- ----------- (In millions) Foodservice..................... $ 350.3 25.4% $ 324.5 27.0% $ 313.0 30.1% Club stores..................... 250.2 18.2 184.4 15.4 161.6 15.5 Retail.......................... 487.1 35.3 506.2 42.2 440.6 42.3 International................... 241.1 17.5 139.2 11.6 60.7 5.8 Other........................... 49.8 3.6 46.2 3.8 64.9 6.3 -------- ------ -------- ------ -------- ------ Totals................ $1,378.5 100.0% $1,200.5 100.0% $1,040.8 100.0% ======== ====== ======== ====== ======== ======
The Company's products are sold domestically in three primary markets: foodservice, club store and retail. The foodservice market is comprised primarily of full service and fast food restaurants, prepared food companies, various institutional customers such as schools, colleges and health care facilities, vending machine operators, convenience stores and delicatessens. The retail market includes grocery store chains, independent grocery stores and grocery wholesalers. The Company sells its products nationwide through independent brokers and sales personnel of the Company under a variety of brand names, product lines and private labels. The products are distributed from the Company's plants, storage and distribution facilities and independent storage facilities to the final customer or distributors via Company- owned trucks or contract carriers. The Company's products are sold internationally to wholesalers under the Hudson(R), Delightful Farms(R) and Pierre(TM) brand names and also private labels. The primary raw materials used by the Company in its operations include raw meat, feed ingredients, cooking ingredients and packaging supplies. The Company grows substantially all the live chickens and turkeys used by its processing plants but also buys live birds and processed poultry from outside sources. All beef and pork raw materials are purchased from outside sources. The Company believes that its sources of supply for these materials are adequate for its present needs and does not anticipate any difficulty in acquiring these materials in the future. Chicken. The Company offers a wide variety of further-processed chicken products including: cooked and uncooked individually frozen boneless and bone-in chicken pieces; marinated whole chicken; breaded and fried chicken breast patties, tenderloins and nuggets; buffalo-style wings and barbecued chicken. These products are sold to retail, foodservice, club store, international and other customers under the Hudson(R) and Delightful Farms(R) brand names. In addition to further-processed products, the Company sells chill-packed and ice-packed chicken parts and whole birds. The chill-packed products are sold to retail and foodservice outlets under the Hudson(R) brand name and private labels. The ice-packed products are sold in bulk to retail and foodservice outlets. Turkey. The Company offers a full line of further-processed turkey products which includes smoked turkey, turkey sausage, turkey pastrami, turkey salami, turkey bologna and turkey ham sold under the Hudson(R) brand name. The Company also sells a premium, fully cooked turkey breast produced in a variety of flavors and sold under the Gourmet Recipe(R) line. Another major turkey product is raw marinated breasts sold under the Carving Station(TM) line. During fiscal 1996, the Company marketed some individually packaged whole turkeys under the Hudson(R) brand name and private labels, but has since begun to process and sell all its turkey as further-processed products. The Company's turkey products are sold primarily to retail, foodservice and international customers. Portioned Entrees. The Company offers a full line of portion-controlled products including: flame-broiled chicken, beef, turkey and pork patties; wrapped microwaveable sandwiches; sausage patties and links; country-fried steak; chicken nuggets; unbreaded char-broiled chicken; beef and pork fingers; pizza; potato skin kits; chicken fajita kits and flavored chicken wings. The Company's portioned entree products are primarily sold to domestic retail, foodservice and club store customers, but some portioned entree products are also sold to international wholesalers. Foodservice customers buying portioned entree products primarily include restaurants, cafeterias, schools, colleges, health-care facilities, vending machine operators and sandwich makers that service convenience stores. The Company is one of the nation's largest processors of United States Department of Agriculture ("USDA") commodity beef and pork into further-processed products for school lunch programs. The portioned entree products are primarily marketed under the Pierre(TM) and Hudson(R) brand names and also under the Classic Seasons(R), Rib-B-Q(R), and Fast Choice(TM) product lines. Beef. The Company primarily sells hamburger patties to a large foodservice customer. In addition, the Company sells patties and chub packages to other foodservice, club store, retail and international customers. Luncheon Meats. The Company's luncheon meat products include sandwich meats, wieners, sausage, turkey hams, and miscellaneous chicken and turkey products. The Company's luncheon meat products are primarily sold to retail, club store, foodservice and international customers under the Schweigert(R) and Hudson(R) brand names as well as various private labels. International Sales The Company's products are sold internationally through sales offices located in Rogers, Arkansas; Miami, Florida; Gdynia, Poland and Moscow, Russia. International sales accounted for 17.5% of the Company's total sales during fiscal 1996. The Company's products are sold primarily to wholesalers in Russia, Eastern Europe, Asia and Latin America. The majority of these sales are chicken leg quarters in Russia and Poland, but the Company also sells other items such as hot dogs and turkey products. The loss of sales to Russia could have a material adverse effect on the Company. Major Customers The Company's sales to Wal-Mart Stores, Inc. ("Wal-Mart") in fiscal 1996 constituted approximately 18.7% of total sales. No other customer accounted for more than 10% of the Company's sales in fiscal 1996. Sales to the Company's next largest customers, the Burger King system, a Russian wholesaler and Boston Chicken were approximately 5.7%, 5.6% and 4.4%, respectively, of total sales in 1996. The loss of any of these customers could have a material adverse effect on the Company. Competition The primary competitive factors in the poultry industry include price, product quality, product development, brand identification and customer service. Hudson's poultry products compete primarily with other integrated poultry companies. Although poultry is relatively inexpensive in comparison with other meats, the Company also competes indirectly with the producers of other meats and fish. Changes in the relative prices of these foods may affect consumer buying patterns. The Company's portioned entree, luncheon meat and beef product lines compete with regional and national meat processing companies, some of which are divisions of fully integrated companies. Price, product quality, product development, brand identification and customer service are important factors in the business. Regulation The poultry industry is subject to significant government regulation, particularly in the health and environmental areas by the United States Department of Agriculture ("USDA"), the Food and Drug Administration ("FDA") and the Environmental Protection Agency. The Company anticipates increased regulation by the USDA concerning food safety as well as by the FDA regarding the use of medication in feed. The Company's food processing facilities are subject to on-site examination, inspection and regulation by the USDA. The FDA inspects the production of the Company's feed mills. Compliance with applicable regulations has not had a material adverse effect upon the Company's earnings or competitive position in the past and is not anticipated to have a material adverse effect in the future. Management believes that the Company is in substantial compliance with all applicable laws and regulations relating to the operation of its facilities. The Company takes all reasonable precautions to ensure that its flocks are healthy and that its processing plants and other facilities operate in a sanitary and environmentally sound manner. However, events beyond the control of the Company, such as an outbreak of poultry disease in its flocks or the adoption by the government of more stringent environmental regulations, could adversely affect its operations. Employees and Labor Relations As of September 28, 1996, the Company employed 11,470 persons. Generally, the Company believes that relations with its employees are good. ITEM 2. PROPERTY General The Company believes that its facilities are generally in good condition and suitable for their current purposes. The Company regularly engages in construction and other capital improvement projects intended to expand and improve the efficiency of its processing and support facilities. The Company's chicken facilities were approximately 93% utilized in fiscal 1996. The Company's portioned entree, luncheon meat and turkey facilities were generally 85% to 100% utilized in fiscal 1996. The Company's beef facility was approximately 48% utilized in fiscal 1996. The Company's Hope, Arkansas, Springfield, Missouri and Cincinnati, Ohio facilities are subject to mortgages or deeds of trust. Plants and Facilities Chicken. The Company's chicken operations include breeding, hatching, rearing, ingredient procurement, feed formulation and milling, veterinary and other technical services, processing and related transportation and delivery services. The Company both owns farms and contracts with independent growers to maintain the Company's flocks of breeder chickens which lay eggs. The Company transfers the eggs to its hatcheries. The newly hatched broiler chicks are then delivered to independent contract growers or Company-owned farms where they are raised until they reach processing weight, usually within seven weeks. During the growout period, the Company provides growers with feed and other items, as well as supervisory and technical assistance. The broilers are then transported by Company trucks to its processing plants. The Company operates seven chicken processing plants devoted to various phases of slaughtering, dressing, cutting, deboning, further-processing and packaging. These processing plants are located in Hope, Arkansas; Berlin, Maryland; Noel, Missouri; Albertville, Alabama; Dexter, Missouri; Corydon, Indiana and Henderson, Kentucky. The Company operates seven feed mills, nine broiler hatcheries and five protein facilities. The Company's current processing capacity is approximately 5.6 million chickens per week. During fiscal 1996, the Company processed a weekly average of 5.2 million chickens per week, yielding approximately 990.0 million pounds. The Company has plans to expand the production capacity of its Corydon, Indiana facility to 650,000 chickens per week and increase production at its Henderson, Kentucky facility to 1.3 million birds per week, which will increase capacity to approximately 7 million chickens per week. The Company began processing chickens at its newly constructed Henderson, Kentucky complex in July 1996. The complex includes a feed mill, hatchery, processing plant and protein plant. At the end of fiscal 1996, the Company was processing approximately 300,000 chickens per week at the Kentucky processing plant and is scheduled to reach 1.3 million chickens per week by July 1997. The Company's goal is to increase production at the Henderson plant to 2 million chickens per week. Turkey. The Company is a fully integrated turkey processor. The Company's turkey operations include similar processes as discussed above for chicken. The Company operates two turkey processing facilities in Springfield, Missouri. One is a basic processing plant and the other is a further-processing plant. These facilities have an annual production capacity of 183.0 million pounds. During fiscal 1996, the Company produced approximately 176.1 million pounds of turkey products. In addition, the Company operates one feed mill and two hatcheries. Portioned Entrees. The Company produces its portioned entree products at plants in Cincinnati, Ohio and Caryville, Tennessee which have an annual production capacity of approximately 100.0 million pounds. During fiscal 1996, the Company produced approximately 86.6 million pounds of portioned entree products. Beef. The Company completed the construction of a beef processing plant in Columbus, Nebraska in February 1995. The annual production capacity is approximately 190.0 million pounds. During fiscal 1996, the Company produced approximately 92.0 million pounds of beef products. The plant was originally designed to process hamburger patties primarily for the Burger King system. However, the plant was subsequently expanded to allow for additional capacity to serve other customers. Luncheon Meat. The Company's luncheon meat plant is located in Albert Lea, Minnesota. The plant's annual production capacity is approximately 61.0 million pounds. During fiscal 1996, the Company produced approximately 60.2 million pounds of luncheon meat products. Other. The Company has a feed mill and an egg breaking plant in Social Circle, Georgia that produces liquid and dried egg products. ITEM 3. LEGAL PROCEEDINGS On March 16, 1993, the United States of America, by the Attorney General of the United States acting at the request of the Environmental Protection Agency, filed a civil complaint against the Company in the United States District Court for the South District of Indiana, New Albany Division, as civil action No. NA 93-19-C, alleging violations of the Federal Water Pollution Control Act (the "Act"). Subsequently, this action was moved to the Indianapolis Division and assigned Cause No. IP93-0692-C. The United States sought, among other things, a permanent injunction preventing the Company from discharging wastewater in violation of the Act from one of its processing facilities, an order requiring the Company to undertake and expeditiously complete an upgrade of its wastewater treatment system and a civil penalty of up to $25,000 per day for each violation of the Act. The Company has reached an agreement in principle with the United States Department of Justice to settle the litigation without admission of any violation. On October 16, 1996, a consent decree was entered in which the Company agreed to pay a civil penalty in the amount of $506,000 and the Company shall receive a credit in the amount of $5,000 for an administrative penalty it paid to the State of Indiana in 1992. The Company will pay the balance of $501,000 in three equal principal amounts of $167,000 plus interest at an annual rate of 5.53% over a two-year period. The Company also has agreed to implement various supplemental environmental projects over a two-year period totaling at least $300,000 in after-tax value. The Company believes that its operations are in substantial compliance with applicable environmental laws and regulations. However in the past, the Company has paid monetary sanctions for violations of its wastewater discharge permits. There can be no assurance that the Company will not experience future regulatory proceedings and lawsuits relating to the environmental impact of its operations. The Company cannot predict what effect, if any, such future proceedings or lawsuits may have on its operations. The Company is, at any time, involved in ordinary routine litigation incidental to its business. Such litigation is not considered material to the Company's operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS COMMON STOCK The Company's certificate of incorporation permits the issuance of up to 40,000,000 shares each of Class A common stock, $.01 par value, and Class B common stock, $.01 par value. On December 2, 1996, there were 21,417,689 shares of Class A common stock issued (including 877,196 shares held in treasury) and 9,602,522 shares of Class B common stock issued and outstanding. The Transfer Agent and Registrar for both classes of common stock is ChaseMellon Shareholder Services of Los Angeles, California. The Class A common stock has one vote per share, while the Class B common stock has ten votes per share in all matters submitted to a vote of the Company's stockholders. Except as required by law or the certificate of incorporation, holders of Class A or Class B common stock shall vote together as a single class. Holders of Class A and Class B common stock are entitled to receive such dividends and other distributions as may be determined by the Board of Directors out of any funds of the Company legally available therefor. However, no dividend may be declared and paid on the Class B common stock unless a dividend is also declared and paid on the Class A common stock. In such an event, the dividend per share of Class B common stock may not exceed 90% of the dividend per share of Class A common stock. Certain members of the Hudson family own substantially all of the Class B common stock which concentrates voting control over the Company with James T. Hudson and the Hudson family. The Class B common stock voting power is sufficient to, among other things, approve or prevent extraordinary corporate transactions, such as mergers, consolidations or sales of substantially all of the Company's assets and to elect or remove the members of the Board of Directors. Transfer of the Class B common stock may only be made to a "permitted transferee" as defined in the Company's certificate of incorporation, but shares of Class B common stock may be converted by the holder into an equal number of shares of Class A common stock at any time. The Company may not issue additional shares of Class B common stock without the approval of a majority of the votes of the outstanding shares of Class A common stock and Class B common stock, each voting separately as a class, except in connection with stock splits and stock dividends. The Board of Directors and the holders of a majority of the outstanding shares of Class B common stock may approve the conversion of all of the Class B common stock into shares of Class A common stock. In the event of a liquidation of the Company, all assets available for distribution after payment of all prior claims would be divided among and paid ratably to the holders of Class A common stock and Class B common stock. Subject to any conversion rights of the holders of Class B common stock, holders of Class A and Class B common stock have no preemptive rights to subscribe for or receive any part of the authorized stock of the Company, additional or increased issues of stock of any class or any obligations convertible into any class or classes of stock. Further, no stockholder has the right to cumulate votes in the election of directors. On December 2, 1996, the 20,540,493 shares of Class A common stock then outstanding were held by approximately 1,261 holders of record (excluding persons holding shares in nominee names). The Company's Class A common stock is currently traded on the New York Stock Exchange ("NYSE") under the symbol "HFI." The following table sets forth the quarterly high and low sales prices for the Class A common stock as reported on the NYSE.
High Low Fiscal 1995 First Quarter......................................... 17 7/8 13 7/8 Second Quarter........................................ 20 16 3/4 Third Quarter......................................... 19 1/4 12 3/4 Fourth Quarter........................................ 15 1/2 13 1/4 Fiscal 1996 First Quarter......................................... 17 1/2 13 5/8 Second Quarter......................................... 18 1/8 12 3/4 Third Quarter.......................................... 15 1/8 11 1/2 Fourth Quarter......................................... 14 1/2 12 1/8 Fiscal 1997 First Quarter (through December 2, 1996)............... 18 1/2 13 1/2
The Class B common stock is not traded on the NYSE or any other exchange, and the Company is not aware of any public market for such shares. On December 2, 1996, 9,602,522 shares of Class B common stock were outstanding and were held by approximately 19 holders of record. James T. Hudson beneficially owns 99.9 percent of the outstanding Class B common stock. DIVIDEND POLICY The Company's Board of Directors has declared cash dividends every fiscal quarter since the Company's initial public offering in February 1986. Since April 1987, the Board has declared quarterly dividends of $.02 per share of Class A common stock and $.0167 per share of Class B common stock. The Company's certificate of incorporation restricts the per share dividends declared and paid on Class B common stock to not more than 90 percent of the per share dividends declared and paid on Class A common stock. Payment of future dividends will depend upon the Company's financial condition, results of operations and other factors deemed relevant by the Board of Directors. Additionally, the Company has entered into certain loan agreements that restrict its ability to pay dividends. The Company's primary credit facility restricts dividend payments to a maximum of $2.8 million in any fiscal year. ITEM 6. SELECTED FINANCIAL DATA Incorporated by reference from the section captioned "Eleven-Year Financial Summary," pages 30 and 31 of the Hudson Foods, Inc. 1996 Annual Report (the "1996 Annual Report"). ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Incorporated by reference from the sections captioned "Discussion of Operations," "Discussion of the Balance Sheet" and "Discussion of Cash Flows," pages 16, 17, 19 and 21 of the 1996 Annual Report. From time to time, the Company may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company's actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the Company's business include the following: competitive pressures, grain prices, the loss of a major customer, inflation, trade restrictions, the loss of sales to Russia, interest rate fluctuations and other capital market conditions. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Incorporated by reference from the sections captioned "Consolidated Statement of Operations," "Consolidated Balance Sheet," "Consolidated Statement of Cash Flows," "Notes to Consolidated Financial Statements," "Report of Independent Accountants" and "Quarterly Financial Data (Unaudited)," pages 16, 18, 20, 22-27, 29 and 32 of the 1996 Annual Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Incorporated by reference from the sections captioned "Election of Directors," "Executive Officers" and "Section 16 Requirements" contained in the Company's Proxy Statement for Annual Meeting of Stockholders, February 14, 1997 and Adjournments (the "Proxy Statement"). ITEM 11. EXECUTIVE COMPENSATION Incorporated by reference from the section captioned "Executive Compensation" contained in the Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated by reference from the section captioned "Principal Stockholders" contained in the Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated by reference from the sections captioned "Executive Compensation--Compensation Committee Interlocks and Insider Participation" and "Certain Transactions" contained in the Proxy Statement. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Documents filed as a part of this report. 1. Financial statements The following consolidated financial statements of Hudson Foods, Inc. and Subsidiaries have been incorporated by reference from the 1996 Annual Report into Part II, Item 8 of this Report. Description Consolidated Statement of Operations Consolidated Balance Sheet Consolidated Statement of Cash Flows Notes to Consolidated Financial Statements Report of Independent Accountants 2. Financial statement schedules Schedule No. Description Page II Valuation and Qualifying Accounts 13 N/A Report of Independent Accountants 14 3. Exhibits required by Item 601 of Regulation S-K Exhibit No Description 3a Restated certificate of incorporation of Hudson Foods, Inc./1/ 3b Restated by-laws of Hudson Foods, Inc., as amended to date/2/ 4a Restated certificate of incorporation of Hudson Foods, Inc., Section 4/1/ 9 Form of revocable proxy held by James T. Hudson/1/ 10a Amended and Restated 1985 Stock Option Plan/3/ 10b Form of Hudson Foods Stock Option Agreement/4/ 10c Form of Hudson Farms Turkey Growing Contract/4/ 10d Form of Hudson Farms Broiler Growing Contract/4/ 10e Revolving Credit Agreement by and among Hudson Foods, Inc., Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland," New York Branch, Bank of America National Trust and Savings Association, NationsBank of Texas, National Association, Caisse Nationale De Credit Agricole, "Credit Agricole," Harris Trust and Savings Bank, SunTrust Bank, Atlanta, Boatmen's First National Bank of Kansas City and Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A., "Rabobank Nederland," New York Branch, as Agent and NationsBank of Texas, N.A., as documentation agent, dated as of April 30, 1996 Exhibit No Description 10f Hudson Foods, Inc. Note Purchase Agreement dated as of May 18, 1994, $50,000,000 Fixed Rate Senior Notes, Guaranteed by Hudson Farms, Inc./5/ 10g Purchase and Supply Agreement (Amended and Restated), dated April 1, 1996 between Hudson Foods, Inc. and Boston Chicken, Inc./6/ 10h Supplier Agreement, dated April 26, 1994, between Hudson Foods, Inc. and Restaurant Services, Inc., as purchasing agent for the Burger King System/7/ 10i Hudson Foods, Inc. Note Purchase Agreement dated December 28, 1995, $55,000,000, 6.69% Senior Notes due December 28, 2005 10j Hudson Foods, Inc. Note Purchase Agreement dated March 22, 1996, $50,000,000, 6.63% Senior Notes Due March 22, 2006 10k Hudson Foods, Inc. 1996 Stock Option Plan 11 Computation of Earnings Per Share 13 Annual Report to Shareholders 21 Subsidiaries of Hudson Foods, Inc. 23 Consent of Independent Accountants 27 Financial Data Schedule (b) Reports on Form 8-K The Company filed no Current Reports on Form 8-K during the fourth quarter of fiscal 1996. /1/ Incorporated by reference from Hudson Foods, Inc. Form S-4 Registration Statement No. 33-15274, as amended, filed with the Securities and Exchange Commission on June 23, 1987. /2/ Incorporated by reference from Hudson Foods, Inc., Form S-3 Registration Statement No. 33-56019, as amended, filed with the Securities and Exchange Commission on October 13, 1994. /3/ Incorporated by reference from Hudson Foods, Inc. Form S-8 Registration Statement No. 33-27738, as amended, filed with the Securities and Exchange Commission on March 23, 1989. /4/ Incorporated by reference from Hudson Foods, Inc. Form S-1 Registration Statement No. 33-2505, as amended, filed with the Securities and Exchange Commission on December 31, 1985. /5/ Incorporated by reference from Hudson Foods, Inc. Quarterly Report on Form 10-Q for the quarterly period ended July 2, 1994, filed with the Securities and Exchange Commission on August 1, 1994. /6/ Incorporated by reference from Hudson Foods, Inc., Form 10-Q for the quarterly period ended March 30, 1996, filed with the Securities and Exchange Commission on June 25, 1996. /7/ Incorporated by reference from Hudson Foods, Inc., Form 8-K Current Report dated October 13, 1994, filed with the Securities and Exchange Commission on October 13, 1994. 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. HUDSON FOODS, INC. December 18, 1996 By /s/ James T. Hudson ----------------------- James T. Hudson Chairman of the Board 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. December 18, 1996 By /s/ James T. Hudson ----------------------- James T. Hudson Chairman of the Board, Chief Executive Officer and Director December 18, 1996 By /s/ Michael T. Hudson ------------------------- Michael T. Hudson President, Chief Operating Officer and Director December 18, 1996 By /s/ Charles B. Jurgensmeyer ------------------------------ Charles B. Jurgensmeyer Chief Financial Officer, Executive Vice President and Director December 18, 1996 By /s/ James R. Hudson ----------------------- James R. Hudson Vice President-Director of Transportation and Director December 18, 1996 By /s/ Jane M. Helmich ----------------------- Jane M. Helmich Director December 18, 1996 By ----------------------- Elmer W. Shannon Director December 18, 1996 By ----------------------- Jerry L. Hitt Director December 18, 1996 By ----------------------- Kenneth N. May Director HUDSON FOODS, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS For the Three Years in the Period Ended September 28, 1996 (Dollars in Thousands)
Column A Column B Column C Column D Column E - ------------------------------------------------------------------------------------------------------------------------------------ Additions Balance at Charged to Charged to Balance at beginning costs and other end of Description of period expenses accounts Write Offs period - ------------------------------------------------------------------------------------------------------------------------------------ Allowance for doubtful accounts: Year ended September 28, 1996 $1,775 $563 $24/1/ $(499) $1,863 ==================================================================================== Year ended September 30, 1995 $1,463 $707 $16/1/ $(411) $1,775 ==================================================================================== Year ended October 1, 1994 $1,208 $627 $15/1/ $(387) $1,463 ==================================================================================== /1/ Collections of previously charged off amounts.
REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders Hudson Foods, Inc. Our report on the consolidated financial statements of Hudson Foods, Inc. has been incorporated by reference in this Form 10-K from page 29 of the 1996 Annual Report to Stockholders of Hudson Foods, Inc. In connection with our audits of such financial statements, we have also audited the related financial statement schedule on page 13 of this Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. Coopers & Lybrand L.L.P. Tulsa, Oklahoma October 29, 1996 EX-10 2 REVOLVING CREDIT AGREEMENT REVOLVING CREDIT AGREEMENT by and among HUDSON FOODS, INC., COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, NATIONSBANK OF TEXAS, N.A., CAISSE NATIONALE DE CREDIT AGRICOLE, HARRIS TRUST AND SAVINGS BANK, SUNTRUST BANK, ATLANTA, BOATMEN'S FIRST NATIONAL BANK OF KANSAS CITY and COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH, as Agent and NATIONSBANK OF TEXAS, N.A., as Documentation Agent dated as of April 30, 1996 TABLE OF CONTENTS Section Page ARTICLE I - COMMITTED ADVANCES, BID RATE ADVANCES AND CERTAIN FEES....................................1 1.01 The Facilities....................................................1 1.02 Agency Fee........................................................2 1.03 Facility Fee......................................................2 ARTICLE II - TERMS OF THE ADVANCES...............................2 2.01 The Advances......................................................2 2.02 Making the Committed Advances.....................................2 2.03 Bid Rate Credits..................................................3 ARTICLE III- REPAYMENT AND PREPAYMENT OF THE ADVANCES............3 3.01 Repayment, Optional Prepayment and Application of Credit Payments...................................................4 3.02 Interest..........................................................6 3.03 Increased Costs.... ..............................................8 3.04 Changes in Law Rendering Certain LIBOR Rate Advances Unlawful..........................................................8 3.05 Payments and Computations.........................................9 3.06 Payment on Non-Business Days......................................9 3.07 Pro Rata Committed Advances.......................................9 3.08 Maximum Amount Limitation.........................................9 3.09 Notation on Schedule.............................................10 ARTICLE IV - CONDITIONS PRECEDENT...............................10 4.01 Conditions Precedent to Initial Advances.........................10 4.02 Conditions Precedent to All Advances.............................11 4.03 Failure to Provide Certificate...................................12 ARTICLE V - REPRESENTATIONS AND WARRANTIES.....................12 5.01 Representations and Warranties of the Borrower...................12 ARTICLE VI - COVENANTS OF THE BORROWER..........................15 6.01 Affirmative Covenants............................................15 6.02 Negative Covenants...............................................19 ARTICLE VII- EVENTS OF DEFAULT..................................22 7.01 Events of Default................................................22 ARTICLE VIII- DEFINITIONS........................................24 8.01 Certain Defined Terms............................................24 8.02 Construction.....................................................32 8.03 Currency.........................................................32 ARTICLE IX - THE AGENT..........................................33 9.01 Authorization and Action.........................................33 9.02 Duties and Obligations...........................................33 9.03 Agent and Affiliates.............................................33 9.04 Bank Credit Decision.............................................34 9.05 Indemnification..................................................34 9.06 Resignation of Agent.............................................34 9.07 Exchange of Information..........................................35 9.08 Benefit of the Banks Only........................................35 ARTICLE X - MISCELLANEOUS......................................35 10.01 Amendments, Etc..................................................35 10.02 Notices, Etc.....................................................35 10.03 No Waiver; Remedies..............................................36 10.04 Accounting Terms.................................................36 10.05 Costs, Expenses and Taxes........................................36 10.06 Right of Set-off.................................................37 10 07 Indemnification..................................................37 10.08 Severability of Provisions.......................................38 10.09 Binding Effect; Successors and Assigns; Participations...........38 10.10 Consent to Jurisdiction..........................................39 10.11 Governing Law....................................................39 10.12 Banks' Obligations Several, Not Joint............................39 10.13 Execution in Counterparts........................................39 10.14 Waiver of Jury Trial.............................................39 10.15 No Oral Agreements...............................................40 10.16 No Effect on Certain Other Rights and Obligations................40 10.17 Amendment and Restatement........................................40 LIST OF SCHEDULES AND EXHIBITS Schedule 6.02(a) Description of Certain Liens, Lease Obligations, Etc. Schedule 6.02(d) Description of Liabilities Schedule 8.01 Subordinated Debt Exhibit A Form of Promissory Note Exhibit B Form of Guaranty Exhibit C Form of Legal Opinion Exhibit D Form of Notice of Committed Borrowing Exhibit E Form of Request for Bids Exhibit F Form of Outstandings Report REVOLVING CREDIT AGREEMENT Dated as of April 30, 1996 HUDSON FOODS, INC., a Delaware corporation (the "Borrower"), COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH ("Rabobank") and the other commercial, banking and financial institutions whose signatures appear on the signature pages hereof or which hereafter become parties hereto pursuant to Section 10.09 (Rabobank and such other additional commercial, banking or financial institutions are sometimes referred to hereinafter collectively as the "Banks" and individually as a "Bank"), Rabobank, as agent for the Banks hereunder (in such agency capacity, the "Agent"), and NationsBank of Texas, N.A., as documentation agent, agree as follows: ARTICLE I COMMITTED ADVANCES, BID RATE ADVANCES AND CERTAIN FEES SECTION 1.01. The Facilities. (a) Each Bank agrees, severally and not jointly, on the terms and conditions hereinafter set forth, to extend credit to the Borrower during the period from the date hereof to the Termination Date (this and certain other capitalized terms are defined in Section 8.01) by making advances (the "Committed Advances") to the Borrower on a revolving basis from time to time; provided that at no time shall any Bank be obligated to make a Committed Advance in any amount which would exceed the lesser of (i) such Bank's Available Commitment at such time, or (ii) such Bank's Available Commitment Share of the Committed Borrowing pertaining to such Committed Advance. Within the foregoing limit, and subject to the terms and conditions hereunder set forth, the Borrower may borrow pursuant to this Section 1.01(a), prepay pursuant to Section 3.01(b), and reborrow in accordance with this Section 1.01(a). (b) Each Bank may, severally and not jointly, on the terms and conditions hereinafter set forth, extend credit to the Borrower during the period from the date hereof to the Termination Date by making advances (the "Bid Rate Advances") to the Borrower or otherwise extending Bid Rate Credit to the Borrower from time to time; provided (i) that at no time shall any Bank make a Bid Rate Advance or otherwise extend any Bid Rate Credit in any amount which would exceed the amount of such Bank's Available Commitment at such time and (ii) at no time shall (A) the sum of (I) the outstanding Bid Rate Advances and (II) the outstanding Bid Rate Credits (other than Bid Rate Credits consisting of Bid Rate Advances) exceed (B) fifty percent (50%) of the Total Commitment. (c) The Borrower shall have the right, upon at least five (5) Business Days' notice to a Bank, to terminate in whole or reduce in part such Bank's Available Commitment (which shall include the termination in whole or the reduction in part of the obligation of such Bank to make Advances to the Borrower in the amount specified in Section 1.01(a) in the event of such termination or reduction), provided, however, that each partial reduction shall be in the amount of $5,000,000 or an integral multiple thereof. (d) So long as no Event of Default shall have occurred and be continuing at such time, the Borrower may request, at least sixty (60) days prior to each anniversary of the date hereof, Agent and the Banks to extend the Termination Date to the third anniversary date next following the date of such determination. Such request shall be in writing to Agent and each Bank. Within the thirty (30) day period immediately following its receipt of such request, each Bank shall notify the Borrower in writing whether it elects to so extend the Termination Date. Any failure by a Bank to so notify the Borrower shall be deemed a decision by such Bank to not extend the Termination Date. No Bank shall be obligated to extend the Termination Date, and if less than all of the Banks elect to extend the Termination Date pursuant to this Section 1.01(d), the Termination Date shall not be extended. SECTION 1.02. Agency Fee. The Borrower agrees to pay to the Agent, for its account, an annual agency fee (the "Agency Fee") in an amount determined jointly by the Borrower and the Agent from time to time and set forth in a separate letter agreement between the Borrower and Agent (the "Agency Fee Letter"). SECTION 1.03. Facility Fee. The Borrower agrees to pay to each Bank a facility fee on the amount of such Bank's Commitment (as such Commitment may be reduced from time to time pursuant to Section 1.01(c)) from the date hereof until the Termination Date at a rate of one-quarter of one percent (0.25%) per annum, payable in arrears on the last day of each calendar quarter during the term of such Bank's Commitment, commencing on the last day of the calendar quarter first occurring after the date hereof, and on the Termination Date (the "Facility Fee"). ARTICLE II TERMS OF THE ADVANCES SECTION 2.01 The Advances. Each Advance shall be in an amount of $500,000 or a greater amount which is an integral multiple of $50,000. SECTION 2.02. Making the Committed Advances. (a) Each Committed Advance shall be made, to the extent that a Bank is so obligated under Section 1.01, on notice from the Borrower in writing in the form of Exhibit D hereto (a "Notice of Committed Borrowing") to the Agent delivered before 11:00 A.M. (New York City time) on, (i) in the case of a LIBOR Rate Advance, a Business Day which is at least two (2) Business Days prior to the first day of the Interest Period for such Committed Borrowing and (ii) in the case of a Base Rate Advance, on the first day of the Interest Period for such Committed Borrowing, containing the representations and other information contemplated in Exhibit D hereto and accompanied by a duly executed Outstandings Report dated as of the first day of the Interest Period for such Committed Borrowing. The Agent shall in turn promptly notify each Bank by telephone (confirmed immediately by telex, cable or facsimile), telex, cable or facsimile of the aggregate amount of, and the initial Interest Period for, such Borrowing and such Bank's ratable portion of such Borrowing. Each Bank shall, not later than 1:00 P.M. (New York City time) on the date of such Borrowing specified in the notice received from the Agent pursuant to the preceding sentence, deposit such Bank's ratable portion of such Borrowing in same day funds to the Agent's Depository Account and include in a communication accompanying such deposit a reference that such funds pertain to a Committed Borrowing by the Borrower under this Agreement. Not later than 3:00 P.M. (New York City time) on the later of the date of such Borrowing specified in such notice or the first Business Day thereafter upon which the applicable conditions set forth in Article IV have been fulfilled, Agent will make such Advance available, to the extent that Agent is so obligated under Section 1.01, to the Borrower in same day funds at Agent's address referred to in Section 10.02. (b) Each Notice of Committed Borrowing shall be irrevocable and binding on the Borrower and, in respect of the Committed Borrowing specified in such Notice of Committed Borrowing, the Borrower shall indemnify each Bank against any loss or expense incurred by such Bank as a result of any failure to fulfill on or before the date specified for such Borrowing the applicable conditions set forth in Article IV, including, without limitation, any loss (including loss of Anticipated Profits) or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by the Bank to fund the Advance to be made by such Bank as part of such Committed Borrowing when such Advance, as a result of such failure, is not made on such date. Provided that notice shall have been given to Borrower of the reasons therefor, determinations by a Bank for purposes of this Section 2.02(b) shall be conclusive, provided that such determinations are made reasonably and in good faith. (c) Unless the Agent shall have received notice from a Bank prior to the date of any Committed Borrowing that such Bank will not make available to the Agent such Bank's ratable portion of such Borrowing, the Agent may assume that such Bank has made such portion available to the Agent on the date of such Borrowing in accordance with subsection (a) of this Section 2.02 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent such Bank shall not have so made such ratable portion available to the Agent, Rabobank may, in its sole discretion, make such ratable portion so available, in which case such portion shall constitute an additional Committed Advance made by Rabobank in connection with such Committed Borrowing, and Rabobank's Commitment in connection with such Committed Borrowing shall be deemed increased to the extent required in order for Rabobank to make such portion so available. (d) The failure of a Bank to make the Committed Advance to be made by it as part of any Borrowing shall not relieve any other Bank of its obligation, if any, hereunder to make its Committed Advance on the date of such Committed Borrowing, but no Bank shall be responsible for the failure of any other Bank to make the Committed Advance to be made by such other Bank on the date of any Borrowing. SECTION 2.03. Bid Rate Credits. From time to time, Borrower may request of any one or more of the Banks, and any one or more such Banks may in their sole and absolute discretion agree, to extend credit to the Borrower in the form of Advances, Acceptances, Letters of Credit or otherwise to the Borrower in such amount, at such pricing and on such other terms and conditions as are agreed to by the Borrower and such Bank from time to time and are not inconsistent with the terms and provisions of this Agreement (each, a "Bid Rate Credit" and collectively, the "Bid Rate Credits"). Such requests shall be made telephonically to such Banks as Borrower may select in its sole discretion and confirmed promptly in writing by delivery of completed Requests for Bids in the form of Exhibit E hereto. Each Request For Bids shall be for an amount not less than $500,000 (or, if greater, an integral multiple of $500,000). No Bank shall be obligated to make any Bid Rate Credit at any time unless such Bank in its sole and absolute discretion then chooses to do so. Any and all Bid Rate Credits made by any Bank(s) pursuant to this Section 2.03 shall be entitled to all of the rights, protections, and benefits of this Agreement and each of the other Loan Documents. ARTICLE III REPAYMENT AND PREPAYMENT OF THE ADVANCES SECTION 3.01. Repayment, Optional Prepayment and Application of Certain Payments. (a) The Borrower shall repay the aggregate unpaid principal amount of all Committed Advances of each Bank in accordance with the terms of the promissory notes of the Borrower, in substantially the form of Exhibit A hereto (the "Notes"), evidencing the indebtedness resulting from such Advances and delivered to the Bank pursuant to Article IV or Section 10.08. All payments of principal of, or interest, premium or other amounts on, the Committed Advances shall be made by the Borrower to the Agent in immediately available funds for the account of the holders of the relevant Notes. All payments of principal of, or interest, premium or other amounts on, the Bid Rate Credits shall be made by the Borrower to the respective Bank or Banks which extended such Bid Rate Credits in accordance with the terms and conditions agreed upon between the Borrower and respective Bank or Banks with respect thereto. All payments of the Facility Fee shall be made by the Borrower to the Banks by a check payable to the order of each such Bank which is duly honored upon the presentment thereof, or in immediately available funds, in each case, pro rata according to their respective Commitments. All payments of the fees described in the Agency Fee Letter shall be made by the Borrower to the Agent by check for the account of Rabobank as Agent. Payments shall be made to the Agent and/or Banks at their respective addresses specified in Section 10.02 (or at such other addresses as they may have specified for such purposes in written notices to the Borrower) not later than 1:00 p.m. (New York City time) on the due date (or such time as is agreed upon by the Borrower and the Agent and/or Banks, as the case may be, on the date due. The Agent shall promptly remit to each Bank in immediately available funds such Bank's share of all such payments received by the Agent for the account of such Bank. All payments by the Borrower of principal, interest, fees, indemnities and other amounts payable to any recipient hereunder shall be made without setoff or counterclaim and free and clear of, and without withholding or deduction for or on account of, any present or future taxes now or hereafter imposed on such recipient or its income, property, assets or franchise. (b) The Borrower may, upon at least one (1) Business Day's notice to the Agent and the Banks, and if such notice is given the Borrower shall, prepay the outstanding amount of any Advances in whole or in part (pro rata among the Banks after and during the continuance of an Event of Default), with accrued interest to the date of such prepayment on the amount prepaid and any and all amounts payable in respect thereof hereunder; provided, however, that any prepayment of any Advance shall be made on, and only on, the last day of an Interest Period for such Advance and, in the event that any Bank receives payment of the principal of any Advance other than on the last day of the Interest Period relating to such Advance (whether due to prepayments made by the Borrower, or due to acceleration of the Bank Obligations, or due to any other reason), the Borrower shall pay to such Bank on demand any amounts required to compensate the Bank for any additional losses, costs or expenses which it may incur as a result of such payment. Provided that notice shall have been given to Borrower of the reasons therefor, determinations of such losses, costs or expenses by a Bank for purposes of this Section 3.01(b) shall be conclusive, provided that such determinations are made reasonably and in good faith. All payments of principal made pursuant to this Section 3.01(b) shall be applied to the outstanding balance in inverse order of maturity. (c) Prior to the occurrence and continuation of an Event of Default, each payment of principal shall be applied to such of the maturing Committed Advances or Bid Rate Credits as the Borrower shall direct; provided, that (i) any Advances of the Borrower maturing the same day shall be paid pro rata among such Advances and (ii) any payments in respect of a Committed Advance shall be paid to the Agent for the account of the holders of the Notes, which payments shall be remitted to such holders. Concurrently with each remittance to any Bank of its share of any such payment in respect of a Committed Advance, the Agent shall advise each Bank as to the application of such payment. Following the occurrence and during the continuation of an Event of Default, the Agent and the Banks shall apply all collections and recoveries of the Advances and the other Bank Obligations hereunder to payment of outstanding Bank Obligations on a pro rata basis to each Bank based on the respective amount of such Bank Obligations owed to each Bank (whether or not mature and currently payable). Without limiting the foregoing, in the case of payments of principal made following the occurrence and during the continuation of an Event of Default while there are Bank Obligations consisting of Letter of Credit Liabilities and Acceptances then outstanding, each Bank primarily or contingently liable with respect thereto may, at its option, require the Borrower to deposit with such Bank funds equal to the amount of payment of principal that such Bank would have received with respect thereto had the undrawn face amount thereof been an outstanding Advance (and if the Borrower fails to promptly make such deposit, such Bank may advance such amount as a Committed Advance). Any such deposit or advance described in the immediately preceding sentence shall be held by such Bank as a reserve to fund future payments by such Bank on such Letter of Credit Liabilities and Acceptances, at such time as all of such Bank Obligations have been drawn upon or expired any remaining amounts in such reserve shall be applied to the other remaining Bank Obligations. The Agent shall endeavor to promptly notify the Borrower and each Bank of the occurrence of an Event of Default; provided, however, that a failure by the Agent to give such a notice shall not impair the rights of the Agent or any Bank with respect to any such Event of Default or result in any liability to the Agent. The Banks and Agent agree that if any distribution shall be made by the Agent contrary to this Section 3.01(c) (whether because the Agent shall not, at the time of distribution, have been aware of the occurrence of any Event of Default or otherwise), the Banks shall cooperate with the Agent to redistribute payments, collections or recoveries in accordance with this Section 3.01(c). SECTION 3.02. Interest. (a) The Borrower shall pay interest on the unpaid principal amount of each Advance from the date of such Advance until such principal is paid in full at the Applicable Rate (as hereinafter defined) as set forth below. (b) The period between the date of each Advance and the date of payment in full of such Advance shall be divided into successive periods, each such period being an "Interest Period" for such Advance. Notwithstanding the duration of the applicable Interest Period, interest on the unpaid amount of each Advance shall be due and payable in accordance with Section 3.02(c) below and the other applicable provisions of this Agreement. The initial Interest Period for each Advance shall begin on the date of such Advance and end on the last day of such period as selected by the Borrower, and thereafter, each subsequent Interest Period for such Advance shall begin on the last day of the immediately preceding Interest Period for such Advance and end on the last day of such period as selected by the Borrower in accordance with the terms hereof. The duration of each such Interest Period for each Advance shall be the period commencing on (and including) the date upon which such Advance is made and (x) in regards to LIBOR Rate Advances and those Base Rate Advances made for periods of one month or greater, ending on (but excluding) the day numerically corresponding to such date one month or three months thereafter, in each case as selected by the Borrower in the relevant Notice of Committed Borrowing, (y) in regards to Base Rate Advances made for periods of less than one month, ending on the date on which the principal amount of such Base Rate Advance becomes due and payable and (z) in regards to Bid Rate Credits, ending on such date as is agreed to between the Borrower and each Bank which makes such Bid Credit available to the Borrower; provided, however, that: (i) the duration of any Interest Period for any Advance that commences before the Termination Date and otherwise ends after the Termination Date shall end on the Termination Date; (ii) the duration of Interest Periods shall be the same for all Committed Advances comprising a Committed Borrowing; (iii) any Interest Period which would otherwise end on a day which is not a Business Day shall continue to and end on the next succeeding Business Day, unless the result would be that such Interest Period would be extended to the next succeeding calendar month in which case such Interest Period shall end on the next preceding Business Day; (iv) if there exists no numerically corresponding day in such month, such Interest Period shall end on the last Business Day of such month; and (v) if the Borrower fails to select the duration of any Interest Period for an Advance, the duration of such Interest Period shall be one month or such other duration as shall be required in order to comply with the provisions hereof. (c) The Borrower shall pay interest on the unpaid principal amount of each Advance from the date of such Advance until such principal amount is due, payable on (x) in the case of Advances during any Interest Period with respect to which interest is payable hereunder at the Base Rate (other than those made for periods of less than one month), the last day of each calendar month and on the Termination Date, and (y) in all other cases, on the last day of each Interest Period for such Advance, at an interest rate per annum equal at all times during such Interest Period for such Advance to the Applicable Rate (as defined below); provided, however, that for any Advance having an Interest Period of three months, interest thereon shall be due and payable monthly in arrears, commencing on the day one month after the first day of such Interest Period, and on the last day of such Interest Period. The term "Applicable Rate", as used herein, shall mean an interest rate per annum equal at all times during the Interest Period then applicable to such Advance to whichever of the following rates is selected by the Borrower: (i) in the case of Committed Advances, either (A) in the case of Base Rate Advances, the Base Rate, as the same shall from time to time change as and when the Base Rate changes; or (B) in the case of LIBOR Rate Advances, (I) if the Borrower's Adjusted Leverage Ratio as of the last day of the most recently preceding fiscal quarter for which Borrower has delivered financial statments described in Section 6.01(e)(iv) is less than 0.35 to 1, a rate equal to one-quarter of one percent (0.25%) in excess of the LIBOR Rate in effect on the first day of such Interest Period, (II) if the Borrower's Adjusted Leverage Ratio as of the last day of the most recently preceding fiscal quarter for which Borrower has delivered financial statments described in Section 6.01(e)(iv) is 0.35 to 1 or greater but less than 0.45 to 1, a rate equal to two-fifths of one percent (0.40%) in excess of the LIBOR Rate in effect on the first day of such Interest Period or (III) if the Borrower's Adjusted Leverage Ratio as of the last day of the most recently preceding fiscal quarter for which Borrower has delivered financial statments described in Section 6.01(e)(iv) is 0.45 to 1 or greater, a rate equal to one-half of one percent (0.50%) in excess of the LIBOR Rate in effect on the first day of such Interest Period; or (ii) in the case of Bid Rate Advances, the Bid Rate in effect on the first day of such Interest Period of such Bank as is making such Bid Rate Advance; provided, however, that if any Bank is unable to acquire the funds upon which the interest rate described in clause (i)(B) or (ii) immediately above is based for such Interest Period or the Borrower fails to select an interest rate in accordance with the terms hereof, then the Applicable Rate for such Interest Period will be the Base Rate; provided, further, that in no event shall the Applicable Rate exceed the maximum nonusurious interest rate, if any, that at any time, or from time to time, may be contracted for, taken, reserved, charged, or received under applicable state or federal laws (the "Maximum Rate"). The term "Adjusted Leverage Ratio," as used herein, means the quotient (expressed as a ratio) of (I) the sum of (A) indebtedness with maturities greater than one year (including all current portions thereof), plus (B) subordinated debt, divided by (II) the sum of (A) indebtedness with maturities greater than one year (including all current portions thereof), plus (B) subordinated debt, plus (C) book equity, plus (D) long-term deferred taxes attributable to Borrower's prior use of cash accounting, plus (E) deferred taxes attributable to Borrower's use of the "farm price" method of accounting for deferred taxes. For purposes of calculating the Adjusted Leverage Ratio in connection with this Section 3.02(c), all Advances shall be considered indebtedness with a maturity greater than one year. (d) All past due principal and, to the extent permitted by applicable law, interest, fees and other amounts owing hereunder upon the Advances, shall bear interest, from the date such amount becomes due to the date such amount is paid in full, at the Default Rate (as defined below) and shall be due and payable upon demand. The term "Default Rate", as used herein, means the lesser of (i) the Maximum Rate, or (ii) the rate per annum which shall from day-to-day be equal to two percent (2%) in excess of the Base Rate. SECTION 3.03. Increased Costs. (a) If either (i) the introduction of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements) in or in the interpretation of any law or regulation or (ii) the compliance by any Bank with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), shall result in any increase in the cost to any Bank of making, funding or maintaining any Advance, then the Borrower shall from time to time, upon demand by such Bank, pay to such Bank additional amounts sufficient to indemnify such Bank against such increased cost. A certificate as to the amount of such increased cost, submitted to the Borrower by such Bank, shall, in the absence of manifest error, be conclusive and binding for all purposes, provided that the determination of such increased costs shall have been made in good faith. (b) If either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) compliance by any Bank with any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by any Bank and any Bank determines that the amount of such capital is increased by or based upon the existence of such Bank's commitment to lend hereunder and other commitments of this type, then, upon demand by such Bank, the Borrower shall immediately pay to such Bank, from time to time as specified by such Bank, additional amounts sufficient to compensate such Bank in the light of such circumstances, to the extent that any Bank reasonably determines such increase in capital to be allocable to the existence of such Bank's commitment to lend hereunder. A certificate as to such amounts, submitted to the Borrower by such Bank, shall, in the absence of manifest error, be conclusive and binding for all purposes, provided that the determination of such amounts shall have been made in good faith. SECTION 3.04 Changes in Law Rendering Certain LIBOR Rate Advances Unlawful. In the event that any change in any applicable law (including the adoption of any new applicable law) or any change in the interpretation of any applicable law by any judicial, governmental or other regulatory body charged with the interpretation, implementation or administration thereof, should make it (or in the good-faith judgment of an affected Bank should raise a substantial question as to whether it is) unlawful for such affected Bank to make, maintain or fund LIBOR Rate Advances of a certain type, then (a) such affected Bank shall promptly notify each of the other parties hereto, (b) the obligation of all Banks to make LIBOR Rate Advances of such type shall, upon the effectiveness of such event, be suspended for the duration of such unlawfulness, and (c) if the affected Bank so requests, the Borrower shall, on such date as may be required by the relevant applicable law, repay, prepay or convert to Base Rate Advances all then outstanding LIBOR Rate Advances of such type made to the Borrower by such affected Bank together with accrued interest thereon and all amounts then due, if any, hereunder, other than amounts that would otherwise be payable under Section 10.05(b). SECTION 3.05. Payments and Computations. The Borrower shall make each payment hereunder and under the Notes not later than 2:00 P.M. (New York City time) on the day when due in lawful money of the United States of America to each Bank and/or the Agent, as the case may be at its address referred to in Section 10.02 in same day funds. The Borrower hereby authorizes each Bank, if and to the extent payment of any amount is not made when due under any Loan Document, to charge from time to time against any account of the Borrower with such Bank any amount so due. All computations of interest accrued at the Applicable Rate (but not the Base Rate or Maximum Rate) hereunder and under the Notes and commitment fee hereunder shall be made by each Bank on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) elapsed, and all computations of interest accrued at the Base Rate or Maximum Rate shall be based upon a year with 365 or 366 days, as appropriate). SECTION 3.06. Payment on Non-Business Days. Whenever any payment to be made hereunder or under the Notes shall be stated to be due, on a day which is not a Business Day, such payment may be made on the next succeeding Business Day (subject to Section 3.02(b)(iii) hereof), and such extension of time shall in such case be included in the computation of payment of interest, commitment fee or other fee, as the case may be. SECTION 3.07. Pro Rata Committed Advances. The Borrower and the Banks acknowledge and agree that all Committed Advances made on or after the date hereof, and all increases and decreases thereof, are to be made and incurred pro rata by the Banks in accordance with such Bank's Available Commitment Share or in such other manner as the Banks among themselves may agree from time to time, except as otherwise required by Section 2.02(c) or Section 3.01(c); and each Bank's actual outstanding Committed Advances shall be adjusted from time to time by each Bank purchasing or selling at par from or to the other Banks, as the case may be, a portion of these Committed Advances simultaneously with each such increase or decrease, such that each Bank's position in each shall equal such Bank's Available Commitment Share at all times. SECTION 3.08. Maximum Amount Limitation. Anything in this Agreement or the other Loan Documents to the contrary notwithstanding, neither Borrower nor any other Person liable for the Bank Obligations shall ever be required to pay unearned interest on any Note or any of the Bank Obligations, or ever be required to pay interest on any Note or any of the Obligations at a rate in excess of the Maximum Rate, if any. If the effective rate of interest which would otherwise be payable under this Agreement, any Note or any of the other Loan Documents would exceed the Maximum Rate, if any, then the rate of interest which would otherwise be contracted for, charged, or received under this agreement, any Note or any of the other Loan Documents shall be reduced to the Maximum Rate, if any, provided, however, that if at any time thereafter such effective rate of interest shall be less than the Maximum Rate, if any, the rate of interest contracted for, charged, or received under this Agreement, any Note or any of the other Loan Documents shall be the Maximum Rate until each Bank shall have received the interest or discount it otherwise would have received but for such limitation to the Maximum Rate. If any unearned interest or discount or property that is deemed to constitute interest (including, without limitation, to the extent that any of the fees payable by Borrower, or any other Person liable for the Bank Obligations to any Bank under this Agreement, any Note, or any of the other Loan Documents are deemed to constitute interest) is contracted for, charged, or received in excess of the Maximum Rate, if any, then such interest in excess of the Maximum Rate shall be deemed a mistake and canceled, shall not be collected or collectible, and if paid nonetheless, shall, at the option of the holder of such Note, be either refunded to Borrower or other Person, or credited on the principal of such Note. It is further agreed that, without limitation of the foregoing and to the extent permitted by applicable law, all calculations of the rate of interest or discount contracted for, charged or received by any Bank under its Note, or under any of the Loan Documents, that are made for the purpose of determining whether such rate exceeds the Maximum Rate applicable to such Bank, if any, shall be made, to the extent permitted by applicable laws (now or hereafter enacted), by amortizing, prorating and spreading during the period of the full terms of the Advances evidenced by the Note, and any renewals thereof all interest at any time contracted for, charged or received by such Bank in connection therewith. This Section 3.08 shall control every other provision of all agreements among the parties to this Agreement pertaining to the transactions contemplated by or contained in the Loan Documents, and the terms of this Section 3.08 shall be deemed to be incorporated in every Loan Document and communication related thereto. SECTION 3.09. Notation on Schedule. Each Bank shall, and is hereby authorized by Borrower to place appropriate notations on the schedule to each Bank's Note evidencing the date, amount, interest date and maturity of each Advance and the amount of each payment of principal; provided, however, that the failure of a Bank to make such notation shall not limit or otherwise affect the obligations of Borrower under the Notes or this Agreement. ARTICLE IV CONDITIONS PRECEDENT SECTION 4.01. Conditions Precedent to Initial Advances. The effectiveness of this Agreement and the obligation of each of the Banks to make its initial Advance is subject to the condition precedent that the Agent shall have received at least two (2) Business Days before the day of such Advance the following, each dated the day of such Advance, in form and substance satisfactory to the Agent and the Banks: (a) This Agreement and the Notes, (b) Certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, listing all effective financing statements which name the Borrower (under its present name and any previous name) as debtor and which are filed in the office of the Arkansas Secretary of State, together with copies of such financing statements, (c) Copies, certified by the Secretary, Assistant Secretary, or Chief Financial Officer of each Loan Party of the resolutions of the Board of Directors of such Loan Party approving each Loan Document to which it is a party, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to such Loan Document, including, without limitation, certificates of good standing and certified copies of each Loan Party's Certificate of Incorporation and Bylaws, (d) A certificate of the Secretary, Assistant Secretary or Chief Financial Officer of Borrower, dated as of the date of the initial Advance, certifying (i) that no Event of Default exists on the date of, or will exist as a result of, the initial Advance; (ii) that the representations and warranties in Section 5.01 are true and correct as of and immediately after the initial Advance; (iii) that the Borrower has performed and complied with all agreements and conditions required to be performed or complied with it prior to or on the date of the initial Advance; and (iv) the names and true signatures of the officers of Borrower authorized to sign each Loan Document to which it is a party and the other documents to be delivered by it hereunder, (e) A favorable opinion of Messrs. Wright, Lindsey & Jennings, counsel for the Loan Parties, in substantially the form of Exhibit C and as to such other matters as the Banks may reasonably request, and (f) The Agency Fee Letter, duly executed and delivered by the Borrower to the Agent. SECTION 4.02. Conditions Precedent to All Advances. The obligation of the Banks to make each Advance (including the initial Advance) shall be subject to the further conditions precedent that on the date of such Advance: (a) the following statements shall be true (and the receipt by the Borrower of the proceeds of such Advance shall be deemed to constitute a representation and warranty by the Borrower that such statements are true on such date): (i) The representations and warranties contained in Section 5.01 of this Agreement and in Section 5 of the Guaranty (if any subsidiary of Borrower has executed a Guaranty pursuant to Section 6.02(m)) are correct on and as of the date of such Advance as though made on and as of such date, (ii) No event has occurred and is continuing, or would result from such Advance, which constitutes an Event of Default (as defined in Section 7.01 hereof) or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (iii) Borrower on such date is in compliance with the compliance criteria set forth in each of the financial covenants contained in subparagraphs (f), (g), (h) and (i) of Section 6.01 as if the Borrower's compliance therewith was to be measured as of such date and for such periods ended on such date (rather than on the measured dates specified therein). (b) the Banks shall have received such other approvals, opinions or documents, including guarantees executed by any or all of Borrower's Affiliates, as the Banks may reasonably request. SECTION 4.03. Failure to Provide Certificate. Notwithstanding the conditions precedent in Sections 4.01 and 4.02 requiring the delivery of the certificates set forth therein, any request by Borrower for an Advance or Letter of Credit will be deemed to be a representation by Borrower, as to the facts set forth in each of said Sections whether or not the certificate required therein is delivered. ARTICLE V REPRESENTATIONS AND WARRANTIES SECTION 5.01. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) The Borrower. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction indicated at the beginning of this Agreement. The Borrower has no subsidiaries which are not a Guarantor, except (i) Ohse Transportation, Inc., a Kansas corporation, (ii) Hudson Foods Poland s.p. zo.o., a Polish limited liability company, (iii) Hudson Development Corporation, an Arkansas corporation and (iv) Hudson Foods Foreign Sales, Inc., a United States Virgin Islands corporation. (b) The Loan Documents. The execution, delivery and performance by the Borrower of each Loan Document to which it is or will be a party are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, do not contravene (i) the Borrower's charter or by-laws or (ii) any law or any contractual restriction binding on or affecting the Borrower, and do not result in or require the creation of any lien, security interest or other charge or encumbrance (other than pursuant hereto) upon or with respect to any of its properties. (c) Governmental Approvals. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower of any Loan Document to which it is or will be a party. (d) Enforceability. This Agreement is, and each other Loan Document to which the Borrower will be a party when delivered hereunder will be, legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms. (e) Financial Condition and Operations. The balance sheets of the Borrower and its subsidiaries as at December 30, 1995, and the related statements of income and cash flows of the Borrower and its subsidiaries for the fiscal period then ended, copies of which have been furnished to the Bank, fairly present the financial condition of the Borrower and its subsidiaries as at such date and the results of the operations of the Borrower and its subsidiaries for the period ended on such date, all in accordance with generally accepted accounting principles consistently applied, and since December 30, 1995, there has been no material adverse change in such condition or operations. (f) Litigation. There is no pending or threatened action or proceeding affecting the Borrower or any of its subsidiaries before any court, governmental agency or arbitrator, which may materially adversely affect the financial condition or operations of the Borrower or any subsidiary. (g) Use of Proceeds of Advances, Etc. (i) No proceeds of any Committed Advance or Bid Rate Credit will be used to acquire any security in any transaction which is subject to Sections 13 and 14 of the Securities Exchange Act of 1934; (ii) the Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System); and (iii) no proceeds of any Committed Advance or Bid Rate Credit will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock; following application of the proceeds of each Committed Advance or Bid Rate Credit, not more than twenty-five percent (25%)of the value of the assets (either of the Borrower only or of the Borrower and its subsidiaries on a consolidated basis) subject to the provisions of Section 6.02(a) will be margin stock (within the meaning of Regulation U). (h) ERISA. (i) All members of any Controlled Group have complied with all applicable minimum funding requirements and all other applicable and material requirements of ERISA and the Code applicable to each Plan, and there are no existing conditions that would give rise to material liability thereunder, (ii) with respect to each Plan, all members of any Controlled Group have made all material contributions or payments to or under each Plan required by law, by the terms of such Plan or the terms of any contract or agreement, (iii) no Termination Event has occurred nor is reasonably expected to occur with respect to any Plan, and there are no unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA, with respect to any Plan which pose a risk of causing a lien to be created on the assets of the Borrower or any of its subsidiaries or which will result in the occurrence of a Reportable Event, (iv) no material liability to the PBGC has been, or is expected to be, incurred by any member of any Controlled Group, (v) no member of any Controlled Group has been required to contribute to a Multiemployer Plan or has incurred or reasonably expects to incur any withdrawal liability under ERISA to any Multiemployer Plan, and (vi) no prohibited transaction under ERISA or the Code has occurred with respect to any Plan which could reasonably be expected to have a material adverse effect on the condition, financial or otherwise, of any Plan. (i) Solvency. The Borrower and each of its subsidiaries is and, after giving effect to the initial Advance, will be solvent, that the execution, delivery and performance of any of the Loan Documents to which the Borrower or any of its subsidiaries is a party does not and will not render such Person insolvent, that any property remaining with such Person after execution, delivery and performance of the Loan Documents to which it is a party is not an unreasonably small capital for the conduct of its business and that each execution, delivery and performance is not intended to and will not hinder, delay or defraud any Person to which the Borrower or any of its subsidiaries was, is or may be liable. (j) Taxes. The Borrower and each subsidiary has filed all federal, state and other income tax returns which are required to be filed and has paid all taxes as shown on said returns, and all taxes due or payable without returns and all assessments received to the extent that such taxes or assessments have become due. All tax liabilities of the Borrower and each subsidiary are adequately provided for on the books of the Borrower and each subsidiary (including interest and penalties pertaining thereto to the extent that the same are estimable). No income tax liability of a material nature has been asserted by taxing authorities for taxes in excess of those already paid, and federal, state and other income tax returns of Borrower and each subsidiary have been examined and reported on by the taxing authorities or closed by applicable laws and satisfied for all years prior to and including the 1989 tax year. (k) Environmental Matters. Except as disclosed in the Borrower's Form 10-K Annual Report for its fiscal year ended September 30, 1995 and except with respect to matters the effect of which would not be material and adverse to the properties, business, prospects, profits or condition (financial or otherwise) of the Borrower or any of its subsidiaries: (i) neither the Borrower nor any of its subsidiaries has generated, transported or disposed of any Hazardous Substance; (ii) neither the Borrower nor any of its subsidiaries is currently generating, transporting or disposing of any Hazardous Substance; (iii) neither the Borrower nor any of its subsidiaries has knowledge, based upon diligent inquiry, that (A) any of its fixed assets (whether owned, leased or otherwise directly or indirectly controlled) has been used for the disposal of or has been contaminated by any Hazardous Substance, or (B) any of its business operations have contaminated lands or waters of others with any Hazardous Substance; (iv) neither the Borrower nor any of its subsidiaries, nor any of their respective assets, are subject to any liability under Environmental Law nor, to the best of the Borrower's and each subsidiary's knowledge following diligent inquiry any threatened liability under any Environmental Law; (v) neither the Borrower nor any of its subsidiaries has received any notice of or otherwise learned of any governmental investigation evaluating whether any remedial action is necessary to respond to a release or a threatened release of any Hazardous Substance for which either the Borrower or any of its subsidiaries is or may be liable; (vi) to the best of the Borrower's and each subsidiary's knowledge, following diligent inquiry, neither the Borrower nor any of its subsidiaries is in violation of any Environmental Law; and (vii) neither the Borrower nor any of its subsidiaries has failed to obtain any permits or licenses required by any Environmental Law. ARTICLE VI COVENANTS OF THE BORROWER SECTION 6.01. Affirmative Covenants. So long as any amount payable hereunder or under the Notes shall remain unpaid or any Bank shall have any commitment hereunder, the Borrower will, unless Agent, after obtaining the approval of the Majority Banks, shall otherwise consent in writing: (a) Payment of Taxes and Claims. Cause to be paid and discharged all lawful taxes, assessments or governmental charges imposed upon the income, profits or property of the Borrower and its subsidiaries before the same shall be in default, and all lawful claims for labor, rentals, materials and supplies which, if unpaid, might become a lien upon Borrower's or its subsidiaries' property or any part thereof; provided, however, that the Borrower and its subsidiaries shall not be required to cause to be paid or discharged any such tax, assessment, governmental charge or claim so long as the validity thereof shall be contested in good faith by appropriate proceedings, and adequate book reserves shall be established with respect thereto, and the Borrower shall, and shall cause each subsidiary to, pay such tax, charge or claim before any property subject thereto shall be sold to satisfy a lien. (b) Compliance with Applicable Laws. Comply, and cause each of its subsidiaries to comply, with the requirements of all applicable laws and orders, except where contested in good faith and by proper proceedings, and obtain any licenses, permits, franchises or other governmental authorizations necessary to the ownership of its properties or to the conduct of its business and those of its subsidiaries. (c) Preservation of Property. Keep, and cause each of its subsidiaries to keep, its properties which are useful in their respective businesses, whether owned in fee or otherwise, or leased, in good operating condition, ordinary wear and tear excepted, and comply with, and cause each subsidiary to comply with, all leases to which it or any subsidiary is a party or under which it or any subsidiary occupies property so as to prevent any loss or forfeiture thereunder. (d) Visitation Rights. At any reasonable time and from time to time, permit the Agent or any Bank, or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of and visit the properties of, and, upon and during the continuance of an Event of Default, to do so at the expense of Borrower and any of its subsidiaries, and to discuss the affairs, finances and accounts of the Borrower and any of its subsidiaries with any of their respective officers or directors. (e) Reporting Requirements. Furnish to the Agent and each Bank: (i) as soon as available and in any event within thirty (30) days after the end of each month, unaudited consolidated balance sheets and unaudited consolidated statements of income of the Borrower and its subsidiaries as of the end of such month certified by the Chief Financial Officer, Secretary or Treasurer of the Borrower; (ii) as soon as available and in any event within ninety (90) days after the end of each fiscal year of the Borrower, a copy of the audited consolidated financial statements for such year for the Borrower and its subsidiaries, certified in a manner acceptable to the Agent by Coopers & Lybrand or other independent public accountants acceptable to the Agent; (iii) promptly after the filing or receiving thereof, copies of all reports and notices which the Borrower or Guarantor files under ERISA with the Internal Revenue Service or the Pension Benefit Guaranty Corporation or the U.S. Department of Labor, or which the Borrower or Guarantor receives therefrom; (iv) as soon as available and in any event within forty-five (45) days after the end of each fiscal quarter, unaudited consolidated financial statements for such quarter for the Borrower and its subsidiaries, certified by the Chief Financial Officer, Secretary or Treasurer of the Borrower, and a compliance certificate in form and substance satisfactory to Agent, showing the calculation of each financial covenant as of such quarter-end, executed by the Chief Financial Officer, Secretary or Treasurer of Borrower; (v) promptly, upon the occurrence of an Event of Default or an event that but for the passage of time or the giving of notice or both would constitute an Event of Default, notice of such Event of Default or event; (vi) weekly Outstandings Reports in the form of Exhibit F hereto setting forth the amounts and types of Advances made and Bid Rate Credits extended by each Bank; (vii) promptly after the filing or receiving thereof, copies of all reports and notices which the Borrower or Guarantor files with the Securities and Exchange Commission or similar state regulatory body, or which the Borrower or Guarantor receives therefrom; and (viii) such other information respecting the condition or operations, financial or otherwise, of the Borrower or the Guarantor as the Agent or any Bank may from time to time reasonably request. (f) Working Capital. Maintain as of the last day of each fiscal quarter (i) a ratio of current assets to current liabilities (exclusive of current deferred taxes) of not less than 1.5 to 1.0, and (ii) an excess of current assets over current liabilities (exclusive of current deferred taxes) of not less than $60,000,000; and the calculation thereof shall be on a basis which in all respects is consistent with the provisions of Section 10.04. (g) Net Worth. Maintain as of the last day of each fiscal quarter a Tangible Net Worth (as hereinafter defined) of not less than the sum of (i) $232,148,622, plus (ii) the amount of all proceeds of any issuance of capital stock of Borrower, plus (iii) the amount of any Subordinated Debt which is converted into capital stock of Borrower, plus (iv) in the case of each fiscal quarter ending on or after October 1, 1995, the Applicable Net Income Carryover (as hereinafter defined). "Tangible Net Worth" means the excess of total assets over total liabilities, total assets and total liabilities each to be determined in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 6.01(e), excluding, however, from the determination of total assets (i) goodwill, organizational expenses, research and development expenses, trademarks, trade names, copyrights, patents, patent applications, licenses and rights in any thereof, and other similar intangibles, (ii) treasury stock, (iii) securities which are not readily marketable, (iv) cash held in a sinking or other analogous fund established for the purpose of redemption, retirement or prepayment of capital stock, (v) any write-up in the book value of any asset resulting from a revaluation thereof subsequent to the date hereof, and (vi) any items not included in clauses (i) through (v) above which are treated as intangibles in conformity with generally accepted accounting principles. "Applicable Net Income Carryover" at any time that any determination thereof is to be made means an amount equal to sixty percent (60%) of the Borrower's net income for each and every fiscal year ending on or after October 1, 1995 which has ended on or before the date such determination of Applicable Net Income Carryover is to be made; provided, however, that in the event that the Borrower's net income for any fiscal year described above is less than zero, the Borrower's net income for such fiscal year shall be deemed to be zero for purposes of calculating Applicable Net Income Carryover. (h) Maximum Leverage Ratio. Maintain as of the last day of each fiscal quarter a Leverage Ratio of not more than 0.5 to 1.0. "Leverage Ratio," as used herein, means, for any period of determination thereof, the quotient (expressed as a ratio) of (I) the sum of (A) indebtedness with maturities greater than one year (including all current portions thereof), plus (B) subordinated debt, divided by (II) the sum of (A) indebtedness with maturities greater than one year (including all current portions thereof), plus (B) subordinated debt, plus (C) book equity, plus (D) long-term deferred taxes attributable to Borrower's prior use of cash accounting, plus (E) deferred taxes attributable to Borrower's use of the "farm price" method of accounting for deferred taxes. For purposes of calculating the Leverage Ratio in connection with this Section 6.01(h), all Advances shall be considered indebtedness with a maturity less than one year. (i) Cash Flow Ratio. Maintain as of the last day of each fiscal quarter a Cash Flow Coverage Ratio of not less than 1.3 to 1.0 on a rolling eight fiscal quarter basis. "Cash Flow Coverage Ratio" means for any period of determination thereof, the quotient (expressed as a ratio) of (I) the sum of (A) earnings before taxes, plus (B) interest expense, plus (C) lease expenses, plus (D) depreciation and amortization, divided by (II) the sum of (A) interest expense, plus (B) lease expenses, plus (C) principal payments on long term debt and capital leases other than Qualifying Balloon Payments (as hereinafter defined), plus (D) dividends, purchases or other acquisitions by the Borrower or any of its subsidiaries of any stock of the Borrower and distributions of assets to the Borrower's stockholders as such. "Qualifying Balloon Payments" at any time that any determination thereof is made means the Balloon Portion (as hereinafter defined) of the final principal payment due on the final maturity date of any long term debt or capital lease having a final maturity date during such fiscal quarter; provided, however, that no such Balloon Portion shall constitute a Qualifying Balloon Payment if (a) the Agent determines in good faith that it is unlikely that the Borrower will be able to refinance the Balloon Portion when due or within sixty (60) days thereafter with Qualifying Replacement Financing (as defined below) or (b) the Agent determines in good faith that the Borrower is not diligently pursuing reasonable efforts to accomplish a refinancing of the Balloon Portion when due or within sixty (60) days thereafter with Qualifying Replacement Financing or (c) more than sixty (60) days have elapsed since the Balloon Portion became due and the Borrower did not prior to expiration of such period refinance the Balloon Portion with Qualifying Replacement Financing. "Balloon Portion" at any time that any determination thereof is to be made means the portion of a final principal payment due on the final maturity date of any long term debt or capital lease which exceeds the average scheduled pre-maturity annual principal amortization under such long term debt or capital lease. "Qualified Replacement Financing" means long term debt or capital lease financing of the Company that does not (or would not if entered into) result in a Default or an Event of Default. (j) Insurance. Maintain, and cause each subsidiary to maintain, in force with financially sound and reputable insurers, policies with respect to its property and business against such casualties and contingencies (including public liability, larceny, embezzlement or other criminal misappropriation insurance) and in such amounts as is customary in the case of corporations engaged in the same or similar lines of business or comparable size and financial strength. (k) Environmental Notice and Inspection. (i) Notify the Agent and the Banks in writing, promptly upon any executive officer or the Borrower or any of its subsidiaries learning of any of the following which is reasonably likely to result in liability in excess of Two Million Dollars ($2,000,000): (A) any Environmental Claim which the Borrower or any of its subsidiaries receives, including one to take or pay for any remedial, removal, response, clean-up or other action with respect to any Hazardous Substances located on any property, whether or not owned by Borrower or any of its subsidiaries; (B) any notice of any alleged violation of or knowledge by the Borrower or any of its subsidiaries of a condition which has a reasonable potential of resulting in a claim for a violation of any Requirement of Law involving environmental, health or safety matters; and (C) any commencement or threatened commencement of any judicial or administrative proceeding or investigation alleging a violation of any Requirement of Law involving environmental, health or safety matters. (ii) Permit and cause each of its subsidiaries to permit the Agent, any Bank and any agent or representative thereof access in accordance with Section 6.01(d), to inspect any documents, property or operations, and interview any employees, representatives or agents, of the Borrower or any of its subsidiaries pertaining to the areas of environmental compliance hazard or liability. (iii) Submit and cause each of its subsidiaries to submit, upon written request of the Agent or any Bank, to the Agent or such Bank, at reasonable intervals, a report providing an update of the status of any environmental, health or safety compliance, hazard or liability issue identified in any notice or report required pursuant to this Section 6.01(k) and any other environmental, health or safety compliance obligation, remedial obligation or liability, that might, individually or in the aggregate, result in liability in excess of Two Million Dollars ($2,000,000). (l) Further Assurances. On request of any Bank or the Agent, promptly correct any defect, error or omission which may be discovered in the contents of any of the Loan Documents or in the execution or acknowledgment thereof, and will execute, acknowledge and deliver such further instruments and do such further acts as may be necessary or as may be requested by any Bank or the Agent to carry out more effectively the purposes of this Agreement and the Loan Documents. SECTION 6.02. Negative Covenants. So long as any amount payable hereunder or under the Notes shall remain unpaid or any Bank shall have any Commitment hereunder, the Borrower will not, unless Agent, after obtaining the approval of the Majority Banks, shall otherwise consent in writing: (a) Liens, Etc. Create or suffer to exist, or permit any of its subsidiaries to create or suffer to exist, any lien, security interest or other charge or encumbrance, or any other type of preferential arrangement, upon or with respect to any of its properties, whether now owned or hereafter acquired, or assign, or permit any of its subsidiaries to assign, any right to receive income, in each case to secure any Indebtedness (as defined below) of any person or entity, other than (i) those described on Schedule 6.02(a) hereto, and renewals and extensions thereof on the same or substantially the same terms and conditions (ii) purchase money liens or purchase money security interests upon or in any fixed assets acquired or held by the Borrower or any subsidiary in the ordinary course of business to secure the purchase price of such fixed assets or to secure indebtedness incurred solely for the purpose of financing the acquisition of such fixed assets, (iii) liens or security interests existing on such fixed assets at the time of their acquisition, (iv) liens and security interests on previously acquired fixed assets, the fair value of which assets does not exceed by more than one hundred percent (100%) the amount of indebtedness secured thereby, all as determined by the Agent in its sole, good faith discretion or (v) obligations for capital and operating leases of real or personal fixed assets acquired or held by the Borrower in the ordinary course of business which are secured only by the fixed assets the subject of the lease, provided, however, that the aggregate principal amount of the indebtedness secured by the liens or security interests referred to in clauses (ii), (iii) and (iv) above plus the aggregate amount of capitalized payment obligations under the leases referred to in clause (v) above plus the amount of any increase in the indebtedness referred to in clause (i) above shall not exceed $25,000,000 at any time outstanding. (b) Dividends, Etc. Declare or pay any dividends, purchase or otherwise acquire for value any of its capital stock now or hereafter outstanding, or make any distribution of assets to its stockholders as such, or permit any of its subsidiaries to purchase or otherwise acquire for value any stock of the Borrower which in the aggregate exceeds $2,750,000 during any fiscal year. (c) Lease Obligations. Create or suffer to exist, or permit any of its subsidiaries to create or suffer to exist, any obligations for the payment of rent for any property under leases or agreements to lease, which do or would constitute operating leases, which in the aggregate have annual rental payments in excess of seven and one-half percent (7.5%) of Borrower's Net Tangible Assets; provided, however, that leases for rolling stock shall be excluded from the foregoing calculation. "Net Tangible Assets" means total assets less intangibles less current liabilities (exclusive of current deferred taxes). (d) Indebtedness, etc. Create, incur, assume or suffer to exist any indebtedness, liabilities or obligations, whether matured or unmatured, liquidated or unliquidated, direct or contingent, joint or several, except: (i) the liabilities of the Borrower permitted under Section 6.02(a); (ii) liabilities of the Borrower to the Agent and the Banks hereunder or otherwise; (iii) short-term indebtedness of the Borrower to parties other than the Agent and Banks hereunder, provided that such indebtedness shall at no time exceed $20,000,000.00 in the aggregate; (iv) other long-term indebtedness, and (v) those liabilities listed on Schedule 6.02(d) hereto. (e) Capital Expenditures, etc. Make any capital expenditures in any one fiscal year in excess of twenty-five percent (25%) of the Borrower's stockholders' equity at the end of the immediately preceding fiscal year (such calculation also to include the gross purchase price of assets or stock, as the case may be, acquired in connection with any merger, consolidation, asset acquisition, stock purchase or similar transaction except for the portion of such gross purchase price which was paid for by the Borrower solely with shares of the Borrower's capital stock); provided, however, that the amount of capital expenditures incurred in fiscal years 1996 and 1997 in connection with Borrower's planned construction of a new processing facility in Kentucky shall be excluded from the calculation of this covenant. (f) Loans, Guarantees, etc. Make any loans or advances to or investments in any person, or directly or indirectly guaranty or otherwise assure a creditor against loss in respect of any indebtedness, obligations or liabilities (contingent or otherwise) of any person unless any such amounts have been included as indebtedness in making calculations with respect to each representation, warranty and covenant herein. (g) Payment of Subordinated Debt. Make any prepayments of principal on any existing or future Subordinated Debt of the Borrower. (h) Merger and Consolidation. (i) Directly or indirectly, consolidate with or merge into any other Person, or permit any other Person to consolidate with or merge into it, unless (A) Borrower is the surviving legal entity, (B) immediately upon the consummation of such consolidation or merger there shall be no Default or Event of Default and (C) any additional documentation required by the Agent shall be delivered to the Agent. (ii) Allow any subsidiary, directly or indirectly, to consolidate with or merge into any other subsidiary, unless (A) immediately upon the consummation of such consolidation or merger, there shall be no Default or Event of Default and (B) any additional documentation required by the Agent shall be delivered to the Agent. (i) Business. Engage, directly or through other Persons, in any business other than the business now carried on, and other businesses directly related thereto. (j) Transactions With Affiliates. Notwithstanding any other provision of this Agreement, enter into any transaction with any Affiliate of the Borrower (other than a merger permitted under Section 6.02(h) hereof) except in the ordinary course of Borrower's business, and on fair and reasonable terms no less favorable to Borrower than it would obtain in a comparable arm's length transaction with a Person not an Affiliate. (k) Sale of Assets. Sell, lease, transfer, or otherwise dispose of assets, except (i) in the ordinary course of business and for full and fair consideration or (ii) assets which Borrower or its subsidiary determines in good faith are obsolete. (l) Use of Proceeds. Use the proceeds of any Advances or Letters of Credit for any purpose other than the financing of the integrated broiler, turkey and food processing and marketing operations of Borrower or for general corporate purposes including acquisitions to the extent permitted under Section 6.02. (m) Subsidiaries. Form or otherwise acquire any subsidiary corporation (including subsidiary corporations of the Borrower), unless (i) the Borrower gives each Bank and the Agent prior written notice thereof and (ii) such subsidiary executes and delivers to each Bank and the Agent (A) its guaranty of debt with respect to this Agreement in form substantially similar to the form of guaranty attached hereto as Exhibit B (the "Guaranty") and (B) such other documents and amendments to the Loan Documents as the Majority Banks shall require. (n) Accounting Methods. Change its methods of accounting, unless required by GAAP. (o) Fiscal Year End. Change its fiscal year. (p) Compliance with ERISA. (i) Terminate any Plan so as to result in any material (in the opinion of the Majority Banks) liability of the Borrower or any of its subsidiaries to the PBGC, or (ii) permit to exist any occurrence of any Reportable Event, or any other event or condition, which presents a material (in the opinion of the Majority Banks) risk of such a termination by the PBGC of any Plan. (q) Restricted Investments. Make any investments (including loans or other advances to or for the benefit of any subsidiary of the Borrower) except (i) investments in readily marketable obligations of the United States of America maturing within one year from date of purchase, (ii) investments in prime (by recognized United States financial standards) commercial paper maturing within one year from date of purchase, (iii) investment in fully insured domestic certificates of deposit and certificates of deposit issued by any Bank (provided such Bank's outstanding long-term debt securities are rated at least A by Standard & Poor's Corporation or at least A-1 by Moody's Investors Service, Inc.) maturing within one year, (iv) endorsements of negotiable instruments for collection in the ordinary course of business, (v) investments in other comparable prudent investments, including investments in or issued by any Bank, reported to the Banks monthly in conjunction with the Borrower's monthly reports required by Section 6.01(e) (together with a copy of the Borrower's then-current investment policy) and (vi) investments in the Borrower's subsidiaries that have complied with the requirements of Section 6.02(m); provided, however, that this Section 6.02(q) shall not be deemed to prohibit the Borrower from creating accounts receivable from any subsidiary of the Borrower as a result of the sale of inventory in accordance with Section 6.02(j). ARTICLE VII EVENTS OF DEFAULT SECTION 7.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing: (a) The Borrower shall fail to pay any amount payable hereunder or under the Notes when due; or (b) Any representation or warranty made by the Borrower (or any of its officers) or any Guarantor under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or (c) The Borrower shall fail to perform or observe the covenants in Sections 6.01(a), (e) or (j) hereof and any such failure shall remain unremedied for 10 days after written notice thereof shall have been given to the Borrower by the Agent or any Bank, or the Borrower shall otherwise have acquired knowledge thereof; or (d) The Borrower or any Guarantor shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document on their respective parts to be performed or observed; or (e) The Borrower or any of its subsidiaries shall fail to pay any indebtedness (excluding indebtedness evidenced by the Notes) of the Borrower or such subsidiary (as the case may be), or any interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such indebtedness; or any other default under any agreement or instrument relating to any such indebtedness, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such indebtedness; or any such indebtedness shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or (f) The Borrower or any of its subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any of its subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its property, and, in the case of any such proceeding instituted against it (but not instituted by it) either such proceeding shall remain undismissed or unstayed for a period of 30 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against it or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property) shall occur; or the Borrower or any of its subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or (g) Any judgment or order for the payment of money in excess of $5,000,000 shall be rendered against the Borrower or any of its subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (h) Any provision of the Guaranty after delivery thereof shall for any reason cease to be valid and binding on any Guarantor, or any Guarantor shall so state in writing; or (i) James T. Hudson and his immediate family cease to own of record at least 51% of the aggregate outstanding voting power of Borrower; or (j) (I) Any Termination Event with respect to a Plan shall have occurred, and, thirty days after notice thereof shall have been given to Borrower by the Agent or any Bank, (A) such Termination Event (if correctable) shall not have been corrected and (B) the then present value of such Plan's vested benefits exceeds the then current value of assets accumulated in such Plan by more than the amount of $500,000 (or in the case of a Termination Event involving the withdrawal of a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), the withdrawing employer's proportionate share of such excess shall exceed such amount, or (II) the Borrower or any of its subsidiaries, as an employer under a Multiemployer Plan, shall have made a complete or partial withdrawal from such Multiemployer Plan and the plan sponsor of such Multiemployer Plan shall have notified such withdrawing employer that such employer has incurred a withdrawal liability in an annual amount exceeding $100,000; then, and in any such event, the Agent, with the consent of the Majority Banks (i) may, by notice to the Borrower, declare the obligation of the Banks to make Committed Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) may, by notice to the Borrower, declare the Notes, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower or any subsidiary under the Federal Bankruptcy Code, (x) the obligation of the Banks to make Committed Advances shall automatically be terminated and (y) the Notes, all such interest and all such amounts shall automatically become due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. ARTICLE VIII DEFINITIONS SECTION 8.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Acceptance" means a draft drawn on a Bank by the Borrower and accepted and discounted by such Bank pursuant to Section 2.03. "Adjusted Leverage Ratio" shall have the meaning specified in Section 3.02(c). "Advances" and "Advance" respectively mean (a) all advances (including Committed Advances and Bid Rate Advances) made by the Banks or any single Bank (as the context requires) to the Borrower pursuant to Article I, and (b) a single such advance made by any Bank. "Affiliate" means (i) the Borrower or (ii) the Guarantor or (iii) any corporation or entity of which either the Borrower or the Guarantor owns, directly or indirectly through one or more intermediaries, 10% or more of the outstanding capital stock of such corporation or entity. "Agency Fee" shall have the meaning specified in Section 1.02. "Agency Fee Letter" shall have the meaning specified in Section 1.02. "Agent's Depository Account" means the Agent's Account No. 8026002533 maintained at The Bank of New York in New York City, ABA Reference No. 021000018, or such other account as shall be designated by the Agent in a written notice to the Banks. "Aggregate Outstanding Liabilities" means, as of any date, the sum of the then outstanding Advances, Bid Rate Credits and Letter of Credit Liabilities. "Anticipated Profits" at any time that any determination thereof is to be made means an amount equal to the excess, if any, of (i) the amount of interest that the Agent or a Bank, as the case may be, determines in good faith that it would have realized on any Advance which was made, or any Advance that was requested by the Borrower to be made pursuant to a Notice of Committed Borrowing as if such requested Advance had been made, and remained outstanding for the duration of the Interest Period pertaining thereto, over (ii) the Agent's or a Bank's, as the case may be, cost of obtaining the funds for any such Advance made, or any such requested Advance, for the Interest Period pertaining thereto. "Applicable Net Income Carryover" shall have the meaning specified in Section 6.01(g). "Applicable Rate" shall have the meaning specified in Section 3.02(c). "Available Commitment" at the time any determination thereof is to be made means, with respect to any Bank, an amount equal to the excess, if any, of such (i) Bank's Commitment over (ii) the Aggregate Outstanding Liabilities then owing to such Bank. "Available Commitment Share" when used with reference to any Bank at the time any determination thereof is to be made means a fraction, expressed as a percentage, the numerator of which shall be the amount of such Bank's Available Commitment then in effect and the denominator of which shall be the amount of the Available Total Commitment then in effect. "Available Total Commitment" at the time any determination thereof is to be made means the aggregate sum of the Available Commitments of the Banks at such times. "Balloon Portion" shall have the meaning specified in Section 6.01(i). "Bank Obligations" means all obligations of any Loan Party to the Agent or the Banks, or any of them, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, joint or several, or now or hereafter existing, or due or to become due, under or in connection with this Agreement, the Notes or any other Loan Documents. "Bank Supplement" shall have the meaning specified in Section 10.09. "Base Rate" means the higher of (i) the fluctuating rate of interest announced publicly by Rabobank in New York, New York, from time to time, as Rabobank's base rate, or (ii) the fluctuating rate of interest per annum equal to one-half of one percent (0.5%) in excess of the rate of interest per annum at which Rabobank, as a federally licensed branch of a foreign bank, can acquire overnight federal funds in the interbank overnight federal funds market in New York City through brokers of recognized standing one Business Day prior to such date in the amount of such Advance. Rabobank may make commercial loans or other loans at rates of interest at, above, or below its base rate. "Bid Rate" for any Interest Period for any Advance of any Bank means an interest rate per annum at all times equal during such Interest Period to the rate per annum which such Bank offers to the Borrower in writing from time to time in response to a request from the Borrower or an interest rate quotation regarding a specific proposed Bid Rate Advance for a specific amount to be made on a specific date for a specific period. "Bid Rate Advance" shall have the meaning specified in Section 1.01(b). "Bid Rate Credits" shall have the meaning specified in Section 2.03. "Borrowing Date" means the date on which a Borrowing is, or is to be, consummated, as the context requires. "Business Day" means (a) in the case of a Business Day which relates to fees, a day upon which the Agent is open at its address specified in or pursuant to the provisions of Section 10.02 for the purpose of conducting commercial banking business, (b) in the case of a Business Day which relates to a LIBOR Rate Advance, a day on which the requirements of clause (a) of this definition are met and, in addition, dealings are carried out in the interbank eurodollar market and banks are open for business in New York, (c) in the case of a Business Day which relates to a Letter of Credit, a day on which the relevant issuer and the Agent are each open at their respective addresses specified in or pursuant to Section 10.02 for purposes of conducting commercial banking business, and (d) in the case of Bid Credits and Base Rate Advances, a day on which the requirements of clause (a) of this definition are met and, in addition, banks are open for business in New York. "Cash Flow Coverage Ratio" shall have the meaning specified in Section 6.01(i). "Code" means the Internal Revenue Code of 1986, as amended. "Commitment" with respect to any Bank means the amount set forth opposite such Bank's name on the signature page hereof (or on the signature page of the then most recent Bank Supplement to which such Bank is a party, if any), as amended from time to time, as such amount may be reduced from time to time pursuant to Section 1.01(c). "Committed Advances" shall have the meaning specified in Section 1.01(a). "Committed Borrowing" means a borrowing consisting of simultaneous Committed Advances from the Banks (or any of them) pursuant to Section 2.02. "Controlled Group" means, as to any Person, all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) which are under common control with such Person and which, together with such Person, are treated as a single employer under Section 4001(a)(14) of ERISA or Section 4.14(b), (c), (m), (n) or (o) of the Code. "Default" means any of the events specified in Section 7.01, whether or not there has been satisfied any requirement in connection with such event for the giving of notice, or the lapse of time, or the happening of any further condition, event or act. "Default Rate" shall have the meaning specified in Section 3.02(d). "Environmental Claim" means all claims, however asserted, by any Governmental Authority or other Person alleging potential liability for violation of any Environmental Law or for release or injury to the environment or threat to public health, personal injury (including sickness, disease or death), property damage, natural resources, damage, or otherwise alleging liability for damages, punitive damages, cleanup costs, removal costs, remedial costs, response costs, restitution, civil or criminal penalties, injunctive relief, or other type of relief, resulting from or based upon (a) the presence, placement, discharge, emission or release (including intentional and unintentional, negligent and non-negligent, sudden or non-sudden, accidental or non-accidental placement, spill, leaks, discharges, emissions or releases) of any Hazardous Substances at, in or from property, whether or not owned by the Borrower or any of its subsidiaries, or (b) any other circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. "Environmental Laws" means (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time, 42 U.S.C. ss. 9601 et seq., (ii) the Resource Conservation and Recovery Act, as amended from time to time, 42 U.S.C. ss. 6901 et seq., (iii) the Clean Air Act, as amended from time to time, 42 U.S.C. ss. 7401 et seq., (iv) the Clean Water Act of 1977, as amended from time to time, 33 U.S.C. ss. 1251 et seq., (v) the Toxic Substances Control Act, as amended from time to time, 15 U.S.C. ss. 2601 et seq., (vi) the Hazardous Materials Transportation Act, as amended from time to time, 49 U.S.C. ss. 1801 et seq., and (vii) all other federal, state and local laws relating to air pollution, water pollution, noise control and/or the handling, discharge, disposal or recovery of on-site or off-site Hazardous Substances, as each of the foregoing may be amended from time to time. "ERISA" means the Employee Retirement Income Security Act of 1974. "Events of Default" shall have the meaning specified in Section 7.01. "Facility Fee" shall have the meaning specified in Section 1.03. "GAAP" means generally accepted accounting principles as in effect from time to time as set forth in the opinions, statements and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, the Financial Accounting Standards Board and such other Persons who shall be approved by a significant segment of the accounting profession and concurred in by the independent certified public accountants certifying any audited financial statements of the Borrower. "Guarantor" shall mean any entity which executes a Guaranty as contemplated in Section 6.02(m). "Guaranty" shall have the meaning specified in Section 6.02(m). "Hazardous Substances" means one or more of the following substances: (i) those substances included within the definitions of "hazardous substances", hazardous materials", "toxic substances", or "solid waste" in any Environmental Laws; (ii) those substances listed in the United States Department of Transportation Table (49 CFR 172.101 and amendments thereto) or by the Environmental Protection Agency (or any successor agency) as hazardous substances (40 CFR Part 302 and amendments thereto); (iii) such other substances, materials and wastes which are or become regulated under any Environmental Laws or regulation, or which are classified as hazardous or toxic; and (iv) any material, waste or substance which is asbestos, explosives or radioactive. "Indebtedness" with respect to any Person means, without duplication, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property acquired by, or services rendered to, such Person, (b) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to any property acquired by such Person, (c) the present value determined in accordance with GAAP of all obligations of such Person under leases which shall have been or should be recorded as capitalized leases in accordance with GAAP, (d) all indebtedness or for the deferred purchase price of property or services secured by any lien upon or in any property owned by such Person whether or not such Person has assumed or become liable for the payment of such indebtedness, (e) indebtedness arising under acceptance facilities, in connection with surety or other similar bonds, and the undrawn maximum face amount of all outstanding letters of credit issued for the account of such Person and, without duplication, the outstanding amount of all drafts drawn thereunder, (f) obligations of such Person with respect to interest rate protection agreements, (g) all liabilities in respect of unfunded vested benefits under Plans and all asserted withdrawal liability of such Person or a commonly controlled entity to a Multiemployer Plan, as such term is defined under Section 3(37) of ERISA, and (h) all direct or indirect guarantees by such Person of indebtedness described in this definition of any other Person; provided, that, for purposes of this definition, Trade Debt shall not be included. "Interest Period" shall have the meaning specified in Section 3.02(b). "Letter of Credit" means each letter of credit, as defined in the Uniform Commercial Code, issued to, for the account of, or for the benefit of the Borrower by a Bank or by another financial institution upon a Bank's guaranty. "Letter of Credit Liabilities" means, at any time, the sum of (a) the aggregate maximum amount that thereafter could be drawn under all Letters of Credit plus (b) all amounts drawn, but unreimbursed, under Letters of Credit. "Leverage Ratio" shall have the meaning specified in Section 6.01(h). "LIBOR Interest Period" means an Interest Period for a particular LIBOR Rate Advance. "LIBOR Office" with respect to any Bank means the office, branch or affiliate of such bank designated as its address on the signature pages hereto or such other office(s), branch(es) or affiliate(s) of such Bank (as designated from time to time by notice from such Bank to the Borrower and the Agent) which shall be making or maintaining the LIBOR Rate Advances of such Bank hereunder. "LIBOR Rate Advance" means any Advance which bears interest as a rate determined by reference to the LIBOR Rate. "LIBOR Rate" for any LIBOR Interest Period for any Advance means an interest rate per annum equal at all times during such Interest Period to the quotient of (i) the rate per annum conclusively determined by Rabobank for such LIBOR Interest Period at which deposits in U.S. dollars in immediately available funds are offered, which appear on Telerate page 3750 as of 11:00 A.M. (London time) on the LIBOR Business Day that is two (2) London banking days preceding the first day of such Interest Period, for delivery on the first day of such LIBOR Interest Period in an amount equal to the principal amount of the Advance outstanding on the first day of such LIBOR Interest Period for a period equal to such LIBOR Interest Period divided by (ii) the remainder of one (1) minus the applicable LIBOR Reserve Percentage. "Loan Documents" and "Loan Document" means this Agreement, the Notes, any Guaranty, the Agency Fee Letter, and all other documents, instruments, and certificates delivered to the Agent and/or any Bank by any Loan Party under this Agreement or in connection herewith, including, without limitation, all documents, instruments and certificates delivered in connection with the extension of Bid Rate Credits by any Bank hereunder and all letters of credit and supporting documents described in Section 10.17 as being deemed to be Loan Documents. "Loan Parties" means, collectively, the Borrower and any Guarantor. "LIBOR Reserve Percentage" means, with respect to each LIBOR Interest Period, a percentage (expressed as a decimal) equal to the daily average during such LIBOR Interest Period of the percentages in effect on each day of such LIBOR Interest Period, as prescribed by the Board of Governors of the Federal Reserve System (or any successor thereto), for determining the maximum reserve requirements applicable to "Eurocurrency Liabilities" pursuant to Regulation D of the Board of Governors of the Federal Reserve System or any other then applicable regulation of the Board of Governors which prescribes reserve requirements applicable to "Eurocurrency Liabilities" as presently defined in Regulation D. "Majority Banks" at the time any determination thereof is to be made and for any specific purpose means a Bank or Banks having a combined Pro Rata Share aggregating sixty percent (60%) or more. "Maximum Rate" shall have the meaning specified in Section 3.02(c). "Multiemployer Plan" means, with respect to any Person, at any time, a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to which such Person or any member of its controlled group is making, or is obligated to make contributions or has made, or been obligated to make, contributions. "Net Tangible Assets" shall have the meaning specified in Section 6.02(c). "Net Worth" means the excess of total assets over total liabilities, total assets and total liabilities each to be determined in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 6.01(e). "Notes" shall have the meaning specified in Section 3.01. "Notice of Committed Borrowing" shall have the meaning specified in Section 2.02. "Original Banks" means the commercial, banking and financial institutions whose signatures appear on the signature pages of the Prior Revolving Credit Agreement. "Outstandings Report" means a duly executed and completed report of the Borrower, substantially in the form of Exhibit F hereto. "Person" shall mean any individual or entity. "PBGC" means the Pension Benefit Guaranty Corporation established under ERISA. "Plan" means any plan subject to Title IV of ERISA and maintained for employees of the Borrower or any of its subsidiaries, or of any member of a Controlled Group, of which the Borrower or any of its subsidiaries is a part. "Prior Revolving Credit Agreement" means that certain Revolving Credit Agreement, dated as of April 26, 1994, by and among the Borrower, Rabobank and the Original Banks, as amended by (i) that certain Amendment to Revolving Credit Agreement dated as of April 17, 1995 and executed by and among the Borrower, Rabobank and the Original Banks and (ii) those certain letter amendments to the Revolving Credit Agreement dated as of October 18, 1995 and executed by and between the Borrower and the Original Banks. "Pro Rata Share" when used with reference to any Bank at the time any determination thereof is to be made means a fraction, expressed as a percentage, the numerator of which shall be the amount of such Bank's Commitment then in effect and the denominator of which shall be the Total Commitment then in effect; provided, that if the respective Commitments of the Banks, and the Total Commitment, have then been terminated, the numerator of such fraction shall be the principal amount of the Aggregate Outstanding Liabilities then owing to such Bank and the denominator of such fraction shall be the principal amount of the Aggregate Outstanding Liabilities then owing to all of the Banks. "Qualifying Balloon Payments" shall have the meaning specified in Section 6.01(i). "Qualifying Replacement Financing" shall have the meaning specified in Section 6.01(i). "Reportable Event" means a reportable event as defined in Section 4043(b) of Title IV of ERISA. "Request for Bids" shall mean a telephonic request for one or more Bid Rate Credits which is confirmed in a writing substantially in the form of Exhibit E. "Requirement of Law" means, with respect to any Person, the charter and by-laws or other organizational or governing documents of such Person, and any law, rule or regulation (including Environmental Laws and ERISA) or order, decree or other determination of an arbitrator or a court or other such governmental authority applicable to or binding upon such Person or any property or to which such Person or any of its property is subject. "Secured Credit Agreement" means that certain Amended and Restated Credit Agreement, dated as of September 23, 1992, by and among the Borrower, the Guarantor, and the Banks, and Bank of America National Trust and Savings Association, as collateral agent. "Subordinated Debt" means, without duplication, all unsecured Indebtedness of the Borrower which is made subordinate and junior in right of payment to the Bank Obligations of the Borrower by the inclusion in the instrument evidencing or creating such Indebtedness or the indenture or other instrument under which such Indebtedness is issued of subordination provisions no more favorable to the Persons extending or purchasing such Indebtedness than the terms of subordination found in the documents evidencing the Subordinated Debt outstanding as of the date hereof set forth on Schedule 8.01 hereof. "Tangible Net Worth" shall have the meaning specified in Section 6.01(g). "Termination Date" means the earlier of June 30, 1999 (or anniversary thereof as may be determined in accordance with Section 1.01(d) hereof) or the date of termination in whole or in part of the Commitment pursuant to Section 1.01(c) or Section 7.01. "Termination Event" means (a) a Reportable Event described in Section 4043 of ERISA and the regulations issued thereunder (other than a Reportable Event not subject to the provision for 30-day notice to the PBGC under such regulations), or (b) the withdrawal of Borrower or any Subsidiary from a Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (c) the filing of a notice of intent to terminate a Plan or the treatment of Plan amendment as termination under Section 4041 of ERISA, or (d) the institution of proceedings to terminate a Plan by the PBGC, or (e) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. "Total Commitment" at the time any determination thereof is to be made means the sum of the then existing Commitments of the Banks. "Trade Debt" means trade accounts payable incurred in the ordinary course of business with an original maturity of not greater than 180 days (and which are not overdue for more than 30 days). SECTION 8.02. Construction. Wherever herein the singular number is used, the same shall include the plural where appropriate, and words of any gender shall include each other gender where appropriate. The headings, captions or arrangements used in any of the Loan Documents are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of the Loan Documents, nor affect the meaning thereof. SECTION 8.03. Currency. All Advances and Bid Rate Credits shall be denominated in United States Dollars. ARTICLE IX THE AGENT SECTION 9.01. Authorization and Action. Each Bank hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Notes), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Banks; provided, however, that the Agent shall not be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement or applicable law. SECTION 9.02. Duties and Obligations. Neither the Agent nor any of its directors, officers, agents, or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Agent (i) may treat the payee of any Note as the holder thereof unless and until the Agent receives written notice of the assignment thereof signed by such payee and the Agent receives the written agreement of the assignee that such assignee is bound hereby as it would have been if it had been an original Bank party hereto, in each case in form satisfactory to the Agent, (ii) may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts, and (iii) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, cable, telex or facsimile) believed by it to be genuine and signed or sent by the proper party or parties or by acting upon any representation or warranty of the Borrower made or deemed to be made hereunder. Further, the Agent (A) makes no warranty or representation to any Bank or shall not be responsible to any Bank for the accuracy or completeness of any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement, (B) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Borrower or to inspect the property (including the books and records) of the Borrower, and (C) shall not be responsible to any Bank for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto. SECTION 9.03. Agent and Affiliates. With respect to its Commitment, the Advances made by it and the Note issued to it, the Agent shall have the same rights and powers under this Agreement as the other Banks and may exercise the same as though it were not the Agent; and the term "Bank" or "Banks" shall, unless otherwise expressly indicated, include the Agent in its capacity as Bank. Rabobank and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Borrower, all as if Rabobank were not the Agent hereunder and without any duty to account therefor to the Banks. SECTION 9.04. Bank Credit Decision. It is understood and agreed by each Bank that it has itself been, and will continue to be, solely responsible for making its own independent appraisal of and investigations into the financial condition, creditworthiness, condition, affairs, status and nature of the Borrower. Accordingly, each Bank confirms to the Agent that such Bank has not relied, and will not hereafter rely, on the Agent (i) to check or inquire on its behalf into the adequacy, accuracy or completeness of any information provided by the Borrower under or in connection with this Agreement or the transactions herein contemplated (whether or not such information has been or is hereafter distributed to such Bank by the Agent), or (ii) to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of the Borrower. Each Bank acknowledges that a copy of this Agreement and a copy of the Exhibits and Schedules hereto have been made available to it and to its individual legal counsel for review and such Bank acknowledges that it is satisfied with the form and substance of this Agreement and the Exhibits and Schedules hereto. SECTION 9.05. Indemnification. The Banks agree to indemnify the Agent (to the extent not reimbursed by the Borrower), ratably according to their respective Pro Rata Shares, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgment, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or any action taken or omitted by the Agent under this Agreement, provided that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct. Without limiting the generality of the foregoing, each Bank agrees to reimburse the Agent promptly upon demand for its ratable share of any reasonable out-of-pocket expenses (including reasonable counsel fees) incurred by the Agent in connection with the preservation of any rights of the Agent or the Banks under, or the enforcement of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Agent is not reimbursed for such expenses by the Borrower. SECTION 9.06. Resignation of Agent. The Agent may resign at any time by giving written notice thereof to the Banks and the Borrower. If no successor Agent shall have been appointed by the Banks, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be either a Bank or a bank organized under the laws of the United States or of any state thereof, or any affiliate of such bank, and having a combined capital and surplus of at least $50,000,000, provided, however, that the appointment of any successor Agent shall require the prior written consent of the Borrower, which consent shall not be unreasonably withheld, and that if the Borrower shall not have consented to the appointment of any of the Banks, then any Bank may be appointed as a successor Agent in accordance with the terms of this Section 9.06 without the consent of the Borrower. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation hereunder as Agent, the provision of this Article IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. SECTION 9.07. Exchange of Information. Each Bank and the Agent shall freely exchange with the other(s) of them any information relating to the condition, financial or otherwise, of any Loan Party, and the Borrower hereby consents any and all prior, present or future such exchanges. SECTION 9.08. Benefit of the Banks Only. The terms and provisions of this Article IX are for the sole and exclusive benefit of the Agent and the Banks, and not for the benefit of the Borrower, the Guarantors or any other Loan Party. ARTICLE X MISCELLANEOUS SECTION 10.01. Amendments, Etc. No amendment or waiver of any provision of any Loan Document, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Banks and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that any modification of, or waiver of compliance with any of the provisions of, this Section 10.01, the Guaranty, the definition of Majority Bank or any terms affecting the maturity of or any other dates for payment or the amounts of any Commitments, the Advances, or interest on the Advances shall require the written agreement of the Borrower, the Agent and each of the Banks. SECTION 10.02. Notices, Etc. All notices and other communications provided for under any Loan Document shall be in writing (including telegraphic, telex or cable communication) and mailed, telegraphed, telexed, cabled or delivered, if to the Borrower, at its address at 1225 Hudson Road, Rogers, AR 72756, Attention: Charles B. Jurgensmeyer and Tommy D. Reynolds; and if to the Agent, at its address at 245 Park Avenue, New York, New York 10167, Attention: Corporate Services Department, and at its address at 13355 Noel Road, Suite 1000, Dallas, Texas 75240, Attention: Douglas L. Pogge; and if to a Bank, at its address or addresses, as the case may be, set forth on the signature page of this Agreement or the then most recent Bank Supplement to which such Bank is a party; or, as to each party, at such other address as shall be designated by such party in a written notice to the other party. All such notices and communications shall, when mailed, telegraphed, telexed or cabled, be effective when deposited in the mails, delivered to the telegraph company, confirmed by telex answerback or delivered to the cable company, respectively, except that notices to the Agent or any Bank pursuant to the provisions of Article II shall not be effective until received by the Agent or such Bank, as the case may be. Notwithstanding the other provisions of this Section 10.02, the Agent may accept oral borrowing notices pursuant to Article II hereof, provided that the Agent shall incur no liability to the Borrower in acting on any such communication that the Agent believes in good faith to have been given by a person authorized to give such notice on behalf of the Borrower. Any confirmation sent by the Agent or any Bank to the Borrower of any borrowing under this Agreement shall, in the absence of manifest error, be conclusive and binding for all purposes. SECTION 10.03. No Waiver; Remedies. No failure on the part of the Agent or any Bank to exercise, and no delay in exercising, any right under any Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right under any Loan Document preclude any other or further exercise thereof or the exercise of any other right. The remedies provided in the Loan Documents are cumulative and not exclusive of any remedies provided by law. SECTION 10.04. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistently applied, except as otherwise stated herein. The Borrower agrees to furnish to the Agent and each Bank concurrently with each delivery of the items referred to in Section 6.01(e)(i) and Section 6.01(e)(ii), a calculation of the Borrower's compliance or noncompliance with the covenants contained in Sections 6.01(f), (g), (h) and (i) and a calculation and reconciliation of the adjustments contemplated in this Section 10.04, each in form and detail satisfactory to the Agent, and certified by such person and in such manner as is prescribed in Sections 6.01(f) (g), (h) and (i), as the case may be, as to the other items referred to therein. SECTION 10.05. Costs, Expenses and Taxes. (a) The Borrower agrees to pay on demand all costs and expenses in connection with the preparation, execution, delivery, filing, recording and administration of the Loan Documents and the other documents to be delivered under the Loan Documents, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Agent and each Bank (who may be in-house counsel for the Agent or such Bank), and local counsel who may be retained by said counsel, with respect thereto and with respect to advising the Agent and such Bank as to its rights and responsibilities under the Loan Documents and all costs and expenses (including reasonable counsel fees and expenses) in connection with the enforcement of the Loan Documents and the other documents to be delivered under the Loan Documents. In addition, the Borrower agrees to pay on demand the expenses described in Section 6.01(d), subject to the limitations on amount specified therein. In addition, the Borrower shall pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of the Loan Documents and the other documents to be delivered under the Loan Documents, and agrees to hold the Agent and the Banks harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees. (b) If, due to payments made by the Borrower pursuant to Section 3.01 or due to acceleration of the maturity of the Advances pursuant to Section 7.01 or due to any other reason, the Agent or any Bank receives payments of principal of any Advance other than on the last day of an Interest Period relating to such Advance, the Borrower shall pay to the Agent or the Bank on demand any amounts required to compensate the Agent or such Bank, as the case may be, for any additional losses, costs or expenses which it may incur as a result of such payment, including, without limitation, any loss (including loss of Anticipated Profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by the Agent or such Bank, as the case may be, to fund or maintain such Advance. SECTION 10.06. Right of Set-off. Upon the occurrence and during the continuance of any Event of Default the Agent and each Bank are hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply, on a pro rata basis according to each Bank's Pro Rata Share, any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Agent and/or such Bank to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under any Loan Document, irrespective of whether or not such Bank shall have made any demand under such Loan Document and although deposits, indebtedness or such obligations may be unmatured or contingent; provided, however, that each Bank and the Agent may first set off and apply such funds to obligations other than Bank Obligations. The Agent and each Bank, as the case may be, agrees promptly to notify the Borrower after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Bank under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Agent and the Banks may have. SECTION 10.07 Indemnification. Borrower agrees to, and does indemnify and hold harmless the Agent and each Bank and their respective officers, directors, agents, employees, attorneys and shareholders against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims (whether made or threatened), costs, expenses and disbursements of any kind or nature whatsoever (including without limitation, the reasonable fees and expenses of counsel (including the allocated cost of staff counsel)) which may be imposed on or incurred by the Agent or any Bank or their respective officers, directors, agents, employees, attorneys and shareholders in any way relating to, or arising out of, (a) any of the Loan Documents, (b) the breach of any representation or warranty as set forth herein regarding Environmental Laws, (c) the failure of the Borrower or any of its subsidiaries to perform any obligation required herein or in any of the Loan Documents to be performed pursuant to Environmental Laws, or (d) any other act, omission, event or other transaction contemplated in any of the Loan Documents, to the extent that any of the same result, directly or indirectly, from any claims (whether made or threatened) or actions, suits or proceedings (whether made or threatened) by or on behalf of any Person other than a Bank. Without limiting the generality of the foregoing, such indemnity shall extend to any and all costs and expenses whatsoever incurred by the Agent and each Bank and their respective officers, directors, agents, employees, attorneys and shareholders (including, without limitation, the reasonable fees and expenses of counsel (including the allocated cost of staff counsel)), in connection with investigating, preparing for or defending against or providing evidence, producing documents or taking any action with respect to any such action, claim (whether made or threatened and whether or not the Agent, any Bank or other indemnified person is a party to such action or claim), suit, liability, damage or loss, whether or not resulting in any liability. The Agent and each Bank may select its own legal counsel in connection with any matters indemnified against hereunder. The obligation of Borrower under this Section 10.07 shall survive execution, delivery, consummation and any termination of this Agreement. Borrower's obligations under this Section 10.07 are and shall remain absolute and unconditional, enforceable against each of them whether or not any Advance is ever made, any Letter of Credit is ever issued, any Acceptance is ever created or any other obligation ever arises or any conditions of lending are ever met and without regard to any act, omission, breach, knowledge or event by, attributable to, or in any manner involving the Agent or any Bank or their respective officers, directors, agents, employees, attorneys and shareholders. Payment by Borrower in respect of a claim made by the Agent or any Bank or their respective officers, directors, agents, employees, attorneys and shareholders pursuant to this Section 10.07 shall be made within thirty days after demand therefor. If and to the extent that the foregoing undertaking may be unenforceable for any reason, Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the foregoing amounts which is permissible under applicable law. SECTION 10.08. Severability of Provisions. Any provision of this Agreement or of any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or thereof or affecting the validity or unenforceability of such provision in any other jurisdiction. SECTION 10.09. Binding Effect; Successors and Assigns; Participations. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Agent and the Banks and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Agent and each Bank. Each Bank shall have the right at any time, to assign, negotiate, hypothecate, or grant participations in this Agreement or in any of its commitments, Advances, Notes and rights under this Agreement and any of the other Loan Documents, and in the event of the exercise of such right shall promptly notify the Agent and the other Banks thereof; provided, however, that no assignment shall be made to a third party without the prior consent of the Borrower, which consent shall not be unreasonably withheld. Each Bank assigning or transferring any of its commitments, Advances, Notes, rights and security under this Agreement or any of the other Loan Documents shall, promptly upon request by the Agent, execute and deliver such documents and instruments reasonably requested by the Agent (collectively, a "Bank Supplement") to evidence such assignment or transfer and to substitute the assignee or transferee as a Bank on all of the Loan Documents. The Borrower hereby acknowledges and agrees that any assignment or transfer described in this Section 10.09 will give rise to a direct obligation of the Borrower to the buyer, assignee or transferee, as the case may be, but not a participant, and such person (other than a participant) shall be considered a Bank and rely on, and possess all rights under, all opinions, certificates or other instruments delivered under or in connection with this Agreement or any other Loan Document. The Borrower shall accord full recognition to any such assignment or transfer, and all rights and remedies of such Bank in connection with the interest so assigned shall be as fully enforceable by such assignee as they were by the assignor Bank thereof before such assignment. In connection with any proposed assignment, negotiation, hypothecation or granting of a participation, the Agent and any such Bank or Banks, as the case may be, may disclose to the proposed assignee or participant any information that the Borrower is required to deliver to the Agent and/or the Banks pursuant to this Agreement or the other Loan Documents, and the Borrower hereby agrees to cooperate fully with the Agent and the Banks, as the case may be, in providing any such information to any proposed assignee or participant. If requested by the Agent, any assignor or transferor Bank, or any assignee or transferee, Borrower shall execute and deliver (a) to such assignor or transferor Bank a promissory note or substitute promissory note, as the case may be, in substantially the form of Exhibit A, payable to the order of such assignor or transferor Bank in the principal amount of the retained Commitment, if any, of such assignee or transferor Bank in respect of such assignment or transfer and (b) to such assignee or transferee a promissory note, in substantially the form of Exhibit A, payable to the order of the assignee or transferee in the principal amount of the assigned or transferred Commitment of such assignee or transferee in respect of such assignment or transfer. SECTION 10.10. Consent to Jurisdiction. (a) The Borrower hereby irrevocably submits to the jurisdiction of any New York State or Federal court sitting in New York City in any action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which the Borrower is a party, and the Borrower hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State court or in such Federal court. The Borrower hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. The Borrower irrevocably consents to the service of copies of the summons and complaint and any other process which may be served in any such action or proceeding by the mailing of copies of such process to the Borrower at its address specified in Section 10.02. The Borrower 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. (b) Nothing in this Section 10.10 shall affect the right of the Bank to serve legal process in any other manner permitted by law or affect the right of the Bank to bring any action or proceeding against the Borrower or its property in the courts of other jurisdictions. SECTION 10.11. Governing Law. THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 10.12. Banks' Obligations Several, Not Joint. The obligations of the Banks under this Agreement and the other Loan Documents are several, and are not joint. No Bank or the Agent shall be responsible or liable in any way for the failure or refusal of any other Bank to make any Advance to be made by any other Bank, or for any other obligations of any other Bank. SECTION 10.13. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute but one and the same agreement. SECTION 10.14. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT TO WHICH IT IS A PARTY OR ANY INSTRUMENT OR DOCUMENT DELIVERED THEREUNDER. SECTION 10.15. NO ORAL AGREEMENTS. THIS AGREEMENT, TOGETHER WITH THE AGREEMENTS, DOCUMENTS AND INSTRUMENTS EXECUTED IN CONNECTION HEREWITH, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. SECTION 10.16. No Effect on Certain Other Rights and Obligations. Notwithstanding anything to the contrary contained in this Agreement or any other Loan Document, nothing contained in this Agreement or any other Loan Document is intended to affect, nor shall it affect, in any way any rights or obligations of any Person arising under or in connection with (a) that certain Note Purchase Agreement dated as of August 27, 1992 by and among the Borrower, Pierre Frozen Foods, Inc., Rabobank, Metropolitan Life Insurance Company and John Hancock Mutual Life Insurance Company (as amended, the "Pierre Foods Facility Note Purchase Agreement") or any of the Transaction Documents (as defined in the Pierre Foods Facility Note Purchase Agreement) or (b) that certain Term Loan Agreement dated as of July 18, 1985, by and among the Borrower and Rabobank (as amended, the "Springfield Facility Loan Agreement"), or any of the Loan Documents (as defined in the Springfield Facility Loan Agreement). SECTION 10.17. Amendment and Restatement. Upon the execution and delivery of this Agreement and the other Loan Documents, this Agreement shall immediately thereupon constitute an amendment, restatement, renewal and extension (but not a novation, extinguishment or satisfaction) of the Prior Revolving Credit Agreement and the other Loan Documents (as defined therein), except that letters of credit issued by any one or more of the Original Banks under the Prior Revolving Credit Agreement which remained outstanding as of April 30, 1996 (which, together with all supporting documents delivered by the Borrower or the Guarantor in connection therewith, shall thereafter be deemed to be Loan Documents under this Agreement) shall not be terminated or affected thereby, and any indemnification or other provisions of the Prior Revolving Credit Agreement or any other Loan Documents executed in connection therewith which were expressly intended to survive the termination of the Prior Revolving Credit Agreement, shall not be terminated or otherwise affected thereby. With respect to matters relating to the period prior to the date hereof, all of the provisions of the Prior Revolving Credit Agreement are hereby ratified and confirmed and shall remain in force and effect. [REMAINDER OF THIS PAGE INTENTIONALLY BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. HUDSON FOODS, INC. By: Name: Title: Commitment: $40,000,000.00 COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "Rabobank Nederland", New York Branch Address: 245 Park Avenue New York, New York 10167 By: Authorized Officer By: Authorized Officer Commitment: $40,000,000.00 NATIONSBANK OF TEXAS, N.A. Address: 901 Main Street, 67th Floor Dallas, Texas 75202 By: Name: Title: Commitment: $30,000,000.00 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION Address: 333 Clay Street, Suite 4550 Houston, Texas 77002 By: Name: Title: Commitment: $30,000,000.00 CAISSE NATIONALE DE CREDIT AGRICOLE Address: 55 East Monroe Street, Suite 4700 Chicago, Illinois 60614 By: Name: Title: Commitment: $30,000,000.00 HARRIS TRUST AND SAVINGS BANK Address: 111 West Monroe Chicago, Illinois 60690-0755 By: Name: Title: Commitment: $15,000,000.00 SUNTRUST BANK, ATLANTA Address: 25 Park Place, 25th Floor Atlanta, Georgia 30303 By: Name: Title: By: Name: Title: Commitment: $15,000,000.00 BOATMEN'S FIRST NATIONAL BANK OF KANSAS CITY Address: 10th & Baltimore Kansas City, Missouri 64183 By: Name: Title: COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "Rabobank Nederland", New York Branch, as Agent for the Banks Address: 245 Park Avenue New York, New York 10167 By: Authorized Officer By: Authorized Officer NATIONSBANK OF TEXAS, N.A., as documentation agent Address: 901 Main Street, 67th Floor Dallas, Texas 75202 By: Name: Title: SCHEDULE 6.02(a) Description of Certain Liens, Lease Obligations, Etc. [See attachment.] SCHEDULE 6.02(d) Description of Liabilities [See attachment.] A-2 SCHEDULE 8.01 Subordinated Debt [See attachment.] EXHIBIT A PROMISSORY NOTE $____________ Dated: April 30, 1996 FOR VALUE RECEIVED, the undersigned, HUDSON FOODS, INC. (the "Borrower"), a Delaware corporation, HEREBY PROMISES TO PAY to the order of ___________________ (the "Bank") on the Termination Date (as defined in the Credit Agreement referred to below) the principal sum of _____________________ Dollars ($_________) or, if less, the aggregate unpaid principal amount of all Advances (as defined below) made by the Bank to the Borrower outstanding on the Termination Date. The Borrower promises to pay interest on the unpaid principal amount of each Advance from the date of such Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to the Bank at ____________________ or at such other location as may specified by the Bank or to the Agent (as defined in the Credit Agreement) as may be required under the Credit Agreement, in same day funds. All Advances made by the Bank to the Borrower and all payments made on account of principal hereof shall be recorded by the Bank and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note. This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Revolving Credit Agreement dated as of April 30, 1996 (the "Credit Agreement") among the Borrower and the Bank, and other commercial, banking and financial institutions party thereto and the Guaranty referred to therein. The Credit Agreement, among other things, (i) provides for the making of advances (the "Advances") by the Bank to the Borrower from time to time in an aggregate amount not to exceed at any time outstanding the amount first above mentioned and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. HUDSON FOODS, INC. By: Name: Title: B-1
ADVANCES, BID RATE CREDITS AND PRINCIPAL PAYMENTS @@ - ----------------------------------------------------------------------------------------------------------------------------------- Type of Advance or Bid Amount of Rate Credit and Advance or Bid Applicable Amount of Unpaid Rate Credit Made Interest Rate Interest Period Principal Repaid Principal Balance Notation Made By Date @@ - -----------------------------------------------------------------------------------------------------------------------------------
The aggregate unpaid principal amount shown on this grid shall be rebuttable presumptive evidence of the principal amount owing and unpaid on this Note. The failure to record the date and amount of any Advance or Bid Rate Credit on this schedule shall not, however, limit or otherwise affect the Borrower's obligations under the Credit Agreement or under this Note to repay the principal amount of the Advances and Bid Rate Credits together with all interest accruing thereon, nor shall such failure affect the Borrower's or any other Loan Party's obligations under any other Loan Document. C-6 EXHIBIT B GUARANTY GUARANTY, dated ___________, 19__ made by __________________, a [corporation] organized and existing under the laws of ________ (the "Guarantor"), in favor of COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "Rabobank Nederland", New York Branch, individually and as Agent for itself and the Banks (as such term is defined in the "Credit Agreement" defined below (the "Agent"). PRELIMINARY STATEMENT. The Agent and one or more of the Banks have entered into a Revolving Credit Agreement dated as of April 30, 1996 (said Agreement, as it may hereafter be amended or otherwise modified from time to time, being the "Credit Agreement," the terms defined therein and not otherwise defined herein being used herein as therein defined) with Hudson Foods, Inc., a corporation organized and existing under the laws of Delaware (the "Borrower"). It is a condition precedent to the making of Advances and extension of Bid Rate Credits by the Agent and/or the Banks under the Credit Agreement that the Guarantor shall have executed and delivered this Guaranty. NOW, THEREFORE, in consideration of the premises and in order to induce Agent and/or the Banks to make Advances under the Credit Agreement, the Guarantor hereby agrees as follows: SECTION 1. Guaranty. The Guarantor hereby unconditionally guarantees the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all obligations of the Borrower now or hereafter existing under the Credit Agreement, the Notes and the other Loan Documents to which the Borrower is a party and any other agreement or instrument relating thereto, whether for Committed Advances, Bid Rate Advances, Bid Rate Credits, principal, interest, fees, expenses or otherwise (such obligations being the "Obligations"), and agrees to pay any and all expenses (including counsel fees and expenses) incurred by the Agent and/or the Banks in enforcing any rights under this Guaranty. SECTION 2. Guaranty Absolute. The Guarantor guarantees that the Obligations will be paid strictly in accordance with the terms of the Credit Agreement, the Notes and the other Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Agent and/or the Banks with respect thereto. The liability of the Guarantor under this Guaranty shall be absolute and unconditional irrespective of: (i) any lack of validity or enforceability of the Credit Agreement, the Notes, any other Loan Document or any other agreement or instrument relating thereto; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from the Credit Agreement, the Notes or any other Loan Document and any other agreement or instrument relating thereto; (iii) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Obligations; or (iv) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Borrower or a guarantor. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned by the Banks upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as though such payment had not been made. SECTION 3. Waiver. The Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Obligations and this Guaranty and any requirement that the Agent or any of the Banks protect, secure, perfect or insure any security interest or lien or any property subject thereto or exhaust any right or take any action against the Borrower or any other person or entity or any collateral. SECTION 4. No Right of Subrogation, Etc. Notwithstanding anything to the contrary contained herein, the Guarantor shall not have any right, claim or action, now or hereafter, against the Borrower arising out of or in connection with this Guaranty or any other document evidencing the Obligations, including, without limitation, any right or claim of subrogation, contribution, reimbursement, exoneration, or indemnity, all such rights and claims being hereby expressly and absolutely waived. If any amount shall be paid to the Guarantor on account of Guarantor having made a payment under this Guaranty at any time when any Obligations shall not have been finally and indefeasibly paid in full, such amount shall be held in trust for the benefit of the Agent and the Banks and shall forthwith be paid to the Agent to be credited and applied upon the Obligations, whether matured or unmatured, in accordance with the terms of the Credit Agreement. SECTION 5. Representations and Warranties. The Guarantor hereby represents and warrants as follows: (a) The Guarantor is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction indicated at the beginning of this Guaranty. (b) The execution, delivery and performance by the Guarantor of this Guaranty are within its corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Guarantor's charter or by-laws or (ii) any law or any contractual restriction binding on or affecting the Guarantor. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Guarantor of this Guaranty. (d) This Guaranty is a legal, valid and binding obligation of the Guarantor enforceable against it in accordance with its terms. (e) The balance sheet for the Borrower and its subsidiaries (including the Guarantor) as at _______________, 19__, and the related statement of income of the Borrower and its subsidiaries (including the Guarantor) for the fiscal period then ended, copies of which have been furnished to the Bank, fairly present the financial condition of the Borrower and its subsidiaries (including the Guarantor) as at such date and the results of the operations of the Borrower and its subsidiaries (including the Guarantor) for the period ended on such date, all in accordance with generally accepted accounting principles consistently applied, and since ______________, 19__, there has been no material adverse change in such condition or operations. (f) There is no pending or threatened action or proceeding affecting the Guarantor before any court, arbitrator or governmental agency, which may materially adversely affect the financial condition or operations of the Guarantor or which purports to affect the legality, validity or enforceability of this Guaranty. SECTION 6. Covenants. The Guarantor covenants and agrees that, so long as any part of the Obligations shall remain unpaid or unperformed or the Agent or any of the Banks shall have any Commitment, the Guarantor will, unless the Agent shall otherwise consent in writing: (a) Reporting Requirements. Furnish to the Bank: (i) as soon as available and in any event within thirty (30) days after the end of each month of each fiscal year of the Borrower, the balance sheet of the Borrower and its subsidiaries (including the Guarantor) as of the end of such month and the statement of income of the Borrower and its subsidiaries (including the Guarantor) for the period commencing at the end of the previous fiscal year and ending with the end of such month, certified by the Chief Financial Officer, Secretary or Treasurer of the Guarantor; (ii) as soon as available and in any event within ninety (90) days after the end of each fiscal year of the Borrower, a copy of the financial statements for the Borrower and its subsidiaries (including the Guarantor) for such year certified in a manner acceptable to the Agent by Coopers & Lybrand or other independent public accountants acceptable to the Agent; and (iii) such other information respecting the condition or operations, financial or otherwise, of the Guarantor or any of its subsidiaries as the Agent may from time to time reasonably request. SECTION 7. Amendments, Etc. No amendment or waiver of any provision of this Guaranty nor consent to any departure by the Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by the Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 8. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing (including telegraphic, telex or cable communication) and mailed, telegraphed, telexed, cabled or delivered, if to the Guarantor, at its address at _______________________________, Attention: __________________, if to the Agent, at its address specified in the Credit Agreement, or as to each party at such other address as shall be designated by such party in a written notice to the other party. All such notices and other communications shall, when mailed, telegraphed, telexed or cabled, be effective when deposited in the mails, delivered to the telegraph company, confirmed by telex answerback or delivered to the cable company, respectively. SECTION 9. No Waiver; Remedies. No failure on the part of the Agent or any of the Banks to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 10. Right of Set-off. Upon the occurrence and during the continuance of any Event of Default the Agent and each of the Banks are 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 indebtedness at any time owing by the Agent or such Bank to or for the credit or the account of the Guarantor against any and all of the obligations of the Guarantor now or hereafter existing under this Guaranty, irrespective of whether or not the Agent or such Bank shall have made any demand under this Guaranty and although such deposits, indebtedness or obligations may be unmatured or contingent. The Agent or such Bank, as the case may be, severally (but not jointly) agrees to notify the Guarantor promptly after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Agent and each of the Banks under this Section 10 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Agent and each of the Banks may have. SECTION 11. Continuing Guaranty; Transfer of Note. This Guaranty is a continuing guaranty and shall (i) remain in full force and effect until the later of payment in full of the Obligations and all other amounts payable under this Guaranty or the Termination Date, (ii) be binding upon the Guarantor, its successors and assigns and (iii) inure to the benefit of and be enforceable by the Agent and its successors, transferees and assigns. Without limiting the generality of the foregoing clause (iii), the Agent and each of the Banks may assign or otherwise transfer the Notes to any other person or entity, and such other person or entity shall thereupon become vested with all the rights in respect thereof granted to the Agent or such Bank, as the case may be, herein or otherwise. SECTION 12. Consent to Jurisdiction. (a) The Guarantor hereby irrevocably submits to the jurisdiction of any New York State or Federal court sitting in New York City in any action or proceeding arising out of or relating to this Guaranty, and the Guarantor hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State court or in such Federal court. The Guarantor hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. The Guarantor irrevocably consents to the service of copies of the summons and complaint and any other process which may be served in any such action or proceeding by the mailing of copies of such process to the Guarantor to its address specified in Section 8. The Guarantor 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. (b) Nothing in this Section 12 shall affect the right of the Bank to serve legal process in any other manner permitted by law or affect the right of the Agent to bring any action or proceeding against the Guarantor or its property in the courts of any other jurisdictions. SECTION 13. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 14. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY. [REMAINDER OF THIS PAGE INTENTIONALLY BLANK] IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. [GUARANTOR] By: Name: Title: D-2 EXHIBIT C [Date of Initial Advance] [To the Agent and the Banks] Re: Hudson Foods, Inc. Gentlemen: We have acted as counsel to Hudson Foods, Inc. (the "Borrower") in connection with the Revolving Credit Agreement dated as of April 30, 1996 (the "Credit Agreement") among the Borrower, Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch, individually and as Agent, and the other commercial, banking and financial institutions party thereto (collectively, the "Banks" and individually, a "Bank"). This opinion is delivered to you pursuant to Section 4.01(f) of the Credit Agreement. Capitalized terms not otherwise defined herein are used herein as defined in the Loan Documents (as such term is defined in the Credit Agreement). In connection with this opinion, we have (i) investigated such questions of law, (ii) examined such corporate documents and records of the Loan Parties, certificates of public officials and other documents and (iii) received such information from officers and representatives of the Loan Parties, as we have deemed necessary or appropriate for the purposes of this opinion. We have examined, among other documents, the following documents: (a) the Credit Agreement; and (b) the Notes; and In our examination of the documents referred to above, we have assumed the due authorization, execution and delivery of the Credit Agreement by the Bank, the authenticity of all documents submitted to us as original documents, and the conformity to original documents of all documents submitted to us as copies thereof. In our examination of the certificates referred to in clause (ii) above, we have assumed that all financing statements in which the Borrower is named as debtor, have been properly filed and indexed in the appropriate filing offices in the State, that such certificates are accurate and complete, and that the Bank has no knowledge of the contents of any other financing statement. Based upon and subject to the foregoing and the further qualifications set forth below, we are of the opinion that: 1. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware. 2. The execution, delivery and performance by the Loan Parties of the Loan Documents to which they are parties are within the Loan Parties' respective powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Loan Parties' respective charters or by-laws or (ii) any law, rule or regulation applicable to the Loan Parties (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System) or (iii) any contractual or legal restriction binding on or affecting the Loan Parties. The Loan Documents have been duly executed and delivered on behalf of the Loan Parties. 3. No authorization, order, license, franchise, consent or approval or other action by, and no notice to or registration or filing with, any governmental authority or regulatory body is required for (i) the due execution, delivery, recordation, filing or performance by the Loan Parties of any Loan Document to which they are a party, or (ii) the exercise by the Bank of its rights under any Loan Document. 4. In any action or proceeding arising out of or relating to any Loan Document in any court in the State of Arkansas, such court would recognize and give effect to the provisions of such Loan Document wherein the parties thereto agree that such Loan Document shall be governed by, and construed in accordance with, the law of the State of New York. If the law of the State of Arkansas were applied to determine the contractual rights and liabilities created by such Loan Document, such Loan Document would be the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, subject, however, to (a) the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and (b) the effect of general principles of equity (regardless whether such enforceability is considered in a proceeding in equity or at law). 5. There is no pending or, to the best of our knowledge after due inquiry, threatened action or proceeding against either Loan Party before any court, governmental agency or arbitrator which is likely to have a materially adverse effect upon the financial condition or operations of either Loan Party. Very truly yours, E-2 EXHIBIT D NOTICE OF COMMITTED BORROWING Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. 245 Park Avenue New York, New York 10167 Attention: Corporate Services Department Re: Revolving Credit Agreement, dated as of April 30, 1996, as amended or modified and in effect from time to time, the "Credit Agreement", among HUDSON FOODS, INC. (the "Borrower"), the various financial institutions party thereto and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. "Rabobank Nederland", New York Branch, individually and as Agent, terms not otherwise expressly defined herein shall have the same meanings set forth in the Credit Agreement. Gentlemen/Ladies: A. Loans and Letter of Credit. The Borrower hereby requests that on __________, 199__, Committed Advances be made to the Borrower in the aggregate principal amount of $__________ and be comprised of [ ] Base Rate Loans in the aggregate principal amount of $__________ and/or [ ] LIBOR Rate Loans in the aggregate principal amount of $__________ with Interest Period(s) of [ ] 1 month in the amount of $__________, [ ] 3 months in the amount of $__________, B. Representations and Warranties. The Borrower hereby expressly confirms that the representations and warranties contained in Section 5.01 of the Credit Agreement [and Section 5 of the Guaranty, if applicable] are correct on and as of the date specified in Section A above as though made on and as of such date. C. Outstandings Report. Attached hereto as Exhibit A is an Outstandings Report dated the date hereof, which Outstandings Report is complete, true and accurate in all respects. IN WITNESS WHEREOF, the undersigned has caused this Certificate to be executed and delivered by its duly authorized officer this _____ day of _________________, 19___. HUDSON FOODS, INC. By: Name: Title: F-1 EXHIBIT E REQUEST FOR BIDS ==================================================== Attention:__________________________________________ Facsimile: Telephone: ___________This instrument constitutes a Request for Bids under, and as defined by, the Revolving Credit Agreement dated as of April 30, 1996 (as amended or modified and in effect from time to time, the "Credit Agreement") among the undersigned HUDSON FOODS, INC. (the "Borrower"), the various financial institutions party thereto, and COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "Rabobank Nederland, New York Branch, individually and as Agent. Terms not otherwise expressly defined herein shall have the meanings set forth in the Credit Agreement. ___________The Borrower hereby requests Bid Rate Credit(s), subject to the terms of the Credit Agreement, as follows: (a)________Bid Rate Credit Borrowing Date: ______________, 19___. (b)________Aggregate principal amount of Bid Rate Credits requested: $__________. (c)________Number of Bid Rate Credits requested and principal amounts thereof: _________ Bid Rate Credits in the amounts of $_________, $__________ and $__________, respectively. (d)________Interest Period(s) and its/their maturity date(s): @@ Principal Amount Maturity Date Interest Period $ days $ days $ days @@ (e)________Applicable Rate: __________ (f)________Deposit to Account #____________ at _________________________. ___________A. Representations and Warranties. ___________ (i) The Borrower hereby expressly confirms that the representations and warranties contained in Section 5.01 of the Credit Agreement [and Section 5 of the Guaranty, if applicable] are correct on and as of the date specified in Section (a) above as though made on and as of such date. ___________ (ii) The Borrower hereby expressly represents and warrants that after giving effect to the Bid Rate Credit(s) requested herein (a) the sum of (I) the outstanding Bid Rate Advances and (II) the outstanding Bid Rate Credits (other than Bid Rate Credits consisting of Bid Rate Advances) does not exceed (b) fifty percent (50%) of the Total Commitment. ___________B. Outstandings Report. Attached hereto as Exhibit A is an Outstandings Report dated the date hereof, which Outstandings Report is complete, true and accurate in all respects. ___________The Borrower agrees that if prior to the time a Bid Rate Credit is made in relation hereto, any matter certified to, confirmed, represented or warranted herein by it will not be true and correct at such time as if then made, it will immediately so notify the Agent. ___________IN WITNESS WHEREOF, the Borrower has caused this Request for Bids to be executed and delivered by its duly authorized officer this _______ day of _______________, 19____. HUDSON FOODS, INC. By: Name: Title:
EXHIBIT F - ------------------------------------------------------------------------------------------------------- OUTSTANDINGS REPORT Bid Advances with the Bank Committed Advances Bid Advances and LCs Group - Outside the Outstanding Outstanding RLOC - ------------------------------------------------------------------------------------------------------- Rabobank Nederland - ------------------------------------------------------------------------------------------------------- Bank of America - ------------------------------------------------------------------------------------------------------- NationsBank - ------------------------------------------------------------------------------------------------------- Credit Agricole - ------------------------------------------------------------------------------------------------------- Harris Trust and Savings Bank - ------------------------------------------------------------------------------------------------------- SunTrust Bank, Atlanta - ------------------------------------------------------------------------------------------------------- Boatmen's First National - ------------------------------------------------------------------------------------------------------- Other Banks Outside the Bank Group Not to Exceed $20,000,000
EX-10 3 NOTE PURCHASE AGREEMENT HUDSON FOODS, INC. Note Purchase Agreement DATED AS OF DECEMBER 28, 1995 $55,000,000 6.69% SENIOR NOTES DUE DECEMBER 28, 2005 TABLE OF CONTENTS (Not a Part of the Agreement) PAGE 1.PURCHASE AND SALE OF NOTES............................................... 1 1.1 Issuance of Notes.............................................. 1 1.2 The Closing.................................................... 1 1.3 Purchase for Investment; ERISA................................. 2 1.4 Failure to Tender, Failure of Conditions....................... 3 1.5 Expenses....................................................... 3 2.WARRANTIES AND REPRESENTATIONS........................................... 4 2.1 Nature of Business............................................. 4 2.2 Financial Statements; Indebtedness; Material Adverse Change.... 4 2.3 Subsidiaries and Affiliates.................................... 5 2.4 Title to Properties; Leases; Patents, Trademarks, etc.......... 5 2.5 Taxes.......................................................... 6 2.6 Pending Litigation............................................. 7 2.7 Full Disclosure................................................ 7 2.8 Corporate Organization and Authority........................... 7 2.9 Charter Instruments, Other Agreements, etc..................... 8 2.10 Restrictions on Company and Subsidiaries....................... 8 2.11 Compliance with Law............................................ 8 2.12 ERISA.......................................................... 9 2.13 Certain Laws................................................... 10 2.14 Transactions are Legal and Authorized; Obligations are Enforceable.................................................... 11 2.15 Governmental Consent; Certain Laws............................. 11 2.16 Private Offering of Notes...................................... 12 2.17 No Defaults; Transactions Prior to Closing Date, etc........... 12 2.18 Use of Proceeds of Notes....................................... 12 2.19 Solvency....................................................... 13 3.CLOSING CONDITIONS....................................................... 13 3.1 Opinions of Counsel............................................ 13 3.2 Warranties and Representations True............................ 13 3.3 Officers' Certificates......................................... 13 3.4 Good Standing Certificate...................................... 14 3.5 Legality....................................................... 14 3.6 Private Placement Number....................................... 14 3.7 Expenses....................................................... 14 3.8 Compliance with this Agreement................................. 14 3.9 Other Purchasers............................................... 14 3.10 Proceedings Satisfactory....................................... 14 4.PAYMENTS................................................................. 15 4.1 Mandatory Interest and Principal Prepayments................... 15 4.2 Optional Prepayments........................................... 15 4.3 Offer to Prepay upon Change in Control......................... 16 4.4 Pro Rata Payments.............................................. 18 4.5 Notation of Notes on Prepayment................................ 18 4.6 No Other Optional Prepayments; No Acquisition of Notes......... 18 5.REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES............................ 19 5.1 Registration of Notes.......................................... 19 5.2 Exchange of Notes.............................................. 19 5.3 Replacement of Notes........................................... 20 5.4 Issuance Taxes................................................. 20 6.COVENANTS................................................................ 20 6.1 Payment of Taxes and Claims.................................... 20 6.2 Maintenance of Properties; Corporate Existence; etc............ 21 6.3 Payment of Notes and Maintenance of Office..................... 22 6.4 Liens.......................................................... 22 6.5 Merger, Consolidation, Transfers of Property, etc.............. 25 6.6 Tangible Net Worth............................................. 26 6.7 Working Capital; Current Ratio................................. 27 6.8 Limitations on Indebtedness.................................... 27 6.9 Current Debt................................................... 30 6.10 Cash Flow Coverage Ratio....................................... 30 6.11 Dividends and Prepayments on Subordinated Debt................. 31 6.12 Capital Expenditures........................................... 32 6.13 Operating Lease Rentals........................................ 32 6.14 Nature of Business............................................. 33 6.15 Transactions with Affiliates................................... 33 6.16 Guaranties of Subsidiaries..................................... 33 6.17 Restricted Investments......................................... 34 6.18 ERISA.......................................................... 34 6.19 Private Offering............................................... 35 6.20 Certain Accounting Matters..................................... 36 7.INFORMATION AS TO COMPANY................................................ 36 7.1 Financial and Business Information............................. 36 7.2 Officer's Certificates......................................... 39 7.3 Accountants' Certificates...................................... 40 7.4 Inspection..................................................... 40 8.EVENTS OF DEFAULT........................................................ 40 8.1 Nature of Events............................................... 40 8.2 Default Remedies............................................... 43 8.3 Annulment of Acceleration of Notes............................. 44 9.INTERPRETATION OF THIS AGREEMENT......................................... 45 9.1 Terms Defined.................................................. 45 9.2 GAAP........................................................... 56 9.3 Directly or Indirectly......................................... 56 9.4 Section Headings and Table of Contents and Construction........ 56 9.5 Governing Law.................................................. 57 10.MISCELLANEOUS........................................................... 57 10.1 Communications................................................ 57 10.2 Reproduction of Documents..................................... 58 10.3 Survival...................................................... 58 10.4 Successors and Assigns........................................ 58 10.5 Amendment and Waiver.......................................... 59 10.6 Expenses...................................................... 60 10.7 Payments on Notes............................................. 60 10.8 Jurisdiction; Service of Process.............................. 61 10.9 Entire Agreement.............................................. 62 10.10 Duplicate Originals, Execution in Counterpart................. 62 TABLE OF CONTENTS (Cont.) iii Annex 1 -- Information as to Purchasers Annex 2 -- Payment Instructions at Closing Annex 3 -- Information as to Company and Subsidiaries Annex 4 -- Information as to Business Covenants Exhibit A -- Form of 6.69% Senior Note Due December 28, 2005 Exhibit B1 -- Form of Company Counsel's Closing Opinion Exhibit B2 -- Form of Special Counsel's Closing Opinion Exhibit C -- Form of Company Officer's Certificate Exhibit D -- Form of Company Secretary's Certificate Exhibit E -- Form of Subsidiary Guaranty HUDSON FOODS, INC. 1225 Hudson Road Rogers, Arkansas 72756 NOTE PURCHASE AGREEMENT $55,000,000 6.69% SENIOR NOTES DUE DECEMBER 28, 2005 Dated as of December 28, 1995 Employers Life Insurance Company of Wausau One Nationwide Plaza (1-33-07) Columbus, Ohio 43215-2220 Ladies and Gentlemen: HUDSON FOODS, INC. (together with its successors and assigns permitted pursuant to this Agreement, the "Company"), a Delaware corporation, hereby agrees with you as follows: 1. PURCHASE AND SALE OF NOTES 1.1 Issuance of Notes. The Company will authorize the issuance of Fifty-Five Million Dollars ($55,000,000) in aggregate principal amount of its six and sixty-nine one-hundredths percent (6.69%) Senior Notes due December 28, 2005 (all such notes, whether initially issued, or issued in exchange or substitution for, any such note, in each case in accordance with the Note Purchase Agreements, collectively, the "Notes"). The Notes shall be in the form of Exhibit A, and shall have the terms as herein and therein provided. 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 at 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 December 28, 1995 (the "Closing Date") at 9:00 a.m., local time, at the office of Metropolitan Life Insurance Company, One Madison Avenue, New York, New York. At the Closing, the Company will deliver to you one or more Notes (as set forth below your name on Annex 1), 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 purchase price thereof, as directed by the Company on Annex 2, which shall be an account at a bank located in the United States of America. (c) Other Purchasers. Contemporaneously with the execution and delivery hereof, the Company is entering into separate note purchase agreements identical (except for the name and signature of the purchaser) hereto (such separate note purchase agreements, together with this Agreement, collectively and as amended from time to time, the "Note Purchase Agreements") with each other purchaser (each, an "Other Purchaser" and collectively, the "Other Purchasers;" you and the Other Purchasers referred to as the "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 Annex 1. The sales of the Notes to you and to each Other Purchaser are to be separate sales. 1.3 Purchase for Investment; ERISA. (a) Purchase for Investment. You represent to the Company that you are purchasing the Notes, in the aggregate amounts provided herein, for your own account for investment and with no present intention of distributing the Notes or any part thereof, but without prejudice to your right at all times to: (i) sell or otherwise dispose of all or any part of the Notes under a registration statement filed under the Securities Act, or in a transaction exempt from the registration requirements of the Securities Act; and (ii) have control over the disposition of all of your respective assets to the fullest extent required by any applicable insurance law. It is understood that, in making the representations set out in Section 2.14(a) and Section 2.15(a) of this Agreement, the Company is relying, to the extent applicable, upon your representations in the immediately preceding sentence. (b) ERISA. Each of you represent and warrant that, with respect to each source of funds to be used by you to purchase the Notes on the Closing Date (respectively, the "Source"), at least one (1) of the following statements is accurate: (i) the Source is assets of an insurance company general account and not assets of an insurance company separate account (within the meaning of Section 3(17) of ERISA), and that all requirements for an exemption under Department of Labor Prohibited Transaction Exemption 95-60 (60 F.R. 35925, July 12, 1995) have been satisfied; provided that in making such representation you are relying on the Company's representations set forth in Section 2.12(c), or; (ii) the Source is a "governmental plan" as defined in Title I, Section 3(32) of ERISA; (iii) the Source is either (A) an insurance company pooled separate account, and the purchase is exempt in accordance with Department of Labor Prohibited Transaction Exemption 90-1 (issued January 29, 1990), or (B) a bank collective investment fund, in which case the purchase is exempt in accordance with Department of Labor Prohibited Transaction Exemption 91-38 (issued July 12, 1991); (iv) the Source is an "investment fund" managed by a qualified professional asset manager" or "QPAM" (as such terms are defined in Part V of Department of Labor Prohibited Transaction Exemption 84-14 (issued March 13, 1984)) which QPAM has been identified in writing, and the purchase is exempt under Department of Labor Prohibited Transaction Exemption 84-14 provided that no other party to the transactions described in this Agreement and no "affiliate" of such other party (as defined in Section V(c) of Department of Labor Prohibited Transaction Exemption 84-14) has at the time of the Closing Date, and has not exercised at any time during the immediately preceding year, the authority to appoint or terminate said QPAM as manager of the assets of any "plan" identified in writing pursuant to this clause (iv) or to negotiate the terms of said QPAM's management agreement on behalf of such identified "plans;" or (v) 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 (v). As used in this Section 1.3(b), "plan" or "plans" shall have the meaning set forth in Title I, section 3(3) of ERISA. 1.4 Failure to Tender, Failure of Conditions. If at the Closing the Company fails to tender to you the Notes to be purchased by you at the Closing, or if the conditions specified in Section 3 hereof 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 your respective 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: (i) the reasonable cost of reproducing this Agreement, the Notes and the other documents delivered in connection with the Closing; (ii) the reasonable fees and disbursements of your special counsel incurred in connection herewith; (iii) the reasonable cost of delivering to your home office or custodian bank, insured to your satisfaction, the Notes purchased by you; (iv) the reasonable fees, expenses and costs incurred in complying with each of the conditions to closing set forth in Section 3 hereof; and (v) the cost of obtaining a private placement number for the Notes. (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 reasonable fees and disbursements of your special counsel presented at the Closing and the Company will also pay, upon receipt of any statement therefor, each additional statement for reasonable 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 1.5(a) hereof. (c) Survival. The obligations of the Company under this Section 1.5, Section 5.4, Section 8.2(e) and Section 10.6 of this Agreement shall survive the payment of the Notes and the termination hereof. 2. WARRANTIES AND REPRESENTATIONS To induce you to enter into this Agreement and to purchase the Notes, the Company warrants and represents, as of the Closing Date, as follows: 2.1 Nature of Business. The Most Recent 10-K (a copy of which previously has been delivered to you), correctly describes the general nature of the business and principal Properties of the Company and the Subsidiaries as of the Closing Date. 2.2 Financial Statements; Indebtedness; Material Adverse Change. (a) Financial Statements. The Company has provided you and each Other Purchaser with its financial statements described in Part 2.2(a) of Annex 3 hereto. Such financial statements have been prepared in accordance with GAAP consistently applied, and present fairly, in all material respects, the financial position of the Company and its consolidated subsidiaries as of such dates and the results of their operations and cash flows for such periods. All such financial statements include the accounts of all subsidiaries of the Company for the respective periods during which a subsidiary relationship has existed. (b) Indebtedness. Part 2.2(b) of Annex 3 hereto lists all Indebtedness of the Company and the Subsidiaries as of the Closing Date, and provides the following information with respect to each item of such Indebtedness: (i) the holder thereof, (ii) the outstanding amount, (iii) the portion which is classified as current under GAAP, and (iv) the collateral securing such Indebtedness, if any. (c) Material Adverse Change. Since September 30, 1995, there has been no change in the business, prospects, profits, Properties or condition (financial or otherwise) of the Company or any of the Subsidiaries, except changes in the ordinary course of business that, in the aggregate for all such changes, could not reasonably be expected to have a Material Adverse Effect. (d) Other Financial Information. All statements or summaries of historical and pro forma financial condition and performance of the Company and the Subsidiaries contained in the Most Recent 10K or described in Part 2.2(a) of Annex 3 have been in all material respects prepared in accordance with GAAP, unless otherwise expressly noted therein. All assumptions and estimates upon which any statements of pro forma financial condition or performance have been based are reasonable in light of the circumstances existing at the time such assumptions and estimates were made, based on the best information available to management of the Company and the Subsidiaries at the time of the preparation thereof. As of the Closing Date, and in light of the circumstances existing on such date, such assumptions continue to be reasonable, based on the best information available to the management of the Company and the Subsidiaries. 2.3 Subsidiaries and Affiliates. Part 2.3 of Annex 3 hereto sets forth: (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) a description of the Affiliates (other than individuals) and the nature of their 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 Title to Properties; Leases; Patents, Trademarks, etc. (a) Each of the Company and the Subsidiaries has good and marketable title to all of the real Property, and good title to all of the other Property, reflected in the most recent balance sheet referred to in Section 2.2(a) hereof (except as sold or otherwise disposed of in the ordinary course of business), except where the failure to have such good and marketable title (i) is immaterial to such financial statements, and (ii) could not reasonably be expected to have a Material Adverse Effect. All such Property is free from Liens not permitted by Section 6.4 hereof. (b) Each of the Company and the Subsidiaries has complied with all material obligations under all leases to which it is a party, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. All such leases are in full force and effect and each of the Company and the Subsidiaries enjoys peaceful and undisturbed possession under all such leases. (c) 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, except for such failures to own, possess, or have the right to use, that, in the aggregate for all such failures, could not reasonably be expected to have a Material Adverse Effect. 2.5 Taxes. (a) Returns Filed; Taxes Paid. (i) All tax returns required to be filed by the Company and each Subsidiary and any other Person with which the Company or any Subsidiary files or has filed a consolidated return in any jurisdiction have been filed on a timely basis, and all taxes, assessments, fees and other governmental charges upon the Company, such Subsidiary and any such Person, and upon any of their respective Properties, income or franchises, that are due and payable have been paid, except for such tax returns and such tax payments which are being contested in good faith and which could not, in the aggregate for all such tax returns and payments, reasonably be expected to have a Material Adverse Effect. (ii) All liabilities of each of the Company, the Subsidiaries and the other Persons referred to in the preceding clause (i) with respect to federal income taxes have been finally determined except for the fiscal years set forth in Part 2.5(a) of Annex 3 hereto, the only years not closed by the completion of an audit or the expiration of the statute of limitations. (b) Book Provisions Adequate. (i) The amount of the liability for taxes reflected in each of the balance sheets referred to in Section 2.2(a) hereof is in each case an adequate provision for taxes as of the dates of such balance sheets (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 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) The Company does not know 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) hereof. 2.6 Pending Litigation. (a) 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) 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. 2.7 Full Disclosure. The financial statements referred to in Section 2.2(a) hereof do not, nor does this Agreement, the Most Recent 10-K or any statement furnished by or on behalf of the Company to you in connection with the negotiation or any closing of any sale of the Notes, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein and herein not misleading. 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. 2.8 Corporate Organization and Authority. Each of the Company and the Subsidiaries: (a) is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation; (b) has all legal and corporate 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 licenses, certificates, permits, franchises and other governmental authorizations necessary 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, permits, franchises and other governmental authorizations, in the aggregate for all such failures, 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, in each state (each of which states is listed in Part 2.8(d) of Annex 3 hereto) 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. 2.9 Charter Instruments, Other Agreements, etc. (a) Charter Instruments. Neither the Company nor any Subsidiary is in violation in any respect of any term of any charter instrument or bylaw. (b) Agreements Relating to Indebtedness. Neither the Company nor any Subsidiary is in violation of any term in, and no default or event of default exists under, any agreement or other instrument to which it is a party or by which it or any of its Properties may be bound relating to, or providing the terms of, any Indebtedness specified in Part 2.2(b) of Annex 3 hereto having a principal or stated amount equal to or in excess of Two Hundred Fifty Thousand Dollars ($250,000). (c) Other Agreements. Neither the Company nor any Subsidiary is in violation of any term in, and no default or event of default exists under, any agreement or other instrument to which it is a party or by which it or any of its Properties may be bound (other than the agreements and other instruments specified in clause (b) of this Section 2.9), which, in the aggregate for all such violations, could reasonably be expected to have a Material Adverse Effect. 2.10 Restrictions on Company and Subsidiaries. Neither the Company nor any Subsidiary: (a) is a party to any contract or agreement, or subject to any charter or other corporate restriction that, in the aggregate for all such contracts, agreements, charters and corporate restrictions, could reasonably be expected to have a Material Adverse Effect; (b) is a party to any contract or agreement that restricts the right or ability of such corporation to incur Indebtedness, other than this Agreement and the agreements listed in Part 2.10(b) of Annex 3 hereto, none of which restricts the issuance and sale of the Notes or the performance by the Company of its obligations under this Agreement or under the Notes; or (c) 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 6.4 hereof. True, correct and complete copies of each of the agreements listed in Part 2.10(b) of Annex 3 hereto have been provided to you and your special counsel. 2.11 Compliance with Law. Neither the Company nor any Subsidiary is in violation of any law, ordinance, governmental rule or regulation to which it is subject, which violations, in the aggregate, could reasonably be expected to have a Material Adverse Effect. 2.12 ERISA. (a) Prohibited Transactions. Neither the execution of this Agreement, the purchase of the Notes by you nor the consummation of the transactions contemplated by this Agreement will constitute a "prohibited transaction" (as such term is defined in section 406(a) of ERISA) or result in a tax under section 4975 of the IRC. The representation by the Company in the preceding sentence is made in reliance upon your respective representations in Section 1.3(b) hereof as to the source of funds to be used by you to purchase the Notes. (b) Pension Plans. (i) Compliance with ERISA. The Company and the ERISA Affiliates are in compliance with ERISA, except for such failures to comply that, in the aggregate for all such failures, could not reasonably be expected to have a Material Adverse Effect. (ii) Funding Status; Relationship of Vested Benefits to Pension Plan Assets. (A) 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. (B) The present value of all benefits, determined as of the most recent valuation date for such benefits as provided in Section 6.18 hereof, 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 such date as provided in Section 6.18 hereof. (iii) PBGC. No liability to the PBGC has been or is expected to be incurred by the Company or any ERISA Affiliate with respect to any Pension Plan that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. No circumstance exists that constitutes grounds under section 4042 of ERISA entitling the PBGC to institute proceedings to terminate, or appoint a trustee to administer, any Pension Plan or trust created thereunder, nor has the PBGC instituted any such proceeding. (iv) Multiemployer Plans. Neither the Company nor any ERISA Affiliate has incurred or presently expects to incur any withdrawal liability under Title IV of ERISA with respect to any Multiemployer Plan. There have been no "reportable events" (as such term is defined in section 4043 of ERISA) with respect to any Multiemployer Plan that could result in the termination of such Multiemployer Plan and give rise to a liability of the Company or any ERISA Affiliate in respect thereof. (c) Disclosure. Part 2.12(c) of Annex 3 sets forth 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" having the meanings specified in section 3 of ERISA and "affiliate" and "employer security" having the meanings specified in section 407(d) of ERISA). 2.13 Certain Laws. (a) Environmental Protection Laws. (i) Compliance. Each of the Company and the Subsidiaries is in compliance with all Environmental Protection Laws in effect in each jurisdiction where it is presently doing business and in which the failure so to comply, in the aggregate for all such failures, could reasonably be expected to have a Material Adverse Effect. (ii) Liability. 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. (iii) Notices. Neither the Company nor any Subsidiary has received any: (A) notice from any Governmental Authority by which any of its present 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 candidate for removal or closure pursuant to any Environmental Protection Law; (B) 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 owned or leased Properties; or (C) communication, written or oral, from any Governmental Authority concerning any action or omission by the Company or such Subsidiary in connection with its ownership or leasing of any Property resulting in the release of any Hazardous Substance or resulting in any violation of any Environmental Protection Law; where the effect of which, in the aggregate for all such notices and communications, could reasonably be expected to have a Material Adverse Effect. (b) Health Laws. (i) Compliance. Each of the Company and the Subsidiaries is in compliance with all Health Laws in effect in each jurisdiction where it is presently doing business and in which the failure so to comply, in the aggregate for all such failures, could reasonably be expected to have a Material Adverse Effect. (ii) Liability. Neither the Company nor any Subsidiary is subject to any liability under any Health Law that, in the aggregate for all such liabilities, could reasonably be expected to have a Material Adverse Effect. (iii) Notices. Neither the Company nor any Subsidiary has received any notice from any Governmental Authority concerning any actual or alleged violation of any Health Law where the effect of which, in the aggregate for all such notices and communications, could reasonably be expected to have a Material Adverse Effect. 2.14 Transactions are Legal and Authorized; Obligations are Enforceable. (a) Transactions are Legal and Authorized. Each of the issuance, sale and delivery of the Notes by the Company, the execution and delivery of this Agreement by the Company, and compliance by the Company with all of the provisions of this Agreement and of the Notes: (i) is within the corporate powers of the Company; and (ii) is legal and does not conflict with, result in any breach of 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 any such Person is a party or by which any such Person or any of such Person's respective Properties may be bound. (b) Obligations are Enforceable. Each of this Agreement and the Notes have been duly authorized by all necessary action on the part of the Company, have been duly executed and delivered by authorized officers of the Company and constitute legal, valid and binding obligations of the Company, enforceable in accordance with their respective terms except that the enforceability of this Agreement and of the Notes 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. 2.15 Governmental Consent; Certain Laws. (a) 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 this 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 Subsidiary as a condition to the execution and delivery of this Agreement or the offer, issuance, sale or delivery of the Notes. (b) Certain Laws. Neither the Company nor any Subsidiary is subject to regulation under, or otherwise required to comply with any filing, registration or notice provisions of, (i) the Investment Company Act of 1940, as amended, (ii) the Public Utility Holding Company Act of 1935, as amended, (iii) the Transportation Acts (49 U.S.C.), as amended, or (iv) the Federal Power Act, as amended, except that Ohse is subject to regulation under the Transportation Acts (49 U.S.C.), as amended. 2.16 Private Offering of Notes. Neither the Company nor any Subsidiary has offered any of the Notes or any similar Security of the Company 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 you and four (4) other Institutional Investors, each of whom was offered all or a portion of the Notes at private sale for investment. 2.17 No Defaults; Transactions Prior to Closing Date, etc. (a) No event has occurred and no condition exists that, upon the execution and delivery of this Agreement or the issuance of the Notes, would constitute a Default or an Event of Default. (b) Except as disclosed in Part 2.17(b) of Annex 3 hereto, neither the Company nor any Subsidiary entered into any transaction during the period beginning on September 30, 1995 and ending on the Closing Date that would have been prohibited by Section 6.5, Section 6.11, Section 6.12 or Section 6.15 hereof had such Sections applied during such period. 2.18 Use of Proceeds of Notes. (a) Use of Proceeds. The Company will generally apply the proceeds from the sale of the Notes to finance Capital Expenditures of the Company. (b) Margin Securities. None of the transactions contemplated herein and in the Notes (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 G, T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. The obligations of the Company under this Agreement and the Notes are not and will not be directly or indirectly secured (within the meaning of such Regulation G) 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. 2.19 Solvency. The fair value of the business and assets of the Company is in excess of the amount that will be required to pay its liabilities (including, without limitation, contingent, subordinated, unmatured and unliquidated liabilities on existing debts, as such liabilities may become absolute and matured), in each case both prior to and after giving effect to the transactions contemplated by this Agreement and the Notes. After giving effect to the transactions contemplated by this Agreement and the Notes, the Company will not be engaged in any business or transaction, or about to engage in any business or transaction, for which it has unreasonably small capital, and the Company has or had no intent to hinder, delay or defraud any entity to which it is, or will become, on or after the Closing Date, indebted or to incur debts that would be beyond its ability to pay as such debts mature. 3. CLOSING CONDITIONS Your obligation to purchase and pay for the Notes at the Closing are subject to the following conditions precedent: 3.1 Opinions of Counsel. You shall have received from (a) Wright, Lindsey & Jennings, counsel for the Company, and (b) Hebb & Gitlin, a Professional Corporation, your special counsel, closing opinions, each dated the Closing Date, substantially in the respective forms set forth in Exhibit B1 and Exhibit B2 hereto and as to such other matters as you may reasonably request. This Section 3.1 shall constitute direction by the Company to such counsel named in the foregoing clause (a) to deliver such closing opinion to you. 3.2 Warranties and Representations True. The warranties and representations contained in Section 2 hereof 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 a Senior Officer of the Company, substantially in the form of Exhibit C hereto; and (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 D hereto. 3.4 Good Standing Certificate. You shall have received a certificate, dated on or immediately prior to the Closing Date, from the Secretary of State (or other appropriate official) of Delaware, certifying as to the due incorporation and good standing of the Company. 3.5 Legality. The Notes to be acquired by you shall, on the Closing Date, qualify as a legal investment for you under applicable insurance law (without regard to any "basket" or "leeway" provisions), and such acquisition shall not subject you to any penalty or other onerous condition contained in or 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. 3.6 Private Placement Number. The Company shall have obtained or caused to be obtained a private placement number for the Notes from the CUSIP Service Bureau of Standard & Poor's (a division of McGraw-Hill, Inc.) and you shall have been informed of such private placement number. 3.7 Expenses. All fees and disbursements required to be paid pursuant to Section 1.5(b) hereof shall have been paid in full. 3.8 Compliance with this Agreement. Each of the Company and the Subsidiaries 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 Subsidiaries on or prior to the Closing Date, and such performance and compliance shall remain in effect on the Closing Date. 3.9 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. 3.10 Proceedings Satisfactory. All proceedings taken in connection with the issuance and sale of the Notes and all documents and papers relating thereto shall be satisfactory to you and your special counsel. You and your special counsel shall have received, in a timely manner, copies of such documents and papers as you or they may 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 Mandatory Interest and Principal Prepayments. (a) Interest. Interest on the Notes shall be computed and paid in the manner and on the dates provided in the Notes. (b) Principal. The Company shall pay, and there shall become due and payable, Seven Million Eight Hundred Fifty-Seven Thousand One Hundred Forty-Two and 86/100 Dollars ($7,857,142.86) in principal amount of the Notes on December 28 in each year beginning on December 28, 1999, and ending on December 28, 2004, inclusive (each, a "Required Principal Prepayment"). Each Required Principal Prepayment shall be at one hundred percent (100%) of the principal amount paid, together with interest accrued thereon to the date of payment. The entire principal of the Notes remaining outstanding on December 28, 2005, together with interest accrued thereon, shall become due and payable on December 28, 2005. 4.2 Optional Prepayments. (a) Optional Prepayments. The Company may, at any time and from time to time, prepay the principal amount of the Notes in part, in integral multiples of One Million Dollars ($1,000,000), or in whole, in each case together with: (i) an amount equal to the Make-Whole Amount on such date 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) Notice of Optional Prepayment. The Company will give notice of any optional prepayment of the Notes to each holder of Notes not less than thirty (30) days or more than sixty (60) days before the date fixed for prepayment, specifying: (i) such date; (ii) that such prepayment is to be made pursuant to Section 4.2 of this Agreement; (iii) the principal amount of each Note to be prepaid on such date; (iv) the interest to be paid on each such Note, accrued to the date fixed for payment; and (v) the calculation of an estimated Make-Whole Amount, if any (calculated as if the date of such notice was the date of prepayment), due in connection with such prepayment, accompanied by a copy of any applicable documentation used in connection with determining the Make-Whole Discount Rate in respect of such prepayment. Notice of prepayment having been so given, the aggregate principal amount of the Notes to be prepaid specified in such notice, together with the Make-Whole Amount as of the specified prepayment date with respect thereto, if any, and accrued interest thereon shall become due and payable on the specified prepayment date. Two (2) Business Days prior to the making of such prepayment, the Company shall deliver to each holder of Notes by facsimile transmission a certificate of a Senior Financial Officer specifying the details of the calculation of such Make-Whole Amount as of the specified prepayment date, accompanied by a copy of any applicable documentation used in connection with determining the Make-Whole Discount Rate in respect of such prepayment. (c) Application of Prepayments. Upon any partial prepayment of the Notes pursuant to this Section 4.2, the principal amount of Notes so prepaid shall be applied to the Required Principal Prepayments with respect to such Notes, and to the payment at maturity of such Notes, as provided in Section 4.1 hereof, in the inverse order of the due date of such payments. 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 or any Subsidiary (including, without limitation, via the receipt of notice of a Control Event from any holder of Notes), the Company will, within three (3) Business Days of the occurrence of either of such events, give written notice of such Change in Control or Control Event to each holder of Notes by certified mail (with a copy thereof sent via an overnight courier of national reputation) 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 hereto 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, the Notes 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 posting of such notice. If the Company shall not have received a written response to such notice from each holder of Notes within ten (10) days after the date of posting of such notice to such holder of Notes, then the Company shall immediately send a second written notice via an overnight courier of national reputation to each such holder of Notes who shall have not previously responded to the Company, which notice shall also specify the Control Prepayment Date. (b) Acceptance and Payment. To accept or reject such offered prepayment, a holder of Notes shall cause a notice of such acceptance or rejection to be delivered to the Company on or prior to the fifteenth (15th) day after the date of receipt by such holder of the latest written offer of such prepayment (the "Offer Determination Date"). 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 any Make-Whole Amount as of the Control Prepayment Date with respect thereto and interest on the Notes then being prepaid accrued to the Control Prepayment Date. If a holder of Notes shall not have responded to such offered prepayment on or prior to the Offer Determination Date, such holder shall be deemed to have accepted such offered prepayment. (c) Officer's Certificate. Each offer to prepay the Notes pursuant to this Section 4.3 shall be accompanied by a certificate, executed by a Senior Officer of the Company and dated the date of such offer, specifying: (i) the Control Prepayment Date; (ii) that such offer is made pursuant to Section 4.3 of this Agreement; (iii) the principal amount of each Note offered to be prepaid; (iv) the interest that would be due on each such Note offered to be prepaid, accrued to the date fixed for payment; (v) the calculation of an estimated Make-Whole Amount, if any (calculated as if the date of such notice was the date of prepayment), that would be due in connection with such offered prepayment, accompanied by a copy of any applicable documentation used in connection with determining the Make-Whole Discount Rate in respect of such prepayment; and (vi) in reasonable detail, the nature and date or proposed date of the Change in Control. Each such notice shall also contain a legend specifying that such holder shall be deemed to have accepted such offered prepayment if such holder shall not have responded to such offer on or prior to the fifteenth (15th) day following such holder's receipt of such notice. (d) Effect of Prepayment. Each partial prepayment of the principal of the Notes made pursuant to this Section 4.3 shall be applied against and reduce each of the then remaining Required Principal Prepayments of the Notes and the payment of principal due at maturity by a percentage equal to the aggregate principal amount of the Notes so prepaid divided by the aggregate principal amount of the Notes outstanding immediately prior to such prepayment. (e) Notice Concerning Status of Holders of Notes. Promptly after each Control Prepayment Date and the making of all prepayments contemplated on such Control Prepayment Date under this Section 4.3 (and, in any event, within thirty (30) days thereafter), the Company shall deliver to each remaining holder of Notes a certificate signed by a Senior Officer of the Company containing a list of the then current holders of Notes (together with their addresses) and setting forth as to each such holder the outstanding principal amount of Notes held by each such holder at such time. 4.4 Pro Rata Payments. (a) Required Principal Prepayments. If at the time any Required Principal Prepayment or the payment of principal due at maturity with respect to the Notes is required to be made pursuant to Section 4.1 hereof, there is more than one Note outstanding, the aggregate principal amount of each such Required Principal Prepayment or such payment due at maturity (as the case may be) shall be allocated among the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts of the Notes then outstanding, with adjustments, to the extent practicable, to equalize for any prior prepayments not in such proportion. (b) Optional Prepayments. If at the time any prepayment under Section 4.2 hereof is due and there is more than one Note outstanding, the aggregate principal amount of each such prepayment of the Notes shall be allocated among the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts of the Notes then outstanding. 4.5 Notation of Notes on Prepayment. Upon any partial prepayment of a Note, such Note may, at the option of the holder thereof, be (but shall not be required to be): (a) surrendered to the Company pursuant to Section 5.2 hereof in exchange for a new Note 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 has been paid, 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 paid principal amount of any Note. 4.6 No Other Optional Prepayments; No Acquisition of Notes. Except for prepayments made in accordance with this Section 4, the Company may not make any prepayment of principal in respect of the Notes. The Company will not, and will not permit any Subsidiary or any Affiliate to, directly or indirectly, acquire or make any offer to acquire any Notes. 5. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES 5.1 Registration of Notes. The Company will cause to be kept at its office maintained pursuant to Section 6.3 hereof a register for the registration and transfer of Notes. The name and address of each holder of one or more Notes, the outstanding principal amount of each such Note, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such 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 and the Company shall not be affected by any notice or knowledge to the contrary. 5.2 Exchange of Notes. (a) Upon surrender of any Note at the office of the Company maintained pursuant to Section 6.3 hereof duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or such holder's attorney duly authorized in writing, the Company will execute and deliver, at the Company's expense (except as provided below), new Notes in exchange therefor, in denominations of at least One Hundred Thousand Dollars ($100,000) (except as may be necessary to reflect any principal amount not evenly divisible by One Hundred Thousand Dollars ($100,000)), 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 and shall be substantially in the form of Exhibit A hereto. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. (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. (c) Each holder of Notes agrees that, in the event it shall sell or transfer any Note without surrendering such Note to the Company as set forth in Section 5.2(a) hereof, it shall: (i) prior to the delivery of such Note, make a notation thereon of all principal, if any, paid on such Note and shall also indicate thereon the date to which interest shall have been paid on such Note; and (ii) promptly notify the Company of the name and address of the transferee of any such Note so transferred and the effective date of such transfer. 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 of 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 such Institutional Investor, such Institutional Investor's own unsecured 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 deliver, in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon. 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 in connection with any modification of this Agreement or the Notes 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 of this Agreement. 6. COVENANTS The Company covenants that on and after the Closing Date and so long as any of the Notes shall be outstanding: 6.1 Payment of Taxes and Claims. The Company will, and will 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, vendors, 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 (i) while being actively contested in good faith and by appropriate proceedings as long as adequate book reserves have been established and maintained and exist with respect thereto, and (ii) so long as the title of the Company or the other Subsidiary, as the case may be, to, and its right to use, such Property, is not materially adversely affected thereby. In the case of any such item being contested as described in the immediately preceding sentence (other than the item described in Part 6.1 of Annex 4 hereto) involving in excess of Two Million Dollars ($2,000,000), the appropriateness of the proceedings will be supported by an opinion of the independent counsel responsible for such proceedings and the adequacy of such reserves will be supported by an opinion of the independent accountants of the Company or such Subsidiary (which opinions will be delivered to the Purchasers and the other holders of Notes as provided in Section 7.1(c) hereof), provided that, if the aggregate amount of all such items shall at any time exceed Three Million Dollars ($3,000,000), regardless of the amount of any individual item, the adequacy of the reserves for all such items will be supported by opinions of the independent accountants of the Company or such Subsidiary (which opinions will be delivered to the Purchasers and the other holders of the Notes as provided in Section 7.1(c) hereof). 6.2 Maintenance of Properties; Corporate Existence; etc. The Company will, and will cause each Subsidiary to: (a) Property -- maintain its Property in good condition and working order, ordinary wear and tear excepted, and make all necessary renewals, replacements, additions, betterments and improvements thereto; (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 a comparable rating by any comparable successor rating agency), insurance 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 accordance with sound business practices in the case of corporations of established reputations engaged in the same or a similar business and similarly situated; (c) Financial Records -- keep accurate and complete books of records and accounts in which accurate and complete entries shall be made of all its business transactions and that will permit the provision of accurate and complete financial statements in accordance with GAAP; (d) Corporate Existence and Rights -- (i) do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises, except where the failure to do so, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, and (ii) maintain each Subsidiary as a Subsidiary and each Wholly-Owned Subsidiary as a Wholly-Owned Subsidiary, in each case except as permitted by Section 6.5 hereof; 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 or any Health Law) and not fail to obtain any license, certificate, permit, franchise or other governmental authorization necessary to the ownership of its Properties or to the conduct of its business if such violations or failures to obtain, in the aggregate, could reasonably be expected to have (i) a Material Adverse Effect or (ii) a material adverse effect on the ability of the Company or any Subsidiary to conduct in the future the business it conducts at the time of such violation or failure to obtain. 6.3 Payment of Notes and Maintenance of Office. The Company will punctually pay, or cause to be paid, the principal of and interest (and Make-Whole Amount, if any) on the Notes, as and when the same shall become due according to the terms of this Agreement and of the Notes. The Company will maintain an office at the address of the Company set forth in Section 10.1 hereof where notices, presentations and demands in respect of this Agreement or of the Notes may be made upon the Company. Such office will be maintained at such address until such time as the Company shall notify the Purchasers and the other holders of the Notes of any change of location of such office, which will in any event be located within the United States of America. 6.4 Liens. (a) Negative Pledge. The Company will not, and will not permit any Subsidiary to, cause or permit to exist, or agree or consent to cause or permit to exist 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 any Lien except: (i) Taxes, etc. -- Liens securing Property taxes, assessments or governmental charges or levies or the claims or demands of materialmen, mechanics, carriers, warehousemen, vendors, landlords and other like Persons, so long as (A) the payment thereof is being actively contested in good faith and by appropriate proceedings and adequate book reserves have been established and maintained and exist with respect thereto, and (B) 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; (ii) Judicial Liens -- Liens (A) arising from judicial attachments and judgments, (B) securing appeal bonds or supersedeas bonds, and (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 (1) the execution or other enforcement of such Liens is effectively stayed, (2) the claims secured thereby are being actively contested in good faith and by appropriate proceedings, (3) adequate book reserves shall have been established and maintained and shall exist with respect thereto and (4) the aggregate amount so secured shall not at any time exceed Two Million Dollars ($2,000,000); (iii) Ordinary Course Business Liens -- 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 6.4(a)(ii) hereof) 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; provided, however, that all such Liens do not, in the aggregate, materially detract from the value of such Property or materially interfere with the use of such Property in the ordinary conduct of the business of the Company and the Subsidiaries, taken as a whole; (iv) Certain Encumbrances -- 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 Property in the ordinary conduct of the business of the Company and the Subsidiaries, taken as a whole; (v) Intergroup Liens -- Liens on Property of a Subsidiary, provided that such Liens secure only obligations owing to the Company; (vi) Closing Date Liens -- (A) Liens in existence on the Closing Date securing Indebtedness, provided that such Liens and such Indebtedness are described in Part 6.4(a)(vi) of Annex 4 hereto; and (B) Liens securing renewals, extensions (as to time) and refinancings of Indebtedness secured by the Liens described in Part 6.4(a)(vi) of Annex 4 hereto, provided that (1) the amount of Indebtedness secured by each such Lien is not increased in excess of the amount of such Indebtedness outstanding on the date of such renewal, extension or refinancing, unless the aggregate amount of Indebtedness in excess of such outstanding Indebtedness is permitted to be outstanding under the terms and provisions of Section 6.8(b) hereof, (2) none of such Liens is extended to encumber or otherwise relate to or cover any additional Property of the Company or any Subsidiary, and (3) immediately prior to, and immediately after the consummation of such renewal, extension or refinancing, and after giving effect thereto, no Default or Event of Default exists or would exist; and (vii) Secured Indebtedness -- other Liens on Property of the Company or the Subsidiaries as specified in Section 6.8(b) hereof securing Indebtedness permitted pursuant to Section 6.8(b) hereof. (b) Equal and Ratable Lien; Equitable Lien. In case any Property shall be subjected to a Lien in violation of this Section 6.4, the Company will forthwith make or cause to be made, to the fullest extent permitted by applicable law, provision whereby the Notes will 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 will 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. Regardless of whether the Company complies with the provisions of the immediately preceding sentence, in case any Property shall be subjected to a Lien in violation of this Section 6.4, the Notes shall have the benefit, to the fullest extent that, and with such priority as, the holders of Notes may be entitled thereto under applicable law, of an equitable Lien on such Property securing the Notes. A violation of this Section 6.4 will constitute an Event of Default, whether or not any such provision is made or action is taken pursuant to this Section 6.4(b). (c) Financing Statements. The Company will not, and will 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 6.4 or to evidence for informational purposes a lessor's interest in Property leased to the Company or any such Subsidiary. 6.5 Merger, Consolidation, Transfers of Property, etc. (a) Merger and Consolidation. The Company will not, and will not permit any Subsidiary to, merge with or into or consolidate with any other Person or permit any other Person to merge or consolidate with or into it (except that a Subsidiary may merge into or consolidate with the Company or a Wholly-Owned Subsidiary), provided that the foregoing restriction does not apply to the merger or consolidation of the Company with another corporation if: (i) the Company is the corporation that results from such merger or consolidation (the "Surviving Corporation"); (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 in the Notes and this Agreement to be performed or observed by the Company are expressly assumed by the Surviving Corporation pursuant to such agreements and instruments as shall be approved by the Required Holders, and the Company causes to be delivered to each holder of Notes an opinion of independent counsel to the effect that such agreements and instruments are enforceable in accordance with their terms (subject to customary qualifications); and (iii) immediately prior to, and immediately after the consummation of the transaction, and after giving effect thereto, no Default or Event of Default exists or would exist. (b) Acquisition of Stock, etc. The Company will not, and will 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 Property of, or such of the Property as would permit the transferee to continue any one or more integral business operations of, any Person unless, immediately prior to, and immediately after the consummation of such acquisition, and after giving effect thereto, no Default or Event of Default exists or would exist. (c) Transfers of Property. The Company will not, and will not permit any Subsidiary to, sell, lease as lessor, transfer or otherwise dispose of any Property (collectively, "Transfers"), except Transfers of inventory and Transfers of other Property for Fair Market Value, in each case in the ordinary course of business of the Company or any such Subsidiary. 6.6 Tangible Net Worth. The Company will maintain, as of the last day of each fiscal quarter, a Tangible Net Worth of not less than the sum of (a) One Hundred Twenty-Nine Million Dollars ($129,000,000), plus (b) the amount of all proceeds of any issuance of capital stock of the Company after May 18, 1994, plus (c) the amount of any Subordinated Debt which is converted into capital stock of the Company after May 18, 1994, plus (d) in the case of each fiscal quarter ending on or after October 1, 1994, the Applicable Net Income Carryover. As used herein, Tangible Net Worth -- means the excess of total assets over total liabilities, as each of total assets and total liabilities would be shown on a consolidated balance sheet for the Company and the Subsidiaries prepared in accordance with GAAP consistent with GAAP applied in the preparation of the financial statements referred to in Section 7.1(a) and Section 7.1(b) hereof, excluding, however, Intangible Assets from such determination of total assets. Intangible Assets -- means (i) goodwill, organizational expenses, research and development expenses, trademarks, trade names, copyrights, patents, patent applications, licenses and rights in any thereof, and other similar intangibles, (ii) treasury stock, (iii) Securities which are not readily marketable, (iv) cash held in a sinking or other analogous fund established for the purpose of redemption, retirement or prepayment of capital stock, (v) any write-up in the book value of any asset resulting from a revaluation thereof subsequent to May 18, 1994, and (vi) any items not included in clauses (i) through (v) above, inclusive, which are treated as intangibles in conformity with GAAP. Applicable Net Income Carryover -- at any time that any determination thereof is to be made means an amount equal to the sum of (i) sixty percent (60%) of the net income of the Company and the Subsidiaries, determined on a consolidated basis for such Persons in accordance with GAAP, for the fiscal year of the Company ending on October 1, 1994, plus (ii) sixty percent (60%) of the net income of the Company and the Subsidiaries, determined on a consolidated basis for such Persons in accordance with GAAP, for each and every fiscal year of the Company ending after October 1, 1994 which has ended on or before the date such determination of Applicable Net Income Carryover is to be made; provided, however, that, in the event that such net income for any fiscal year described above is less than zero (0), the net income of the Company and the Subsidiaries for such fiscal year shall be deemed to be zero (0) for purposes of calculating Applicable Net Income Carryover. 6.7 Working Capital; Current Ratio. The Company will maintain as of the last day of each fiscal quarter: (a) a ratio of current assets to current liabilities (exclusive of current deferred taxes), in each case as would be shown on a consolidated balance sheet for the Company and the Subsidiaries at such time prepared in accordance with GAAP, of not less than 1.5 to 1.0, and (b) an excess of current assets over current liabilities (exclusive of current deferred taxes), in each case as would be shown on a consolidated balance sheet for the Company and the Subsidiaries at such time prepared in accordance with GAAP, of not less than Sixty Million Dollars ($60,000,000). 6.8 Limitations on Indebtedness. (a) Leverage Ratio. The Company will maintain, as of the last day of each fiscal quarter, a Leverage Ratio of not more than 0.5 to 1.0. As used herein: Leverage Ratio -- means for any date of determination thereof, the quotient (expressed as a ratio) of (x) Indebtedness with maturities of greater than one (1) year (including, without limitation, all current portions thereof and all Subordinated Debt) of the Company and the Subsidiaries as would appear on a consolidated balance sheet prepared in accordance with GAAP for such Persons at such time, divided by (y) the sum of (i) Indebtedness with maturities of greater than one (1) year (including, without limitation, all current portions thereof and all Subordinated Debt) of the Company and the Subsidiaries as would appear on a consolidated balance sheet prepared in accordance with GAAP for such Persons at such time, plus (ii) stockholders' equity of the Company and the Subsidiaries (excluding, in any event, any minority interests) as would appear on a consolidated balance sheet prepared in accordance with GAAP for such Persons at such time, plus (iii) long-term deferred taxes, attributable to the Company's prior use of cash accounting, of the Company and the Subsidiaries as would appear on a consolidated balance sheet prepared in accordance with GAAP for such Persons at such time, plus (iv) deferred taxes, attributable to the Company's use of the "farm price method" of accounting for deferred taxes, of the Company and the Subsidiaries as would appear on a consolidated balance sheet prepared in accordance with GAAP for such Persons at such time. (b) Limitation on Secured Indebtedness. The Company will not, and will not permit any Subsidiary to, create, incur, assume or suffer to exist any Indebtedness or other liabilities or obligations, whether matured or unmatured, liquidated or unliquidated, direct or contingent, or joint or several, which are secured by, or have the benefit of, any Lien except Indebtedness secured by or having the benefit of, or in respect of: (i) Liens outstanding on the Closing Date described in Part 6.4(a)(vi) of Annex 4 hereto; (ii) purchase money Liens or purchase money security interests upon or in any fixed assets acquired or held by the Company or any Subsidiary in the ordinary course of business to secure the purchase price of such fixed assets or to secure Indebtedness incurred solely for the purpose of financing the acquisition of such fixed assets; (iii) Liens or security interests existing on fixed assets at the time of their acquisition; (iv) Liens and security interests on previously acquired fixed assets, the Fair Market Value of which assets does not exceed by more than one hundred percent (100%) the amount of Indebtedness secured thereby, all as determined by the Required Holders, in their sole, good faith discretion; or (v) Liens in respect of obligations for Capital Leases of real or personal fixed assets acquired or held by the Company in the ordinary course of business which are secured only by the fixed assets that are the subject of such Capital Lease, provided, however, that (x) the aggregate amount of any Indebtedness incurred in connection with renewals, extensions (as to time) and refinancings of Indebtedness described in Part 6.4(a)(vi) of Annex 4 hereto in excess of the amount of such Indebtedness outstanding immediately prior to each such renewal, extension or refinancing, plus (y) the aggregate principal amount of the Indebtedness secured by the Liens or security interests referred to in clause (ii), clause (iii) and clause (iv) of this Section 6.8(b), plus (z) the aggregate amount of capitalized payment obligations under the Capital Leases specified in clause (v) of this Section 6.8(b) shall not at any time exceed Twenty-Five Million Dollars ($25,000,000). (c) Limitation on Subsidiary Indebtedness. The Company shall not at any time permit Total Subsidiary Indebtedness to exceed ten percent (10%) of Consolidated Indebtedness at such time. As used herein: Total Subsidiary Indebtedness -- means, at any time (without duplication), (a) the aggregate Indebtedness of all Subsidiaries outstanding at such time, plus (b) the aggregate amount of claims in respect of the redemption of, and accumulated unpaid dividends on, all preferred stock (and other equity Securities and all other Securities convertible into, exchangeable for, or representing the right to purchase, preferred stock) of all Subsidiaries outstanding at such time (whether or not any right of redemption or conversion is exercisable by the holder thereof at such time), determined, in each case, on a combined basis for such Persons, but excluding from such calculation (i) any such Indebtedness of any Subsidiary in respect of any Guaranty of the Notes provided pursuant to, and in accordance with the provisions of, Section 6.16 hereof, (ii) any such Indebtedness of any Subsidiary in respect of any Guaranty of any of the obligations of the Company under (A) the Bank Credit Agreement and (B) any other primary Indebtedness of the Company, so long as, in each such case, such Subsidiary has entered into a Guaranty of the obligations of the Company under the Notes and this Agreement, (iii) any such Indebtedness of any Subsidiary existing on the Closing Date which is described in Part 6.8(c) of Annex 4 hereto, and (iv) all such preferred stock and other equity Securities which are legally and beneficially owned by the Company. Consolidated Indebtedness -- means, at any time, the aggregate amount of Indebtedness of the Company and the Subsidiaries, determined on a consolidated basis for such Persons at such time in accordance with GAAP. (d) Limitation on Indebtedness. The Company will not, and will not permit any Subsidiary to, create, incur, assume or suffer to exist any Indebtedness or other liabilities or obligations, whether matured or unmatured, liquidated or unliquidated, direct or contingent, or joint or several, except: (i) liabilities of the Company in respect of the Notes, the Note Purchase Agreements and the Bank Credit Agreement, and liabilities of any Subsidiary in respect of any Guaranty of the obligations of the Company under the Notes, the Note Purchase Agreements or the Bank Credit Agreement; (ii) long-term Indebtedness, provided the Company complies with the provisions of Section 6.8(a) hereof; (iii) Indebtedness secured by Liens permitted to be outstanding pursuant to Section 6.8(b) hereof; (iv) unsecured short-term Indebtedness of the Company incurred for the purpose of funding the working capital requirements of the Company and the Subsidiaries, provided the Company complies with the provisions of Section 6.9 hereof; (v) Indebtedness of Subsidiaries, provided the Company complies with the provisions of Section 6.8(c) hereof; and (vi) those liabilities listed in Part 6.8(d) of Annex 4 hereto. (e) Loans, Guaranties, etc. The Company will not, and will not permit any Subsidiary to, make any loans or advances to or investments in any Person, or directly or indirectly enter into any Guaranty or otherwise assure a creditor against loss in respect of any Indebtedness or other obligations or liabilities (contingent or otherwise) of any Person unless any such amounts have been included as Indebtedness in making calculations with respect to each representation, warranty and covenant set forth in this Agreement. 6.9 Current Debt. The Company will not, and will not permit any Subsidiary to, have any Current Debt outstanding on any day unless, within the period of three hundred sixty-five (365) days immediately preceding such day, there shall have been at least one (1) period of not less than forty-five (45) consecutive days during which on each day of such period the aggregate Current Debt of all such Persons did not exceed the amount of additional Funded Debt in favor of a Person other than a Subsidiary that the Company would have been permitted to have outstanding (but did not have outstanding) if the Company were required to maintain a Leverage Ratio of not more than 0.5 to 1.0 on such day. 6.10 Cash Flow Coverage Ratio. The Company will maintain, as of the last day of each fiscal quarter, a Cash Flow Coverage Ratio of not less than 1.3 to 1.0 for the period of eight (8) consecutive fiscal quarters then most recently ended. As used herein: Cash Flow Coverage Ratio -- means for any period of determination thereof, the quotient (expressed as a ratio) of (x) the sum of (i) Consolidated Net Income, plus (ii) income taxes of the Company and the Subsidiaries, plus (iii) Consolidated Interest Expense, plus (iv) Consolidated Lease Expense, plus (iv) depreciation and amortization of the Company and the Subsidiaries, divided by (y) the sum of (i) Consolidated Interest Expense, plus (ii) Consolidated Lease Expense, plus (iii) all scheduled and optional principal payments on long-term Indebtedness (including, without limitation, imputed principal on Capital Leases), other than, in each such case, the principal amount of any such Indebtedness which shall be paid during such period from the proceeds of Indebtedness incurred in connection with any refinancing thereof prior to, or at the time of, the maturity thereof, plus (iv) the sum of (a) dividends on the capital stock of the Company or a Subsidiary (other than dividends paid to the Company or a Subsidiary), (b) purchases or other acquisitions by the Company or any Subsidiary of any capital stock of the Company, and (c) distributions of assets to the Company's stockholders as such. Consolidated Net Income -- means, for any period, net income (or loss) from continuing operations (after income taxes) of the Company and the Subsidiaries, excluding, in any event, net income (or loss) in respect of extraordinary items, net income (or loss) from discontinued operations and the cumulative effects of changes in accounting principles, all as determined on a consolidated basis for such Persons in accordance with GAAP. Consolidated Interest Expense -- means, for any period, the aggregate amount of interest accrued or capitalized on, or with respect to, Indebtedness (including, without limitation, amortization of debt discount, imputed interest on Capital Leases and interest on the Notes), but without giving effect to any deduction for any interest income, of the Company and the Subsidiaries determined on a consolidated basis for such Persons for such period in accordance with GAAP. Consolidated Lease Expense -- means, for any period, the aggregate amount of rentals payable in respect of Operating Leases for such period by any one or more of the Company and the Subsidiaries, determined on a consolidated basis for such Persons for such period in accordance with GAAP. Operating Lease -- means, with respect to any Person, any lease other than a Capital Lease. 6.11 Dividends and Prepayments on Subordinated Debt. (a) Limit on Dividends and Other Distributions. The Company will not declare or pay any dividends (whether in cash or other Property), purchase, redeem, retire or otherwise acquire for value any of its capital stock (or any warrants, rights or options to acquire any shares of such capital stock) now or hereafter outstanding, or make any other distribution of Property to its stockholders, or permit any of its Subsidiaries to purchase or otherwise acquire for value any capital stock of the Company if: (i) after giving effect to such dividend, distribution or other payment, the aggregate amount of all such dividends, distributions and other payments exceeds Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000) during any fiscal year, or (ii) at the time of the declaration of such dividend, distribution or other payment, and immediately before, and after giving effect to the payment thereof, an Event of Default exists or would exist. (b) No Subordinated Debt Prepayments. The Company will not at any time, and will not at any time permit any Subsidiary to, make any prepayments, directly or indirectly, of principal on, or redeem, repurchase or retire, any existing or future Subordinated Debt of the Company or any Subsidiary. 6.12 Capital Expenditures. The Company will not, and will not permit any Subsidiary to, make any Capital Expenditures, if: (a) the aggregate amount of Capital Expenditures of the Company and the Subsidiaries, determined on a consolidated basis for such Persons in accordance with GAAP, in any one (1) fiscal year would be in excess of twenty-five percent (25%) of stockholder's equity of the Company and the Subsidiaries as would appear on a consolidated balance sheet prepared in accordance with GAAP for such Persons as at the end of the fiscal year then most recently ended; provided, however, that (i) the amount of Capital Expenditures incurred in fiscal year 1996 and fiscal year 1997 of the Company in connection with the Company's planned construction of a new processing facility in the state of Kentucky, and (ii) the portion of any purchase price in respect of any Capital Expenditure which was paid for by the Company solely with shares of the Company's capital stock, shall be excluded from the application of this covenant; or (b) at the time of such Capital Expenditure, and immediately before and after giving effect thereto, a Default or an Event of Default exists or would exist. As used herein: Capital Expenditure -- means, with respect to any Person, any payments in respect of the acquisition or construction cost of Property (including, without limitation, (i) the purchase price of tangible assets acquired by such Person and (ii) the gross purchase price of assets or stock, as the case may be, acquired by such Person in connection with any merger, consolidation, asset acquisition, stock purchase or similar transaction entered into by such Person) or other expenditures in respect of Property, in each case that is, or is part of a group of related items of Property substantially all of which are, required to be classified as long-term assets on a balance sheet of such Person prepared in accordance with GAAP. 6.13 Operating Lease Rentals. The Company will not create or suffer to exist, or permit any of the Subsidiaries to create or suffer to exist, any obligations for the payment of rent for any Property under leases or agreements to lease, which do or would constitute Operating Leases, which in the aggregate have annual rental payments for any fiscal year in excess of seven and one-half percent (7.5%) of Net Tangible Assets determined at the end of such fiscal year; provided, however, that leases for rolling stock shall be excluded from the foregoing calculation. As used herein: Net Tangible Assets -- means total assets minus Intangible Assets minus current liabilities (exclusive of current deferred taxes) of the Company and the Subsidiaries, in each case as would appear on a consolidated balance sheet for such Persons prepared in accordance with GAAP. 6.14 Nature of Business. The Company will not, and will not permit any Subsidiary to, engage in any business if, as a result thereof, the principal businesses of the Company and the Subsidiaries, taken as a whole, would not be substantially the same as the businesses described in the Most Recent 10-K. 6.15 Transactions with Affiliates. The Company will not, and will 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. 6.16 Guaranties of Subsidiaries. (a) New Subsidiaries. The Company shall cause each Subsidiary not existing as of the Closing Date to execute and deliver to the holders of the Notes a Subsidiary Guaranty, in substantially the form of Exhibit E hereto, within ten (10) Business Days of the creation or acquisition of any such Subsidiary. (b) Certain Existing Subsidiaries. If Ohse, Hudson Poland, Hudson Development or Hudson Foreign Sales shall at any time own or hold, directly or indirectly, assets having a book value equal to or in excess of five percent (5%) of the total assets of the Company and the Subsidiaries at such time, as would be shown on a consolidated balance sheet for such Persons prepared in accordance with GAAP, then the Company shall cause such Person to execute and deliver to the holders of the Notes a Subsidiary Guaranty, in substantially the form of Exhibit E hereto, within ten (10) Business Days of such time. (c) Delivery of Documents. The delivery of any agreements pursuant to Section 6.16(a) or Section 6.16(b) hereof shall be accompanied by such other documents as any Purchaser or other holder of Notes may reasonably request, including, without limitation, charter documents, bylaws, and appropriate resolutions of the Board of Directors of any such Subsidiary providing a Subsidiary Guaranty. (d) Guaranties of Bank Credit Agreement Obligations. Notwithstanding the other terms and provisions of this Section 6.16, the Company will not at any time permit any Subsidiary or Affiliate to provide to the Banks any Guaranty of the Company's obligations under the Bank Credit Agreement unless such Subsidiary or such Affiliate shall, at the same time, deliver a Subsidiary Guaranty and other documents to the holders of the Notes as specified in Section 6.16(c) hereof. 6.17 Restricted Investments. The Company will not at any time, and will not at any time permit any Subsidiary to, make any investments (including, without limitation, loans or other advances to or for the benefit of any Subsidiary) except: (a) investments in readily marketable obligations of the United States of America maturing within one (1) year from date of purchase, (b) investments in prime (by recognized United States financial standards) commercial paper maturing within one (1) year from date of purchase, (c) investments in fully insured domestic certificates of deposit and certificates of deposit issued by any Bank (provided such Bank's outstanding long-term debt securities are rated at least "A" by Standard & Poor's (a division of McGraw-Hill, Inc.) or at least "A-1" by Moody's Investors Service, Inc.) maturing within one (1) year from the date of creation thereof, (d) endorsements of negotiable instruments for collection in the ordinary course of business, (e) investments in Subsidiaries that have complied with the requirements of Section 6.16 hereof, and (f) other investments so long as the aggregate book value of all such investments does not at any time exceed ten percent (10%) of Tangible Net Worth at such time; provided, however, that this Section 6.17 shall not be deemed to prohibit the Company from creating accounts receivable owing from any Subsidiary as a result of the sale of inventory in accordance with Section 6.15 hereof. 6.18 ERISA. (a) Compliance. The Company will, and will cause each ERISA Affiliate to, at all times with respect to each Pension Plan, make timely payment of contributions required to meet the minimum funding standard set forth in ERISA or the IRC with respect thereto, and to comply with all other applicable provisions of ERISA. (b) Relationship of Vested Benefits to Pension Plan Assets. The Company will not at any time permit the present value of all employee benefits vested under each Pension Plan to exceed the assets of such Pension Plan allocable to such vested benefits at such time, in each case determined pursuant to Section 6.18(c) hereof. (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 will be reasonable in the good faith judgment of the Company and will comply with all requirements of law. (d) Prohibited Actions. The Company will not, and will 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) 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) at any time be an "employer" (as such term is defined in section 3(5) of ERISA) required to contribute to any Multiemployer 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. 6.19 Private Offering. The Company will not, and will not permit 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. 6.20 Certain Accounting Matters. The Company will not, at any time, (a) change its methods of accounting, unless required in accordance with GAAP, or (b) change its fiscal year. 7. INFORMATION AS TO COMPANY 7.1 Financial and Business Information. The Company will deliver to each Purchaser and to each other holder of Notes: (a) 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) a consolidated balance sheet of the Company and the Subsidiaries as at the end of such quarter, and (ii) consolidated statements of operations and cash flows 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, 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, and accompanied by the certificate required by Section 7.2 hereof; (b) 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) consolidated balance sheets of the Company and the Subsidiaries as at the end of such year, and (ii) consolidated statements of operations and cash flows of the Company and the Subsidiaries for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP and accompanied by (A) an opinion of independent certified public accountants of recognized national standing, which opinion shall, without qualification (including, without limitation, qualifications related to the scope of the audit or the ability of the Company or a Subsidiary to continue as a going concern), state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their 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 financial statements are complete and correct, and (C) the certificates required by Section 7.2 and Section 7.3 hereof; (c) Opinions of Independent Accountants and Counsel -- 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 all opinions of independent accountants and counsel required pursuant to Section 6.1 hereof; (d) 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 annual, interim or special audit made by them of the books of the Company or any Subsidiary; (e) SEC and Other Reports -- within fifteen (15) days of their becoming available, one copy, without duplication, of (i) each financial statement, report, notice or proxy statement sent by the Company or any Subsidiary to public securities holders generally, and (ii) each regular or periodic report (including, without limitation, each Annual Report on Form 10-K, each Quarterly Report on Form 10-Q and each Current Report on Form 8-K), each registration statement (other than registration statements on Form S-8) which shall have become effective (without exhibits except as expressly requested by a holder of Notes), and each final prospectus, and all amendments to any of the foregoing, filed by the Company or any Subsidiary with, or received by, such Person in connection therewith from, the Securities and Exchange Commission or any successor agency; (f) ERISA -- (i) immediately upon becoming aware of the occurrence of any (A) "reportable event" (as such term is defined in section 4043 of ERISA), or (B) "prohibited transaction" (as such term is 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) prompt 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, (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 such term is defined in section 4245 of ERISA) under Title IV of ERISA, (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, and (F) any material increase in contingent liabilities of the Company or any Subsidiary in respect of any post-retirement employee welfare benefits. (g) Actions, Proceedings -- promptly after the commencement thereof, written notice of any action or proceeding relating to the Company or any Subsidiary in any court or before any Governmental Authority or arbitration board or tribunal as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, is reasonably likely to have a Material Adverse Effect; (h) Certain Matters -- prompt written notice of and a description of any event or circumstance that, had such event or circumstance occurred or existed immediately prior to the Closing Date, would have been required to be disclosed as an exception to any statement set forth in Section 2.13(a) or Section 2.13(b) hereof; (i) Notice of Default or Event of Default -- immediately upon 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; (j) Notice of Claimed Default -- immediately upon becoming aware that the holder of any Note, or of any Indebtedness or other 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; (k) Information Furnished to Other Creditors -- promptly after any request therefor, copies of any statement, report or certificate furnished to any holder of Indebtedness of the Company or any Subsidiary; (l) Rule 144A -- promptly after any request therefor, information requested to comply with 17 C.F.R. ss.230.144A, as amended from time to time; and (m) Requested Information -- promptly after any request therefor, such other data and information as from time to time may be reasonably requested by any holder of Notes, including, without limitation, data, information, agreements, instruments or documents relating to the business or financial operations or performance of the Company or any Subsidiary and any financial statements prepared by the Company (in addition to the financial statements specified in clause (a) and clause (b) of this Section 7.1), in each case which 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) hereof shall be accompanied by a certificate of a Senior Financial Officer setting forth: (a) Covenant Compliance -- the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Section 6.4 through Section 6.13, inclusive, and Section 6.17 hereof, 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); (b) Event of Default -- a statement that the signers have reviewed the relevant terms hereof and have made, or caused to be made, under their 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 statement 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; and (c) Investments -- a description of all investments of the Company and the Subsidiaries made pursuant to Section 6.17(f) hereof during such accounting period (which description shall specify the type of investment, the cost thereof and the book value thereof), and, if any such investments are made, a description of the Company's then-current investment policy. 7.3 Accountants' Certificates. Each set of annual financial statements delivered pursuant to Section 7.1(b) hereof shall be accompanied by a certificate of the accountants who certify such financial statements, stating that (a) 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, and (b) they have reviewed the annual certificate of a Senior Financial Officer of the Company provided pursuant to clause (a) of Section 7.2 hereof and that they confirm the calculations contained therein. 7.4 Inspection. The Company will permit, upon prior notice to the Company, the representatives of each holder of Notes (at the expense of the Company at any time when a Default or an Event of Default has occurred and is in existence, and otherwise at the expense of such holder) 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 (and by this provision the Company authorizes 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 or 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; (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; (c) Certain Defaults -- the Company or any Subsidiary shall fail to perform or observe any covenant contained in Section 6.1 hereof, in Section 6.2(b) hereof, in Section 7.1(a) through Section 7.1(h) hereof, inclusive, or in Section 7.1(k) through Section 7.1(m) hereof, inclusive, and such failure continues for more than ten (10) days after the earlier of (i) receipt by the Company of written notice thereof from any Purchaser or any other holder of Notes, or (ii) such time as such failure shall otherwise first become known to any officer of the Company; (d) Other Defaults -- the Company or any Subsidiary shall fail to perform, observe or comply with any other term, covenant or agreement contained in this Agreement, in the Notes or in any other document or instrument delivered in connection herewith required to be performed by the Company or such Subsidiary pursuant to the terms of this Agreement, of the Notes or of such other document or instrument; (e) Warranties or Representations -- any warranty, representation or other statement by or on behalf of the Company (or any of its officers) contained herein or in any certificate or instrument furnished in compliance with or in reference hereto shall have been false or misleading in any material respect when made; (f) Default on Indebtedness or Security -- (i) the Company or any Subsidiary shall fail to make any payment on any Indebtedness or any Security when due; (ii) any event shall occur or any condition shall exist in respect of any Indebtedness or any Security of the Company or any Subsidiary, or under any agreement securing or relating to any such Indebtedness or Security, that immediately or with any one or more of the passage of time or the giving of notice: (A) causes (or permits any holder thereof or a trustee therefor to cause) such Indebtedness 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; or (B) permits any one or more of the holders thereof or a trustee therefor to require the Company or any Subsidiary to repurchase such Indebtedness or Security from such holder and any such holder or trustee exercises (or attempts to exercise) such right; or (iii) any "Event of Default" shall have occurred or shall exist under, and as defined in, the Bank Credit Agreement, as amended and as in effect at such time; (g) Involuntary Bankruptcy Proceedings -- (i) a receiver, liquidator, custodian or trustee of the Company or any Subsidiary, or of all or any part of the Property of any such Person, shall be appointed by court order and such order shall remain 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 a bankrupt or insolvent; (ii) any of the Property of the Company or any Subsidiary shall be sequestered by court order and such order shall remain 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; (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, or take any corporate action to authorize, the filing of any petition against, or with respect to, any such Person, under any such law; (i) Assignments for Benefit of Creditors, etc. -- the Company or any Subsidiary shall make an assignment for the benefit of its creditors, or admit in writing its inability, or 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 any such Person; (j) Undischarged Final Judgments -- a final, nonappealable judgment or final, nonappealable judgments for the payment of money aggregating in excess of Two Million Dollars ($2,000,000) is or are outstanding against any one or more of the Company or any Subsidiary and any one of such judgments shall have been outstanding for more than ten (10) days from the date of its entry and shall not have been discharged in full or stayed; or (k) Subsidiary Guaranty -- (i) any Subsidiary Guaranty shall cease to be in full force and effect or shall be declared by a court or Governmental Authority of competent jurisdiction to be void, voidable or unenforceable against the Subsidiary which is a guarantor thereunder; (ii) the validity or enforceability of any Subsidiary Guaranty against the Subsidiary which is a guarantor thereunder shall be contested by such Subsidiary, or any subsidiary or affiliate thereof; or (iii) any Subsidiary, or any subsidiary or affiliate thereof, shall deny that such Subsidiary has any further liability or obligation under the Subsidiary Guaranty to which such Subsidiary is a party. 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. (i) If an Event of Default in respect of the Company specified in clause (g), clause (h) or clause (i) of Section 8.1 hereof 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 (if any) in respect thereof, in each case without presentment, demand, protest or 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, and all other amounts owing under the Note Purchase Agreements. (ii) If an Event of Default other than those in respect of the Company specified in clause (g), clause (h) or clause (i) of Section 8.1 hereof 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 to declare the entire principal of, and all interest accrued on and Make-Whole Amount (if any) in respect of, 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 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 owing under the Note Purchase Agreements. (b) Acceleration on Payment Default. During the existence of an Event of Default described in Section 8.1(a) or Section 8.1(b) hereof, and irrespective of whether the Notes then outstanding shall have been declared to be due and payable pursuant to Section 8.2(a)(ii) hereof, any holder of Notes that shall have not consented to any waiver with respect to such Event of Default may, at such holder's 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 Make-Whole Amount (if any) in respect thereof, 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 such Notes and all other amounts owing under the Note Purchase Agreements to such holder. (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 are prepaid or are accelerated as a result of an Event of Default under certain circumstances, is intended to provide compensation for the deprivation of such right under such circumstances. (d) Other Remedies; Remedies Cumulative; Nonwaiver. 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)(ii) hereof and irrespective of whether any Purchaser or any other holder of Notes then outstanding shall otherwise have pursued or be pursuing any other rights or remedies, any Purchaser and any other holder of Notes may proceed to protect and enforce its rights hereunder and under such Notes 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) hereof. All rights and remedies of each Purchaser and each other holder of Notes are cumulative to, and not exclusive of, any rights or remedies any such Purchaser or such other holder of Notes would otherwise have. No course of dealing on the part of any Purchaser or any other holder of Notes nor any delay or failure on the part of any Purchaser or any other holder of Notes to exercise any right shall operate as a waiver of such right or otherwise prejudice such Purchaser's or such other holder's rights, powers and remedies. (e) Expenses. 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 hereof, the Company shall pay to each Purchaser and to each other 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 Purchaser or such other 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)(ii) hereof, then and in every such case, the Required Holders 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)(ii) hereof) 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 hereof 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 of this Agreement following such term: Acceptable Control Persons -- means any members of the immediate family of, or the respective heirs, executors or trustees holding for the sole benefit of such heirs or members of the immediate family of, James T. Hudson. 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, (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, (d) that is an officer or director (or a member of the immediate family of an officer or director) of the Company or any Subsidiary, or (e) that is an Acceptable Control Person, a natural Person in any manner related by birth or marriage to any Acceptable Control Person or a Person owned or Controlled by any such Person, 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 Note Purchase Agreement, as it may be amended and restated from time to time. Applicable Net Income Carryover -- Section 6.6. Bank Credit Agreement -- means the Revolving Credit Agreement, dated as of April 26, 1994, by and among the Company, the Banks and Rabobank, as agent, as the same shall have been amended, modified or restated from time to time, and any substitute or replacement credit facility in respect thereof. Banks -- means each of Rabobank, Bank of America National Trust and Savings Association, NationsBank of Texas, National Association, Caisse Nationale de Credit Agricole, and Harris Trust and Savings Bank. Board of Directors -- means the board of directors of the Company or a Subsidiary, as applicable, or any committee thereof that, in the instance, shall have the lawful power to exercise the power and authority of such board of directors. Business Day -- means, at any time, a day other than a Saturday, a Sunday or a day on which the bank designated by the holder of a Note 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. Capital Expenditure -- Section 6.12. Capital Lease -- means, at any time, a lease with respect to which the lessee is required to recognize the acquisition of an asset and the incurrence of a liability at such time in accordance with GAAP. Cash Flow Coverage Ratio -- Section 6.10. Change in Control -- means, at any time: (a) the failure of Acceptable Control Persons to beneficially own, in the aggregate, at least fifty-one percent (51%) (by number of votes) of the aggregate voting power in respect of the Voting Stock of the Company outstanding at such time; or (b) the failure of Acceptable Control Persons to have the power to elect or cause the election of at least fifty-one percent (51%) of the members of the Board of Directors of the Company at such time. Closing -- Section 1.2(b). Closing Date -- Section 1.2(b). Company -- has the meaning assigned to such term in the introductory sentence hereof. Consolidated Indebtedness -- Section 6.8(c). Consolidated Interest Expense -- Section 6.10. Consolidated Lease Expense -- Section 6.10. Consolidated Net Income -- Section 6.10. Control Event -- means: (a) the execution by the Company, any Subsidiary, any Affiliate or any Acceptable Control Person of any letter of intent or similar agreement 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; or (b) the execution of any written agreement that, when fully performed by the parties thereto, would result in a Change in Control. Control Prepayment Date -- Section 4.3(a). Current Debt -- means, with respect to any Person, (without duplication) (a) the portion of the amount of liabilities for borrowed money of such Person pursuant to a credit facility, under which such Person borrows (and re-borrows) money on a short-term basis for working capital purposes in the ordinary course of such Person's business, that is at such time classified in good faith by such Person as a current liability, and (b) all other liabilities for borrowed money, Capital Leases and all liabilities secured by any Lien existing on Property owned by such Person whether or not such liabilities have been assumed, which, in each case are payable on demand or within one (1) year, except: (i) any such liabilities which are renewable or extendable at the option of such Person to a date more than one (1) year, and (ii) any such liabilities which, although payable within one (1) year, constitute payments required to be made on account of principal of Indebtedness initially expressed to mature more than one (1) year from origination. 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. Dollars or $ -- means United States of America dollars. Environmental Protection Law -- means any federal, state, county, regional or local law, statute or regulation (including, without limitation, CERCLA, RCRA and SARA) 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. As used in this definition: CERCLA -- means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended from time to time (by SARA or otherwise), and all rules and regulations promulgated in connection therewith. RCRA -- means the Resource Conservation and Recovery Act of 1976, as amended from time to time, and all rules and regulations promulgated in connection therewith. SARA -- means the Superfund Amendments and Reauthorization Act of 1986, as amended from time to time, and all rules and regulations promulgated in connection therewith. 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: (a) is a member of the same "controlled group of corporations" (within the meaning of section 414(b) of the IRC) as the Company; or (b) 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. 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. Funded Debt -- means, at any time, in respect of any Person, Indebtedness of such Person with maturities of greater than one (1) year (including, without limitation, all current portions thereof) as would appear on a balance sheet of such Person prepared in accordance with GAAP at such time. GAAP -- means accounting principles as promulgated from time to time in statements, opinions and pronouncements by the American Institute of Certified Public Accountants and the Financial Accounting Standards Board and in such statements, opinions and pronouncements of such other entities with respect to financial accounting of for-profit entities as shall be accepted by a substantial 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 other 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; and (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. Guaranty -- means, with respect to any Person (for the purposes of this definition, the "Guarantor"), any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of the Guarantor guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person (the "Primary Obligor") in any manner, whether directly or indirectly, including, without limitation, obligations incurred through an agreement, contingent or otherwise, by the Guarantor: (a) to purchase such indebtedness or obligation or any Property constituting security therefor; (b) to advance or supply funds (i) for the purpose of payment of such indebtedness, dividend or other 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, dividend or other 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 issuer of such Guaranty. Hazardous Substances -- means any and all pollutants, contaminants, toxic or hazardous wastes and 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, in each of the foregoing cases, restricted, prohibited or penalized by any applicable law. Health Laws -- means any federal, state, county, regional or local law, statute or regulation enacted in connection with, or relating to, the processing, production, use, marketing or sale of meat, poultry, feed and other food products (and any similar businesses of the Company and the Subsidiaries), including, without limitation, all regulations issued or promulgated in connection with such laws and statutes by any Governmental Authority (including, without limitation, the United States Department of Agriculture and the United States Food and Drug Administration), and any orders, decrees or judgments issued by any court of competent jurisdiction in connection with any of the foregoing. Hudson Development -- means Hudson Development Corporation, an Arkansas corporation. Hudson Foreign Sales -- means Hudson Foods Foreign Sales, Inc., a corporation organized under the laws of the United States Virgin Islands. Hudson Poland -- means Hudson Foods Poland s.p. zo.o, a limited liability company organized under the laws of Poland. Indebtedness -- means, at any time, with respect to any Person, without duplication: (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of Property acquired by, or services rendered to, such Person, (b) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to any Property acquired by such Person, (c) the present value, determined in accordance with GAAP, of all obligations of such Person under leases which shall have been or should be recorded as Capital Leases in accordance with GAAP, (d) all indebtedness or other payment obligations for the deferred purchase price of property or services secured by any Lien upon or in any Property owned by such Person whether or not such Person has assumed or become liable for the payment of such indebtedness, (e) indebtedness arising under acceptance facilities, in connection with surety or other similar bonds, and the undrawn maximum face amount of all outstanding letters of credit issued for the account of such Person and, without duplication, the outstanding amount of all drafts drawn thereunder, (f) Swaps of such Person, (g) all liabilities of such Person in respect of unfunded vested benefits under Pension Plans and all asserted withdrawal liabilities of such Person or a commonly controlled entity to a Multiemployer Plan, and (h) all direct or indirect Guaranties by such Person of indebtedness described in this definition of any other Person; provided, that, for purposes of this definition, Trade Debt and Operating Leases shall not be included. As used in this definition: Swaps -- means, with respect to any Person, payment obligations with respect to interest rate swaps, currency swaps and similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency. For purposes of this Agreement, the amount of the obligation under any Swap shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Swap had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such Swap 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 such obligation shall be the net amount so determined. Trade Debt -- means trade accounts payable incurred in the ordinary course of business with an original maturity or due date of not greater than one hundred eighty (180) days from the creation thereof (and which are not overdue for more than thirty (30) days). Institutional Investor -- means the Purchasers, any affiliate of any of the Purchasers and any holder or beneficial owner of Notes that is an "accredited investor" as defined in section 2(15) of the Securities Act. Intangible Assets -- Section 6.6. 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. Leverage Ratio -- Section 6.8(a). 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, encumbrance, pledge, conditional sale, sale with recourse or a trust receipt, or a lease, consignment or bailment for security purposes. The term "Lien" includes, without limitation, reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting real Property and includes, without limitation, with respect to stock, stockholder agreements, voting trust agreements, buy-back agreements and all similar arrangements. For the purposes hereof, the Company and each Subsidiary shall be 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, with respect to any date (a "Prepayment Date") and any principal amount ("Prepaid Principal") of Notes required for any reason to be paid prior to the regularly scheduled maturity thereof on such Prepayment Date, the greater of (a) Zero Dollars ($0), and (b) (i) the sum of the present values of the then remaining scheduled payments of principal and interest (minus, in the case of the first of such interest payments, and prior to determining the present value thereof, the amount of interest accrued on such Prepaid Principal since the scheduled interest payment date immediately preceding such Prepayment Date) that would be payable in respect of such Prepaid Principal but for such prepayment, minus (ii) such Prepaid Principal. In determining such present values, a discount rate equal to the Make-Whole Discount Rate with respect to such Prepayment Date and Prepaid Principal divided by twelve (12), and a discount period of one (1) month of thirty (30) days, shall be used. Make-Whole Discount Rate -- means, with respect to any Prepayment Date and Prepaid Principal, a rate equal to the sum of fifty one-hundredths percent (.50%) plus the Treasury Rate determined as of such Prepayment Date. As used in this definition: Treasury Rate -- means, with respect to the calculation of a Make-Whole Amount in respect of any prepayment or acceleration of any Notes, (a) the yield reported on the day on which such calculation is being made, as the yield, based on the "bid" price, on the display designated as "Page 678" on the Telerate Service (or such other display as may replace Page 678 on the Telerate Service) providing the most current yields for actively traded United States Treasury securities with maturities corresponding to the remaining Weighted Average Life to Maturity of the Prepaid Principal (such Weighted Average Life to Maturity being determined as of the date of such calculation and rounded to the nearest month), or (b) if and only if the source of data described in clause (a) ceases to exist or fails to report such yield, a reasonably comparable electronic service as may be designated by the Required Holders, or (c) if and only if the source of data specified in clause (a) of this definition ceases to exist or fails to report such yield and the Required Holders shall fail to agree upon a comparable electronic service pursuant to clause (b) of this definition, such yield reported under the heading "This Week" and under the caption "Treasury Constant Maturities" of the maturity corresponding to the remaining Weighted Average Life to Maturity of the Prepaid Principal (such Weighted Average Life to Maturity being determined as of the date of such calculation and rounded to the nearest month) as most recently published and made available to the public in the statistical release designated "H.15(519)" or any successor publication that is published weekly by the Federal Reserve System and that establishes yields on actively traded United States Treasury securities or, if no such successor publication is available, then any other source of current information in respect of interest rates on the securities of the United States of America that is generally available and, in the judgment of the Required Holders, provides information reasonably comparable to the H.15(519) statistical release. If no maturity exactly corresponds to such rounded Weighted Average Life to Maturity, yields for the two (2) most closely corresponding published maturities next above and below the rounded Weighted Average Life to Maturity of the Prepaid Principal shall be calculated pursuant to the immediately preceding sentence and the Treasury Rate shall be interpolated from such yields on a straight-line basis, rounding with respect to each such relevant period to the nearest month. Margin Security -- means "margin stock" within the meaning of Regulations G, T 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 a material adverse effect on (a) the business, prospects, profits, Properties or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, (b) the ability of the Company to perform its obligations set forth in this Agreement and in the Notes, or (c) the validity or enforceability of any of the terms or provisions of this Agreement or the Notes. Most Recent 10-K -- means the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1995, as filed with the Securities and Exchange Commission. 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 of ERISA). Net Tangible Assets -- Section 6.13. Note Purchase Agreements -- Section 1.2(c). Notes -- Section 1.1. Offer Determination Date -- Section 4.3(b). Ohse -- means Ohse Transportation, Inc., a Kansas corporation. Operating Lease -- Section 6.10. Other Purchaser -- 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 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. Person -- means an individual, sole proprietorship, partnership, corporation, trust, limited liability company, joint venture, unincorporated organization, or a government or agency or political subdivision thereof. Prepaid Principal -- has the meaning assigned to such term in the definition of "Make-Whole Amount" set forth in this Section 9.1. Prepayment Date -- has the meaning assigned to such term in the definition of "Make-Whole Amount" set forth in this Section 9.1. Property -- means any interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible. Purchasers -- Section 1.2(c). Rabobank -- means Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. ("Rabobank Nederland"), New York Branch. Required Holders -- means, at any time, the holders of more than 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 and any Affiliate). Required Principal Prepayment -- Section 4.1(b). Securities Act -- means the Securities Act of 1933, as amended from time to time. Security -- means "security" as defined in section 2(1) of the Securities Act. Senior Financial Officer -- means the chief financial officer, the principal accounting officer, the treasurer or the comptroller of the Company. Senior Officer -- means the chief executive officer, the chief operating officer, the president, the chief financial officer, the treasurer or the secretary of the Company. Source -- Section 1.3(b). Subordinated Debt -- means, at any time, any unsecured Indebtedness of the Company or a Subsidiary that is in any respect subordinate or junior in right of payment or otherwise to the Indebtedness evidenced by the Notes or to any other Indebtedness of the Company or any Subsidiary. Subsidiary -- means, at any time, any corporation of which the Company owns, directly or indirectly, more than fifty percent (50%) (by number of votes) of each class of the Voting Stock of such corporation at such time. Subsidiary Guaranty -- means a Guaranty Agreement, substantially in the form of Exhibit E hereto, executed by a Subsidiary in favor of the holders of Notes pursuant to Section 6.16 hereof guarantying the Company's obligations under the Note Purchase Agreements and the Notes. Surviving Corporation -- Section 6.5(a). Tangible Net Worth -- Section 6.6. Total Subsidiary Indebtedness -- Section 6.8(c). Transfers -- Section 6.5(c). Voting Stock -- means capital stock of any class or classes of a corporation the holders of which are ordinarily, in the absence of contingencies, entitled to elect corporate directors (or Persons performing similar functions). Weighted Average Life to Maturity -- means, with respect to any Prepayment Date and Prepaid Principal, the number of years obtained by dividing (a) the Remaining Dollar-Years with respect to such Prepayment Date and such Prepaid Principal by (b) such Prepaid Principal. As used in this definition: Remaining Dollar-Years -- means, with respect to any Prepayment Date and Prepaid Principal, the result obtained by (a) multiplying an amount equal to each then remaining required payment of principal (including repayment at final maturity) of such Indebtedness unpaid immediately prior to such date, by (ii) the number of years (calculated to the nearest one-twelfth (1/12)) that will elapse between such date and the date each such required payment of principal is due, and (b) calculating the sum of each of the products obtained in the preceding clause (a). 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. Unless otherwise provided herein, all financial statements delivered in connection herewith will be prepared in accordance with GAAP as in effect on the date of, or during the period covered by, such financial statement. 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. Whenever a calculation based on the consolidated financial position or consolidated results of operations of a group of Persons is required hereby, investments by members of the group in Persons which are excluded hereby from such group shall be accounted for using the cost method. 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 and Table of Contents and Construction. (a) Section Headings and Table of Contents, etc. The titles of the Sections of this Agreement and the Table of Contents of this Agreement appear as a matter of convenience only, do not constitute a part of this Agreement 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. (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. 9.5 Governing Law. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL NEW YORK LAW. 10. MISCELLANEOUS 10.1 Communications. (a) Method; Address. All communications hereunder or under the Notes shall be in writing, shall be hand delivered, deposited into the United States mail (registered or certified mail), postage prepaid, sent by overnight courier or sent by facsimile transmission (confirmed by delivery by overnight courier) and shall be addressed, (i) if to the Company, Hudson Foods, Inc. 1225 Hudson Road Rogers, Arkansas 72756 Attention: Charles B. Jurgensmeyer, Chief Financial Officer and Executive Vice President, and Tommy D. Reynolds, Secretary and Treasurer Telephone: (501) 636-1100 Facsimile: (501) 631-5400, or at such other address as the Company shall have furnished in writing to each Purchaser and all other holders of the Notes at the time outstanding, and (ii) 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 hereto, and further including any parties referred to on such 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 hereof, 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 (which other address shall be entered in such register). (b) When Given. Any communication properly addressed and sent in accordance with Section 10.1(a) hereof shall be deemed to be received when actually received at the address of the addressee. 10.2 Reproduction of Documents. This Agreement and all documents relating hereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the Closing of your purchase of Notes (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to any Purchaser or any other holder of Notes, may be reproduced by such Purchaser or such other holder of Notes by any photographic, photostatic, microfilm, micro-card, miniature photographic, digital or other similar process and each Purchaser or such other holder of Notes may destroy any original document so reproduced. The Company agrees and stipulates 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 Purchaser or such other holder of Notes in the regular course of business) and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. Nothing in this Section 10.2 shall prohibit the Company or any Purchaser or any other holder of Notes from contesting the validity or the accuracy of any such reproduction. 10.3 Survival. All warranties, representations, certifications and covenants made by the Company herein or in any certificate or other instrument delivered by the Company or on behalf of the Company hereunder 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 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 any Purchaser or any Purchaser's successor or assign. 10.5 Amendment and Waiver. (a) General 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 (i) no such amendment or waiver shall, without the written consent of the holders of all Notes (exclusive of Notes held by the Company, any Subsidiary or any Affiliate) at the time outstanding, (A) subject to Section 8 hereof, 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, (B) amend Section 6.19 or Section 8 hereof, (C) amend the definition of "Required Holders," or (D) amend this Section 10.5; and (ii) no amendment or waiver of any of the provisions of Section 1 through Section 4 hereof, inclusive, or any defined term used therein, shall be effective as to any Purchaser or any other holder of Notes unless agreed and consented to by such Purchaser or such other holder of Notes in writing. (b) Solicitation. (i) Solicitation. The Company shall not solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions hereof or the Notes unless each Purchaser and each other holder of the Notes (irrespective of the amount of Notes then owned by it) shall be provided 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 Purchaser and each other 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 Purchaser or any other 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, ratably to all of the Purchasers and the other 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 amendment or waiver initially took or takes effect, except solely as to such holder. (c) Binding Effect. Except as provided in Section 10.5(a) and Section 10.5(b)(iii) hereof, any amendment or waiver consented to as provided in this Section 10.5 shall apply equally to all Purchasers and all other 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 Expenses. The Company shall pay when billed (a) all expenses incurred by any Purchaser and any other holder of Notes in connection with the enforcement of any rights under this Agreement and the Notes (including, without limitation, all fees and expenses of such Purchaser's or such other holder's special counsel), and (b) all expenses relating to the consideration, negotiation, preparation or execution of any amendments, waivers or consents pursuant to Section 10.5 and the other terms and provisions hereof, whether or not any such amendments, waivers or consents are executed, including, without limitation any amendments, waivers or consents resulting from any work-out, restructuring or similar proceedings relating to the performance by the Company of its obligations under this Agreement or the Notes. 10.7 Payments on Notes. (a) 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 as may be reasonably directed or to such other address in the United States of America as may be reasonably designated in writing by such holder. Annex 1 hereto shall be deemed to constitute notice, direction or designation (as appropriate) to the Company with respect to payments as aforesaid. In the absence of such written direction, all amounts payable with respect to each Note shall be paid by check mailed and addressed to the registered holder of such Note at the address shown in the register maintained by the Company pursuant to Section 5.1 hereof. (b) 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, such interest shall accrue and be payable to (but not including) the actual date of payment, and the amount of the next succeeding interest payment shall be adjusted accordingly. (c) Payments, When Received. Any payment to be made to the holders of Notes hereunder or under the Notes shall be deemed to have been made on the Business Day such payment actually becomes available to such holder at such holder's bank prior to 11:00 a.m. (local time of such bank). 10.8 Jurisdiction; Service of Process THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE NOTES, OR ANY ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH HEREUNDER OR UNDER THE NOTES, BROUGHT BY ANY PURCHASER OR ANY OTHER REGISTERED HOLDER OF A NOTE AGAINST THE COMPANY OR ANY OF ITS PROPERTY, MAY BE BROUGHT BY SUCH PERSON IN THE COURTS OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR ANY STATE COURT SITTING IN NEW YORK, NEW YORK, AS SUCH PURCHASER OR OTHER REGISTERED HOLDER OF A NOTE MAY IN ITS SOLE DISCRETION ELECT, AND BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE NON-EXCLUSIVE IN PERSONAM JURISDICTION OF EACH SUCH COURT, AND AGREES THAT PROCESS SERVED EITHER PERSONALLY OR BY REGISTERED MAIL SHALL CONSTITUTE, TO THE EXTENT PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUCH SUIT, AND THE COMPANY IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, ANY CLAIM THAT THE COMPANY IS NOT SUBJECT TO THE IN PERSONAM JURISDICTION OF ANY SUCH COURT. RECEIPT OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS EVIDENCED BY A DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL SERVICE OR ANY COMMERCIAL DELIVERY SERVICE. IN ADDITION, THE COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT THE COMPANY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND/OR THE NOTES, BROUGHT IN SUCH COURTS, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF ANY PURCHASER OR OTHER REGISTERED HOLDER OF A NOTE TO SERVE ANY SUCH WRITS, PROCESS OR SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER THE COMPANY IN SUCH OTHER JURISDICTION, AND IN SUCH MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW. THE COMPANY 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. 10.9 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. 10.10 Duplicate Originals, Execution in Counterpart. Two (2) 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 that, collectively, show execution by each party hereto shall constitute one duplicate original. [Remainder of page intentionally blank; next page is signature page.] 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 between us in accordance with its terms. Very truly yours, HUDSON FOODS, INC. By Name: Title: Accepted: [PURCHASER] By Name: Title: ANNEX 1 INFORMATION AS TO PURCHASERS ANNEX 1 INFORMATION AS TO PURCHASER (Cont.) NOTE PURCHASE AGREEMENT Annex 1-1 NOTE PURCHASE AGREEMENT Annex 2-1 ANNEX 2 PAYMENT INSTRUCTIONS AT CLOSING NOTE PURCHASE AGREEMENT Annex 3-1 ANNEX 3 INFORMATION AS TO COMPANY AND SUBSIDIARIES ANNEX 2 INFORMATION AS TO COMPANY AND SUBSIDIARIES (Cont.) NOTE PURCHASE AGREEMENT Annex 3-1 NOTE PURCHASE AGREEMENT Annex 4-1 ANNEX 4 INFORMATION AS TO BUSINESS COVENANTS FORM OF NOTE A-2 EXHIBIT A FORM OF NOTE HUDSON FOODS, INC. 6.69% SENIOR NOTE DUE DECEMBER 28, 2005 No. R-[_] PPN: 443782 A# 4 $[________] December 28, 1995 HUDSON FOODS, INC. (the "Company"), a Delaware corporation, for value received, hereby promises to pay to [______] or registered assigns the principal sum of [______] DOLLARS ($[______]) on December 28, 2005 and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid principal balance hereof from the date of this Note at the rate of six and sixty-nine one-hundreds percent (6.69%) per annum, payable monthly in arrears on the twenty-eighth (28th) day of each calendar month in each year, commencing on the later of January 28, 1996 or the first interest payment date following the date of this Note, until the principal amount hereof shall become due and payable; and to pay on demand interest on any overdue principal (including any overdue partial payment of principal) and Make-Whole Amount, if any, and (to the extent permitted by applicable law) on any overdue installment of interest (the due date of such payments to be determined without giving effect to any grace period), at a rate per annum equal to the lesser of (a) the highest rate allowed by applicable law or (b) the greater of (i) eight and sixty-nine one-hundredths percent (8.69%), or (ii) two percent (2%) per annum in excess of the prime rate of interest of Morgan Guaranty Trust Company in New York City as publicly announced and in effect on the first day of each calendar month, from month to month. Payments of principal, Make-Whole Amount, if any, and interest shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts to the registered holder hereof at the address shown in the register maintained by the Company for such purpose, in the manner provided in the Note Purchase Agreement (defined below). This Note is one of an issue of Notes of the Company issued in an aggregate principal amount limited to Fifty-Five Million Dollars ($55,000,000) pursuant to the Company's separate Note Purchase Agreements (collectively, as amended from time to time, the "Note Purchase Agreement"), each dated as of December 28, 1995, with the purchasers listed on Annex 1 thereto, is entitled to the benefits thereof and subject to the terms thereof, and the terms of which are incorporated herein by reference. Capitalized terms used herein and not defined herein have the meanings specified in the Note Purchase Agreement. As provided in the Note Purchase Agreement, (i) a portion of the principal of this Note must be repaid (and will become due and payable) prior to the stated maturity hereof, (ii) all or a portion of the principal of this Note may be repaid at the option of the Company (and will, on the exercise of such option, become due and payable) prior to the stated maturity hereof and a Make-Whole Amount may be due in connection therewith, and (iii) all of the principal of this Note (together with any applicable Make-Whole Amount) may, under certain circumstances, be declared due and payable in the manner and with the effect provided in the Note Purchase Agreement. This Note is a registered Note and is transferable only by surrender thereof at the principal office of the Company as specified in the Note Purchase Agreement, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or its attorney duly authorized in writing. THIS NOTE AND THE NOTE PURCHASE AGREEMENT ARE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL NEW YORK LAW. HUDSON FOODS, INC. By: Name: Title: FORM OF SUBSIDIARY GUARANTY E-3 EXHIBIT E FORM OF SUBSIDIARY GUARANTY GUARANTY THIS GUARANTY (as amended from time to time, this "Guaranty"), dated as of [_______ __, ____], by [____________] (together with its successors and assigns, the "Guarantor"), a[n] [__________] corporation, in favor of each of the holders of Notes (as defined below). W I T N E S S E T H: WHEREAS, Hudson Foods, Inc., a Delaware corporation (together with its successors, assigns and transferees, the "Company"), entered into those certain separate Note Purchase Agreements (collectively, as amended, modified, waived or restated from time to time, the "Note Purchase Agreement"), each dated as of December 28, 1995, with, respectively, each of the purchasers listed on Annex 1 thereto (the "Purchasers"), which provide, among other things, for the issuance and sale to the Purchasers of the Company's 6.69% Senior Notes due December 28, 2005 (which notes, together with any notes delivered in substitution or exchange for any such notes, are herein referred to individually as a "Note," and collectively, as the "Notes") in the aggregate principal amount of Fifty-Five Million Dollars ($55,000,000); and WHEREAS, the Purchasers, subject to the terms and conditions of the Note Purchase Agreement, agreed to purchase the Notes from the Company on the condition that, among other things, the Company shall, pursuant to Section 6.16 of the Note Purchase Agreement, cause the Guarantor to guaranty the payment and performance of all obligations of the Company arising under, or in respect of, the Notes, the Note Purchase Agreement, and all other documents executed in connection therewith, and agree to be bound by the terms and provisions of the Note Purchase Agreement, all as hereinafter provided; and WHEREAS, the Guarantor is a [wholly-owned] subsidiary of the Company and has or will derive 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 the Guarantor, and the incurrence of such Indebtedness is in the best interests of the Guarantor; and WHEREAS, the Guarantor desires and is willing to execute this Guaranty in accordance with the requirements of the Note Purchase Agreement, and all acts and proceedings required by law and by the certificate of incorporation and bylaws 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; NOW THEREFORE, in consideration of the premises and mutual agreements set forth herein, and other good and valuable consideration to the Guarantor paid (the receipt and sufficiency of which are hereby acknowledged), the Guarantor hereby agrees as follows: 11. GUARANTY AND OTHER RIGHTS AND UNDERTAKINGS 11.1 Guarantied Obligations The Guarantor hereby irrevocably, unconditionally and absolutely guarantees to each holder of Notes, as and for the 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 holders of the Notes under the Note Purchase Agreement and the Notes (all such obligations so guarantied are herein collectively referred to as the "Guarantied Obligations"), in each case when and as the same shall become due and payable, whether at maturity, pursuant to mandatory or optional prepayment, by acceleration or otherwise, all in accordance with the terms and provisions thereof; it being the intent of the Guarantor that the guaranty set forth herein (the "Unconditional Guaranty") shall be a guaranty of payment and not a guaranty of collection; and (b) the punctual and faithful performance, keeping, observance, and fulfillment by the Company of all duties, agreements, covenants and obligations of the Company contained in the Note Purchase Agreement and the Notes. 11.2 Performance Under Note Purchase Agreement In the event the Company fails to make, on or before the due date thereof, any payment of the principal of, or interest or the Make-Whole Amount (if any) on, the Notes or of any other amounts payable, or any other indebtedness owing, to the holders of the Notes under the Note Purchase Agreement or any of the Notes or if the Company shall fail to perform, keep, observe, or fulfill any other obligation referred to in clause (a) or clause (b) of Section 1.1 hereof in the manner provided in the Notes or in the Note Purchase Agreement after, in each case, giving effect to any applicable grace periods or cure provisions or waivers or amendments, 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 Notes (including, without limitation, the provisions related to the annulment thereof), forthwith become due and payable without notice, regardless of whether the acceleration of the Notes shall be stayed, enjoined, delayed or otherwise prevented. 11.3 Waivers To the fullest extent permitted by law, the Guarantor does hereby waive: (a) notice of acceptance of this Guaranty; (b) notice of any purchase of the Notes under the Note Purchase Agreement, or the creation, existence or acquisition of any of the Guarantied Obligations, subject to the Guarantor's right to make inquiry of each holder of Notes to ascertain the amount of the Guarantied Obligations at any reasonable time; (c) notice of the amount of the Guarantied Obligations, subject to the Guarantor's right to make inquiry of each holder of Notes to ascertain the amount of the Guarantied Obligations at any reasonable time; (d) notice of adverse change in the financial condition of the Company or any other fact that might increase or expand the Guarantor's risk hereunder; (e) notice of presentment for payment, demand, protest, and notice thereof as to the Notes or any other instrument; (f) notice of any Default or Event of Default; (g) all other notices and demands to which the Guarantor might otherwise be entitled (except if such notice or demand is specifically otherwise required to be given to the Guarantor pursuant to the terms of this Guaranty); (h) the right by statute or otherwise to require any holder of Notes to institute suit against the Company or any other Person or to exhaust the rights and remedies of such holder of Notes against the Company or any other Person, the Guarantor being bound to the payment of each and all Guarantied Obligations, whether now existing or hereafter accruing, as fully as if such Guarantied Obligations were directly owing to the holders of Notes by the Guarantor; (i) any defense arising by reason of any disability or other defense (other than the defense that the Guarantied Obligations shall have been fully and finally performed and indefeasibly paid) of the Company or by reason of the cessation from any cause whatsoever of the liability of the Company in respect thereof, and any other defense that the Guarantor may otherwise have against the Company or any holder of Notes; and (j) 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. 11.4 Certain Waivers of Subrogation, Reimbursement and Indemnity. The Guarantor hereby acknowledges and agrees that (a) the Guarantor shall not have any right of subrogation, contribution, 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, (b) it will not file any claims against the Company or the estate of the Company in the course of any proceeding under any applicable bankruptcy or insolvency law in respect of the rights referred to in this Section 1.4, and (c) each holder of Notes may specifically enforce the provisions of this Section 1.4. Nothing shall discharge or satisfy the obligations of the Guarantor hereunder except the full and final performance and indefeasible payment of the Guarantied Obligations. 11.5 Releases The Guarantor consents and agrees that, without notice to or by the Guarantor and without impairing, releasing, abating, deferring, suspending, reducing, terminating or otherwise affecting the obligations of the Guarantor hereunder, each holder of Notes, in the manner provided herein, 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 the Notes or the Note Purchase Agreement; (b) assign, sell or transfer, or otherwise dispose of, any one or more of the Notes; (c) grant waivers, extensions, consents and other indulgences to the Company or any other Person in respect of any one or more of the Notes or the Note Purchase Agreement; (d) amend, modify or supplement in any manner and at any time (or from time to time) any one or more of the Notes or the Note Purchase Agreement; (e) release or substitute any one or more of the endorsers or guarantors of the Guarantied Obligations whether parties hereto or not; (f) sell, exchange, release or surrender any Property at any time pledged or granted as security in respect of the Guarantied Obligations, whether so pledged or granted by the Guarantor or another guarantor of the Company's obligations under the Note Purchase Agreement and the Notes; and (g) exchange, enforce, waive, or release, by action or inaction, any security for the Guarantied Obligations or any other guaranty of any of the Notes. 11.6 Marshaling The Guarantor consents and agrees that: (a) no holder of Notes 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; and (b) to the extent the Company or another Person makes a payment or payments to any holder of Notes, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, or required, for any of the foregoing reasons or for any other reason, to be repaid or paid over to a custodian, trustee, receiver, or any other party under any bankruptcy law, common law, or equitable cause, then to the extent of such payment or repayment, the obligation or part thereof intended to be satisfied thereby shall be revived and continued in full force and effect as if said payment or payments had not been made and the Guarantor shall be primarily liable for such obligation. 11.7 Liability The Guarantor agrees that its liability in respect of this Guaranty shall be immediate and shall not be contingent upon the exercise or enforcement by any holder of Notes of whatever remedies any such holder may have against the Company or any other Person or the enforcement of any Lien or realization upon any security any such holder may at any time possess. 11.8 Primary Obligation The Unconditional Guaranty set forth herein is a primary and original 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 (except as set forth in Section 1.16 hereof) until the full, final and indefeasible payment of the Guarantied Obligations without respect to future changes in conditions, including, without limitation: (a) any change of law or any invalidity or irregularity with respect to the issuance or assumption of any obligations (including, without limitation, the Notes) of or by any of the Company or the Guarantor, or with respect to the execution and delivery of any agreement (including, without limitation, the Notes, the Note Purchase Agreement and this Guaranty) of or by any of the Company or the Guarantor; (b) the genuineness, validity, regularity or enforceability of any of the Guarantied Obligations; (c) any default, failure or delay, willful or otherwise, in the performance of any obligations by the Company; (d) any event or condition described in Section 1.5 hereof; (e) the occurrence of any event or the existence of any condition specified in Section 8.1(g), Section 8.1(h) or Section 8.1(i) of the Note Purchase Agreement with respect to the Company or any Subsidiary; (f) any change in the ownership of the Voting Stock or other equity Securities of the Company or the Guarantor; (g) the impossibility or illegality of performance on the part of the Company under the Note Purchase Agreement, the Notes or this Guaranty; (h) any change of 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; (i) 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, so that such sums would be rendered inadequate or would be unavailable to make the payment herein provided; (j) any order, judgment, decree, ruling or regulation (whether or not valid) of any court of any nation or of any political subdivision thereof or any body, agency, department, official or administrative or regulatory agency of any nation or any political subdivision thereof; or (k) any other change or circumstance whatsoever. 11.9 Election to Perform Obligations Any election by the Guarantor to pay or otherwise perform any of the obligations of the Company under the Notes or the Note Purchase Agreement shall not release the Company from such obligations or any of the Company's other obligations under the Notes or the Note Purchase Agreement. 11.10 No Election Each holder of Notes 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 Notes. 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 holder's right to proceed in any other form of action or proceeding or against other parties unless such holder has expressly waived such right in writing. Specifically, but without limiting the generality of the foregoing, no action or proceeding by any holder of Notes against the Company or the Guarantor under any document or instrument evidencing obligations of the Company or the Guarantor to such holder of Notes shall serve to diminish the liability of the Guarantor under this Guaranty, except to the extent that such holder of Notes finally and unconditionally shall have realized payment by such action or proceeding, notwithstanding the effect of any such action or proceeding upon the Guarantor's right of subrogation against the Company. 11.11 Severability Subject to Section 8 of the Note Purchase Agreement, each of the rights and remedies granted under this Guaranty to each holder of Notes in respect of the Notes held by such holder may be exercised by such holder without notice by such holder to, or the consent of or any other action by, any other holder of Notes. 11.12 Other Enforcement Rights Each holder of Notes may proceed, as provided in Section 1.11 hereof, to protect and enforce this 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. Each holder of Notes 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 holder of Notes, or anyone acting for such holder, to ensure the full performance of any and all obligations of the Guarantor hereunder. 11.13 Delay or Omission; No Waiver No course of dealing on the part of any holder of Notes and no delay or failure on the part of any such holder to exercise any right hereunder shall impair such right or operate as a waiver of such right or otherwise prejudice such holder's rights, powers and remedies hereunder. Every right and remedy given by this Guaranty or by law to any holder of Notes may be exercised from time to time as often as may be deemed expedient by such Person. 11.14 Restoration of Rights and Remedies If any holder of Notes shall have instituted any proceeding to enforce any right or remedy under this Guaranty, under the Note Purchase Agreement or under any Note held by such holder of Notes, and such proceeding shall have been dismissed, discontinued or abandoned for any reason, or shall have been determined adversely to such holder, then and in every such case each such holder, 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 holders of Notes shall continue as though no such proceeding had been instituted. 11.15 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. 11.16 Survival So long as the Guarantied Obligations shall not have been fully and finally performed and indefeasibly paid, the obligations of the Guarantor under this Guaranty shall survive the transfer and payment of any Note and the payment in full of all the Notes. 11.17 No Setoff, Counterclaim or Other Deduction Except as otherwise required by law, each payment by the Guarantor shall be made without setoff, counterclaim or other deduction. 11.18 Notices in Respect of Payments. If the Guarantor shall pay to any holder of a Note any amount in respect of the Guarantied Obligations, the Guarantor, within five (5) Business Days after making such payment, shall provide notice of such payment to each other holder of a Note. INTERPRETATION OF THIS GUARANTYIS GUARANTY 12.1 Terms Defined As used in this Guaranty, the capitalized terms have the meaning specified in the Note Purchase Agreement unless otherwise set forth in this Guaranty (such definitions, unless otherwise expressly provided, to be equally applicable to both the singular and plural forms of the terms defined). 12.2 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. (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. WARRANTIES AND REPRESENTATIONS The Guarantor represents and warrants to each holder of Notes, as of the date of effectiveness hereof, as follows: 13.1 Generally. (a) The Guarantor is fully aware of the financial condition of the Company. The Guarantor delivers this guaranty based solely upon its own independent investigation and in no part upon any representation or statement of any one or more of the holders of Notes with respect thereto. The 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 the Guarantor may deem material to its obligations hereunder, and the Guarantor is neither relying upon, nor expecting, any holder of Notes to furnish it any information concerning the financial condition of the Company. (b) The Guarantor is a corporation duly organized and validly existing and in good standing under the laws of if its jurisdiction of organization. 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. (c) This Guaranty has been duly authorized by all necessary action on the part of the Guarantor, has been duly executed and delivered by a duly authorized officer of the Guarantor, and constitutes a legal, valid and binding obligation of the Guarantor. (d) 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 certificate of incorporation or bylaws 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. (e) Neither the legal nature of the Guarantor, nor any of its businesses and Properties, nor any relationship between or among the Guarantor or any other Person, nor any circumstance in connection with the execution or delivery of this Guaranty, is such as to require any authorization, consent, approval, license, registration, notarization, exemption or other action by or notice to or filing with any court or administrative or governmental body or agency having jurisdiction over the Guarantor or the Company or any of their respective properties or businesses, in connection with the execution and delivery of this Guaranty or the fulfillment of and compliance with the terms and provisions hereof. (f) The warranties and representations contained in Section 2 of the Note Purchase Agreement are true in all material respects on the date hereof with the same effect as though made on and as of the date hereof. 13.2 Nature of Business of Company and Subsidiaries. The Company, the Guarantor 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 the Guarantor is directly or indirectly dependent upon the Company and each other Subsidiary for and in connection with its business activities and its financial resources. 13.3 Solvency. The fair value of the business and assets of the Company and the Guarantor is in excess of the amount that will be required to pay its respective liabilities (including, without limitation, contingent, subordinated, unmatured and unliquidated liabilities on existing debts, as such liabilities may become absolute and matured), in each case both prior to and after giving effect to the transactions contemplated by this Guaranty. After giving effect to the transactions contemplated by this Guaranty, neither the Company nor the Guarantor will be engaged in any business or transaction, or about to engage in any business or transaction, for which it has unreasonably small capital, and neither the Company nor the Guarantor has or had any intent to hinder, delay or defraud any entity to which it is, or will become, on or after the date hereof, indebted or to incur debts that would be beyond its ability to pay as such debts mature. GENERAL COVENANTSL COVENANTS The Guarantor covenants and agrees that on and after the date hereof and so long as any of the Guarantied Obligations shall be outstanding: 14.1 Undertakings in Note Purchase Agreement The Guarantor will be bound by the terms and provisions of the Note Purchase Agreement. Without limiting the generality of the foregoing, the Guarantor will comply with each of the undertakings of the Company in the Note Purchase Agreement in respect of which the Company undertakes to cause a Subsidiary generally or the Guarantor specifically to comply with such undertakings, as if such undertakings (as they apply to the Guarantor) were set forth at length herein as the undertakings of the Guarantor. 14.2 Payment of Notes and Maintenance of Office The Guarantor will punctually pay, or cause to be paid, all of the Guarantied Obligations when due and all other payment obligations required of it hereunder and will maintain an office at its address as set forth in paragraph 5.3 where notices, presentations and demands in respect of this Guaranty may be made upon it. Such office will be maintained at such address until such time as the Guarantor shall notify the holders of Notes of any change of location of such office. 14.3 Further Assurances The Guarantor will cooperate with the holders of Notes 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 this Guaranty and the Note Purchase Agreement. 15. MISCELLANEOUS 15.1 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 the successors and assigns of the Guarantor and shall inure to the benefit of each of the holders, from time to time, of the Notes, 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 holder of Notes in connection with the purchase by such holder or the transfer of the Notes of such holder in accordance with the requirements of the Note Purchase Agreement in connection with providing an executed copy of this Guaranty to the new holder or holders of such Notes, provided that no additional obligations of the Guarantor shall thereby be created (beyond what is provided by this Guaranty). 15.2 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. 15.3 Communications. All communications to the holders of Notes or the Company hereunder shall be in writing, shall be delivered in the manner, to the addresses, and with the effect, as provided by the Note Purchase Agreement. Notices to the Guarantor shall be addressed as indicated on Annex 1, or as the Guarantor shall from time to time notify the holders of Notes in writing. 15.4 Governing Law. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL NEW YORK LAW. 15.5 Jurisdiction; Service of Process THE GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY, THE NOTES OR THE NOTE PURCHASE AGREEMENT, OR ANY ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH HEREUNDER OR UNDER THE NOTES OR THE NOTE PURCHASE AGREEMENT, BROUGHT BY ANY HOLDER OF A NOTE AGAINST THE GUARANTOR OR ANY OF ITS PROPERTY, MAY BE BROUGHT BY SUCH HOLDER IN THE COURTS OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR ANY STATE COURT SITTING IN NEW YORK, NEW YORK, AS SUCH HOLDER OF A NOTE MAY IN ITS SOLE DISCRETION ELECT, AND BY THE EXECUTION AND DELIVERY OF THIS GUARANTY, THE GUARANTOR IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE NON-EXCLUSIVE IN PERSONAM JURISDICTION OF EACH SUCH COURT, AND AGREES THAT PROCESS SERVED EITHER PERSONALLY OR BY REGISTERED MAIL SHALL CONSTITUTE, TO THE EXTENT PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUCH SUIT, AND THE GUARANTOR IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, ANY CLAIM THAT THE GUARANTOR IS NOT SUBJECT TO THE IN PERSONAM JURISDICTION OF ANY SUCH COURT. RECEIPT OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS EVIDENCED BY A DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL SERVICE OR ANY COMMERCIAL DELIVERY SERVICE. IN ADDITION, THE GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT THE GUARANTOR MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY AND/OR THE NOTES AND/OR THE NOTE PURCHASE AGREEMENT BROUGHT IN SUCH COURTS, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF ANY HOLDER OF A NOTE TO SERVE ANY SUCH WRITS, PROCESS OR SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER THE GUARANTOR IN SUCH OTHER JURISDICTION, AND IN SUCH MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW. THE GUARANTOR 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. 15.6 Effective Date. This Guaranty shall be effective as of the date first written above. FORM OF SUBSIDIARY GUARANTY E-17 FORM OF SUBSIDIARY GUARANTY E-12 15.7 Benefits of Guaranty Restricted to Noteholders. Nothing express or implied in this Guaranty is intended or shall be construed to give to any Person other than the Guarantor and the holders of Notes any legal or equitable right, remedy or claim under or in respect hereof or any covenant, condition or provision therein or 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 holders of Notes. 15.8 Survival of Representations and Warranties. All representations and warranties contained herein or made in writing by the Guarantor in connection herewith shall survive the execution and delivery hereof. 15.9 Expenses. (a) The Guarantor shall pay when billed the reasonable costs and expenses (including reasonable attorneys' fees) incurred by the holders of Notes 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 the Company or the Guarantor and the holders of Notes 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 holders of Notes in connection with the assessment, analysis or enforcement of any rights or remedies that are or may be available to the holders of the Notes. (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 holder of Notes, 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 holder in collecting any sums due on such Notes. 15.10 Amendment. This Guaranty may be amended only in a writing executed by the Guarantor and the Required Holders. 15.11 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. 15.12 Duplicate Originals. Two or more duplicate counterpart 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. [Remainder of page intentionally blank. Next page is signature page.] IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed on its behalf by a duly authorized officer of the Guarantor. [GUARANTOR] By Name: Title: E-18 Annex 1 Address of Guarantor: [To be added at the time of execution and delivery of the Guaranty.] EX-10 4 NOTE PURCHASE AGREEMENT [Execution Copy] ================================================================= HUDSON FOODS, INC. $50,000,000 6.63% SENIOR NOTES DUE MARCH 22, 2006 --------------- NOTE AGREEMENT --------------- Dated as of March 22, 1996 ================================================================= TABLE OF CONTENTS (Not Part of Agreement) Page 1. Authorization of Issues of Notes........................................-2- 2. Purchase and Sale of Notes..............................................-2- 3. Conditions of Closing...................................................-2- 3A. Certain Documents.............................................-2- 3B. Opinion of Purchasers' Special Counsel........................-2- 3C. Representations and Warranties; No Default....................-3- 3D. Good Standing Certificate.....................................-3- 3E. Legality......................................................-3- 3F. Private Placement Number......................................-3- 3G. Structuring Fee...............................................-3- 3H. Compliance with this Agreement................................-3- 3I. Proceedings...................................................-3- 4. Prepayments.............................................................-4- 4A. Required Prepayments..........................................-4- 4B. Optional Prepayment With Yield-Maintenance Amount.............-4- 4C. Notice of Optional Prepayment.................................-4- 4D. Partial Payments Pro Rata.....................................-4- 4E. Retirement of Notes...........................................-5- 5. Affirmative Covenants...................................................-5- 5A. Financial Statements..........................................-5- 5B. Officer's Certificates........................................-9- 5C. Accountants' Certificates.....................................-9- 5D. Inspection...................................................-10- 5E. Equal and Ratable Lien; Equitable Lien.......................-10- 5F. Payment of Taxes and Claims..................................-10- 5G. Maintenance of Properties; Corporate Existence; etc..........-11- 5H. Payment of Notes and Maintenance of Office...................-12- 5I. Guaranties of Subsidiaries...................................-12- 6. Negative Covenants.....................................................-13- 6A. Financial Covenants..........................................-13- 6A(1) Tangible Net Worth................................-13- 6A(2) Working Capital; Current Ratio....................-14- 6A(3) Leverage Ratio....................................-14- 6A(4) Cash Flow Coverage Ratio..........................-15- 6A(5) Current Debt......................................-16- 6B. Dividends and Prepayments on Subordinated Debt...............-16- 6C. Liens, Debt, and Other Restrictions..........................-17- 6C(1) Liens.............................................-17- 6C(2) Limitations on Indebtedness.......................-19- 6C(3) Restricted Investments............................-22- 6C(4) Merger, Consolidation, Transfers of Property, etc.-23- 6C(5) Operating Lease Rentals...........................-24- 6D. Transactions with Affiliates.................................-24- 6E. Capital Expenditures.........................................-24- 6F. Nature of Business...........................................-25- 6G. ERISA........................................................-25- 6H. Private Offering.............................................-26- 6I. Certain Accounting Matters...................................-26- 7. Events of Default......................................................-26- 7A. Acceleration.................................................-26- 7B. Rescission of Acceleration...................................-30- 7C. Notice of Acceleration or Rescission.........................-30- 7D. Other Remedies...............................................-30- 8. Representations, Covenants and Warranties..............................-30- 8A. Corporate Organization and Authority.........................-31- 8B. Financial Statements; Indebtedness; Material Adverse Change..-31- 8C. Nature of Business...........................................-32- 8D. Subsidiaries and Affiliates..................................-32- 8E. Title to Properties; Leases; Patents, Trademarks, etc........-32- 8F. Taxes........................................................-33- 8G. Pending Litigation...........................................-34- 8H. Full Disclosure..............................................-34- 8I. Charter Instruments, Other Agreements, etc...................-34- 8J. Restrictions on Company and Subsidiaries.....................-35- 8K. Compliance with Law..........................................-35- 8L. ERISA........................................................-35- 8M. Certain Laws.................................................-37- 8N. Transactions are Legal and Authorized; Obligations are Enforceable..............................................-38- 8O. Governmental Consent; Certain Laws...........................-39- 8P. Private Offering of Notes....................................-39- 8Q. No Defaults; Transactions Prior to Closing Date, etc.........-39- 8R. Use of Proceeds of Notes.....................................-39- 8S. Solvency.....................................................-40- 9. Representations of Each Purchaser......................................-40- 9A. Nature of Purchase...........................................-40- 9B. Source of Funds..............................................-40- 9C. Representations of Each Purchaser to Each Other Purchaser....-41- 10. Definitions...........................................................-41- 10A. Yield-Maintenance Terms.....................................-41- 10B. Other Terms.................................................-42- 10C. Accounting Principles, Terms and Determinations.............-52- 11. Miscellaneous.........................................................-53- 11A. Note Payments...............................................-53- 11B. Expenses....................................................-53- 11C. Consent to Amendments.......................................-54- 11D. Form, Registration, Transfer and Exchange of Notes; Lost Notes..................................................-54- 11E. Persons Deemed Owners; Participations.......................-55- 11F. Survival of Representations and Warranties; Entire Agreement-55- 11G. Successors and Assigns......................................-55- 11H. Disclosure to Other Persons.................................-55- 11I. Notices.....................................................-56- 11J. Payments Due on Non-Business Days...........................-56- 11K. Satisfaction Requirement....................................-56- 11L. Governing Law...............................................-56- 11M. Severability................................................-56- 11N. Descriptive Headings........................................-57- 11O. Maximum Interest Payable....................................-57- 11P. Jurisdiction; Service of Process............................-57- 11Q. Counterparts................................................-58- 11R. Severalty of Obligations....................................-58- ANNEX 1 -- PURCHASER SCHEDULE ANNEX 2 -- PAYMENT INSTRUCTIONS ANNEX 3 -- INFORMATION AS TO COMPANY AND SUBSIDIARIES ANNEX 4 -- INFORMATION AS TO BUSINESS COVENANTS EXHIBIT A -- FORM OF NOTE EXHIBIT B -- FORM OF OPINION OF COMPANY'S COUNSEL EXHIBIT C -- FORM OF COMPANY EXHIBIT C -- OFFICER'S CERTIFICATE EXHIBIT D -- FORM OF COMPANY SECRETARY'S CERTIFICATE EXHIBIT E -- FORM OF SUBSIDIARY GUARANTY HUDSON FOODS, INC. 1225 Hudson Road Rogers, Arkansas 72756 As of March 22, 1996 To Each of the Purchasers Named in the Purchaser Schedule Attached Hereto $50,000,000 6.63% Senior Notes due March 22, 2006 Ladies and Gentlemen: The undersigned, Hudson Foods, Inc., a Delaware corporation (the "Company"), hereby agrees with the purchasers named in the Purchaser Schedule attached hereto (the "Purchasers") as follows: PARAGRAPH 1. AUTHORIZATION OF ISSUES OF NOTES. 1.Authorization of Issues of Notes. The Company will authorize the issue of its senior promissory notes in the aggregate principal amount of $50,000,000, to be dated the date of issue thereof, to mature March 22, 2006, to bear interest on the unpaid balance thereof from the date thereof until the principal thereof shall have become due and payable at the rate of 6.63% per annum and on overdue payments at the rate specified therein, and to be substantially in the form of Exhibit A attached hereto. The term "Notes" as used herein shall include each such senior promissory note delivered pursuant to any provision of this Agreement and each such senior promissory note delivered in substitution or exchange for any other Note pursuant to any such provision. Capitalized terms used herein have the meanings specified in paragraph 10. PARAGRAPH 2. PURCHASE AND SALE OF NOTES. 2.Purchase and Sale of Notes. The Company hereby agrees to sell to each Purchaser and, subject to the terms and conditions herein set forth, each Purchaser agrees to purchase from the Company the aggregate principal amount of Notes set forth opposite such Purchaser's name in the Purchaser Schedule attached hereto at 100% of such aggregate principal amount. The Company will deliver to each Purchaser, at the offices of Prudential Equity Investors Inc. at 717 5th Avenue, Suite 1100, New York City, New York, one or more Notes registered in such Purchaser's name, evidencing the aggregate principal amount of Notes to be purchased by such Purchaser and in the denomination or denominations specified with respect to such Purchaser in the Purchaser Schedule against payment of the purchase price thereof by transfer of immediately available funds for credit to the account of Hudson Foods, Inc. as specified by the Company in Annex 2 hereto on the date of closing, which shall be March 22, 1996 or any other date on or before March 25, 1996 upon which the Company and the Purchasers may mutually agree (the "Closing" or the "Date of Closing"). PARAGRAPH 3. CONDITIONS PRECEDENT. 3.Conditions of Closing. Each Purchaser's obligation to purchase and pay for the Notes to be purchased by such Purchaser hereunder is subject to the satisfaction, on or before the Date of Closing, of the following conditions: 3A.Certain Documents. Each Purchaser shall have received the following, each dated the Date of Closing: (i) The Notes to be purchased by such Purchaser. (ii) A certificate signed by a Senior Officer of the Company, substantially in the form of Exhibit C hereto. (iii) A certificate signed by the Secretary or an Assistant Secretary of the Company, substantially in the form of Exhibit D hereto. (iv) A favorable opinion of Wright, Lindsey & Jennings, special counsel to the Company, satisfactory to the Purchasers and substantially in the form of Exhibit B attached hereto and as to such other matters as the Purchasers may reasonably request. (v) Certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, listing all effective financing statements which name the Company or any Subsidiary (under its present name and any previous name) as debtor and which are filed in Arkansas, Indiana, Alabama, Maryland, Minnesota, Missouri, Ohio, Georgia, and Tennessee. 3B.Opinion of Purchasers' Special Counsel. Such Purchaser shall have received from Thomas P. Donahue, counsel for the Purchasers in connection with this transaction, a favorable opinion satisfactory to such Purchaser as to such matters incident to the matters herein contemplated as it may reasonably request. 3C.Representations and Warranties; No Default. The representations and warranties contained in paragraph 8 shall be true on and as of the Date of Closing, except to the extent of changes caused by the transactions herein contemplated; and there shall exist on the Date of Closing no Event of Default or Default. 3D.Good Standing Certificate. A certificate, dated on or immediately prior to the Date of Closing, from the Secretary of State (or other appropriate official) of Delaware, certifying as to the due incorporation and good standing of the Company. 3E.Legality. The Notes to be acquired by such Purchaser shall, on the Closing Date, qualify as a legal investment for you under applicable insurance law (without regard to any "basket" or "leeway" provisions), and such acquisition shall not subject you to any penalty or other onerous condition contained in or 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. 3F.Private Placement Number. The Company shall have obtained or caused to be obtained a private placement number for the Notes from the CUSIP Service Bureau of Standard & Poor's (a division of McGraw-Hill, Inc.) and you shall have been informed of such private placement number. 3G.Structuring Fee. The Company shall have paid Prudential a $20,000 Structuring Fee in cash. 3H.Compliance with this Agreement. Each of the Company and the Subsidiaries 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 Subsidiaries on or prior to the Date of Closing, and such performance and compliance shall remain in effect on the Date of Closing. 3I.Proceedings. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incident thereto shall be satisfactory in substance and form to such Purchaser, and such Purchaser shall have received all such counterpart originals or certified or other copies of such documents as it may reasonably request. PARAGRAPH 4. PREPAYMENTS. 4.Prepayments. The Notes shall be subject to prepayment only with respect to the required prepayments specified in paragraph 4A and the optional prepayments permitted by paragraph 4B. 4A.Required Prepayments. Until the Notes shall be paid in full, the Company shall apply to the prepayment of the Notes, without premium, the sum of $7,142,857.14 on March 22 in each of the years 2000 to 2005, inclusive, and such principal amounts of the Notes, together with interest thereon to the prepayment dates, shall become due on such prepayment dates. The remaining outstanding principal amount of the Notes, together with interest accrued thereon, shall become due on the maturity date of the Notes. 4B.Optional Prepayment With Yield-Maintenance Amount. The Notes shall be subject to prepayment on any Business Day on or after 90 days from the date of issuance thereof, in whole at any time or from time to time in part (in multiples of $1,000,000), at the option of the Company, at 100% of the principal amount so prepaid plus interest thereon to the prepayment date and the Yield-Maintenance Amount, if any, with respect to each Note. Any partial prepayment of the Notes pursuant to this paragraph 4B shall be applied in satisfaction of required payments of principal in inverse order of their scheduled due dates. 4C.Notice of Optional Prepayment. The Company shall give the holder of each Note irrevocable written notice of any prepayment pursuant to paragraph 4B not less than 10 Business Days prior to the prepayment date, specifying such prepayment date and the principal amount of the Notes, and of the Notes held by such holder, to be prepaid on such date and stating that such prepayment is to be made pursuant to paragraph 4B. Notice of prepayment having been given as aforesaid, the principal amount of the Notes specified in such notice, together with interest thereon to the prepayment date and together with the Yield-Maintenance Amount, if any, with respect thereto, shall become due and payable on such prepayment date. The Company shall, on or before the day on which it gives written notice of any prepayment pursuant to paragraph 4B, give telephonic notice of the principal amount of the Notes to be prepaid and the prepayment date to each holder which shall have designated a recipient of such notices in the Purchaser Schedule attached hereto or by notice in writing to the Company. 4D.Partial Payments Pro Rata. Upon any partial prepayment of the Notes pursuant to paragraph 4A or 4B, the principal amount so prepaid shall be allocated to all Notes at the time outstanding (including, for the purpose of this paragraph 4D only, all Notes prepaid or otherwise retired or purchased or otherwise acquired by the Company or any of its Subsidiaries or Affiliates other than by prepayment pursuant to paragraph 4A or 4B) in proportion to the respective outstanding principal amounts thereof. 4E.Retirement of Notes. The Company shall not, and shall not permit any of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in part prior to their stated final maturity (other than by prepayment pursuant to paragraph 4A or 4B or upon acceleration of such final maturity pursuant to paragraph 7A), or purchase or otherwise acquire, directly or indirectly, Notes held by any holder. PARAGRAPH 5. AFFIRMATIVE COVENANTS. 5.Affirmative Covenants. So long as any Note shall remain unpaid, the Company covenants that 5A.Financial Statements. The Company will deliver to each holder: (i) 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 45 days thereafter, duplicate copies of (a) a consolidated balance sheet of the Company and the Subsidiaries as at the end of such quarter, and (b) consolidated statements of operations and cash flows 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, 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, and accompanied by the certificate required by Paragraph 5B hereof; (ii) Annual Statements -- as soon as practicable after the end of each fiscal year of the Company, and in any event within 90 days thereafter, duplicate copies of (a) consolidated balance sheets of the Company and the Subsidiaries as at the end of such year, and (b) consolidated statements of operations and cash flows of the Company and the Subsidiaries for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP and accompanied by (I) an opinion of independent certified public accountants of recognized national standing, which opinion shall, without qualification (including, without limitation, qualifications related to the scope of the audit or the ability of the Company or a Subsidiary to continue as a going concern), state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their 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, (II) a certification by a Senior Financial Officer that such consolidated financial statements are complete and correct, and (III) the certificates required by paragraph 5B and paragraph 5C hereof; (iii) Opinions of Independent Accountants and Counsel -- as soon as practicable after the end of each fiscal year of the Company, and in any event within 90 days thereafter, duplicate copies of all opinions of independent accountants and counsel required pursuant to paragraph 5F hereof; (iv) 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 annual, interim or special audit made by them of the books of the Company or any Subsidiary; (v) SEC and Other Reports -- within 15 days of their becoming available, one copy, without duplication, of (a) each financial statement, report, notice or proxy statement sent by the Company or any Subsidiary to public securities holders generally, and (b) each regular or periodic report (including, without limitation, each Annual Report on Form 10-K, each Quarterly Report on Form 10-Q and each Current Report on Form 8-K), each registration statement (other than registration statements on Form S-8) which shall have become effective (without exhibits except as expressly requested by a holder of Notes), and each final prospectus, and all amendments to any of the foregoing, filed by the Company or any Subsidiary with, or received by, such Person in connection therewith from, the Securities and Exchange Commission or any successor agency; (vi) ERISA -- (a) immediately upon becoming aware of the occurrence of any (I) "reportable event" (as such term is defined in section 4043 of ERISA), or (II) "prohibited transaction" (as such term is defined in section 406 of ERISA or section 4975 of the Code), 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 (b) prompt written notice of and, where applicable, a description of (I) 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, (II) 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, (III) the placement of any Multiemployer Plan in reorganization status under Title IV of ERISA, (IV) any Multiemployer Plan becoming "insolvent" (as such term is defined in section 4245 of ERISA) under Title IV of ERISA, (V) the whole or partial withdrawal of the Company or any ERISA Affiliate from any Multiemployer Plan and the withdrawal liability incurred in connection therewith, and (VI) any material increase in contingent liabilities of the Company or any Subsidiary in respect of any post-retirement employee welfare benefits. (vii) Actions, Proceedings -- promptly after the commencement thereof, written notice of any action or proceeding relating to the Company or any Subsidiary in any court or before any Governmental Authority or arbitration board or tribunal as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, is reasonably likely to have a Material Adverse Effect; (viii) Certain Matters -- prompt written notice of and a description of any event or circumstance that, had such event or circumstance occurred or existed immediately prior to the Closing Date, would have been required to be disclosed as an exception to any statement set forth in Section 2.13(a) or Section 2.13(b) hereof; (ix) Notice of Default or Event of Default -- immediately upon 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; (x) Notice of Claimed Default -- immediately upon becoming aware that the holder of any Note, or of any Indebtedness or other 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; (xi) Information Furnished to Other Creditors -- promptly after any request therefor, copies of any statement, report or certificate furnished to any holder of Indebtedness of the Company or any Subsidiary; (xii) Rule 144A -- promptly after any request therefor, information requested to comply with 17 C.F.R. ss.230.144A, as amended from time to time; and (xiii) Requested Information -- promptly after any request therefor, such other data and information as from time to time may be reasonably requested by any holder of Notes, including, without limitation, data, information, agreements, instruments or documents relating to the business or financial operations or performance of the Company or any Subsidiary and any financial statements prepared by the Company (in addition to the financial statements specified in clause (i) and clause (ii) of this paragraph 5A), in each case which may be reasonably requested by any holder of Notes. 5B.Officer's Certificates. Each set of financial statements delivered to each holder of Notes pursuant to paragraph 5A(i) or paragraph 5A(ii) hereof shall be accompanied by a certificate of a Senior Financial Officer setting forth: (i) Covenant Compliance -- the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of paragraphs 6A, 6B, 6C(1), 6C(2), 6C(3), 6C(4), 6C(5) and 6E hereof, 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 paragraphs, and the calculation of the amounts, ratio or percentage then in existence); (ii) Event of Default -- a statement that the signers have reviewed the relevant terms hereof and have made, or caused to be made, under their 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 statement 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; and (iii) Investments -- a description of all investments of the Company and the Subsidiaries made pursuant to paragraph 6C(3)(vi) hereof during such accounting period (which description shall specify the type of investment, the cost thereof and the book value thereof), and, if any such investments are made, a description of the Company's then-current investment policy. 5C.Accountants' Certificates. Each set of annual financial statements delivered pursuant to paragraph 5A(ii) hereof shall be accompanied by a certificate of the accountants who certify such financial statements, stating that (i) 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, and (ii) they have reviewed the annual certificate of a Senior Financial Officer of the Company provided pursuant to clause (i) of paragraph 5B hereof and that they confirm the calculations contained therein. 5D.Inspection. The Company will permit, upon prior notice to the Company, the representatives of each holder of Notes (at the expense of the Company at any time when a Default or an Event of Default has occurred and is in existence, and otherwise at the expense of such holder) 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 (and by this provision the Company authorizes 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. 5E.Equal and Ratable Lien; Equitable Lien. In case any Property shall be subjected to a Lien (other than Liens permitted by paragraph 6C(1)), the Company will forthwith make or cause to be made provision whereby the Notes will 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 will 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. Regardless of whether the Company complies with the provisions of the immediately preceding sentence, in case any Property shall be subjected to a Lien in violation of this paragraph 5E, the Notes shall have the benefit and with such priority as, the holders of Notes may be entitled thereto under applicable law, of an equitable Lien on such Property securing the Notes. A violation of paragraph 6C(1) will constitute an Event of Default, whether or not any such provision is made or action is taken pursuant to this paragraph 5E. 5F.Payment of Taxes and Claims. The Company will, and will cause each Subsidiary to, pay before they become delinquent: (i) all taxes, assessments and governmental charges or levies imposed upon it or its Property; and (ii) all claims or demands of materialmen, mechanics, carriers, warehousemen, vendors, 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 (a) while being actively contested in good faith and by appropriate proceedings as long as adequate book reserves have been established and maintained and exist with respect thereto, and (b) so long as the title of the Company or the other Subsidiary, as the case may be, to, and its right to use, such Property, is not materially adversely affected thereby. In the case of any such item being contested as described in the immediately preceding sentence involving in excess of $2,000,000, the appropriateness of the proceedings will be supported by an opinion of the independent counsel responsible for such proceedings and the adequacy of such reserves will be supported by an opinion of the independent accountants of the Company or such Subsidiary (which opinions will be delivered to the Purchasers and the other holders of Notes as provided in paragraph 5A(iii) hereof), provided that, if the aggregate amount of all such items shall at any time exceed $3,000,000, regardless of the amount of any individual item, the adequacy of the reserves for all such items will be supported by opinions of the independent accountants of the Company or such Subsidiary (which opinions will be delivered to the Purchasers and the other holders of the Notes as provided in paragraph 5A(iii) hereof). 5G.Maintenance of Properties; Corporate Existence; etc.nce; etc. The Company will, and will cause each Subsidiary to: (i) Property -- maintain its Property in good condition and working order, ordinary wear and tear excepted, and make all necessary renewals, replacements, additions, betterments and improvements thereto; (ii) 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 a comparable rating by any comparable successor rating agency), insurance 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 accordance with sound business practices in the case of corporations of established reputations engaged in the same or a similar business and similarly situated; (iii) Financial Records -- keep accurate and complete books of records and accounts in which accurate and complete entries shall be made of all its business transactions and that will permit the provision of accurate and complete financial statements in accordance with GAAP; (iv) Corporate Existence and Rights -- (a) do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises, except where the failure to do so, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, and (b) maintain each Subsidiary as a Subsidiary and each Wholly-Owned Subsidiary as a Wholly-Owned Subsidiary, in each case except as permitted by paragraph 6C(4) hereof; and (v) 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 or any Health Law) and not fail to obtain any license, certificate, permit, franchise or other governmental authorization necessary to the ownership of its Properties or to the conduct of its business if such violations or failures to obtain, in the aggregate, could reasonably be expected to have (i) a Material Adverse Effect or (ii) a material adverse effect on the ability of the Company or any Subsidiary to conduct in the future the business it conducts at the time of such violation or failure to obtain. 5H. Payment of Notes and Maintenance of Office. The Company will punctually pay, or cause to be paid, the principal of and interest (and Yield-Maintenance Amount, if any) on the Notes, as and when the same shall become due according to the terms of this Agreement and of the Notes. The Company will maintain an office at the address of the Company set forth in paragraph 11I hereof where notices, presentations and demands in respect of this Agreement or of the Notes may be made upon the Company. Such office will be maintained at such address until such time as the Company shall notify the Purchasers and the other holders of the Notes of any change of location of such office, which will in any event be located within the United States of America. 5I.Guaranties of Subsidiaries. (i) New Subsidiaries. The Company shall cause each Subsidiary not existing as of the Date of Closing to execute and deliver to the holders of the Notes a Subsidiary Guaranty, in substantially the form of Exhibit E hereto, within 10 Business Days of the creation or acquisition of any such Subsidiary. (ii) Certain Existing Subsidiaries. If Ohse, Hudson Poland, Hudson Development or Hudson Foreign Sales shall at any time own or hold, directly or indirectly, assets having a book value equal to or in excess of five percent of the total assets of the Company and the Subsidiaries at such time, as would be shown on a consolidated balance sheet for such Persons prepared in accordance with GAAP, then the Company shall cause such Person to execute and deliver to the holders of the Notes a Subsidiary Guaranty, in substantially the form of Exhibit E hereto, within 10 Business Days of such time. (iii) Delivery of Documents. The delivery of any agreements pursuant to paragraph 5I(i) or paragraph 5I(ii) hereof shall be accompanied by such other documents as any Purchaser or other holder of Notes may reasonably request, including, without limitation, charter documents, bylaws, and appropriate resolutions of the Board of Directors of any such Subsidiary providing a Subsidiary Guaranty. (iv) Guaranties of Bank Credit Agreement Obligations. Notwithstanding the other terms and provisions of this paragraph 5I, the Company will not at any time permit any Subsidiary or Affiliate to provide to the Banks any Guaranty of the Company's obligations under the Bank Credit Agreement unless such Subsidiary or such Affiliate shall, at the same time, deliver a Subsidiary Guaranty and other documents to the holders of the Notes as specified in paragraph 5I(iii) hereof. PARAGRAPH 6. NEGATIVE COVENANTS. 6.Negative Covenants. So long as any Note shall remain unpaid, 6A.Financial Covenants. 6A(1).Tangible Net Worth. The Company will not permit, as of the last day of each fiscal quarter, Tangible Net Worth to be less than the sum of (i) $129,000,000, plus (ii) the amount of all proceeds of any issuance of capital stock of the Company after May 18, 1994, plus (iii) the amount of any Subordinated Debt which is converted into capital stock of the Company after May 18, 1994, plus (iv) in the case of each fiscal quarter ending on or after October 1, 1994, the Applicable Net Income Carryover. As used herein, "Tangible Net Worth" -- means the excess of total assets over total liabilities, as each of total assets and total liabilities would be shown on a consolidated balance sheet for the Company and the Subsidiaries prepared in accordance with GAAP consistent with GAAP applied in the preparation of the financial statements referred to in paragraph 5A(i) and paragraph 5A(ii) hereof, excluding, however, Intangible Assets from such determination of total assets. "Intangible Assets" -- means (i) goodwill, organizational expenses, research and development expenses, trademarks, trade names, copyrights, patents, patent applications, licenses and rights in any thereof, and other similar intangibles, (ii) treasury stock, (iii) Securities which are not readily marketable, (iv) cash held in a sinking or other analogous fund established for the purpose of redemption, retirement or prepayment of capital stock, (v) any write-up in the book value of any asset resulting from a revaluation thereof subsequent to May 18, 1994, and (vi) any items not included in clauses (i) through (v) above, inclusive, which are treated as intangibles in conformity with GAAP. "Applicable Net Income Carryover" -- at any time that any determination thereof is to be made means an amount equal to the sum of (i) 60% of the net income of the Company and the Subsidiaries, determined on a consolidated basis for such Persons in accordance with GAAP, for the fiscal year of the Company ending on October 1, 1994, plus (ii) 60% of the net income of the Company and the Subsidiaries, determined on a consolidated basis for such Persons in accordance with GAAP, for each and every fiscal year of the Company ending after October 1, 1994 which has ended on or before the date such determination of Applicable Net Income Carryover is to be made; provided, however, that, in the event that such net income for any fiscal year described above is less than zero, the net income of the Company and the Subsidiaries for such fiscal year shall be deemed to be zero for purposes of calculating Applicable Net Income Carryover. 6A(2).Working Capital; Current Ratio. The Company will not permit as of the last day of each fiscal quarter: (i) the ratio of current assets to current liabilities (exclusive of current deferred taxes), in each case as would be shown on a consolidated balance sheet for the Company and the Subsidiaries at such time prepared in accordance with GAAP, to be less than 1.5 to 1.0, and (ii) the excess of current assets over current liabilities (exclusive of current deferred taxes), in each case as would be shown on a consolidated balance sheet for the Company and the Subsidiaries at such time prepared in accordance with GAAP, to be less than $60,000,000. 6A(3).Leverage Ratio. The Company will not permit, as of the last day of each fiscal quarter, a Leverage Ratio to be more than 0.5 to 1.0. As used herein: "Leverage Ratio" -- means for any date of determination thereof, the quotient (expressed as a ratio) of (x) Indebtedness with maturities of greater than one year (including, without limitation, all current portions thereof and all Subordinated Debt) of the Company and the Subsidiaries as would appear on a consolidated balance sheet prepared in accordance with GAAP for such Persons at such time, divided by (y) the sum of (i) Indebtedness with maturities of greater than one year (including, without limitation, all current portions thereof and all Subordinated Debt) of the Company and the Subsidiaries as would appear on a consolidated balance sheet prepared in accordance with GAAP for such Persons at such time, plus (ii) stockholders' equity of the Company and the Subsidiaries (excluding, in any event, any minority interests) as would appear on a consolidated balance sheet prepared in accordance with GAAP for such Persons at such time, plus (iii) long-term deferred taxes, attributable to the Company's prior use of cash accounting, of the Company and the Subsidiaries as would appear on a consolidated balance sheet prepared in accordance with GAAP for such Persons at such time, plus (iv) deferred taxes, attributable to the Company's use of the "farm price method" of accounting for deferred taxes, of the Company and the Subsidiaries as would appear on a consolidated balance sheet prepared in accordance with GAAP for such Persons at such time. 6A(4) Cash Flow Coverage Ratio. The Company will not permit, as of the last day of each fiscal quarter, the Cash Flow Coverage Ratio to be less than 1.3 to 1.0 for the period of eight consecutive fiscal quarters then most recently ended. As used herein: "Cash Flow Coverage Ratio" means for any period of determination thereof, the quotient (expressed as a ratio) of (x) the sum of (i) Consolidated Net Income, plus (ii) income taxes of the Company and the Subsidiaries, plus (iii) Consolidated Interest Expense, plus (iv) Consolidated Lease Expense, plus (iv) depreciation and amortization of the Company and the Subsidiaries, divided by (y) the sum of (i) Consolidated Interest Expense, plus (ii) Consolidated Lease Expense, plus (iii) all scheduled and optional principal payments on long-term Indebtedness (including, without limitation, imputed principal on Capital Leases), other than, in each such case, the principal amount of any such Indebtedness which shall be paid during such period from the proceeds of Indebtedness incurred in connection with any refinancing thereof prior to, or at the time of, the maturity thereof, plus (iv) the sum of (a) dividends on the capital stock of the Company or a Subsidiary (other than dividends paid to the Company or a Subsidiary), (b) purchases or other acquisitions by the Company or any Subsidiary of any capital stock of the Company, and (c) distributions of assets to the Company's stockholders as such. "Consolidated Net Income" means, for any period, net income (or loss) from continuing operations (after income taxes) of the Company and the Subsidiaries, excluding, in any event, net income (or loss) in respect of extraordinary items, net income (or loss) from discontinued operations and the cumulative effects of changes in accounting principles, all as determined on a consolidated basis for such Persons in accordance with GAAP. "Consolidated Interest Expense" means, for any period, the aggregate amount of interest accrued or capitalized on, or with respect to, Indebtedness (including, without limitation, amortization of debt discount, imputed interest on Capital Leases and interest on the Notes), but without giving effect to any deduction for any interest income, of the Company and the Subsidiaries determined on a consolidated basis for such Persons for such period in accordance with GAAP. "Consolidated Lease Expense" means, for any period, the aggregate amount of rentals payable in respect of Operating Leases for such period by any one or more of the Company and the Subsidiaries, determined on a consolidated basis for such Persons for such period in accordance with GAAP. "Operating Lease" means, with respect to any Person, any lease other than a Capital Lease. 6A(5) Current Debt. The Company will not, and will not permit any Subsidiary to, have any Current Debt outstanding on any day unless, within the period of 365 days immediately preceding such day, there shall have been at least one period of not less than 45 consecutive days during which on each day of such period the aggregate Current Debt of all such Persons did not exceed the amount of additional Funded Debt in favor of a Person other than a Subsidiary that the Company would have been permitted to have outstanding (but did not have outstanding) if the Company were required to maintain a Leverage Ratio of not more than 0.5 to 1.0 on such day. 6B.Dividends and Prepayments on Subordinated Debt. (i) Limit on Dividends and Other Distributions. The Company will not declare or pay any dividends (whether in cash or other Property), purchase, redeem, retire or otherwise acquire for value any of its capital stock (or any warrants, rights or options to acquire any shares of such capital stock) now or hereafter outstanding, or make any other distribution of Property to its stockholders, or permit any of its Subsidiaries to purchase or otherwise acquire for value any capital stock of the Company if: (a) after giving effect to such dividend, distribution or other payment, the aggregate amount of all such dividends, distributions and other payments exceeds $2,750,000 during any fiscal year, or (b) at the time of the declaration of such dividend, distribution or other payment, and immediately before, and after giving effect to the payment thereof, an Event of Default exists or would exist. (ii) No Subordinated Debt Prepayments. The Company will not at any time, and will not at any time permit any Subsidiary to, make any prepayments, directly or indirectly, of principal on, or redeem, repurchase or retire, any existing or future Subordinated Debt of the Company or any Subsidiary. 6C.Liens, Debt, and Other Restrictions. 6C(1) Liens. (i) Negative Pledge. The Company will not, and will not permit any Subsidiary to, cause or permit to exist, or agree or consent to cause or permit to exist 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 any Lien except: (a) Taxes, etc. -- Liens securing Property taxes, assessments or governmental charges or levies or the claims or demands of materialmen, mechanics, carriers, warehousemen, vendors, landlords and other like Persons, so long as (I) the payment thereof is being actively contested in good faith and by appropriate proceedings and adequate book reserves have been established and maintained and exist with respect thereto, and (II) 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; (b) Judicial Liens -- Liens (I) arising from judicial attachments and judgments, (II) securing appeal bonds or supersedeas bonds, and (III) 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 (A) the execution or other enforcement of such Liens is effectively stayed, (B) the claims secured thereby are being actively contested in good faith and by appropriate proceedings, (C) adequate book reserves shall have been established and maintained and shall exist with respect thereto and (D) the aggregate amount so secured shall not at any time exceed $2,000,000; (c) Ordinary Course Business Liens -- Liens incurred or deposits made in the ordinary course of business (I) in connection with workers' compensation, unemployment insurance, social security and other like laws, and (II) 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 paragraph 6C(1)(i)(b) hereof) 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; provided, however, that all such Liens do not, in the aggregate, materially detract from the value of such Property or materially interfere with the use of such Property in the ordinary conduct of the business of the Company and the Subsidiaries, taken as a whole; (d) Certain Encumbrances -- 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 Property in the ordinary conduct of the business of the Company and the Subsidiaries, taken as a whole; (e) Intergroup Liens -- Liens on Property of a Subsidiary, provided that such Liens secure only obligations owing to the Company; (f) Closing Date Liens -- (I) Liens in existence on the Date of Closing securing Indebtedness, provided that such Liens and such Indebtedness are described in Part 6C(1)(i)(f) of Annex 4 hereto; and (II) Liens securing renewals, extensions (as to time) and refinancings of Indebtedness secured by the Liens described in Part 6C(1)(i)(f) of Annex 4 hereto, provided that (A) the amount of Indebtedness secured by each such Lien is not increased in excess of the amount of such Indebtedness outstanding on the date of such renewal, extension or refinancing, unless the aggregate amount of Indebtedness in excess of such outstanding Indebtedness is permitted to be outstanding under the terms and provisions of paragraph 6C(2)(ii) hereof, (B) none of such Liens is extended to encumber or otherwise relate to or cover any additional Property of the Company or any Subsidiary, and (C) immediately prior to, and immediately after the consummation of such renewal, extension or refinancing, and after giving effect thereto, no Default or Event of Default exists or would exist; and (g) Secured Indebtedness -- other Liens on Property of the Company or the Subsidiaries as specified in paragraph 6C(2)(ii) hereof securing Indebtedness permitted pursuant to paragraph 6C(2)(ii) hereof. (ii) Financing Statements. The Company will not, and will 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 paragraph 6C(1) or to evidence for informational purposes a lessor's interest in Property leased to the Company or any such Subsidiary. 6C(2) Limitations on Indebtedness. (i) Limitation on Indebtedness. The Company will not, and will not permit any Subsidiary to, create, incur, assume or suffer to exist any Indebtedness or other liabilities or obligations, whether matured or unmatured, liquidated or unliquidated, direct or contingent, or joint or several, except: (a) liabilities of the Company in respect of the Notes, this Agreement and the Bank Credit Agreement, and liabilities of any Subsidiary in respect of any Guaranty of the obligations of the Company under the Notes, this Agreement or the Bank Credit Agreement; (b) long-term Indebtedness, provided the Company complies with the provisions of paragraph 6A(3) hereof; (c) Indebtedness secured by Liens permitted to be outstanding pursuant to paragraph 6C(2)(ii) hereof; (d) unsecured short-term Indebtedness of the Company incurred for the purpose of funding the working capital requirements of the Company and the Subsidiaries, provided the Company complies with the provisions of paragraph 6A(5) hereof; (e) Indebtedness of Subsidiaries, provided the Company complies with the provisions of Section 6C(2)(iii) hereof; and (f) those liabilities listed in Part 6C(2)(i) of Annex 4 hereto. (ii) Limitation on Secured Indebtedness. The Company will not, and will not permit any Subsidiary to, create, incur, assume or suffer to exist any Indebtedness or other liabilities or obligations, whether matured or unmatured, liquidated or unliquidated, direct or contingent, or joint or several, which are secured by, or have the benefit of, any Lien except Indebtedness secured by or having the benefit of, or in respect of: (a) Liens outstanding on the Closing Date described in Part 6C(1)(a)(vi) of Annex 4 hereto; (b) purchase money Liens or purchase money security interests upon or in any fixed assets acquired or held by the Company or any Subsidiary in the ordinary course of business to secure the purchase price of such fixed assets or to secure Indebtedness incurred solely for the purpose of financing the acquisition of such fixed assets; (c) Liens or security interests existing on fixed assets at the time of their acquisition; (d) Liens and security interests on previously acquired fixed assets, the Fair Market Value of which assets does not exceed by more than 100% the amount of Indebtedness secured thereby, all as determined by the Required Holders, in their sole, good faith discretion; or (e) Liens in respect of obligations for Capital Leases of real or personal fixed assets acquired or held by the Company in the ordinary course of business which are secured only by the fixed assets that are the subject of such Capital Lease, provided, however, that (I) the aggregate amount of any Indebtedness incurred in connection with renewals, extensions (as to time) and refinancings of Indebtedness described in Part 6C(1)(i)(f) of Annex 4 hereto in excess of the amount of such Indebtedness outstanding immediately prior to each such renewal, extension or refinancing, plus (II) the aggregate principal amount of the Indebtedness secured by the Liens or security interests referred to in clause (b), clause (c) and clause (d) of this paragraph 6C(2)(ii), plus (z) the aggregate amount of capitalized payment obligations under the Capital Leases specified in clause (e) of this paragraph 6C(2)(ii) shall not at any time exceed $25,000,000. (iii) Limitation on Subsidiary Indebtedness. The Company shall not at any time permit Total Subsidiary Indebtedness to exceed 10% of Consolidated Indebtedness at such time. As used herein: "Total Subsidiary Indebtedness" -- means, at any time (without duplication), (a) the aggregate Indebtedness of all Subsidiaries outstanding at such time, plus (b) the aggregate amount of claims in respect of the redemption of, and accumulated unpaid dividends on, all preferred stock (and other equity Securities and all other Securities convertible into, exchangeable for, or representing the right to purchase, preferred stock) of all Subsidiaries outstanding at such time (whether or not any right of redemption or conversion is exercisable by the holder thereof at such time), determined, in each case, on a combined basis for such Persons, but excluding from such calculation (i) any such Indebtedness of any Subsidiary in respect of any Guaranty of the Notes provided pursuant to, and in accordance with the provisions of, paragraph 5I hereof, (ii) any such Indebtedness of any Subsidiary in respect of any Guaranty of any of the obligations of the Company under (A) the Bank Credit Agreement and (B) any other primary Indebtedness of the Company, so long as, in each such case, such Subsidiary has entered into a Guaranty of the obligations of the Company under the Notes and this Agreement, (iii) any such Indebtedness of any Subsidiary existing on the Date of Closing which is described in Part 6C(2)(iii) of Annex 4 hereto, and (iv) all such preferred stock and other equity Securities which are legally and beneficially owned by the Company. "Consolidated Indebtedness" -- means, at any time, the aggregate amount of Indebtedness of the Company and the Subsidiaries, determined on a consolidated basis for such Persons at such time in accordance with GAAP. (iv) Loans, Guaranties, etc. The Company will not, and will not permit any Subsidiary to, make any loans or advances to or investments in any Person, or directly or indirectly enter into any Guaranty or otherwise assure a creditor against loss in respect of any Indebtedness or other obligations or liabilities (contingent or otherwise) of any Person unless any such amounts have been included as Indebtedness in making calculations with respect to each representation, warranty and covenant set forth in this Agreement. 6C(3) Restricted Investments. The Company will not at any time, and will not at any time permit any Subsidiary to, make any investments (including, without limitation, loans or other advances to or for the benefit of any Subsidiary) except: (i) investments in readily marketable obligations of the United States of America maturing within one year from date of purchase, (ii) investments in prime (by recognized United States financial standards) commercial paper maturing within one year from date of purchase, (iii) investments in fully insured domestic certificates of deposit and certificates of deposit issued by any Bank (provided such Bank's outstanding long-term debt securities are rated at least "A" by Standard & Poor's (a division of McGraw-Hill, Inc.) or at least "A-1" by Moody's Investors Service, Inc.)maturing within one year from the date of creation thereof, (iv) endorsements of negotiable instruments for collection in the ordinary course of business, (v) investments in Subsidiaries that have complied with the requirements of paragraph 5I hereof, and (vi) other investments so long as the aggregate book value of all such investments does not at any time exceed 10% of Tangible Net Worth at such time; provided, however, that this paragraph 6C(3) shall not be deemed to prohibit the Company from creating accounts receivable owing from any Subsidiary as a result of the sale of inventory in accordance with paragraph 6D hereof. 6C(4) Merger, Consolidation, Transfers of Property, etc. (i) Merger and Consolidation. The Company will not, and will not permit any Subsidiary to, merge with or into or consolidate with any other Person or permit any other Person to merge or consolidate with or into it (except that a Subsidiary may merge into or consolidate with the Company or a Wholly-Owned Subsidiary), provided that the foregoing restriction does not apply to the merger or consolidation of the Company with another corporation if: (a) the Company is the corporation that results from such merger or consolidation (the "Surviving Corporation"); (b) the due and punctual payment of the principal of and Yield-Maintenance 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 in the Notes and this Agreement to be performed or observed by the Company are expressly assumed by the Surviving Corporation pursuant to such agreements and instruments as shall be approved by the Required Holders, and the Company causes to be delivered to each holder of Notes an opinion of independent counsel to the effect that such agreements and instruments are enforceable in accordance with their terms (subject to customary qualifications); and (c) immediately prior to, and immediately after the consummation of the transaction, and after giving effect thereto, no Default or Event of Default exists or would exist. (ii) Acquisition of Stock, etc. The Company will not, and will 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 Property of, or such of the Property as would permit the transferee to continue any one or more integral business operations of, any Person unless, immediately prior to, and immediately after the consummation of such acquisition, and after giving effect thereto, no Default or Event of Default exists or would exist. (iii) Transfers of Property. The Company will not, and will not permit any Subsidiary to, sell, lease as lessor, transfer or otherwise dispose of any Property (collectively, "Transfers"), except Transfers of inventory and Transfers of other Property for Fair Market Value, in each case in the ordinary course of business of the Company or any such Subsidiary. 6C(5) Operating Lease Rentals. The Company will not create or suffer to exist, or permit any of the Subsidiaries to create or suffer to exist, any obligations for the payment of rent for any Property under leases or agreements to lease, which do or would constitute Operating Leases, which in the aggregate have annual rental payments for any fiscal year in excess of 7.5% of Net Tangible Assets determined at the end of such fiscal year; provided, however, that leases for rolling stock shall be excluded from the foregoing calculation. As used herein: "Net Tangible Assets" -- means total assets minus Intangible Assets minus current liabilities (exclusive of current deferred taxes) of the Company and the Subsidiaries, in each case as would appear on a consolidated balance sheet for such Persons prepared in accordance with GAAP. 6D Transactions with Affiliates. The Company will not, and will 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. 6E Capital Expenditures. The Company will not, and will not permit any Subsidiary to, make any Capital Expenditures, if: (i) the aggregate amount of Capital Expenditures of the Company and the Subsidiaries, determined on a consolidated basis for such Persons in accordance with GAAP, in any one fiscal year would be in excess of 25% of stockholder's equity of the Company and the Subsidiaries as would appear on a consolidated balance sheet prepared in accordance with GAAP for such Persons as at the end of the fiscal year then most recently ended; provided, however, that (a) the amount of Capital Expenditures incurred in fiscal year 1996 and fiscal year 1997 of the Company in connection with the Company's planned construction of a new processing facility in the state of Kentucky, and (b) the portion of any purchase price in respect of any Capital Expenditure which was paid for by the Company solely with shares of the Company's capital stock, shall be excluded from the application of this covenant; or (ii) at the time of such Capital Expenditure, and immediately before and after giving effect thereto, a Default or an Event of Default exists or would exist. As used herein: "Capital Expenditure" -- means, with respect to any Person, any payments in respect of the acquisition or construction cost of Property (including, without limitation, (x) the purchase price of tangible assets acquired by such Person and (y) the gross purchase price of assets or stock, as the case may be, acquired by such Person in connection with any merger, consolidation, asset acquisition, stock purchase or similar transaction entered into by such Person) or other expenditures in respect of Property, in each case that is, or is part of a group of related items of Property substantially all of which are, required to be classified as long-term assets on a balance sheet of such Person prepared in accordance with GAAP. 6F Nature of Business. The Company will not, and will not permit any Subsidiary to, engage in any business if, as a result thereof, the principal businesses of the Company and the Subsidiaries, taken as a whole, would not be substantially the same as the businesses described in the Most Recent 10-K. 6G ERISA. (i) Compliance. The Company will, and will cause each ERISA Affiliate to, at all times with respect to each Pension Plan, make timely payment of contributions required to meet the minimum funding standard set forth in ERISA or the Code with respect thereto, and to comply with all other applicable provisions of ERISA. (ii) Relationship of Vested Benefits to Pension Plan Assets. The Company will not at any time permit the present value of all employee benefits vested under each Pension Plan to exceed the assets of such Pension Plan allocable to such vested benefits at such time, in each case determined pursuant to paragraph 6G(iii) hereof. (iii) 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 will be reasonable in the good faith judgment of the Company and will comply with all requirements of law. (iv) Prohibited Actions. The Company will not, and will not permit any ERISA Affiliate to: (a) engage in any "prohibited transaction" (as such term is defined in section 406 of ERISA or section 4975 of the Code) that would result in the imposition of a material tax or penalty; (b) 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; (c) terminate any Pension Plan in a manner that could result in (I) the imposition of a Lien on the Property of the Company or any Subsidiary pursuant to section 4068 of ERISA, or (II) the creation of any liability under section 4062 of ERISA; (d) fail to make any payment required by section 515 of ERISA; or (e) at any time be an "employer" (as such term is defined in section 3(5) of ERISA) required to contribute to any Multiemployer 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. 6H Private Offering. The Company will not, and will not permit 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. 6I Certain Accounting Matters. The Company will not, at any time, (a) change its methods of accounting, unless required in accordance with GAAP, or (b) change its fiscal year. PARAGRAPH 7. EVENTS OF DEFAULT. 7 Events of Default.s of Default. 7A Acceleration. If any of the following events shall occur and be continuing for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or otherwise): (i) Principal or Yield-Maintenance Amount Payments -- the Company shall fail to make any payment of principal or Yield-Maintenance Amount on any Note on or before the date such payment is due; (ii) Interest Payments -- the Company shall fail to make any payment of interest on any Note on or before the date such payment is due; (iii) Certain Defaults -- the Company or any Subsidiary shall fail to perform or observe any covenant contained in paragraph 5F, 5G(ii), 5A(i) through (viii), inclusive, or 5(A)(xi) through (xiii), inclusive, and such failure continues for more than 10 days after the earlier of (i) receipt by the Company of written notice thereof from any Purchaser or any other holder of Notes, or (ii) such time as such failure shall otherwise first become known to any officer of the Company; (iv) Other Defaults -- the Company or any Subsidiary shall fail to perform, observe or comply with any other term, covenant or agreement contained in this Agreement, in the Notes or in any other document or instrument delivered in connection herewith required to be performed by the Company or such Subsidiary pursuant to the terms of this Agreement, of the Notes or of such other document or instrument; (v) Warranties or Representations -- any warranty, representation or other statement by or on behalf of the Company (or any of its officers) contained herein or in any certificate or instrument furnished in compliance with or in reference hereto, or by any Subsidiary in any Subsidiary Guaranty, shall have been false or misleading in any material respect when made; (vi) Cross Default -- (a) the Company or any Subsidiary shall fail to make any payment on any Indebtedness or any Security when due; (b) any event shall occur or any condition shall exist in respect of any Indebtedness or any Security of the Company or any Subsidiary, or under any agreement securing or relating to any such Indebtedness or Security, that immediately or with any one or more of the passage of time or the giving of notice: (I) causes (or permits any holder thereof or a trustee therefor to cause) such Indebtedness 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; or (II) permits any one or more of the holders thereof or a trustee therefor to require the Company or any Subsidiary to repurchase such Indebtedness or Security from such holder and any such holder or trustee exercises (or attempts to exercise) such right; or (c) any "Event of Default" shall have occurred or shall exist under, and as defined in, the Bank Credit Agreement, as amended and as in effect at such time; (vii) Involuntary Bankruptcy Proceedings -- (a) a receiver, liquidator, custodian or trustee of the Company or any Subsidiary, or of all or any part of the Property of any such Person, shall be appointed by court order and such order shall remain in effect for more than 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 a bankrupt or insolvent; (b) any of the Property of the Company or any Subsidiary shall be sequestered by court order and such order shall remain in effect for more than 30 days; or (c) 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 30 days after such filing; (viii) 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, or take any corporate action to authorize, the filing of any petition against, or with respect to, any such Person, under any such law; (ix) Assignments for Benefit of Creditors, etc. -- the Company or any Subsidiary shall make an assignment for the benefit of its creditors, or admit in writing its inability, or 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 any such Person; (x) Undischarged Final Judgments -- a final, nonappealable judgment or final, nonappealable judgments for the payment of money aggregating in excess of $2,000,000 is or are outstanding against any one or more of the Company or any Subsidiary and any one of such judgments shall have been outstanding for more than 10 days from the date of its entry and shall not have been discharged in full or stayed; or (xi) Subsidiary Guaranty -- (a) any Subsidiary Guaranty shall cease to be in full force and effect or shall be declared by a court or Governmental Authority of competent jurisdiction to be void, voidable or unenforceable against the Subsidiary which is a guarantor thereunder; (b) the validity or enforceability of any Subsidiary Guaranty against the Subsidiary which is a guarantor thereunder shall be contested by such Subsidiary, or any subsidiary or affiliate thereof; or (c) any Subsidiary, or any subsidiary or affiliate thereof, shall deny that such Subsidiary has any further liability or obligation under the Subsidiary Guaranty to which such Subsidiary is a party; then (a) if such event is an Event of Default specified in clause (i) or (ii) of this paragraph 7A, the holder of any Note (other than the Company or any of its Subsidiaries or Affiliates) may at its option, by notice in writing to the Company, declare such Note to be, and such Note shall thereupon be and become, immediately due and payable at par together with interest accrued thereon, without presentment, demand, protest or other notice of any kind (including, without limitation, notice of intent to accelerate), all of which are hereby waived by the Company, (b) if such event is an Event of Default specified in clause (vii), (viii) or (ix) of this paragraph 7A with respect to the Company, all of the Notes at the time outstanding shall automatically become immediately due and payable together with interest accrued thereon and together with the Yield-Maintenance Amount, if any, with respect to each Note, without presentment, demand, protest or notice of any kind (including, without limitation, notice of intent to accelerate and notice of acceleration of maturity), all of which are hereby waived by the Company, and (c) if such event is not an Event of Default specified in clause (vii), (viii) or (ix) of this paragraph 7A with respect to the Company, the Required Holder(s) may at its or their option, by notice in writing to the Company, declare all of the Notes to be, and all of the Notes shall thereupon be and become, immediately due and payable together with interest accrued thereon and together with the Yield-Maintenance Amount, if any, with respect to each Note, without presentment, demand, protest or other notice of any kind (including, without limitation, notice of intent to accelerate), all of which are hereby waived by the Company. The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of the Yield-Maintenance Amount by the Company in the event that the Notes 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. 7B.Rescission of Acceleration. At any time after any or all of the Notes shall have been declared immediately due and payable pursuant to paragraph 7A, the Required Holder(s) may, by notice in writing to the Company, rescind and annul such declaration and its consequences if (i) the Company shall have paid all overdue interest on the Notes, the principal of and Yield-Maintenance Amount, if any, payable with respect to any Notes which have become due otherwise than by reason of such declaration, and interest on such overdue interest and overdue principal and Yield-Maintenance Amount at the rate specified in the Notes, (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 11C, and (iv) no judgment or decree shall have been entered for the payment of any amounts due pursuant to the Notes or this Agreement. No such rescission or annulment shall extend to or affect any subsequent Event of Default or Default or impair any right arising therefrom. 7C.Notice of Acceleration or Rescission. Whenever any Note shall be declared immediately due and payable pursuant to paragraph 7A or any such declaration shall be rescinded and annulled pursuant to paragraph 7B, the Company shall forthwith give written notice thereof to the holder of each Note at the time outstanding. 7D.Other Remedies. If any Event of Default or Default shall occur and be continuing, the holder of any Note may proceed to protect and enforce its rights under this Agreement and such Note 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 covenant or other agreement contained in this Agreement or in aid of the exercise of any power granted in this Agreement. No remedy conferred in this Agreement upon the holder of any Note 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. PARAGRAPH 8. REPRESENTATIONS, COVENANTS AND WARRANTIES. 8. Representations, Covenants and Warranties. The Company represents, covenants and warrants as follows: 8A. Corporate Organization and Authority. Each of the Company and the Subsidiaries: (i) is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation; (ii) has all legal and corporate 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; (iii) has all licenses, certificates, permits, franchises and other governmental authorizations necessary 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, permits, franchises and other governmental authorizations, in the aggregate for all such failures, could not reasonably be expected to have a Material Adverse Effect; and (iv) has duly qualified or has been duly licensed, and is authorized to do business and is in good standing, as a foreign corporation, in each state (each of which states is listed in Part 8A(iv) of Annex 3 hereto) 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. 8B. Financial Statements; Indebtedness; Material Adverse Change. (i) Financial Statements. The Company has provided each Purchaser with its financial statements described in Part 8B(i) of Annex 3 hereto. Such financial statements have been prepared in accordance with GAAP consistently applied, and present fairly, in all material respects, the financial position of the Company and its consolidated subsidiaries as of such dates and the results of their operations and cash flows for such periods. All such financial statements include the accounts of all Subsidiaries of the Company for the respective periods during which a Subsidiary relationship has existed. (ii) Indebtedness. Part 8B(ii) of Annex 3 hereto lists all Indebtedness of the Company and the Subsidiaries as of the Closing Date, and provides the following information with respect to each item of such Indebtedness: (a) the holder thereof, (b) the outstanding amount, (c) the portion which is classified as current under GAAP, and (d) the collateral securing such Indebtedness, if any. (iii) Material Adverse Change. Since September 30, 1995, there has been no change in the business, prospects, profits, Properties or condition (financial or otherwise) of the Company or any of the Subsidiaries, except changes in the ordinary course of business that, in the aggregate for all such changes, could not reasonably be expected to have a Material Adverse Effect. (iv) Other Financial Information. All statements or summaries of historical and pro forma financial condition and performance of the Company and the Subsidiaries contained in the Most Recent 10K or described in Part 8B(i) of Annex 3 have been in all material respects prepared in accordance with GAAP, unless otherwise expressly noted therein. All assumptions and estimates upon which any statements of pro forma financial condition or performance have been based are reasonable in light of the circumstances existing at the time such assumptions and estimates were made, based on the best information available to management of the Company and the Subsidiaries at the time of the preparation thereof. As of the Closing Date, and in light of the circumstances existing on such date, such assumptions continue to be reasonable, based on the best information available to the management of the Company and the Subsidiaries. 8C. Nature of Business. The Most Recent 10-K (a copy of which previously has been delivered to you), correctly describes the general nature of the business and principal Properties of the Company and the Subsidiaries as of the Closing Date. 8D. Subsidiaries and Affiliates. Part 8D of Annex 3 hereto sets forth (i) 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 (ii) a description of the Affiliates (other than individuals) and the nature of their 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. 8E. Title to Properties; Leases; Patents, Trademarks, etc. (i) Each of the Company and the Subsidiaries has good and marketable title to all of the real Property, and good title to all of the other Property, reflected in the most recent balance sheet referred to in paragraph 8B(i) hereof (except as sold or otherwise disposed of in the ordinary course of business), except where the failure to have such good and marketable title (a) is immaterial to such financial statements, and (b) could not reasonably be expected to have a Material Adverse Effect. All such Property is free from Liens not permitted by paragraph 6C(i) hereof. (ii) Each of the Company and the Subsidiaries has complied with all material obligations under all leases to which it is a party, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. All such leases are in full force and effect and each of the Company and the Subsidiaries enjoys peaceful and undisturbed possession under all such leases. (iii) 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, except for such failures to own, possess, or have the right to use, that, in the aggregate for all such failures, could not reasonably be expected to have a Material Adverse Effect. 8F. Taxes. (i) Returns Filed; Taxes Paid. (a) All tax returns required to be filed by the Company and each Subsidiary and any other Person with which the Company or any Subsidiary files or has filed a consolidated return in any jurisdiction have been filed on a timely basis, and all taxes, assessments, fees and other governmental charges upon the Company, such Subsidiary and any such Person, and upon any of their respective Properties, income or franchises, that are due and payable have been paid, except for such tax returns and such tax payments which are being contested in good faith and which could not, in the aggregate for all such tax returns and payments, reasonably be expected to have a Material Adverse Effect. (b) All liabilities of each of the Company, the Subsidiaries and the other Persons referred to in the preceding clause (i) with respect to federal income taxes have been finally determined except for the fiscal years set forth in 8F(i) of Annex 3 hereto, the only years not closed by the completion of an audit or the expiration of the statute of limitations. (ii) Book Provisions Adequate. (a) The amount of the liability for taxes reflected in each of the balance sheets referred to in paragraph 8B(i) hereof is in each case an adequate provision for taxes as of the dates of such balance sheets (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 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. (b) The Company does not know 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 paragraph 8B(i) hereof. 8G. Pending Litigation. (i) 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. (ii) 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. 8H. Full Disclosure. The financial statements referred to in paragraph 8B(i) hereof do not, nor does this Agreement, the Most Recent 10-K or any statement furnished by or on behalf of the Company to you in connection with the negotiation or any closing of any sale of the Notes, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein and herein not misleading. 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. 8I. Charter Instruments, Other Agreements, etc. (i) Charter Instruments. Neither the Company nor any Subsidiary is in violation in any respect of any term of any charter instrument or bylaw. (ii) Agreements Relating to Indebtedness. Neither the Company nor any Subsidiary is in violation of any term in, and no default or event of default exists under, any agreement or other instrument to which it is a party or by which it or any of its Properties may be bound relating to, or providing the terms of, any Indebtedness specified in Part 8B(ii) of Annex 3 hereto having a principal or stated amount equal to or in excess of $250,000. (iii) Other Agreements. Neither the Company nor any Subsidiary is in violation of any term in, and no default or event of default exists under, any agreement or other instrument to which it is a party or by which it or any of its Properties may be bound (other than the agreements and other instruments specified in clause (ii) of this paragraph 8I), which, in the aggregate for all such violations, could reasonably be expected to have a Material Adverse Effect. 8J. Restrictions on Company and Subsidiaries. Neither the Company nor any Subsidiary: (i) is a party to any contract or agreement, or subject to any charter or other corporate restriction that, in the aggregate for all such contracts, agreements, charters and corporate restrictions, could reasonably be expected to have a Material Adverse Effect; (ii) is a party to any contract or agreement that restricts the right or ability of such corporation to incur Indebtedness, other than this Agreement and the agreements listed in Part 8J(ii) of Annex 3 hereto, none of which restricts the issuance and sale of the Notes or the performance by the Company of its obligations under this Agreement or under the Notes; or (iii) has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its Property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by paragraph 6C(1) hereof. True, correct and complete copies of each of the agreements listed in Part 8J(ii) of Annex 3 hereto have been provided to you and your counsel. 8K. Compliance with Law. Neither the Company nor any Subsidiary is in violation of any law, ordinance, governmental rule or regulation to which it is subject, which violations, in the aggregate, could reasonably be expected to have a Material Adverse Effect. 8L. ERISA. (i) Prohibited Transactions. Neither the execution of this Agreement, the purchase of the Notes by you nor the consummation of the transactions contemplated by this Agreement will constitute a "prohibited transaction" (as such term is defined in section 406(a) of ERISA) or result in a tax under section 4975 of the Code. The representation by the Company in the preceding sentence is made in reliance upon your respective representations in paragraph 9B hereof as to the source of funds to be used by you to purchase the Notes. (ii) Pension Plans. (a) Compliance with ERISA. The Company and the ERISA Affiliates are in compliance with ERISA, except for such failures to comply that, in the aggregate for all such failures, could not reasonably be expected to have a Material Adverse Effect. (b) Funding Status; Relationship of Vested Benefits to Pension Plan Assets. (I) No "accumulated funding deficiency" (as defined in section 302 of ERISA and section 412 of the Code), whether or not waived, exists with respect to any Pension Plan. (II) The present value of all benefits, determined as of the most recent valuation date for such benefits as provided in paragraph 6G hereof, 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 such date as provided in paragraph 6G hereof. (c) PBGC. No liability to the PBGC has been or is expected to be incurred by the Company or any ERISA Affiliate with respect to any Pension Plan that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. No circumstance exists that constitutes grounds under section 4042 of ERISA entitling the PBGC to institute proceedings to terminate, or appoint a trustee to administer, any Pension Plan or trust created thereunder, nor has the PBGC instituted any such proceeding. (d) Multiemployer Plans. Neither the Company nor any ERISA Affiliate has incurred or presently expects to incur any withdrawal liability under Title IV of ERISA with respect to any Multiemployer Plan. There have been no "reportable events" (as such term is defined in section 4043 of ERISA) with respect to any Multiemployer Plan that could result in the termination of such Multiemployer Plan and give rise to a liability of the Company or any ERISA Affiliate in respect thereof. (iii) Disclosure. Part 8L(iii) of Annex 3 sets forth 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" having the meanings specified in section 3 of ERISA and "affiliate" and "employer security" having the meanings specified in section 407(d) of ERISA). 8M. Certain Laws. (i) Environmental Protection Laws. (a) Compliance. Each of the Company and the Subsidiaries is in compliance with all Environmental Protection Laws in effect in each jurisdiction where it is presently doing business and in which the failure so to comply, in the aggregate for all such failures, could reasonably be expected to have a Material Adverse Effect. (b) Liability. 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. Neither the Company nor any Subsidiary has received any: (I) notice from any Governmental Authority by which any of its present 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 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 owned or leased Properties; or (III) communication, written or oral, from any Governmental Authority concerning any action or omission by the Company or such Subsidiary in connection with its ownership or leasing of any Property resulting in the release of any Hazardous Substance or resulting in any violation of any Environmental Protection Law; where the effect of which, in the aggregate for all such notices and communications, could reasonably be expected to have a Material Adverse Effect. (ii) Health Laws. (a) Compliance. Each of the Company and the Subsidiaries is in compliance with all Health Laws in effect in each jurisdiction where it is presently doing business and in which the failure so to comply, in the aggregate for all such failures, could reasonably be expected to have a Material Adverse Effect. (b) Liability. Neither the Company nor any Subsidiary is subject to any liability under any Health Law that, in the aggregate for all such liabilities, could reasonably be expected to have a Material Adverse Effect. (c) Notices. Neither the Company nor any Subsidiary has received any notice from any Governmental Authority concerning any actual or alleged violation of any Health Law where the effect of which, in the aggregate for all such notices and communications, could reasonably be expected to have a Material Adverse Effect. 8N. Transactions are Legal and Authorized; Obligations are Enforceable. (i) Transactions are Legal and Authorized. Each of the issuance, sale and delivery of the Notes by the Company, the execution and delivery of this Agreement by the Company, and compliance by the Company with all of the provisions of this Agreement and of the Notes: (a) is within the corporate powers of the Company; and (b) is legal and does not conflict with, result in any breach of 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 any such Person is a party or by which any such Person or any of such Person's respective Properties may be bound. (ii) Obligations are Enforceable. Each of this Agreement and the Notes have been duly authorized by all necessary action on the part of the Company, have been duly executed and delivered by authorized officers of the Company and constitute legal, valid and binding obligations of the Company, enforceable in accordance with their respective terms except that the enforceability of this Agreement and of the Notes may be limited by applicable bankruptcy, reorganization, arrangement, insolvency, moratorium or other similar laws affecting the enforceability of creditors' rights generally. 8O. Governmental Consent; Certain Laws. (i) 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 this 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 Subsidiary as a condition to the execution and delivery of this Agreement or the offer, issuance, sale or delivery of the Notes. (ii) Certain Laws. Neither the Company nor any Subsidiary is subject to regulation under, or otherwise required to comply with any filing, registration or notice provisions of, (i) the Investment Company Act of 1940, as amended, (ii) the Public Utility Holding Company Act of 1935, as amended, (iii) the Transportation Acts (49 U.S.C.), as amended, or (iv) the Federal Power Act, as amended, except that Ohse is subject to regulation under the Transportation Acts (49 U.S.C.), as amended. 8P. Private Offering of Notes. Neither the Company nor any Subsidiary has offered any of the Notes or any similar Security of the Company 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 you. 8Q. No Defaults; Transactions Prior to Closing Date, etc. (i) No event has occurred and no condition exists that, upon the execution and delivery of this Agreement or the issuance of the Notes, would constitute a Default or an Event of Default. (ii) Except as disclosed in Part 8Q(ii) of Annex 3 hereto, neither the Company nor any Subsidiary entered into any transaction during the period beginning on September 30, 1995 and ending on the Closing Date that would have been prohibited by paragraphs 6B, 6C(4), 6D or 6E hereof had such paragraphs applied during such period. 8R. Use of Proceeds of Notes. (i) Use of Proceeds. The Company will generally apply the proceeds from the sale of the Notes to finance Capital Expenditures of the Company. (ii) Margin Securities. None of the transactions contemplated herein and in the Notes (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 G, T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. The obligations of the Company under this Agreement and the Notes are not and will not be directly or indirectly secured (within the meaning of such Regulation G) by any Margin Security, and no Notes are being sold on the basis of any such collateral. (iii) 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. 8S. Solvency. The fair value of the business and assets of the Company is in excess of the amount that will be required to pay its liabilities (including, without limitation, contingent, subordinated, unmatured and unliquidated liabilities on existing debts, as such liabilities may become absolute and matured), in each case both prior to and after giving effect to the transactions contemplated by this Agreement and the Notes. After giving effect to the transactions contemplated by this Agreement and the Notes, the Company will not be engaged in any business or transaction, or about to engage in any business or transaction, for which it has unreasonably small capital, and the Company has or had no intent to hinder, delay or defraud any entity to which it is, or will become, on or after the Closing Date, indebted or to incur debts that would be beyond its ability to pay as such debts mature. PARAGRAPH 9. REPRESENTATIONS OF EACH PURCHASER. 9.Representations of Each Purchaser. Each Purchaser represents as follows: 9A.Nature of Purchase. Such Purchaser is not acquiring the Notes to be purchased by it hereunder with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act, provided that the disposition of such Purchaser's property shall at all times be and remain within its control. 9B.Source of Funds. The source of funds to be used by such Purchaser to purchase the Notes constitutes assets allocated to: (i) the "insurance company general account" of such Purchaser (as such term is defined under Section V of the United States Department of Labor's Prohibited Transaction Class Exemption ("PTCE") 95-60) and, as of the date of the purchase of the Notes, such Purchaser satisfies all of the applicable requirements for relief under Sections I and V of PTCE 95-60 or (ii) as separate account maintained by such Purchaser in which no employee benefit plan, other than employee benefit plans identified on a list that has been furnished by such Purchaser to the Company, participates to the extent of 10% or more. 9C.Representations of Each Purchaser to Each Other Purchaser. By its execution of this Agreement, each Purchaser severally represents and acknowledges to each other Purchaser that it has, independently and without reliance upon any other Purchaser and based on the financial statements referred to in paragraph 8B(i) and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Purchaser also severally represents and acknowledges to each other Purchaser that it will, independently and without reliance upon any other Purchaser and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. The provisions of this paragraph 9C are for the sole benefit of the Purchasers and are not intended to benefit or to confer any right upon the Company or any other Person. PARAGRAPH 10. DEFINITIONS. 10. Definitions. For the purpose of this Agreement, the terms defined in the introductory sentence and in paragraphs 1 and 2 shall have the respective meanings specified therein, and the following terms shall have the meanings specified with respect thereto below (such meanings to be equally applicable to both the singular and plural forms of the terms defined): 10A. Yield-Maintenance Terms. "Business Day" shall mean any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed. "Called Principal" shall mean, with respect to any Note, the principal of such Note that is to be prepaid pursuant to paragraph 4B or is declared to be immediately due and payable pursuant to paragraph 7A, as the context requires. "Discounted Value" shall mean, with respect to the Called Principal of any 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 Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal. "Reinvestment Yield" shall mean, with respect to the Called Principal of any Note, 0.50% over the yield to maturity implied by (i) the yields reported, as of 10:00 a.m. (New York City time) on the Business Day next preceding the Settlement Date with respect to such Called Principal, on the display designated as "Page 678" on the Telerate Service (or such other display as may replace Page 678 on the Telerate Service) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or if such yields shall not be reported as of such time or the yields reported as of such time shall not be ascertainable, (ii) 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 Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield shall be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between yields reported for various maturities. "Remaining Average Life" shall mean, with respect to the Called Principal of any Note, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) each Remaining Scheduled Payment of such Called Principal (but not of interest thereon) by (b) the number of years (calculated to the nearest one-twelfth year) which 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" shall mean, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due on or 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. "Settlement Date" shall mean, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to paragraph 4B or is declared to be immediately due and payable pursuant to paragraph 7A, as the context requires. "Yield-Maintenance Amount" shall mean, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Called Principal of such Note over the sum of (i) such Called Principal plus (ii) interest accrued thereon as of (including interest due on) the Settlement Date with respect to such Called Principal. The Yield-Maintenance Amount shall in no event be less than zero. 10B. Other Terms. "Acceptable Control Persons" shall mean any members of the immediate family of, or the respective heirs, executors or trustees holding for the sole benefit of such heirs or members of the immediate family of, James T. Hudson. "Affiliate" shall mean, at any time, a Person (other than a Subsidiary) (i) that directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, the Company, (ii) that beneficially owns or holds 5% or more of any class of the Voting Stock of the Company, (iii) 5% or more of the Voting Stock (or in the case of a Person that is not a corporation, 5% or more of the equity interest) of which is beneficially owned or held by the Company or a Subsidiary, (iv) that is an officer or director (or a member of the immediate family of an officer or director) of the Company or any Subsidiary, or (v) that is an Acceptable Control Person, a natural Person in any manner related by birth or marriage to any Acceptable Control Person or a Person owned or Controlled by any such Person, at such time. As used in this definition, "Control" shall mean 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. "Applicable Net Income Carryover" shall have the meaning specified in paragraph 6A(1). "Bank Credit Agreement" shall mean the Revolving Credit Agreement, dated as of April 26, 1994, by and among the Company, the Banks and Rabobank, as agent, as the same shall have been amended, modified or restated from time to time, and any substitute or replacement credit facility in respect thereof. "Banks" shall mean each of Rabobank, Bank of America National Trust and Savings Association, NationsBank of Texas, National Association, Caisse Nationale de Credit Agricole, and Harris Trust and Savings Bank or any future banks which become parties to the Bank Credit Agreement. "Board of Directors" shall mean the board of directors of the Company or a Subsidiary, as applicable, or any committee thereof that, in the instance, shall have the lawful power to exercise the power and authority of such board of directors. "Capital Expenditure" shall have the meaning specified in paragraph 6E. "Capital Lease" shall mean, at any time, a lease with respect to which the lessee is required to recognize the acquisition of an asset and the incurrence of a liability at such time in accordance with GAAP. "Cash Flow Coverage Ratio" shall have the meaning specified in paragraph 6A(4). "Closing" or "Date of Closing" shall have the meaning specified in paragraph 2. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Company" shall have the meaning specified in the introductory sentence hereof. "Consolidated Indebtedness" shall have the meaning specified in paragraph 6C(2)(iii). "Consolidated Interest Expense" shall have the meaning specified in paragraph 6A(4). "Consolidated Lease Expense" shall have the meaning specified in paragraph 6A(4). "Consolidated Net Income" shall have the meaning specified in paragraph 6A(4). "Current Debt" shall mean, with respect to any Person, (without duplication) (i) the portion of the amount of liabilities for borrowed money of such Person pursuant to a credit facility, under which such Person borrows (and re-borrows) money on a short-term basis for working capital purposes in the ordinary course of such Person's business, that is at such time classified in good faith by such Person as a current liability, and (ii) all other liabilities for borrowed money, Capital Leases and all liabilities secured by any Lien existing on Property owned by such Person whether or not such liabilities have been assumed, which, in each case are payable on demand or within one year, except: (a) any such liabilities which are renewable or extendable at the option of such Person to a date more than one year, and (b) any such liabilities which, although payable within one year, constitute payments required to be made on account of principal of Indebtedness initially expressed to mature more than one year from origination. "Environmental Protection Law" shall mean any federal, state, county, regional or local law, statute or regulation (including, without limitation, CERCLA, RCRA and SARA) 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. As used in this definition: "CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended from time to time (by SARA or otherwise), and all rules and regulations promulgated in connection therewith. "RCRA" shall mean the Resource Conservation and Recovery Act of 1976, as amended from time to time, and all rules and regulations promulgated in connection therewith. "SARA" shall mean the Superfund Amendments and Reauthorization Act of 1986, as amended from time to time, and all rules and regulations promulgated in connection therewith. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" shall mean any corporation which is a member of the same controlled group of corporations as the Company within the meaning of section 414(b) of the Code, or any trade or business which is under common control with the Company within the meaning of section 414(c) of the Code. "Event of Default" shall mean any of the events specified in paragraph 7A, provided that there has been satisfied any requirement in connection with such event for the giving of notice, or the lapse of time, or the happening of any further condition, event or act, and "Default" shall mean any of such events, whether or not any such requirement has been satisfied. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Fair Market Value" shall mean, 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. "GAAP" shall have the meaning specified in paragraph 10C. "Governmental Authority" shall mean: (i) the government of (a) the United States of America and any state or other political subdivision thereof, or (b) any other 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; and (ii) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. "Guaranty" shall mean, with respect to any Person (for the purposes of this definition, the "Guarantor"), any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of the Guarantor guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person (the "Primary Obligor") in any manner, whether directly or indirectly, including, without limitation, obligations incurred through an agreement, contingent or otherwise, by the Guarantor: (i) to purchase such indebtedness or obligation or any Property constituting security therefor; (ii) to advance or supply funds (a) for the purpose of payment of such indebtedness, dividend or other obligation, or (b) 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, dividend or other obligation; (iii) 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 (iv) 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 issuer of such Guaranty. "Hazardous Substances" shall mean any and all pollutants, contaminants, toxic or hazardous wastes and 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, in each of the foregoing cases, restricted, prohibited or penalized by any applicable law. "Health Laws" shall mean any federal, state, county, regional or local law, statute or regulation enacted in connection with, or relating to, the processing, production, use, marketing or sale of meat, poultry, feed and other food products (and any similar businesses of the Company and the Subsidiaries), including, without limitation, all regulations issued or promulgated in connection with such laws and statutes by any Governmental Authority (including, without limitation, the United States Department of Agriculture and the United States Food and Drug Administration), and any orders, decrees or judgments issued by any court of competent jurisdiction in connection with any of the foregoing. "Hudson Development" shall mean Hudson Development Corporation, an Arkansas corporation. "Hudson Foreign Sales" shall mean Hudson Foods Foreign Sales, Inc., a corporation organized under the laws of the United States Virgin Islands. "Hudson Poland" shall mean Hudson Foods Poland s.p. zo.o, a limited liability company organized under the laws of Poland. "Indebtedness" shall mean, at any time, with respect to any Person, without duplication: (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of Property acquired by, or services rendered to, such Person, (ii) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to any Property acquired by such Person, (iii) the present value, determined in accordance with GAAP, of all obligations of such Person under leases which shall have been or should be recorded as Capital Leases in accordance with GAAP, (iv) all indebtedness or other payment obligations for the deferred purchase price of property or services secured by any Lien upon or in any Property owned by such Person whether or not such Person has assumed or become liable for the payment of such indebtedness, (v) indebtedness arising under acceptance facilities, in connection with surety or other similar bonds, and the undrawn maximum face amount of all outstanding letters of credit issued for the account of such Person and, without duplication, the outstanding amount of all drafts drawn thereunder, (vi) Swaps of such Person, (vii) all liabilities of such Person in respect of unfunded vested benefits under Pension Plans and all asserted withdrawal liabilities of such Person or a commonly controlled entity to a Multiemployer Plan, and (viii) all direct or indirect Guaranties by such Person of indebtedness described in this definition of any other Person; provided, that, for purposes of this definition, Trade Debt and Operating Leases shall not be included. As used in this definition: "Swaps" shall mean, with respect to any Person, payment obligations with respect to interest rate swaps, currency swaps and similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency. For purposes of this Agreement, the amount of the obligation under any Swap shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Swap had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such Swap 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 such obligation shall be the net amount so determined. "Trade Debt" shall mean trade accounts payable incurred in the ordinary course of business with an original maturity or due date of not greater than 180 days from the creation thereof (and which are not overdue for more than 30 days). "Institutional Investor" shall mean the Purchasers, any affiliate of any of the Purchasers and any holder or beneficial owner of Notes that is an "accredited investor" as defined in section 2(15) of the Securities Act. "Intangible Assets" shall have the meaning specified in paragraph 6A(1). "Leverage Ratio" shall have the meaning specified in paragraph 6A(3). "Lien" shall mean 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, encumbrance, pledge, conditional sale, sale with recourse or a trust receipt, or a lease, consignment or bailment for security purposes. The term "Lien" includes, without limitation, reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting real Property and includes, without limitation, with respect to stock, stockholder agreements, voting trust agreements, buy-back agreements and all similar arrangements. For the purposes hereof, the Company and each Subsidiary shall be 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. "Margin Security" shall mean "margin stock" within the meaning of Regulations G, T 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" shall mean a material adverse effect on (i) the business, prospects, profits, Properties or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, (ii) the ability of the Company to perform its obligations set forth in this Agreement and in the Notes, or (iii) the validity or enforceability of any of the terms or provisions of this Agreement or the Notes. "Most Recent 10-K" shall mean the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1995, as filed with the Securities and Exchange Commission. "Multiemployer Plan" shall mean 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 of ERISA). "Net Tangible Assets" shall have the meaning specified in paragraph 6C(5). "Notes" shall have the meaning specified in paragraph 1. "Officer's Certificate" shall mean a certificate signed in the name of the Company by its President, one of its Vice Presidents or its Treasurer. "Ohse" shall mean Ohse Transportation, Inc., a Kansas corporation. "Operating Lease" shall have the meaning specified in paragraph 6A(4). "PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor entity. "Pension Plan" shall mean, at any time, any "employee pension benefit plan" (as such term is defined in section 3 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. "Person" shall mean an individual, sole proprietorship, partnership, corporation, trust, limited liability company, joint venture, unincorporated organization, or a government or agency or political subdivision thereof. "Property" shall mean any interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible. "Purchasers" shall have the meaning specified in the introductory sentence hereof. "Rabobank" shall mean Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. ("Rabobank Nederland"), New York Branch. "Person" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, a limited liability company, an unincorporated organization and a government or any department or agency thereof. "Required Holder(s)" shall mean the holder or holders of at least 66 2/3% of the aggregate principal amount of the Notes from time to time outstanding. "Securities Act" shall mean the Securities Act of 1933, as amended. "Security" shall mean "security" as defined in section 2(1) of the Securities Act. "Senior Financial Officer" shall mean the chief financial officer, the principal accounting officer, the treasurer or the comptroller of the Company. "Senior Officer" shall mean the chief executive officer, the chief operating officer, the president, the chief financial officer, the treasurer or the secretary of the Company. "Subordinated Debt" shall mean, at any time, any unsecured Indebtedness of the Company or a Subsidiary that is in any respect subordinate or junior in right of payment or otherwise to the Indebtedness evidenced by the Notes or to any other Indebtedness of the Company or any Subsidiary. "Subsidiary" shall mean, at any time, any corporation of which the Company owns, directly or indirectly, more than 50% (by number of votes) of each class of the Voting Stock of such corporation at such time. "Subsidiary Guaranty" shall mean a Guaranty Agreement, substantially in the form of Exhibit E hereto, executed by a Subsidiary in favor of the holders of Notes pursuant to paragraph 5I hereof guarantying the Company's obligations under this Agreement and the Notes. "Surviving Corporation" shall have the meaning specified in paragraph 6C(4)(i). "Tangible Net Worth" shall have the meaning specified in paragraph 6A(1). "Total Subsidiary Indebtedness" shall have the meaning specified in paragraph 6C(2)(iii). "Transferee" shall mean any direct or indirect transferee of all or any part of any Note purchased by any Purchaser under this Agreement. "Transfers" shall have the meaning specified in paragraph 6C(4)(iii). "Voting Stock" shall mean capital stock of any class or classes of a corporation the holders of which are ordinarily, in the absence of contingencies, entitled to elect corporate directors (or Persons performing similar functions). "Wholly-Owned Subsidiary" shall mean, at any time, any Subsidiary 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. 10C.Accounting Principles, Terms and Determinations. All references in this Agreement to "GAAP" shall be deemed to refer to generally accepted accounting principles in effect in the United States at the time of application thereof. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all unaudited financial statements and certificates and reports as to financial matters required to be furnished hereunder shall be prepared, in accordance with generally accepted accounting principles, applied on a basis consistent with the most recent audited consolidated financial statements of the Company and its Subsidiaries delivered pursuant to clause (ii) of paragraph 5A or, if no such statements have been so delivered, the most recent audited financial statements referred to in clause (i) of paragraph 8B. PARAGRAPH 11. MISCELLANEOUS. 11A.Note Payments. So long as any Purchaser shall hold any Note, the Company will make payments of principal of, interest on and any Yield-Maintenance Amount payable with respect to such Note, which comply with the terms of this Agreement, by wire transfer of immediately available funds for credit (not later than 12:00 noon, New York City time, on the date due) to such Purchaser's account or accounts as specified in the Purchaser Schedule attached hereto, or such other account or accounts in the United States as such Purchaser may designate in writing, notwithstanding any contrary provision herein or in any Note with respect to the place of payment. Each Purchaser agrees that, before disposing of any Note, such Purchaser will make a notation thereon (or on a schedule attached thereto) of all principal payments previously made thereon and of the date to which interest thereon has been paid. The Company agrees to afford the benefits of this paragraph 11A to any Transferee which shall have made the same agreement as each Purchaser has made in this paragraph 11A. 11B.Expenses. The Company agrees, whether or not the transactions contemplated hereby shall be consummated, to pay, and save each Purchaser and any Transferee harmless against liability for the payment of, all out-of-pocket expenses arising in connection with such transactions, including (i) all document production and duplication charges and the fees and expenses of any special counsel engaged by such Purchaser or such Transferee in connection with this Agreement, the transactions contemplated hereby and any subsequent proposed modification of, or proposed consent under, this Agreement, whether or not such proposed modification shall be effected or proposed consent granted, and (ii) the costs and expenses, including attorneys' fees, incurred by such Purchaser or such Transferee in enforcing (or determining whether or how to enforce) any rights under this Agreement or the Notes or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement or the transactions contemplated hereby or by reason of such Purchaser's or such Transferee's having acquired any Note, including without limitation costs and expenses incurred in any bankruptcy case. The obligations of the Company under this paragraph 11B shall survive the transfer of any Note or portion thereof or interest therein by any Purchaser or any Transferee and the payment of any Note. 11C.Consent to Amendments. This Agreement may be amended, and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, if the Company shall obtain the written consent to such amendment, action or omission to act, of the Required Holder(s) except that, without the written consent of the holder or holders of all Notes at the time outstanding, no amendment to this Agreement shall change the maturity of any Note, or change the principal of, or the rate or time of payment of interest on or any Yield-Maintenance Amount payable with respect to any Note, or affect the time, amount or allocation of any prepayments, or change the proportion of the principal amount of the Notes required with respect to any consent, amendment, waiver or declaration. Each holder of any Note at the time or thereafter outstanding shall be bound by any consent authorized by this paragraph 11C, whether or not such Note shall have been marked to indicate such consent, but any Notes issued thereafter may bear a notation referring to any such consent. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein and in the Notes, the term "this Agreement" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. 11D.Form, Registration, Transfer and Exchange of Notes; Lost Notes. The Notes are issuable as registered notes without coupons in denominations of at least $100,000, except as may be necessary to reflect any principal amount not evenly divisible by $100,000. The Company shall keep at its principal office a register in which the Company shall provide for the registration of Notes and of transfers of Notes. Upon surrender for registration of transfer of any Note at the principal office of the Company, the Company shall, at its expense, execute and deliver one or more new Notes of like tenor and of a like aggregate principal amount, registered in the name of such transferee or transferees. At the option of the holder of any Note, such Note may be exchanged for other Notes of like tenor and of any authorized denominations, of a like aggregate principal amount, upon surrender of the Note to be exchanged at the principal office of the Company. Whenever any Notes are so surrendered for exchange, the Company shall, at its expense, execute and deliver the Notes which the holder making the exchange is entitled to receive. Every Note surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer duly executed, by the holder of such Note or such holder's attorney duly authorized in writing. Any Note or Notes issued in exchange for any Note or upon transfer thereof shall carry the rights to unpaid interest and interest to accrue which were carried by the Note so exchanged or transferred, so that neither gain nor loss of interest shall result from any such transfer or exchange. Upon receipt of written notice from the holder of any Note of the loss, theft, destruction or mutilation of such Note and, in the case of any such loss, theft or destruction, upon receipt of such holder's unsecured indemnity agreement, or in the case of any such mutilation upon surrender and cancellation of such Note, the Company will make and deliver a new Note, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Note. 11E.Persons Deemed Owners; Participations. Prior to due presentment for registration of transfer, the Company may treat the Person in whose name any Note is registered as the owner and holder of such Note for the purpose of receiving payment of principal of, interest on and any Yield-Maintenance Amount payable with respect to such Note and for all other purposes whatsoever, whether or not such Note shall be overdue, and the Company shall not be affected by notice to the contrary. Subject to the preceding sentence, the holder of any Note may from time to time grant participations in such Note to any Person on such terms and conditions as may be determined by such holder in its sole and absolute discretion, provided that any such participation shall be in a principal amount of at least $100,000. 11F.Survival of Representations and Warranties; Entire Agreement. All representations and warranties contained herein or made in writing by or on behalf of the Company in connection herewith shall survive the execution and delivery of this Agreement and the Notes, the transfer by any Purchaser of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any Transferee, regardless of any investigation made at any time by or on behalf of any Purchaser or any Transferee. Subject to the preceding sentence, this Agreement and the Notes 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. 11G.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 the parties hereto (including, without limitation, any Transferee) whether so expressed or not. 11H.Disclosure to Other Persons. The Company acknowledges that the holder of any Note may deliver copies of any financial statements and other documents delivered to such holder, and disclose any other information disclosed to such holder, by or on behalf of the Company or any Subsidiary in connection with or pursuant to this Agreement to (i) such holder's directors, officers, employees, agents and professional consultants, (ii) any other holder of any Note, (iii) any Person to which such holder offers to sell such Note or any part thereof, (iv) any Person to which such holder sells or offers to sell a participation in all or any part of such Note, (v) any Person from which such holder offers to purchase any security of the Company, (vi) any federal or state regulatory authority having jurisdiction over such holder, (vii) the National Association of Insurance Commissioners or any similar organization 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 holder, (b) in response to any subpoena or other legal process or informal investigative demand or (c) in connection with any litigation to which such holder is a party. 11I.Notices. All notices or other communications provided for hereunder (except for the telephonic notice required by paragraph 4D) shall be in writing and sent by first class mail or nationwide overnight delivery service (with charges prepaid) and (i) if to any Purchaser, addressed to such Purchaser at the address specified for such communications in the Purchaser Schedule attached hereto, or at such other address as such Purchaser shall have specified to the Company in writing, (ii) if to any other holder of any Note, addressed to such other holder at such address as such other holder shall have specified to the Company in writing or, if any such other holder shall not have so specified an address to the Company, then addressed to such other holder in care of the last holder of such Note which shall have so specified an address to the Company, and (iii) if to the Company, addressed to it at 1225 Hudson Road, Rogers, Arkansas 72756, Attention: Charles B. Jurgensmeyer, Chief Financial Officer and Executive Vice President, and Tommy D. Reynolds, Secretary and Treasurer, or at such other address as the Company shall have specified to the holder of each Note in writing; provided, however, that any such communication to the Company may also, at the option of the holder of any Note, be delivered by any other means either to the Company at its address specified above or to any officer of the Company. 11J.Payments Due on Non-Business Days. Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day. If the date for any payment is extended to the next succeeding Business Day by reason of the preceding sentence, the period of such extension shall be included in the computation of the interest payable on such Business Day. 11K.Satisfaction Requirement. If any agreement, certificate or other writing, or any action taken or to be taken, is by the terms of this Agreement required to be satisfactory to any Purchaser or to the Required Holder(s), the determination of such satisfaction shall be made by such Purchaser or the Required Holder(s), as the case may be, in the sole and exclusive judgment (exercised in good faith) of the Person or Persons making such determination. 11L.Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK. This Agreement may not be changed orally, but (subject to the provisions of paragraph 11C) only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. 11M.Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 11N.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. 11O.Maximum Interest Payable. The Company, each Purchaser and any other holders of the Notes specifically intend and agree to limit contractually the amount of interest payable under this Agreement, the Notes and all other instruments and agreements related hereto and thereto to the maximum amount of interest lawfully permitted to be charged under applicable law. Therefore, none of the terms of this Agreement, the Notes or any instrument pertaining to or relating to this Agreement or the Notes shall ever be construed to create a contract to pay interest at a rate in excess of the maximum rate permitted to be charged under applicable law, and neither the Company, any guarantor nor any other party liable or to become liable hereunder, under the Notes, any guaranty or under any other instruments and agreements related hereto and thereto shall ever be liable for interest in excess of the amount determined at such maximum rate, and the provisions of this paragraph 11O shall control over all other provisions of this Agreement, any Notes, any guaranty or any other instrument pertaining to or relating to the transactions herein contemplated. If any amount of interest taken or received by any Purchaser or any holder of a Note shall be in excess of said maximum amount of interest which, under applicable law, could lawfully have been collected by such Purchaser or such holder incident to such transactions, then such excess shall be deemed to have been the result of a mathematical error by all parties hereto and shall be refunded promptly by the Person receiving such amount to the party paying such amount, or, at the option of the recipient, credited ratably against the unpaid principal amount of the Note or Notes held by such Purchaser or such holder, respectively. All amounts paid or agreed to be paid in connection with such transactions which would under applicable law be deemed "interest" shall, to the extent permitted by such applicable law, be amortized, prorated, allocated and spread throughout the stated term of this Agreement and the Notes. "Applicable law" as used in this paragraph means that law in effect from time to time which permits the charging and collection of the highest permissible lawful, nonusurious rate of interest on the transactions herein contemplated, and "maximum rate" as used in this paragraph means, with respect to each of the Notes, the maximum lawful, nonusurious rates of interest (if any) which under applicable law may be charged to the Company from time to time with respect to such Notes. 11P. Jurisdiction; Service of Process. THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE NOTES, OR ANY ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH HEREUNDER OR UNDER THE NOTES, BROUGHT BY ANY PURCHASER OR ANY OTHER REGISTERED HOLDER OF A NOTE AGAINST THE COMPANY OR ANY OF ITS PROPERTY, MAY BE BROUGHT BY SUCH PERSON IN THE COURTS OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR ANY STATE COURT SITTING IN NEW YORK, NEW YORK, AS SUCH PURCHASER OR OTHER REGISTERED HOLDER OF A NOTE MAY IN ITS SOLE DISCRETION ELECT, AND BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE NON-EXCLUSIVE IN PERSONAM JURISDICTION OF EACH SUCH COURT, AND AGREES THAT PROCESS SERVED EITHER PERSONALLY OR BY REGISTERED MAIL SHALL CONSTITUTE, TO THE EXTENT PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUCH SUIT, AND THE COMPANY IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, ANY CLAIM THAT THE COMPANY IS NOT SUBJECT TO THE IN PERSONAM JURISDICTION OF ANY SUCH COURT. RECEIPT OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS EVIDENCED BY A DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL SERVICE OR ANY COMMERCIAL DELIVERY SERVICE. IN ADDITION, THE COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT THE COMPANY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND/OR THE NOTES, BROUGHT IN SUCH COURTS, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF ANY PURCHASER OR OTHER REGISTERED HOLDER OF A NOTE TO SERVE ANY SUCH WRITS, PROCESS OR SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER THE COMPANY IN SUCH OTHER JURISDICTION, AND IN SUCH MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW. THE COMPANY 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. 11Q.Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. 11R.Severalty of Obligations. The sales of Notes to the Purchasers are to be several sales, and the obligations of the Purchasers under this Agreement are several obligations. Except as provided in paragraph 3F, no failure by any Purchaser to perform its obligations under this Agreement shall relieve any other Purchaser or the Company of any of its obligations hereunder, and no Purchaser shall be responsible for the obligations of, or any action taken or omitted by, any other Purchaser hereunder. If you are in agreement with the foregoing, please sign the form of acceptance on the enclosed counterparts of this letter and return the same to the Company, whereupon this letter shall become a binding agreement among the Company and the Purchasers. Very truly yours, HUDSON FOODS, INC. By________________________ Title: The foregoing Agreement is hereby accepted as of the date first above written. THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By_________________________ Vice President PRUCO LIFE INSURANCE COMPANY By_________________________ Vice President P-3 ANNEX I PURCHASER SCHEDULE Aggregate Principal Amount of Notes to be Note Denom- Purchased ination(s) THE PRUDENTIAL INSURANCE COMPANY OF AMERICA $49,000,000 $49,000,000 (1) All payments on account of Notes held by such purchaser shall be made by wire transfer of immediately available funds for credit to: Account No. 050-54-526 Morgan Guaranty Trust Company of New York 23 Wall Street New York, New York 10015 (ABA No.: 021-000-238) Each such wire transfer shall set forth the name of the Company, a reference to "6.63% Senior Notes due March 22, 2006, Security No. !INV5360!", and the due date and application (as among principal, interest and Yield-Maintenance Amount) of the payment being made. (2) Address for all notices relating to payments: The Prudential Insurance Company of America c/o Prudential Capital Group Four Gateway Center 100 Mulberry Street Newark, New Jersey 07102 Attention: Investment Operations Group (Attention: Manager) (3) Address for all other communications and notices: The Prudential Insurance Company of America c/o Prudential Capital Group 1201 Elm Street Suite 4900 Dallas, Texas 75270 Attention: Managing Director (4) Recipient of telephonic prepayment notices: Manager, Asset Management Unit (201) 802-5260 (5) Tax Identification No.: 22-1211670 PRUCO LIFE INSURANCE COMPANY $1,000,000 $1,000,000 (1) All payments on account of Notes held by such purchaser shall be made by wire transfer of immediately available funds for credit to: Account No. 000-55-455 Morgan Guaranty Trust Company of New York 23 Wall Street New York, New York 10015 (ABA No.: 021-000-238) Each such wire transfer shall set forth the name of the Company, a reference to "6.63% Senior Notes due March 22, 2006, Security No. !INV5361!", and the due date and application (as among principal, interest and Yield-Maintenance Amount) of the payment being made. (2) Address for all notices relating to payments: Pruco Life Insurance Company c/o Prudential Capital Group Four Gateway Center 100 Mulberry Street Newark, New Jersey 07102 Attention: Investment Administration Unit (3) Address for all other communications and notices: Pruco Life Insurance Company c/o Prudential Capital Group 1201 Elm Street Suite 4900 Dallas, Texas 75270 Attention: Managing Director (4) Recipient of telephonic prepayment notices: Manager, Asset Management Unit (201) 802-6429 (5) Tax Identification No.: 22-1944557 A-4 EXHIBIT A HUDSON FOODS, INC. 6.63% SENIOR NOTE DUE MARCH 22, 2006 No. _____ [Date] $-------- FOR VALUE RECEIVED, the undersigned, HUDSON FOODS, INC. (the "Company"), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to ____________________________ ___________________________, or registered assigns, the principal sum of _________________________ DOLLARS on _____________, ____, with interest (computed on the basis of a 360-day year--30-day month) (a) on the unpaid balance thereof at the rate of 6.63% per annum from the date hereof, payable monthly on the 22nd day of each month in each year, commencing with the 22nd day of the calendar month next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Yield-Maintenance Amount (as defined in the Note Agreement referred to below), payable monthly as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the lesser of (a) the maximum rate permitted by applicable law or (b) the greater of (i) 8.63% or (ii) 2.0% over the rate of interest publicly announced by Morgan Guaranty Trust Company of New York from time to time in New York City as its Prime Rate. Payments of principal of, interest on and any Yield-Maintenance Amount payable with respect to this Note are to be made at the main office of Morgan Guaranty Trust Company of New York in New York City or at such other place as the holder hereof shall designate to the Company in writing, in lawful money of the United States of America. This Note is one of a series of Senior Notes (the "Notes") issued pursuant to a Note Agreement, dated as of March 22, 1996 (the "Agreement"), among the Company and the original purchasers of the Notes named in the Purchaser Schedule attached thereto and is entitled to the benefits thereof. This Note is a registered Note and, as provided in the Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company shall not be affected by any notice to the contrary. The Company agrees to make required prepayments of principal on the dates and in the amounts specified in the Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, on the terms specified in the Agreement. If an Event of Default, as defined in the Agreement, shall occur and be continuing, the principal of this Note may be declared or otherwise become due and payable in the manner and with the effect provided in the Agreement. The Company and any and all endorsers, guarantors and sureties severally waive grace, demand, presentment for payment, notice of dishonor or default, notice of intent to accelerate, notice of acceleration (to the extent set forth in the Agreement), protest and diligence in collecting. Should any indebtedness represented by this Note be collected at law or in equity, or in bankruptcy or other proceedings, or should this Note be placed in the hands of attorneys for collection, the Company agrees to pay, in addition to the principal, premium, if any, and interest due and payable hereon, all costs of collecting or attempting to collect this Note, including reasonable attorneys' fees and expenses (including those incurred in connection with any appeal). The Company, and the purchaser and the registered holder of this Note specifically intend and agree to limit contractually the amount of interest payable under this Note to the maximum amount of interest lawfully permitted to be charged under applicable law. Therefore, none of the terms of this Note shall ever be construed to create a contract to pay interest at a rate in excess of the maximum rate permitted to be charged under applicable law, and neither the Company nor any other party liable or to become liable hereunder shall ever be liable for interest in excess of the amount determined at such maximum rate, and the provisions of paragraph 11O of the Agreement shall control over any contrary provision of this Note. THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH STATE. HUDSON FOODS, INC. By_________________________ Secretary/Treasurer B-1 EXHIBIT B [FORM OF OPINION OF COMPANY'S COUNSEL] EX-10 5 1996 STOCK OPTION PLAN HUDSON FOODS, INC. 1996 STOCK OPTION PLAN 1. Purpose of the Plan. The Plan shall be known as the Hudson Foods, Inc. 1996 Stock Option Plan (the "Plan"). The purpose of the Plan is to attract and retain the best available personnel for positions of substantial responsibility and to provide additional incentive to employees of Hudson Foods, Inc. (the "Company") or any present or future Parent or Subsidiary of the Company to promote the success of the business. It is intended that options issued pursuant to this Plan shall primarily constitute incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. Stock options not constituting incentive stock options may also be issued. 2. Definitions. As used herein, the following definitions shall apply. (a) "Company" shall mean Hudson Foods, Inc. (b) "Board" shall mean the Board of Directors of the Company. (c) "Common Stock" or "Stock" shall mean the Company's Class A Common Stock. (d) "Code" shall mean the Internal Revenue Code of 1986, as amended. (e) "Committee" shall mean the Stock Option Committee appointed by the Board in accordance with paragraph 4(a) of the Plan. (f) "Continuous Employment" or "Continuous Status as an Employee" shall mean the absence of any interruption or termination of employment by the Company or any present or future Parent or Subsidiary of the Company. Employment shall not be considered interrupted in the case of sick leave, military leave or any other leave of absence approved by the Company or in the case of transfers between payroll locations of the Company or between the Company, its Parent, its Subsidiaries or a successor. (g) "Effective Date" shall mean the date specified in paragraph 12 hereof. (h) "Employee shall mean any person employed on a full-time basis by the Company or any present or future Parent or Subsidiary of the Company. For the purposes of granting Non-qualified Options pursuant to the Plan, "Employee" shall also mean any member of the Board of Directors of the Company or any present or future Parent or Subsidiary of the Company. (i) "Incentive Stock Option" shall mean an option granted pursuant to Section 422 of the Code. (j) "Non-qualified Option" shall mean an option not constituting an Incentive Stock Option. (k) "Option" shall mean an option to purchase Common Stock granted pursuant to this Plan. (l) "Optioned Stock" shall mean stock subject to an Option granted pursuant to this Plan. (m) "Optionee" shall mean an Employee who receives an Option. (n) "Parent" shall mean any present or future corporation which would be a "parent corporation" as defined in Subsection 424(e) of the Code. (o) "Plan" shall mean the Hudson Foods, Inc. 1996 Stock Option Plan. (p) "Share" shall mean one share of the Common Stock. (q) "Subsidiary" shall mean any present or future corporation which would be a "subsidiary corporation" as defined in Subsection 424(f) of the Code. 3. Shares Subject to the Plan. Except as otherwise required by the provisions of paragraph 11 hereof, the aggregate number of shares of Common Stock deliverable upon the exercise of Options pursuant to the Plan shall not exceed one million two hundred thousand (1,200,000) Shares for Incentive Stock Options or three hundred thousand (300,000) Shares for Non-qualified Options. Such Shares may either be authorized but unissued or treasury Shares. If an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares which were subject thereto shall, unless the Plan shall have been terminated, be available for the grant of other Options under the Plan. 4. Administration of the Plan. (a) Composition of Option Committee. The Plan shall be administered by an Option Committee (the "Committee") consisting of three directors of the Company appointed by the Board. Employees who are designated by the Committee as key management personnel shall be eligible to receive Options under the Plan. (b) Powers of the Option Committee. The Committee is authorized (but only to the extent not contrary to the express provisions of the Plan or to resolutions adopted by the Board) to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the form and content of Options to be issued under the Plan and to make other determinations necessary or advisable for the administration of the Plan, and shall have and may exercise such other power and authority as may be delegated to it by the Board from time to time. A majority of the entire Committee shall constitute a quorum and the action of a majority of the members present at any meeting at which a quorum is present shall be deemed the action of the Committee. The President of the Company and such other officers as shall be designated by the Committee are hereby authorized to execute instruments evidencing Options on behalf of the Company and to cause them to be delivered to the Optionees or other participants. (c) Effect of Option Committee's Decision. All decisions, determinations and interpretations of the Committee shall be final and conclusive on all persons affected thereby. 5. Eligibility. Options may be granted to Employees who are key management personnel, as determined by the Option Committee, of the Company or any present or future Parent or Subsidiary. An Employee who has been granted an Option may, if otherwise eligible, be granted an additional Option or Options. In any calendar year, the aggregate fair market value of the Shares (as determined at the time the Option is granted) for which Incentive Stock Options are exercisable for the first time by any Employee cannot exceed the sum of $100,000. Notwithstanding the prior provisions of this paragraph, the Committee may grant Options in excess of the foregoing limitations, provided said Options shall be clearly and specifically designated as not being Incentive Stock Options, as defined in Section 422 of the Code. Any Incentive Stock Option or Non-qualified Option which is cancelled by consent of the parties shall not be considered outstanding and shall revert to the status of authorized but unissued Options. 6. Term of Plan; Term of Options. (a) The Plan shall continue in effect for a term of ten (10) years from the date it is adopted, unless sooner terminated pursuant to paragraph 15. No Option shall be granted under the Plan after ten (10) years from the date it is adopted by the Board. (b) The term of each Option granted under the Plan shall be established by the Committee, but shall not exceed 10 years, provided however that in the case of an Employee who owns stock representing more than ten (10) percent of the total combined voting power of all classes of the Company stock including the stock of the Company's Parent and Subsidiary, the term of such Option shall not exceed five years. (c) Notwithstanding the provision of any Option which provides for its exercise in installments as designated by the Option Committee, all such Options shall become immediately exercisable in the event of change in control or threatened change in control of the Company. The term "control" shall refer to the acquisition of ten (10) percent or more of the voting securities of the Company by any person or by persons acting as a group within the meaning of Section 13(d) of the Securities Exchange Act of 1934; provided, however, that for the purposes of the Option Plan no change in control or threatened change in control shall be deemed to have occurred if prior to the acquisition of, or offer to acquire, 10 percent or more of the voting securities of the Company, the full Board of Directors shall have adopted by not less than a two-thirds vote a resolution specifically approving such acquisition or offer. The term "person" refers to an individual or a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or any other form of entity not specifically listed herein. 7. Incentive Stock Option Price. The price per Share at which each Incentive Stock Option granted under the Plan may be exercised shall not, as to any particular Incentive Stock Option, be less than the fair market value of the Stock at the time such Incentive Stock Option is granted. In the case of an Employee who owns Stock representing more than ten (10) percent of the Company's outstanding Common Stock at the time the Incentive Stock Option is granted, the Incentive Stock Option price shall not be less than 110% of the fair market value of the Stock at the time the Incentive Stock Option is granted. If the Common Stock is traded otherwise than on a national securities exchange at the time of the granting of an Incentive Stock Option, then the price per Share shall be not less than the mean between the bid and asked price on the date the Option is granted or, if there is no bid and asked price on said date, then on the next prior business day on which there was a bid and asked price. If no such bid and asked price is available, then the price per Share shall be determined by the Committee. If the Common Stock is listed on a national securities exchange at the time of granting an Incentive Stock Option, then the price per Share shall be not less than the average of the highest and lowest selling price on such exchange on the date such Incentive Stock Option is granted or if there were no sales on said date, then the price shall be not less than the mean between the bid and asked price on such date. 8. Exercise of Option. (a) Procedure for Exercise. Any Option granted hereunder shall be exercisable at such times and under such conditions as shall be permissible under the terms of the Plan and of the Option granted to an Optionee. An Option may not be exercised for a fractional Share. An Option granted pursuant to the Plan may be exercised, subject to provisions relative to its termination and limitations on its exercise, from time to time only by (a) written notice of intent to exercise the Option with respect to a specified number of Shares, and (b) payment to the Company (contemporaneously with delivery of each such notice), in cash, of the amount of the Option price of the number of Shares with respect to which the Option is then being exercised. Each such notice and payment shall be delivered, or mailed by prepaid registered or certified mail, addressed to the Treasurer of the Company at the Company's executive offices, until the total number of Shares then subject to the Option have been purchased. (b) Exercise During Employment or Following Death. Unless otherwise provided in the terms of an Option, an Option may be exercised by an Optionee only while he is an Employee and has maintained Continuous Status as an Employee since the date of the grant of the Option, or within 3 months after termination of his status as an Employee (but not later than the date on which the Option would otherwise expire), except if his Continuous Employment is terminated by reason of disability, within the meaning of Code Section 22(e)(3), or death, then to the extent that the Optionee would have been entitled to exercise the Option immediately prior to his disability or death, such Option may be exercised within twelve (12) months from the date of his disability or death by the Optionee, the personal representatives of his estate, or persons to whom his rights under such Option shall have passed by will or by laws of descent and distribution. The Committee's determination whether an Optionee's employment has ceased, and the effective date thereof, shall be final and conclusive on all persons affected thereby. 9. Non-Transferability of Options. Options granted under the Plan may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent and distribution. An Option may be exercised, during the lifetime of the Optionee, only by the Optionee. 10. Effect of Change in Stock Subject to the Plan. In the event that each of the outstanding shares of Common Stock (other than shares held by dissenting shareholders) shall be changed into or exchanged for a different number or kind of shares of stock of the Company or of another corporation whether by reason of merger, consolidation, recapitalization, reclassification, stock dividend, split-up, combination of shares, or otherwise), then there shall be substituted for each share of Common Stock then under Option or available for Option the number and kind of shares of stock into which each outstanding share of Common Stock (other than shares held by dissenting shareholders) shall be so changed or for which each such share shall be so exchanged, together with an appropriate adjustment of the Option price. In the event there shall be any other change, in the number of, or kind of, issued shares of Common Stock, or of any stock or other securities into which such Common Stock shall have been changed, or for which it shall have been exchanged, then if the Committee shall, in its sole discretion, determine that such change equitably requires an adjustment in the number, or kind, or Option price of shares then subject to an Option or available for Option, such adjustment shall be made by the Board and shall be effective and binding for all purposes of the Plan. 11. Time of Granting Options. The date of grant of an Option under the Plan shall, for all purposes, be the date on which the Committee makes the determination of granting such Option. Notice of the determination shall be given to each Employee to whom an Option is so granted within a reasonable time after the date of such grant. 12. Effective Date. The Plan shall become effective April 1, 1996. Options may be granted prior to ratification of the Plan by the stockholders if the exercise of such Options is subject to such stockholder ratification. The Plan shall continue in effect for a term of ten (10) years from the date it is adopted by the Board, unless sooner terminated under paragraph 15 of the Plan. 13. Approval by Shareholders. The Plan shall be approved by stockholders of the Company within twelve (12) months before or after the date it becomes effective. 14. Modification of Options. At any time and from time to time the Board may authorize the Committee to direct execution of an instrument providing for the modification of any outstanding Option, provided no such modification, extension or renewal shall confer on the holder of said Option any right or benefit which could not be conferred on him by the grant of a new Option at such time, or impair the Option without the consent of the holder of the Option. 15. Amendment and Termination of the Plan. The Board may alter, suspend or discontinue the Plan except that no action of the Board may increase (other than as provided in paragraph 10) the maximum number of shares permitted to be optioned or become available for the granting of Options under the Plan, or reduce the minimum Option price, or extend the period within which Options may be exercised, unless such action of the Board shall be subject to approval or ratification by the shareholders of the Company. No action of the Board may, without the consent of the holder of the Option, impair any then outstanding Option. 16. Conditions Upon Issuance of Shares. Shares shall not be issued with respect to any Option granted under the Plan unless the issuance and delivery of such Shares shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, any applicable state securities law, and the requirements of any stock exchange upon which the Shares may then be listed. Inability of the Company to obtain from any regulatory body or authority deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder shall relieve the Company of any liability in respect of the non-issuance or sale of such Shares. As a condition to the exercise of an Option, the Company may require the person exercising to make such representations and warranties as may be necessary to assure the availability of an exemption from the registration requirement of federal or state securities law. 17. Reservation of Shares. The Company, during the term of this Plan, will reserve and keep available a number of Shares sufficient to satisfy the requirements of the Plan. Date Adopted: April 1, 1996. HUDSON FOODS, INC. By:_______________________ President ATTEST: _______________________________ Secretary EX-11 6 EARNINGS PER SHARE EXHIBIT 11 HUDSON FOODS, INC. AND SUBSIDIARIES CALCULATION OF EARNINGS PER SHARE
(In thousands except per share data) - ------------------------------------------------------------------------------------------------------------------------------ Threee Months Ended Twelve Months Ended September 28, September 30, September 28, September 30, 1996 1995 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------ Net income $8,808 $8,361 $22,998 $35,758 - ------------------------------------------------------------------------------------------------------------------------------ PRIMARY EARNINGS PER SHARE: Weighted average number of common shares outstanding 30,108 29,921 30,084 29,124 Common stock equivalents: Dilutive options 305 352 317 370 - ------------------------------------------------------------------------------------------------------------------------------ Weighted average number of common and common equivalent shares 30,413 30,273 30,401 29,494 - ------------------------------------------------------------------------------------------------------------------------------ Primary earnings per share $0.29 $0.28 $0.76 $1.21 - ------------------------------------------------------------------------------------------------------------------------------ FULLY DILUTED EARNINGS PER SHARE: Weighted average number of common shares outstanding 30,108 29,921 30,084 29,124 Common stock equivalents: Dilutive options 305 352 317 370 - ------------------------------------------------------------------------------------------------------------------------------ Weighted average number of common and common equivalent shares 30,413 30,273 30,401 29,494 - ------------------------------------------------------------------------------------------------------------------------------ Fully diluted earnings per share $0.29 $0.28 $0.76 $1.21 - ------------------------------------------------------------------------------------------------------------------------------
EX-13 7 ANNUAL REPORT
Consolidated Statement of Operations Hudson Foods, Inc. and Subsidiaries For the Years Ended September 28, September 30, October 1, (Dollars in thousands except per share data) 1996 1995 1994 Sales $1,378,474 $1,200,512 $1,040,840 Cost of sales 1,211,556 1,023,959 885,248 ---------- ---------- ---------- Gross profit 166,918 176,553 155,592 Selling 94,805 82,945 78,698 General and administrative 32,240 29,211 25,755 ---------- ---------- ---------- Operating income 39,873 64,397 51,139 ---------- ---------- ---------- Other expense (income): Interest, net 5,789 1,845 6,152 Interest on tax settlement - 4,500 - Other, net (4,246) (2,190) - ---------- ---------- ----------- Total other expense 1,543 4,155 6,152 ---------- ---------- ----------- Income before income taxes 38,330 60,242 44,987 Income tax expense 15,332 24,484 17,995 ---------- ---------- ----------- Net income $ 22,998 $ 35,758 $ 26,992 ========== ========== =========== Earnings per share: Primary $.76 $1.21 $1.08 Fully diluted $.76 $1.21 $1.08 ========== ========== =========== The accompanying notes are an integral part of the consolidated financial statements.
Discussion of Operations 1996 vs. 1995. Sales from the Company's operations were $1.4 billion for fiscal 1996, an increase of $178.0 million, or 14.8%, over fiscal 1995. International sales were 17.5% and 11.6% of fiscal 1996 and 1995 sales, respectively. The sales increase primarily resulted from the following: o Chicken sales increased 21.7% to $788.9 million in fiscal 1996 from $648.3 million in fiscal 1995 primarily due to an 18.6% increase in volume and a 2.6% increase in selling prices. The volume increase was essentially due to increased sales in international markets, especially Russia and Eastern Europe, and increased domestic consumer demand for chicken products. o Turkey sales increased 25.8% to $182.6 million in fiscal 1996 from $145.1 million in fiscal 1995 mainly due to a 23.1% increase in volume and a 2.2% increase in selling prices. The Company has greatly expanded its sales of turkey in international markets and also to foodservice customers. o Portioned entree sales increased 2.3% to $175.4 million in fiscal 1996 from $171.4 million in fiscal 1995 mostly due to a 2.9% increase in volume offset by a slight decrease in selling prices. The volume increase was primarily due to increased sales to vending, convenience stores and club stores. Portioned entrees have begun to see benefits from changes to its customer base and the introduction of new product lines. o Beef sales were $90.3 million in fiscal 1996 compared with $37.3 million in fiscal 1995. The Company's beef plant in Columbus, Nebraska began production in February 1995. The Company produces beef patties primarily for a large restaurant chain but also produces patties and chub packages for club stores, retail outlets and international sales. o Luncheon meat sales decreased 40.7% to $94.2 million in fiscal 1996 from $159.0 million in fiscal 1995 largely due to a 45.0% decrease in volume offset by a 7.7% increase in selling prices. The volume decrease was due to the December 29, 1995 sale of the Company's Topeka, Kansas luncheon meat plant and its related brand names, and the closing and subsequent sale of its Wichita, Kansas luncheon meat plant. The Company continues to produce luncheon meat products at its plant in Albert Lea, Minnesota. Cost of sales was $1.2 billion for fiscal 1996, an increase of $187.6 million, or 18.3%, over fiscal 1995. As a percentage of sales, cost of sales increased to 87.9% in fiscal 1996 from 85.3% in fiscal 1995. This increase was primarily due to increases in volume and higher feed and ingredient costs that resulted from extremely high grain markets. Feed and ingredient costs increased to 26.6% of sales in fiscal 1996 from 19.3% in fiscal 1995. Gross profit was $166.9 million in fiscal 1996, a decrease of $9.6 million, or 5.5%, from fiscal 1995. Selling and general and administrative expenses were $127.0 million in fiscal 1996, an increase of $14.9 million, or 13.3%, over fiscal 1995. As a percentage of sales, selling and general and administrative expenses decreased to 9.2% in fiscal 1996 from 9.3% in fiscal 1995. Operating income was $39.9 million in fiscal 1996, a decrease of $24.5 million, or 38.1%, from fiscal 1995. The decrease was mainly due to higher feed and ingredient costs described previously. Interest expense increased as a result of $120 million and $75 million of long-term borrowings made in fiscal 1996 and 1995, respectively. Other income for fiscal 1996 was primarily composed of a gain of $7.5 million resulting from insurance proceeds received in excess of the book value of assets destroyed by fire. That gain was offset by a loss of $1.3 million resulting from the sale of the Topeka and Wichita, Kansas luncheon meat assets and related brand names. 1995 vs. 1994. Sales from the Company's operations were $1.2 billion for fiscal 1995, an increase of $159.7 million, or 15.3%, over fiscal 1994. International sales were 11.6% and 5.8% of fiscal 1995 and 1994 sales, respectively. The sales increase primarily resulted from the following: o Chicken sales increased 21.5% to $648.3 million in fiscal 1995 from $533.4 million in fiscal 1994 mostly due to a 25.2% increase in volume partially offset by a 2.9% decrease in selling prices. The volume increase was essentially due to increased sales in international markets, especially Russia, and increased domestic consumer demand for chicken products. o Turkey sales increased 28.2% to $145.1 million in fiscal 1995 from $113.2 million in fiscal 1994 largely due to a 22.0% increase in volume and a 5.1% increase in selling prices. o Portioned entree sales decreased 2.4% to $171.4 million in fiscal 1995 from $175.5 million in fiscal 1994 primarily due to a 3.8% decrease in selling prices slightly offset by a 1.5% increase in volume. Portioned entrees experienced some changes in its customer base and product lines that caused overall selling prices to decline. o Beef sales were $37.3 million in fiscal 1995. The Company's beef plant in Columbus, Nebraska began production in February 1995. o Luncheon meat sales decreased 3.5% to $159.0 million in fiscal 1995 from $164.7 million in fiscal 1994 mainly due to a 9.9% decrease in selling prices offset by a 7.1% increase in volume. Cost of sales was $1.0 billion for fiscal 1995, an increase of $138.7 million, or 15.7%, over fiscal 1994. As a percentage of sales, cost of sales increased to 85.3% in fiscal 1995 from 85.1% in fiscal 1994. The increase primarily resulted from higher processing costs due to increased sales of further-processed products and decreases in selling prices discussed earlier. The increase was offset somewhat by an 8.8% decrease in feed costs per ton. Gross profit was $176.6 million in fiscal 1995, an increase of $21.0 million, or 13.5%, over fiscal 1994. Selling and general and administrative expenses were $112.2 million in fiscal 1995, an increase of $7.7 million, or 7.4%, over fiscal 1994. As a percentage of sales, selling and general and administrative expenses decreased to 9.3% in fiscal 1995 from 10.0% in fiscal 1994. Operating income was $64.4 million in fiscal 1995, an increase of $13.3 million, or 25.9%, over fiscal 1994. The increase was mostly due to the improvements in the Company's operations described previously. Interest expense decreased primarily due to the conversion and redemption of the 8% convertible subordinated debentures, increased capitalized interest on construction in progress and increased interest income on the short-term investment of excess cash. During the second quarter of fiscal 1995, based on the Company's best estimate of the final tax and interest due resulting from an Internal Revenue Service examination settlement, the Company recorded $0.5 million of tax expense and $4.5 million of interest expense. Other income for fiscal 1995 was primarily composed of insurance proceeds received in excess of the book value of assets destroyed by fire. General. Historically, the Company's operating results have been heavily influenced by two factors: the cost of feed grains and commodity-based finished product prices. These two factors have fluctuated significantly and independently. In recent years the Company has undertaken a business strategy to increase the production and sale of further-processed products and increase sales to large customers such as club store and foodservice chains. In 1996, one such customer accounted for approximately 18.7% of total sales. This strategy helps decrease the proportion of feed grain costs to total cost of sales, which helps reduce the impact of commodity cost fluctuations. In addition, the sales prices of further-processed products are less sensitive to commodity price fluctuations. Even so, a material increase in feed costs or a material decrease in finished product prices could have an adverse effect on the Company, but management believes that the implementation of this strategy has reduced the Company's vulnerability to such price fluctuations. The Company believes that its operations are in substantial compliance with applicable environmental laws and regulations.
Consolidated Balance Sheet Hudson Foods, Inc. and Subsidiaries September 28, September 30, (Dollars in thousands) 1996 1995 Assets Current assets: Cash and cash equivalents $ 6,437 $ 2,159 Accounts receivable 110,655 82,853 Less allowance for doubtful accounts 1,863 1,775 ---------- --------- 108,792 81,078 Inventories 226,872 177,055 Other 22,373 36,313 ---------- --------- Total current assets 364,474 296,605 Property, plant and equipment, net 367,600 275,624 Excess cost of investment over net assets acquired, net 14,119 14,682 Other assets 28,549 36,630 ---------- --------- Total assets $774,742 $623,541 ========== ========= Liabilities and Stockholders' Equity Current liabilities: Notes payable $ - $ 12,300 Current portion of long-term obligations 24,714 8,742 Accounts payable 69,552 47,676 Accrued liabilities 49,578 44,590 Deferred income taxes 6,741 2,839 ---------- --------- Total current liabilities 150,585 116,147 ---------- --------- Long-term obligations 224,951 129,973 ---------- --------- Deferred income taxes and deferred gain 73,286 73,072 ---------- --------- Commitments and contingencies (Note 9) Stockholders' equity: Common stock: Class A, $.01 par value, issued 21,384,664 and 21,331,374 shares 214 213 Class B, $.01 par value, issued and outstanding 9,602,522 and 9,602,672 shares 96 96 Additional capital 159,314 158,842 Retained earnings 177,153 156,432 ---------- --------- 336,777 315,583 Treasury stock, at cost (877,196 and 915,438 Class A shares) (10,857) (11,234) ---------- --------- Total stockholders' equity 325,920 304,349 ---------- --------- Total liabilities and stockholders' equity $774,742 $623,541 ========== ========= The accompanying notes are an integral part of the consolidated financial statements.
Discussion of the Balance Sheet Working capital at September 28, 1996 was $213.9 million compared with $180.5 million at September 30, 1995 and the current ratio was 2.42 to 1 and 2.55 to 1 at September 28, 1996 and September 30, 1995, respectively. Accounts receivable and inventories increased mainly due to expanded sales in both international and domestic markets. Other current assets decreased primarily due to cash received on an insurance claim receivable for fire losses. Accounts payable increased largely due to payables for the new Kentucky chicken complex, increased outside product purchases for international sales and increased feed and ingredient payables. Current deferred income taxes increased primarily due to an increase in the book/tax difference in live farm inventories resulting from increased flock numbers and higher feed costs. Other assets decreased essentially due to the expenditure of funds received from a trustee for a capital project of $16.9 million offset by costs for that project. The Company's total capitalization, as represented by long-term obligations plus stockholders' equity, was $550.9 million on September 28, 1996, compared with $434.3 million on September 30, 1995. Long-term obligations represented 40.8% and 29.9% of total capitalization on September 28, 1996 and September 30, 1995, respectively. The Company did not have any notes payable due under its unsecured credit agreements at September 28, 1996 compared with $12.3 million on September 30, 1995. Total long-term obligations and current portion of long-term obligations increased $111.0 million due to proceeds of $120.0 million received on new unsecured loans offset by normal debt payments. Common stock and additional capital increased due to the exercise of employee stock options and treasury stock issued under the employee stock purchase plan.
Consolidated Statement of Cash Flows Hudson Foods, Inc. and Subsidiaries For the Years Ended September 28, September 30, October 1, (Dollars in thousands) 1996 1995 1994 Cash Flows from Operating Activities: Net income $ 22,998 $ 35,758 $ 26,992 Non-cash items included in net income: Depreciation 25,318 24,084 21,246 Amortization 1,385 1,053 1,033 Deferred income taxes 3,661 4,637 209 Other (892) (2,777) (2,777) Changes in assets and liabilities: Accounts receivable (33,811) (15,570) (8,056) Inventories (54,946) (41,554) (19,004) Accounts payable 21,876 6,488 9,633 Accrued liabilities 6,340 4,423 11,814 Other 18,138 (35,261) (4,798) ---------- ---------- --------- Cash flows provided by (used for) operating activities 10,067 (18,719) 36,292 ---------- ---------- --------- Cash Flows from Investing Activities: Purchase of property, plant and equipment (139,387) (73,314) (49,161) Disposition of property, plant and equipment, net 758 3,828 4,271 Funds received from (held by) trustee for capital project 16,926 (16,926) - Sale of business 28,885 - - Other (9,613) (5,427) (4,407) ---------- ---------- --------- Cash flows used for investing activities (102,431) (91,839) (49,297) ---------- ---------- --------- Cash Flows from Financing Activities: Additions (reductions) to notes payable (12,300) (4,500) 16,800 Additions to long-term obligations 120,000 75,000 - Reductions of long-term obligations (9,050) (11,021) (5,635) Sale of Class A common stock - 51,264 - Dividends (2,277) (2,249) (1,796) Exercise of stock options and other 269 2,324 1,644 ---------- ---------- --------- Cash flows provided by financing activities 96,642 110,818 11,013 ---------- ---------- --------- Increase (decrease) in cash and cash equivalents 4,278 260 (1,992) Cash and cash equivalents at beginning of period 2,159 1,899 3,891 ---------- ---------- --------- Cash and cash equivalents at end of period $ 6,437 $ 2,159 $ 1,899 ========== ========== ========= Supplemental disclosure of cash flow information: Cash paid during the year for: Interest, net of amounts capitalized $ 6,957 $ 7,111 $ 6,321 Income taxes $ 8,524 $ 32,210 $ 13,300 ========== ========== ========= The accompanying notes are an integral part of the consolidated financial statements.
Discussion of Cash Flows The Company's cash flows provided by operations was $10.1 million for fiscal 1996 compared with cash flows used for operations of $18.7 million for fiscal 1995. The change was primarily due to a decrease in other current assets and an increase in accounts payable. Historically, the Company's operations have been financed through internally generated funds, borrowings, lease arrangements and the issuance of common stock. On April 30, 1996, the Company entered into a $200.0 million unsecured credit agreement that expires June 30, 1999, but may be extended annually. At September 28, 1996, the Company did not have any notes payable outstanding under the agreement but had $12.9 million in outstanding letters of credit. The credit agreement, among other things, limits the payment of dividends to approximately $2.8 million in any fiscal year and limits annual capital expenditures and lease obligations. It requires the maintenance of minimum levels of working capital and tangible net worth, and requires that the current ratio, leverage ratio and cash flow coverage ratio be maintained at certain levels. It also limits the creation of new secured debt to $25.0 million and new unsecured short-term debt with parties outside the credit agreement to $20.0 million. Additionally, an event of default will occur if the aggregate outstanding voting power of James T. Hudson and his immediate family is reduced below 51%. Also, the Company has two separate unsecured short-term credit agreements with financial institutions (outside the $200.0 million credit agreement) giving the Company the right to borrow up to $15.0 million from one institution and $10.0 million from the other. At September 28, 1996, the Company did not have any notes outstanding under these agreements. On December 28, 1995 and March 22, 1996, the Company borrowed $55.0 million at 6.69% due December 28, 2005 and $50.0 million at 6.63% due March 22, 2006, respectively, under unsecured term loan agreements from insurance companies. Interest payments only will be due in the first four years. On January 31, 1996, the Company borrowed $15.0 million under an unsecured term loan agreement from a bank at 6.45% due January 31, 2006. Interest and principal payments are due each month. A balloon payment of $6.8 million will be due on January 31, 2006. Covenants under the loan agreements are substantially the same as those included in the $200.0 million unsecured credit agreement. For fiscal 1996 and 1995, the Company had capital expenditures of $139.4 million and $73.3 million, respectively. Capital expenditures for fiscal 1996 included the construction of a chicken complex near Henderson, Kentucky and the expansion and/or upgrading of existing production facilities and related equipment. The Kentucky chicken complex began production in July 1996 and was producing 300,000 birds per week at September 28, 1996. It is scheduled to be producing 1.3 million birds per week by July 1997. The Company's capital budget for fiscal 1997 contemplates aggregate capital expenditures of approximately $65 million for the completion of the chicken complex near Henderson, Kentucky and the upgrading and/or expansion of current production facilities and related equipment. The capital expenditures have been and will continue to be financed by operations, borrowings, lease arrangements and the issuance of common stock. On December 29, 1995, the Company sold its Topeka, Kansas luncheon meat plant and its related brand names for $32.3 million. The initial sales price was reduced by certain post-closing adjustments and the expenses of the sale resulting in a final sales price of approximately $28.9 million. Additionally, the Company closed its Wichita, Kansas luncheon meat processing facility on January 13, 1996 and subsequently sold the plant on June 28, 1996. The sale of the Topeka and Wichita assets resulted in a $1.3 million loss. Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies Nature of Operations. The Company is a vertically integrated producer of chicken and turkey products, including the breeding, hatching, growing, processing and packaging of those product lines. Additionally, the Company processes and markets beef and pork products. The Company's products are sold domestically in three primary markets: foodservice, club stores and retail outlets. The Company's products are also sold internationally to wholesalers primarily in Russia, Eastern Europe, Asia and Latin America. Principles of Consolidation. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Estimates. Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenue and expenses as reflected in the financial statements. Actual results could differ from estimates. Cash and Cash Equivalents. The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. At September 28, 1996 and September 30, 1995, cash and cash equivalents included temporary cash investments in certificates of deposit, U.S. treasury bills and U.S. government agency securities of $18,817,000 and $18,944,000, respectively. Cash equivalents are stated at cost, which approximates market value, and have been used to offset book overdrafts. Concentrations. Financial instruments which subject the Company to concentrations of credit risk consist primarily of trade receivables from large domestic and foreign companies. The Company generally does not require collateral from its customers. Such credit risk is considered by management to be limited due to the Company's broad customer base. In fiscal years 1996, 1995 and 1994, one domestic customer accounted for approximately 18.7%, 14.7% and 17.7% of consolidated sales, respectively. At September 28, 1996, accounts receivable from this customer were $20.8 million. The Company's foreign sales in fiscal years 1996, 1995 and 1994 were 17.5%, 11.6% and 5.8% of total sales, respectively. Fiscal 1996 sales included 5.6% to one foreign customer. At September 28, 1996, accounts receivable from this foreign customer were $14.0 million. Inventories. Inventories are stated at the lower of cost (first-in, first-out method) or market. Inventory cost includes the cost of raw materials and all applicable costs of processing. Property, Plant and Equipment. Property, plant and equipment are stated at cost. When assets are sold or retired, the costs of the assets and the related accumulated depreciation are removed from the accounts and the resulting gains or losses are recognized. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Interest costs of approximately $8,066,000, $4,487,000 and $1,702,000 were capitalized during 1996, 1995 and 1994, respectively. Earnings per Share. Earnings per share are based on the weighted average number of shares outstanding. The primary earnings per share computation assumes that outstanding dilutive stock options were exercised and the proceeds used to purchase common shares. Earnings per share, assuming full dilution, gives effect to the conversion of outstanding convertible debentures and the exercise of dilutive stock options. Excess Cost of Investment Over Net Assets Acquired. The excess cost of investment over net assets acquired is being amortized over periods ranging from 33 to 40 years and is evaluated annually for impairment based on estimated undiscounted cash flows of the acquired entities. Accumulated amortization was $5,273,000 and $4,758,000 at September 28, 1996 and September 30, 1995, respectively. Income Taxes. The Company utilizes the asset and liability approach for financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are recorded to reflect the expected tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. Advertising. Advertising costs are expensed in the period incurred. Such expenses were $9,893,000, $7,399,000 and $7,841,000 for fiscal 1996, 1995 and 1994, respectively. Fiscal Year. The Company utilizes a 52-53 week accounting period which ends on the Saturday closest to September 30. 2. Inventories
Sept. 28, Sept. 30, (Dollars in thousands) 1996 1995 Field inventory - broilers and breeder stock $ 46,545 $ 33,493 Field inventory - turkeys and breeder stock 14,705 11,610 Feed, eggs and other 32,273 30,441 Finished products 133,349 101,511 -------- -------- Total $226,872 $177,055 ======== ========
3. Property, Plant and Equipment
Sept. 28, Sept. 30, (Dollars in thousands) 1996 1995 Land $ 13,402 $ 13,579 Buildings and improvements 204,248 190,945 Machinery and equipment 160,807 145,550 Construction in progress 139,888 63,129 -------- -------- 518,345 413,203 Less accumulated depreciation 150,745 137,579 -------- -------- Total $367,600 $275,624 ======== ========
4. Financing Arrangements The Company's line of credit agreement (the "Agreement"), which expires June 30, 1999, provides for aggregate borrowings or letters of credit up to $200 million. At September 28, 1996, the Company had issued $12.9 million in letters of credit. The Agreement, among other things, limits the payment of dividends to approximately $2.8 million in any fiscal year and limits annual capital expenditures and lease obligations. It requires the maintenance of minimum levels of working capital and tangible net worth, and requires that the current ratio, leverage ratio and cash flow coverage ratio be maintained at certain levels. It also limits the creation of new secured debt to $25.0 million and new unsecured short-term debt with parties outside the Agreement to $20.0 million. At September 28, 1996, $187.1 million was unused under the Agreement. In addition, the Company has two separate unsecured short-term credit agreements with financial institutions giving the Company the right to borrow up to $15.0 million from one institution and $10.0 million from the other. At September 28, 1996, the Company did not have any notes outstanding under these agreements. 5. Accrued Liabilities
Sept. 28, Sept. 30, (Dollars in thousands) 1996 1995 Payroll and benefits $32,952 $28,223 Advertising 4,499 3,888 Income, property and other taxes 3,286 2,605 Interest 1,160 625 Other 7,681 9,249 ------- ------- Total $49,578 $44,590 ======= =======
6. Long-Term Obligations
Sept. 28, Sept. 30, (Dollars in thousands) 1996 1995 6.69% Notes to insurance companies due Dec. 28, 2005 $ 55,000 $ - 6.63% Notes to an insurance company due March 22, 2006 50,000 - 6.90% Notes to an insurance company due June 1, 2005 45,463 49,124 Tax-exempt floating rate bonds (3.95% at Sept. 28, 1996) due March 1, 2015 25,000 25,000 9.99% Notes to an insurance company due April 12, 1997 15,000 15,000 6.45% Note to a bank due Jan. 31, 2006 14,647 - 8.99% Note to an insurance company due March 15, 1998 13,632 14,504 7.62% Note to an insurance company due Sept. 1, 2002 9,835 11,459 9.95% Note to a bank due June 30, 1999 6,150 6,700 7.20%-7.64% Notes to a bank due Sept. 1, 2002 6,084 7,084 8.14% Note to an insurance company due March 15, 1998 4,480 4,740 7.68% Note to an insurance company due Sept. 1, 2002 3,750 4,375 Other - 6%-7% Notes due through 2002 624 729 -------- -------- Total 249,665 138,715 Less current portion of long-term obligations 24,714 8,742 -------- -------- Long-term obligations $224,951 $129,973 ======== ========
Certain of the Company's loan agreements contain restrictive covenants which are similar to those required under the $200 million line of credit. The fair value of the Company's long-term obligations is based on discounted future cash flows using current interest rates. The fair value of the Company's long-term obligations at September 28, 1996 and September 30, 1995, including current portion, is estimated to be approximately $247 million and $141 million, respectively. At September 28, 1996, the aggregate amount of long-term obligations which will become due during each of the next five fiscal years is as follows: $24,714,000 in 1997; $25,676,000 in 1998; $13,646,000 in 1999; $23,966,000 in 2000; and $24,338,000 in 2001. 7. Income Taxes Consolidated income tax expense for each of the three years in the period ended September 28, 1996 consists of the following:
For the Years Ended Sept. 28, Sept. 30, Oct. 1, (Dollars in thousands) 1996 1995 1994 Current provision: Federal $ 9,993 $17,620 $16,067 State 1,678 2,227 1,719 Deferred provision: Federal 3,333 4,250 306 State 328 387 (97) ------- ------- -------- Total income tax expense $15,332 $24,484 $17,995 ======= ======= ========
Reconciliations of the statutory federal income tax rate with the effective income tax rate for each of the three years in the period ended September 28, 1996 are as follows:
For the Years Ended Sept. 28, Sept. 30, Oct. 1, 1996 1995 1994 Federal income tax rate 35.0% 35.0% 35.0% State income taxes, net of federal benefit 4.0 3.1 2.7 Tax credits (0.6) (0.7) (0.7) Other 1.6 3.2 3.0 ----- ----- ----- Effective income tax rate 40.0% 40.6% 40.0% ===== ===== =====
An analysis of the Company's net current and long-term deferred tax liabilities (assets) at September 28, 1996 and September 30, 1995 is as follows:
Sept. 28, Sept. 30, (Dollars in thousands) 1996 1995 Current: Inventory $13,783 $ 9,568 Allowance for doubtful accounts (703) (682) Accrued liabilities (6,839) (6,297) Other 500 250 -------- -------- Total current deferred income taxes $6,741 $2,839 ======== ======== Long-term: Property, plant and equipment $31,274 $27,963 Change from the cash basis to the accrual basis of accounting in 1988 for the "Family Farm" subsidiaries 38,315 38,315 Other 3,263 2,617 -------- -------- Total long-term deferred income taxes $72,852 $68,895 ======== ========
8. Employee Benefit and Compensation Plans Stock Option Plan. The 1996 Stock Option Plan reserves 1,200,000 and 300,000 shares of the Company's Class A common stock for issuance as incentive stock options and nonqualified stock options, respectively. The Company continues to reserve 477,534 shares of Class A common stock for issuance against outstanding options granted under the Second Amended and Restated 1985 Stock Option Plan (the "1985 Stock Option Plan") which expired during fiscal year 1996. The 1996 Stock Option Plan and the 1985 Stock Option Plan (collectively, the "Option Plans") provide for the grant of options to key employees upon terms and conditions determined by a committee of the Board of Directors. Options expire no later than the tenth anniversary of the date of grant, and are exercisable at a price which is at least 100% of the fair market value of such shares on the date of grant (110% in the case of individuals holding at least 10% of the Company's Class A common stock). A summary of stock option activity related to the Option Plans for each of the three years in the period ended September 28, 1996 is as follows:
Number of Number Option price shares of shares per share exercisable Outstanding at 10/2/93 1,361,373 $4.63-$8.21 854,091 ======= Granted - - Exercised (322,394) $4.67-$8.21 Cancelled (6,525) $4.75-$7.00 ---------- Outstanding at 10/1/94 1,032,454 $4.63-$7.13 723,464 ======= Granted - - Exercised (484,980) $4.63-$6.67 Cancelled (10,200) $4.75-$5.04 ---------- Outstanding at 9/30/95 537,274 $4.63-$7.13 344,284 ======= Granted 30,000 $14.13 Exercised (53,140) $4.63-$6.69 Cancelled (6,600) $5.04 ---------- Outstanding at 9/28/96 507,534 $4.63-$14.13 396,339 ========== =======
Employee Stock Purchase Plan. The Company's 1990 Employee Stock Purchase Plan (the "Purchase Plan") makes available to eligible employees a means of purchasing up to 1,500,000 shares of the Company's common stock at current market prices. Under the terms of the Purchase Plan, the Company contributes an amount annually, in cash or Class A stock, equal to 15% of the undistributed total of participants' contributions for the past ten years. All full-time employees of the Company (except those owning 10% or more of the Company's Class A stock) are eligible to participate in the Purchase Plan. Retirement Plans. The Company provides a 401(k) Plan and an Executive Salary Deferral Plan which include Company matching of 50% of contributions not exceeding 4% of each participant's salary. The Company's contribution was $1,483,000 in 1996; $1,393,000 in 1995; and $1,168,000 in 1994. 9. Commitments and Contingencies The Company leases transportation and delivery equipment, poultry farms, processing equipment and distribution facilities under operating leases expiring during the next six years. Management expects that in the normal course of business the leases will be renewed or replaced by other leases. In November and December 1992, under sale-leaseback agreements, the Company sold certain equipment with a net book value of $4.5 million for $19.2 million cash. Annual payments under the operating lease agreements are $3.5 million. The gain of $14.7 million is being amortized over the terms of the leases. At September 28, 1996 and September 30, 1995, the unamortized portion of the deferred gain is included in the balance sheet captions "accrued liabilities" ($2,005,000 and $2,777,000, respectively) and "deferred income taxes and deferred gain" ($434,000 and $4,177,000, respectively). Total rental expense (net of amortized gain) was $35,566,000 in 1996; $28,378,000 in 1995; and $23,042,000 in 1994. At September 28, 1996, future minimum rental payments required under leases that have initial or remaining noncancellable terms in excess of one year are as follows: $30,030,000 in 1997; $24,377,000 in 1998; $19,984,000 in 1999; $14,933,000 in 2000; and $8,551,000 in 2001. The Company maintains separate self-insurance programs for employee group health, dental and disability benefits and for workers' compensation costs. Self-insurance costs are accrued based upon the aggregate of the liability for reported claims and an estimated liability for claims incurred but not yet reported. The Company is involved in litigation incidental to its business. Such litigation is not considered by management to be significant. 10. Related Party Transactions Lease payments for transportation equipment made to the Company's chairman amounted to $3,112,000 in 1996; $1,708,000 in 1995; and $956,000 in 1994. Certain officers and employees of the Company own turkey and broiler farms and enter into grower contracts with the Company which provide for the payment of grower fees. The Company's arrangements with these officers and employees are similar to contracts with unrelated growers and, as such, do not include an ongoing commitment by the Company. Grower fees paid to these officers and employees amounted to $787,000 in 1996; $803,000 in 1995; and $689,000 in 1994. At September 28, 1996 and September 30, 1995, other current assets include $217,000 and $216,000, respectively, and other assets include $8,234,000 and $6,084,000, respectively, of accounts and notes receivable from an officer and director and entities controlled by this person. 11. Impact of New Financial Accounting Pronouncement Beginning in fiscal 1997, the Company will adopt Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The statement establishes accounting standards for the impairment of long-lived assets such as buildings, equipment and certain intangibles. The Company does not believe adoption of the new standard will have a material impact on the financial statements. 12. Stockholders' Equity
(Dollars in thousands) Common stock Class A Class B -------------------------------------------------------------------------------------- Additional Retained Treasury Shares Amount Shares Amount capital earnings stock -------------------------------------------------------------------------------------- Balance at October 2, 1993 8,630,407 $ 86 8,502,052 $85 $ 87,638 $ 97,727 $(11,634) Net income - - - - - 26,992 - Stock exchange 170 - (170) - - - - Exercise of stock options 214,928 2 - - 1,641 - - Conversion of 8% debentures 388,388 4 - - 8,154 - - Issuance of stock under the Employee Stock Purchase Plan - - - - 72 - 218 Cash dividends: Class A $.080 per share - - - - - (946) - Class B $.067 per share - - - - - (850) - -------------------------------------------------------------------------------------- Balance at October 1, 1994 9,233,893 92 8,501,882 85 97,505 122,923 (11,416) Net income - - - - - 35,758 - Stock exchange 2,101,102 21 (2,101,102) (21) - - - Exercise of stock options 422,455 4 - - 2,333 - - Conversion of 8% debentures 262,885 3 952 - 5,262 - - Stock offering 2,500,000 25 - - 51,239 - - 3-for-2 stock split 6,653,539 66 3,200,940 32 (101) - - Purchase of land 157,500 2 - - 2,371 - - Issuance of stock under the Employee Stock Purchase Plan - - - - 233 - 182 Cash dividends: Class A $.080 per share - - - - - (1,611) - Class B $.067 per share - - - - - (638) - -------------------------------------------------------------------------------------- Balance at September 30, 1995 21,331,374 213 9,602,672 96 158,842 156,432 (11,234) Net income - - - - - 22,998 - Stock exchange 150 - (150) - - - - Exercise of stock options 53,140 1 - - 269 - - Issuance of stock under the Employee Stock Purchase Plan - - - - 203 - 377 Cash dividends: Class A $.080 per share - - - - - (1,639) - Class B $.067 per share - - - - - (638) - -------------------------------------------------------------------------------------- Balance at September 28, 1996 21,384,664 $214 9,602,522 $96 $159,314 $177,153 $(10,857) ======================================================================================
On February 6, 1987, the Company's Restated Certificate of Incorporation was amended to create two classes of common stock. The amendment authorized the issuance of up to 40,000,000 shares of Class A common stock, par value $.01 per share, and 40,000,000 shares of Class B common stock, par value $.01 per share. Upon adoption of the amendment, each outstanding share of common stock converted automatically into a share of Class A common stock. During fiscal 1987, the Company concluded a one-time-only exchange offer in which holders of Class A common stock were given the opportunity to exchange their shares for an equivalent number of shares of Class B common stock. The Class B common stock has ten votes per share in most matters submitted to a vote of the Company's stockholders, while the Class A common stock has one vote per share. As a result of the exchange offer, voting control of the Company rests with the holders of Class B common stock. In addition, the dividend per share of Class B common stock may not exceed 90 percent of the dividend per share of Class A common stock. The number of outstanding Class A shares at September 28, 1996 and September 30, 1995 were 20,507,468 and 20,415,936, respectively. Management Responsibility for Financial Statements The financial statements have been prepared by the management of Hudson Foods, Inc. in conformity with generally accepted accounting principles. Management is responsible for the fairness and reliability of the financial statements and other financial data included in this report. In the preparation of the financial statements, it is necessary to make informed estimates and judgments based on currently available information of the effects of certain events and transactions. Hudson maintains accounting and other controls which management believes provide reasonable assurance that financial records are reliable, assets are safeguarded and transactions are properly recorded in accordance with management's authorizations. However, limitations exist in any system of internal control based upon the recognition that the cost of the system should not exceed benefits derived. Hudson's independent auditors, Coopers & Lybrand L.L.P., are engaged to audit the financial statements of Hudson and to express an opinion thereon. Their audit is conducted in accordance with generally accepted auditing standards to enable them to report whether the financial statements present fairly, in all material respects, the financial position and the results of operations and cash flows of Hudson in conformity with generally accepted accounting principles. James T. Hudson Chairman and Chief Executive Officer Charles B. Jurgensmeyer Chief Financial Officer and Executive Vice President October 29, 1996 Report of Independent Accountants To the Board of Directors and Stockholders Hudson Foods, Inc. We have audited the accompanying consolidated balance sheet of Hudson Foods, Inc. and subsidiaries as of September 28, 1996 and September 30, 1995, and the related consolidated statements of operations and cash flows for each of the three years in the period ended September 28, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated 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 consolidated financial statements referred to above (included on pages 16, 18, 20 and 22 to 27) present fairly, in all material respects, the consolidated financial position of Hudson Foods, Inc. and subsidiaries as of September 28, 1996 and September 30, 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended September 28, 1996, in conformity with generally accepted accounting principles. Coopers & Lybrand L.L.P. Tulsa, Oklahoma October 29, 1996
Eleven-Year Financial Summary (Dollars in thousands except per share data) 1996 1995 1994 1993 Operating data: Sales $1,378,474 $1,200,512 $1,040,840 $920,545 Cost of sales 1,211,556 1,023,959 885,248 802,002 Gross profit 166,918 176,553 155,592 118,543 Selling 94,805 82,945 78,698 63,926 General and administrative 32,240 29,211 25,755 20,695 Operating income 39,873 64,397 51,139 33,922 Interest, net 5,789 1,845 6,152 7,975 Interest on tax settlement - 4,500 - - Other, net (4,246) (2,190) - 530 Income (loss) before income taxes and extraordinary item 38,330 60,242 44,987 25,417 Income tax expense (benefit) 15,332 24,484 17,995 9,512 Income before extraordinary item 22,998 35,758 26,992 15,905 Net income 22,998 35,758 26,992 15,905 Per share data: Primary earnings per share before extraordinary item $.76 $1.21 $1.08 $.67 Primary earnings per share .76 1.21 1.08 .67 Fully diluted earnings per share before extraordinary item .76 1.21 1.08 .67 Fully diluted earnings per share .76 1.21 1.08 .67 Dividends declared per Class A common share .080 .080 .080 .080 Dividends declared per Class B common share .067 .067 .067 .067 Stockholders' equity per share 10.82 10.14 8.30 7.17 Financial data: Working capital $213,889 $180,458 $100,096 $103,811 Capital expenditures 139,387 73,314 49,161 21,453 Property, plant and equipment, net 367,600 275,624 229,050 205,613 Total assets 774,742 623,541 473,180 416,503 Long-term obligations less current portion 224,951 129,973 75,169 88,985 Total debt 249,665 151,015 97,078 94,070 Stockholders' equity 325,920 304,349 209,189 173,902 Depreciation and amortization 26,703 25,137 22,279 22,943 Statistical data: Sales growth 14.8% 15.3% 13.1% 13.8% Return on sales (net margin) 1.7 3.0 2.6 1.7 Return on average stockholders' equity 7.3 13.9 14.1 10.3 Current ratio 2.42:1 2.55:1 1.87:1 2.28:1 Long-term obligations to total capitalization 40.8% 29.9% 26.4% 33.8% Shares used in primary earnings per share computation (000's) 30,401 29,494 24,948 23,627 Shares used in fully diluted earnings per share computation (000's) 30,401 29,494 25,099 23,627 Shares outstanding at year-end (000's) 30,110 30,019 25,203 24,261 Stockholders of record 1,332 1,433 1,316 1,402 Number of employees 11,470 10,303 8,911 8,554 Class A common stock price (high-low) $18 1/8-11 1/2 $20-12 3/4 $16 3/4-7 1/8 $10 1/4-5
1992 1991 1990 1989 1988 1987 1986 $809,243 $765,292 $666,697 $620,485 $549,032 $428,880 $223,963 733,028 690,316 606,220 547,929 521,745 384,045 184,915 76,215 74,976 60,477 72,556 27,287 44,835 39,048 49,907 37,135 27,270 13,400 12,989 7,253 4,401 18,533 16,645 16,377 15,735 10,155 8,879 6,915 7,775 21,196 16,830 43,421 4,143 28,703 27,732 8,476 9,073 7,571 9,462 10,843 8,734 2,349 - - - - - - - (4,342) (1,406) (4,591) (2,606) (228) (2,382) (1,096) 3,641 13,529 13,850 36,565 (6,472) 22,351 26,479 1,471 4,987 5,138 13,798 (10,410) 9,432 13,001 2,170 8,542 8,712 22,767 3,938 12,919 13,478 2,170 8,542 8,712 22,767 14,793 12,919 13,478 $.10 $.39 $.40 $1.13 $.20 $.69 $.78 .10 .39 .40 1.13 .75 .69 .78 .10 .39 .40 1.04 .30 .67 .78 .10 .39 .40 1.04 .73 .67 .78 .080 .080 .080 .080 .080 .070 .05 .067 .067 .067 .067 .067 .033 - 6.42 6.39 5.85 5.51 4.21 3.74 2.71 $81,475 $88,564 $89,822 $86,813 $66,679 $41,072 $39,308 46,960 31,326 32,446 19,501 20,522 26,050 9,359 207,097 178,753 164,357 133,495 128,096 120,774 87,428 402,188 360,191 342,269 299,054 290,493 293,594 235,495 125,695 97,418 89,675 78,509 73,747 93,652 83,842 145,924 100,295 97,032 83,886 118,641 125,625 104,614 134,330 133,499 126,005 110,637 82,315 74,031 50,458 17,911 16,536 14,346 12,406 10,608 8,258 3,022 5.7% 14.8% 7.4% 13.0% 28.0% 91.5% 21.3% 0.3 1.1 1.3 3.7 2.7 3.0 6.0 1.6 6.6 7.4 23.6 18.9 20.8 43.1 2.00:1 2.35:1 2.48:1 2.60:1 1.91:1 1.37:1 1.45:1 48.3% 42.2% 41.6% 41.5% 47.3% 55.9% 62.4% 21,455 22,100 21,932 20,096 19,787 18,848 17,324 21,455 22,100 21,932 25,427 24,867 23,436 17,337 20,922 20,880 21,539 20,075 19,533 19,781 18,653 1,483 1,514 1,657 1,668 1,911 1,913 1,571 8,229 7,659 7,370 6,262 5,474 6,027 2,758 $6 1/2-4 5/8 $7 3/4-4 3/8 $9 5/8-4 3/8 $11 1/4-6 1/8 $8 3/4-3 1/4 $13 7/8-8 5/8 $14 1/8-7 1/8
Quarterly Financial Data (unaudited) Hudson Foods, Inc. and Subsidiaries
(Dollars in thousands except per share data) Quarter Ended 1996 December 30 March 30 June 29 September 28 Fiscal 1996 Sales $340,674 $330,297 $337,234 $370,269 $1,378,474 Cost of sales 293,757 293,369 296,069 328,361 1,211,556 Gross profit 46,917 36,928 41,165 41,908 166,918 Selling 23,657 24,134 23,440 23,574 94,805 General and administrative 7,121 8,208 8,542 8,369 32,240 Operating income 16,139 4,586 9,183 9,965 39,873 Other expense (income), net 1,270 1,540 3,778 (5,045) 1,543 Income before income taxes 14,869 3,046 5,405 15,010 38,330 Income tax expense 5,870 1,164 2,096 6,202 15,332 Net income $8,999 $1,882 $3,309 $8,808 $22,998 Earnings per share: Primary $.30 $.06 $.11 $.29 $.76 Fully diluted .30 .06 .11 .29 .76 Dividends: Class A .0200 .0200 .0200 .0200 .080 Class B .0167 .0167 .0167 .0167 .067 Market price (high-low) $17 1/2-13 5/8 $18 1/8-2 3/4 $15 1/8-11 1/2 $14 1/2-12 1/8 $18 1/8-11 1/2
Quarter Ended 1995 December 31 April 1 July 1 September 30 Fiscal 1995 Sales $279,955 $271,814 $305,650 $343,093 $1,200,512 Cost of sales 238,202 227,520 261,825 296,412 1,023,959 Gross profit 41,753 44,294 43,825 46,681 176,553 Selling 19,048 19,150 21,393 23,354 82,945 General and administrative 7,252 7,402 6,818 7,739 29,211 Operating income 15,453 17,742 15,614 15,588 64,397 Other expense (income), net (932) 3,718 578 791 4,155 Income before income taxes 16,385 14,024 15,036 14,797 60,242 Income tax expense 6,550 5,856 5,642 6,436 24,484 Net income $9,835 $8,168 $9,394 $8,361 $35,758 Earnings per share: Primary $.35 $.27 $.31 $.28 $1.21 Fully diluted .35 .27 .31 .28 1.21 Dividends: Class A .0200 .0200 .0200 .0200 .080 Class B .0167 .0167 .0167 .0167 .067 Market price (high-low) $17 7/8-13 7/8 $20-16 3/4 $19 1/4-12 3/4 $15 1/2-13 1/4 $20-12 3/4
EX-21 8 HUDSON FOODS, INC. SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES OF HUDSON FOODS, INC. 1. Hudson Development Company, Inc., an Arkansas corporation. 2. Hudson Foods Foreign Sales, Inc., incorporated under the laws of the U.S. Virgin Islands. 3. Hudson Foods Poland, Sp. zo.o., a Polish limited liability company. 4. Hudson Midwest Foods, Inc., a Nebraska corporation. EX-23 9 CONSENT OF INDEPENDENT ACCTS EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Hudson Foods, Inc. on Form S-8 (File Nos. 33-36690 and 33-41839) of our reports dated October 29, 1996, on our audits of the consolidated financial statements and financial statement schedule of Hudson Foods, Inc. as of September 28, 1996, and September 30, 1995, and for each of the three years in the period ended September 28, 1996, which reports are incorporated by reference and included in this Annual Report on Form 10-K. Coopers & Lybrand L.L.P. Tulsa, Oklahoma December 11, 1996 EX-27 10 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 12-MOS SEP-28-1996 OCT-01-1995 SEP-28-1996 1 6,437 0 110,655 1,863 226,872 364,474 518,345 150,745 774,742 150,585 0 0 0 310 325,610 774,742 1,378,474 1,378,474 1,211,556 1,338,601 (4,246) 0 5,789 38,330 15,332 22,998 0 0 0 22,998 0.76 0.76
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