-----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, E+9XyFU101Ssqt61Qu6EjriDw7nUOBV8NmWwuLehMVu/bMTilJop6W4sJqpNju29 pcqICXfdqti0CJMcEcWnAw== 0000950134-00-000192.txt : 20000202 0000950134-00-000192.hdr.sgml : 20000202 ACCESSION NUMBER: 0000950134-00-000192 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20000101 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUIZA FOODS CORP CENTRAL INDEX KEY: 0000931336 STANDARD INDUSTRIAL CLASSIFICATION: ICE CREAM & FROZEN DESSERTS [2024] IRS NUMBER: 752559681 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-12755 FILM NUMBER: 505155 BUSINESS ADDRESS: STREET 1: 2515 MCKINNEY AVENUE LB 30 STREET 2: SUITE 1200 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2145289922 MAIL ADDRESS: STREET 1: 3811 TURTLE CREEK BLVD STREET 2: SUITE 1300 CITY: DALLAS STATE: TX ZIP: 75219 8-K 1 FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): January 11, 2000 (January 1, 2000) Suiza Foods Corporation ----------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 1-12755 75-2559681 -------- ------- ---------- (STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.) INCORPORATION)
2515 McKinney Avenue, LB 30, Suite 1200 Dallas, Texas 75201 ------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's telephone number, including area code: (214) 303-3400 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. Effective January 1, 2000, Suiza Foods Corporation ("Suiza") entered into a joint venture with Dairy Farmers of America ("DFA") in which Suiza and DFA combined certain of their domestic fluid dairy operations into Suiza Fluid Dairy Group, L.P. (the "Venture"). DFA received a 33.8% ownership interest in the Venture in exchange for the contribution of the operations of Southern Foods Group, L.P. ("Southern Foods") and for the contribution of its investments in its other joint ventures with Suiza: Suiza GTL, LLC and Suiza SoCal, LLC. In connection with this transaction, the Venture also acquired the ownership interest in Southern Foods held by Pete Schenkel, who joined the Board of Directors of Suiza upon the closing of this transaction. Suiza received a 66.2% ownership interest in the Venture in exchange for the contribution of Suiza's domestic fluid dairy operations. The ownership interests received by Suiza and DFA were determined by negotiation between the parties. Suiza will continue to own and operate its Morningstar and Puerto Rico dairy operations outside of the Venture. This transaction will be recorded by Suiza under the purchase method of accounting. The deemed purchase price for the acquisition of Southern Foods has not been determined at this time, pending a valuation of Southern Foods. Simultaneously with the closing of the acquisition, the Venture entered into a new $1.61 billion credit facility and borrowed approximately $1.1 billion under this new facility. The Venture distributed a portion of the borrowings under the new credit facility to DFA and to Suiza. DFA used its portion of the distributed funds to repay certain existing obligations of Southern Foods. Suiza used its portion of the distributed funds to repay certain existing obligations of Suiza, including to redeem $100 million aggregate stated amount of mandatorily redeemable trust issued preferred securities held by DFA. Suiza also terminated its existing senior credit facility and replaced it with a new $300 million senior credit facility. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements of Business Acquired. In accordance with paragraph (a)(4) of Item 7 of Form 8-K, the historical financial statements required in connection with the Southern Foods acquisition are not included in this initial report but will be filed not later than 60 days after the date this report is required to be filed. (b) Pro Forma Financial Information In accordance with paragraph (b)(2) of Item 7 of Form 8-K, the pro forma financial information required in connection with the Southern Foods acquisition are not included in this initial report but will be filed not later than 60 days after the date this report is required to be filed. (c) Exhibits 4.1 Registration Rights Agreement, dated as of January 1, 2000, between Suiza Foods Corporation, Dairy Farmers of America, Inc. and Mid-Am Capital, L.L.C. 10.1 Credit Agreement dated as of January 4, 2000 among Suiza Fluid Dairy Group, L.P. and Southern Foods Group, L.P. as Borrowers, certain domestic subsidiaries of the parent borrower, the Lenders parties thereto, First Union National Bank as Administrative Agent, Bank One, NA as Syndication Agent, Bank of America, N.A. and Fleet National Bank as Co-Documentation Agents and First Union Securities, Inc. and Bank One Capital Markets, Inc., as Co-Book Runners. 10.2 Credit Agreement dated as of January 4, 2000 among Suiza Foods Corporation as Borrower, certain domestic subsidiaries of the Borrower as Guarantors, the Lenders parties thereto, First Union National Bank as Administrative Agent, Bank One, NA as Syndication Agent, Bank of America, N.A. and Fleet National Bank as Co-Documentation Agents, and First Union Securities, Inc. and Bank One Capital Markets, Inc., as Co-Book Runners. 10.3 Amended and Restated Limited Partnership of Suiza Fluid Dairy Group, L.P. 99.1 Press Release dated as of January 4, 2000. 3 SIGNATURES Pursuant to the requirements 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. Dated: January 11, 2000 SUIZA FOODS CORPORATION By: /s/ Lisa N. Tyson ------------------------------------- Lisa N. Tyson Vice President and Assistant General Counsel 4 INDEX TO EXHIBITS
Exhibit No. Description ----------- ----------- 4.1 Registration Rights Agreement, dated as of January 1, 2000, between Suiza Foods Corporation, Dairy Farmers of America, Inc. and Mid-Am Capital, L.L.C. 10.1 Credit Agreement dated as of January 4, 2000 among Suiza Fluid Dairy Group, L.P. and Southern Foods Group, L.P. as Borrowers, certain domestic subsidiaries of the parent borrower, the Lenders parties thereto, First Union National Bank as Administrative Agent, Bank One, NA as Syndication Agent, Bank of America, N.A. and Fleet National Bank as Co-Documentation Agents and First Union Securities, Inc. and Bank One Capital Markets, Inc., as Co-Book Runners. 10.2 Credit Agreement dated as of January 4, 2000 among Suiza Foods Corporation as Borrower, certain domestic subsidiaries of the Borrower as Guarantors, the Lenders parties thereto, First Union National Bank as Administrative Agent, Bank One, NA as Syndication Agent, Bank of America, N.A. and Fleet National Bank as Co-Documentation Agents, and First Union Securities, Inc. and Bank One Capital Markets, Inc., as Co-Book Runners. 10.3 Amended and Restated Limited Partnership of Suiza Fluid Dairy Group, L.P. 99.1 Press Release dated as of January 4, 2000.
EX-4.1 2 REGISTRATION RIGHTS AGREEMENT DATED 1/1/00 1 EXHIBIT 4.1 REGISTRATION RIGHTS AGREEMENT (SUIZA COMMON STOCK) January 1, 2000 Dairy Farmers of America, Inc. Mid-Am Capital, L.L.C. Northpointe Tower Suite 1000 10220 N. Executive Hills Blvd. Kansas City, MO 64153 Ladies and Gentlemen: Suiza Foods Corporation, a Delaware corporation (the "Company"), Dairy Farmers of America, Inc., a Kansas cooperative marketing association ("DFA") and Mid-Am Capital, L.L.C., a Delaware limited liability company ("Mid-Am"), (DFA and Mid-Am, collectively, the "Holders"), among others, have formed Suiza Fluid Dairy Group, L.P., a Delaware limited partnership (the "Venture"), through a series of contributions, mergers and a redemption upon the terms set forth in an Amended and Restated Contribution Agreement, Plan of Merger and Purchase Agreement dated as of November 12, 1999 (the "Merger Agreement"). Pursuant to the terms of that certain Amended and Restated Limited Partnership Agreement of the Venture dated as of the date hereof (the "Partnership Agreement"), the interests in the Venture held by the Holders are exchangeable, under certain circumstances, for shares of common stock, $.01 par value per share, of the Company ("Common Stock"). In accordance with the terms of the Partnership Agreement, the Company agrees to register the resale of the Common Stock issuable upon exchange of the interests in the Venture (the "Interests") held by the Holders (such Common Stock, the "Registrable Securities") pursuant to the terms and subject to the conditions set forth herein. 1. Definitions. Capitalized terms used herein without definition shall have their respective meanings set forth in or pursuant to the Merger Agreement. All references to Sections herein are to Sections of this Agreement unless otherwise indicated. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Affiliate" of any specified person means any other person which, directly or indirectly, is in control of, is controlled by, or is under common control with such specified person. For purposes of this definition, control of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by ownership, contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Commission" means the Securities and Exchange Commission. 2 "Effectiveness Period" has the meaning set forth in Section 2(b) hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Prospectus" means the prospectus included in any Shelf Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities. "Securities Act" means the Securities Act of 1933, as amended. "Shelf Registration" means a registration effected pursuant to Section 2 hereof. "Shelf Registration Statement" means a Shelf Registration Statement of the Company pursuant to the provisions of Section 2 hereof filed with the Commission which covers the Registrable Securities, on an appropriate form under Rule 415 under the Securities Act, or any similar rule that may be adopted by the Commission, amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. 2. Shelf Registration. (a) (i) The Company shall use its commercially reasonable efforts to file, within sixty (60) calendar days following the receipt by the Company of a written request therefore (a "Demand Notice") by the Holders holding more than fifty percent (50%) of the Registrable Securities (the "Demand Date"), with the Commission a Shelf Registration Statement relating to the offer and sale of the Registrable Securities by the Holders in accordance with the methods of distribution elected by the Holders and set forth in such Shelf Registration Statement and, thereafter, shall use commercially reasonable efforts to cause such Shelf Registration Statement to be declared effective under the Securities Act within one hundred twenty (120) calendar days following the Demand Date; provided, however, that no Holder shall be entitled to sell or otherwise transfer any Registrable Securities held by it unless such Holder is in compliance with Section 3(g) hereof. (ii) Each Demand Notice shall specify the amount of Registrable Securities proposed to be sold. Within fifteen (15) calendar days after receipt of a Demand Notice, the Company will give written notice thereof to the other Holders, if any, and include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within ten (10) calendar days after the receipt by the applicable Holder of the 2 3 Company's notice. Each such request shall also specify the method of disposition thereof. (iii) The Holders as a group shall be entitled to make only one (1) demand on the Company pursuant to this Agreement (and only after the exchange of the Interests), and under no circumstances shall the Company be required to file more than one (1) Shelf Registration Statement pursuant to this Agreement. (b) The Company shall use its commercially reasonable efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders for a period (the "Effectiveness Period") from the date the Shelf Registration Statement is declared effective until the Company's obligation pursuant to this Section 2(b) is terminated upon the earliest of the following: (A) when all outstanding Registrable Securities held by the Holders which are not affiliates of the Company may be resold without registration under the Securities Act pursuant to Rule 144(k) under the Securities Act or any successor provision thereto or any other applicable law, rule or regulation, whether now in effect or hereinafter promulgated, adopted or issued, or (B) when all outstanding Registrable Securities have been sold pursuant to the Shelf Registration Statement; provided, that such Effectiveness Period will be extended by the aggregate number of days during which any Holders are prevented from selling Registrable Securities as a result of Section 4 of this Agreement. 3. Registration Procedures. In connection with any Shelf Registration Statement, the following provisions shall apply: (a) (1) The Company shall advise the Holders: (i) when a Shelf Registration Statement, and any amendment thereto, has been filed with the Commission and when the Shelf Registration Statement or any post-effective amendment thereto has become effective; and (ii) of any request by the Commission for amendments or supplements to the Shelf Registration Statement or the Prospectus included therein or for additional information. (2) The Company shall advise the Holders: (i) of the issuance by the Commission of any stop order suspending effectiveness of the Shelf Registration Statement or the initiation of any proceedings for that purpose; and (ii) of the receipt by the Company of any notification with respect to the suspension of the qualification of the securities included 3 4 therein for sale in any jurisdiction or the initiation of any proceeding for such purpose. (b) The Company shall use its commercially reasonable efforts to prevent the issuance, and, if issued, to obtain the withdrawal, of any order suspending the effectiveness of any Shelf Registration Statement at the earliest possible time. (c) The Company shall furnish to each Holder of Registrable Securities included within the coverage of any Shelf Registration Statement, without charge, at least one copy of such Shelf Registration Statement and any post-effective amendments thereto, including financial statements and schedules contained therein, provided, that the Company shall not be required to furnish to the Holders reports and other documents incorporated by reference in the Shelf Registration Statement or any exhibits thereto (including those incorporated by reference). (d) The Company shall, during the Effectiveness Period, deliver to each Holder of Registrable Securities included within the coverage of any Shelf Registration Statement, without charge, as many copies of the Prospectus (including each preliminary prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request, and the Company consents (except upon and during the continuance of any event described in Section 4) to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of Registrable Securities in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto during the Effectiveness Period. (e) Prior to any offering of Registrable Securities pursuant to any Shelf Registration Statement, the Company shall use its commercially reasonable efforts to register or qualify or cooperate with the Holders participating in an offering of the Registrable Securities and their respective counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions in the United States as any such Holders reasonably request in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Registrable Securities covered by such Shelf Registration Statement; provided, however, that in no event shall the Company be obligated to (i) qualify generally to do business or as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to so qualify but for this Section 3(e), (ii) file any general consent to service of process in any jurisdiction where it is not as of the date hereof then so subject or (iii) subject itself to taxation in any such jurisdiction if it is not so subject. (f) Unless any Registrable Securities shall be in book-entry only form, the Company shall cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold pursuant to any Shelf Registration Statement free of any restrictive legends and in such permitted denominations 4 5 and registered in such names as the Holders may request in connection with the sale of Registrable Securities pursuant to such Shelf Registration Statement. (g) The Company may require each Holder of Registrable Securities to be sold pursuant to any Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution by such Holder of such Registrable Securities required by law to be disclosed in the Shelf Registration Statement (the "Requisite Information") or as the Company may otherwise from time to time reasonably require for inclusion in such Shelf Registration Statement and the Company may exclude from such registration statement such information as to any Holder that fails to furnish such information within a reasonable time after receiving such request. (h) The Company shall use its commercially reasonable efforts to list, within fifteen (15) business days of the exchange of the Interests into Registrable Securities, all of the Registrable Securities covered by any Shelf Registration Statement on any national securities exchange or quotation system on which the Common Stock is then listed or quoted. The Company shall file, within fifteen (15) business days of the receipt of notice from any Holder which includes the Requisite Information with respect to such Holder, with the Commission a Prospectus supplement pursuant to Rule 424 of the Securities Act, or any similar rule that may be adopted by the Commission, to amend or supplement such Shelf Registration Statement to include in the Shelf Registration Statement the Requisite Information as to such Holder (and the Registrable Securities held by such Holder), and the Company shall provide such Holder within fifteen (15) business days of such notice with a copy of such Prospectus as so amended or supplemented containing the Requisite Information in order to permit such Holder to comply with the Prospectus delivery requirements of the Securities Act in a timely manner with respect to any proposed disposition of such Holder's Registrable Securities. No Holder shall be entitled to use the Prospectus unless and until such Holder shall have furnished the information required by this Section 3(g). (i) The Company shall use its commercially reasonable efforts to take all other steps necessary to effect the registration, offering and sale of the Registrable Securities covered by the Shelf Registration Statement contemplated hereby pursuant to such Shelf Registration Statement. 4. Standstill. (a) Any Holder participating in an offering of Registrable Securities will notify the Company two business days prior to selling any Registrable Securities pursuant to any Shelf Registration Statement. If, upon receipt of such a notice, the Company certifies to such Holder in writing that (i) due to a change in circumstances or a pending transaction, the Shelf Registration Statement contains an untrue statement of a material fact or omits 5 6 to state any material fact required to be stated therein or necessary to make the statements therein not misleading and (ii) the public disclosure required to correct such misstatement or omission would be injurious to the Company, then such Holder will refrain from selling any Registrable Securities pursuant to the Shelf Registration Statement for the period of time, not to exceed forty-five (45) days for each circumstance or transaction, requested by the Company. The Company will use commercially reasonable efforts to minimize the time period during which any Holder is required to refrain from selling Registrable Securities under this paragraph. (b) If, during the Effectiveness Period, the Company commences an underwritten offering of Common Stock on its own behalf or on behalf of selling stockholders, the Holders participating in an offering of Registrable Securities will refrain from selling Registrable Securities pursuant to the Shelf Registration Statement for a period of time beginning ten (10) days before the anticipated effective date of the Company's offering (as disclosed by the Company to such Holders in writing) and ending ninety (90) days after such effective date (or thirty (30) days after the beginning of such period, if such effective date has not yet occurred). 5. Registration Expenses. The Company shall bear all fees and expenses incurred in connection with the performance of its obligations under Sections 2 and 3 hereof. 6. Indemnification and Contribution. (a) In connection with any Shelf Registration Statement, the Company shall indemnify and hold harmless each Holder participating in an offering of Registrable Securities, each Person, if any, who controls any such Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each Holder's respective directors, officers, employees, trustees and agents, as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Shelf Registration Statement (or any amendment thereto) covering Registrable Securities, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary in order to make the statements therein not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such 6 7 untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Company; and (iii) against any and all expenses whatsoever, as incurred (including reasonable fees and disbursements of counsel chosen by the Holders or such Holder (except to the extent otherwise expressly provided in Section 6(c) hereof)), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) of this Section 6(a); provided, that this indemnity shall not apply to any loss, liability, claim, damage or expense to the extent arising out of an untrue statement or omission or alleged untrue statement or omission (i) made in reliance upon and in conformity with written information furnished to the Company by such Holder participating in an offering of Registrable Securities in writing expressly for use in the Shelf Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto) or (ii) contained in any preliminary prospectus if such Holder failed to send or deliver a copy of the Prospectus (or any amendment or supplement thereto) to the Person asserting such losses, claims, damages or liabilities on or prior to the delivery of written confirmation of any sale of securities covered thereby to such Person in any case where such Prospectus (or any amendment or supplement thereto) would have cured the defect giving rise to such loss, claim, damage or liability, unless the failure to so send or deliver such Prospectus (or any amendment or supplement thereto) was caused by the failure of the Company to provide a copy of such Prospectus (or any amendment or supplement thereto) in accordance with the terms of this Agreement. Any amounts advanced by the Company to an indemnified party pursuant to this Section 6 as a result of such losses shall be returned to the Company if it shall be finally determined by such a court in a judgment not subject to appeal or final review that such indemnified party was not entitled to indemnification by the Company. (b) Each Holder participating in an offering of Registrable Securities agrees, severally and not jointly, to indemnify and hold harmless the Company and the other selling Holders and each of their respective directors, officers (including each officer of the Company who signed the Shelf Registration Statement), employees, trustees and agents and each Person, if any, who controls the Company, or any other selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all loss, liability, claim, damage and expense whatsoever described in the indemnity contained in Section 6(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Shelf Registration Statement (or any amendment thereto) or any Prospectus (or any amendment 7 8 or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such selling Holder expressly for use in the Shelf Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto); provided, however, that no such Holder shall be liable for any claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Registrable Securities pursuant to the Shelf Registration Statement. (c) Each indemnified party shall give prompt notice to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, enclosing a copy of all papers served on such indemnified party, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability which it may have otherwise than under this Section 6 unless and to the extent it is not prejudiced as a proximate result of such failure. An indemnifying party may participate at its own expense in the defense of any such action. If an indemnifying party so elects within 30 days after receipt of such notice, such indemnifying party, jointly with any other indemnifying party, may assume the defense of such action with counsel chosen by it (subject to the approval of the indemnified parties defendant in such action, which approval shall not be unreasonably withheld), unless such indemnified party reasonably determines that there may be legal defenses available to such indemnified party which are different from or in conflict with those available to such indemnifying party. If an indemnifying party is not entitled to assume the defense of such action as a result of the proviso to the preceding sentence, counsel for such indemnifying party shall be entitled to conduct the defense of such indemnifying party and counsel for each indemnified party or parties shall be entitled to conduct the defense of such indemnified party or parties, with the reasonable expenses and fees of one such separate counsel (in addition to any local counsel) and other expenses of the indemnified party or parties related to the defense of such action to be paid by the indemnifying party. If an indemnifying party assumes the defense of an action in accordance with and as permitted by the provisions of this paragraph, such indemnifying party shall not be liable for any fees and expenses of counsel for the indemnified parties incurred thereafter in connection with such action. In no event shall the indemnifying party or parties be liable for the fees and expenses of more than one counsel (in addition to any local counsel) separate from its own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. The indemnifying party shall not be liable for any loss, liability, claim, damage or expense by reason of any settlement of any such action or proceeding effected without the indemnifying party's prior written consent, which consent shall not be unreasonably withheld. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim, (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of, the indemnified party and (iii) does not include any payment or consideration by the indemnified party that is not covered by the indemnification provisions of this Agreement. 8 9 (d) In order to provide for just and equitable contribution in circumstances in which the indemnity provision agreement provided for in this Section 6 is for any reason held to be unavailable to the indemnified parties although applicable in accordance with its terms, the Company, and the Holders participating in an offering of Registrable Securities shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by said indemnity agreement incurred by the indemnified party, as incurred; provided, that no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person that was not guilty of such fraudulent misrepresentation. As between the Company and the Holders, such parties shall contribute to such aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement in such proportion as shall be appropriate to reflect the relative fault of the Company, on the one hand, and the Holders, on the other hand, with respect to the statements or omissions which resulted in such loss, liability, claim, damage or expense, or action in respect thereof, as well as any other relevant equitable considerations. The relative fault of the Company, on the one hand, and of the Holders, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or by or on behalf of the Holders, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Holders agree that it would not be just and equitable if contributions pursuant to this Section 6 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the relevant equitable considerations. Notwithstanding the provisions of this Section, no Holder shall be required to contribute any amount in excess of the net proceeds received by such Holder from the sale of Registrable Securities pursuant to the Shelf Registration Statement. For purposes of this Section 6(d), each director, officer, employee, trustee, agent and Person, if any, who controls a Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as such Holder, and each director, officer, employee, trustee and agent of each of the Company, and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company. No party shall be liable for contribution with respect to any action, suit, proceeding or claim settled without its written consent. 7. Miscellaneous. (a) No Inconsistent Agreements; Other Registration Rights. The Company shall not enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The Company is not currently a party to any agreement granting any registration rights with respect to any of its securities to any person which conflicts with the Company's obligations hereunder or gives any other party the right to include any 9 10 securities in any Registration Statement filed pursuant hereto (except in each case, as have been waived). (b) Amendments and Waivers. The provision of this Agreement, including the provisions of this sentence, may not be amended, qualified, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the Holders representing more than fifty percent (50%) of the Registrable Securities from time to time. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telex, telecopier, or air courier guaranteeing overnight delivery: 1) if to a Holder, at the address of such Holder as it appears on the register for the Common Stock; and 2) if to the Company, initially at its address set forth in the Merger Agreement. All such notices and communications shall be deemed to have duly given when received, if delivered in person or by fax; five days after mailing, if sent by mail, or the day following transmission, if sent by overnight courier. The Company by notice to the others may designate additional or different addresses for subsequent notices or communications. (d) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties. (e) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (f) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (g) Governing Law. This Agreement shall be governed by the internal laws of the State of Delaware, without regard to principles of conflicts of law. (h) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in 10 11 any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 11 12 IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have executed this Agreement as of the day and year first above written. Very truly yours, SUIZA FOODS CORPORATION By: /s/ MICHELLE GOOLSBY -------------------------------- Name: Michelle Goolsby -------------------------------- Title: Executive Vice President, -------------------------------- Secretary & General Counsel -------------------------------- DAIRY FARMERS OF AMERICA, INC. By: /s/ GARY E. HANMAN -------------------------------- Name: Gary E. Hanman -------------------------------- Title: President & -------------------------------- Chief Executive Officer -------------------------------- MID-AM CAPITAL, L.L.C. By: /s/ GERALD L. BOS -------------------------------- Name: Gerald L. Bos -------------------------------- Title: Chief Executive Officer & -------------------------------- Treasurer -------------------------------- 12 EX-10.1 3 CREDIT AGREEMENT DATED 1/4/00-SUIZA FLUID DAIRY 1 EXHIBIT 10.1 - ------------------------------------------------------------------------------- CREDIT AGREEMENT among SUIZA FLUID DAIRY GROUP, L.P. and SOUTHERN FOODS GROUP, L.P., as Borrowers, CERTAIN OF THE DOMESTIC SUBSIDIARIES OF THE PARENT BORROWER FROM TIME TO TIME PARTIES HERETO, as Guarantors, THE LENDERS PARTIES HERETO, FIRST UNION NATIONAL BANK, as Administrative Agent, BANK ONE, NA, as Syndication Agent and BANK OF AMERICA, N.A. and FLEET NATIONAL BANK, as Co-Documentation Agents Dated as of January 4, 2000 FIRST UNION SECURITIES, INC. and BANK ONE CAPITAL MARKETS, INC., as Co-Book Runners - ------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS............................................................................................1 Section 1.1 Defined Terms.............................................................................1 Section 1.2 Other Definitional Provisions............................................................27 Section 1.3 Accounting Terms.........................................................................27 ARTICLE II THE LOANS; AMOUNT AND TERMS..........................................................................28 Section 2.1 Revolving Loans..........................................................................28 Section 2.2 SFG Revolving Loans Subfacility..........................................................29 Section 2.3 Term A Loan..............................................................................31 Section 2.4 SFG Term Loan............................................................................32 Section 2.5 Swingline Loan Subfacility...............................................................33 Section 2.6 Letter of Credit Subfacility.............................................................34 Section 2.7 Fees.....................................................................................38 Section 2.8 Reduction or Increase of the Revolving Commitments.......................................39 Section 2.9 Prepayments..............................................................................40 Section 2.10 Minimum Borrowing Amounts and Principal Amounts of Tranches..............................42 Section 2.11 Interest; Interest Payment Dates.........................................................43 Section 2.12 Conversion Options.......................................................................43 Section 2.13 Computation of Interest and Fees.........................................................44 Section 2.14 Pro Rata Treatment and Payments..........................................................45 Section 2.15 Non-Receipt of Funds by the Administrative Agent.........................................46 Section 2.16 Inability to Determine Interest Rate.....................................................47 Section 2.17 Illegality...............................................................................47 Section 2.18 Requirements of Law......................................................................48 Section 2.19 Indemnity................................................................................49 Section 2.20 Taxes....................................................................................49 Section 2.21 Indemnification; Nature of Issuing Lender's Duties.......................................51 Section 2.22 Joint and Several Liability of the Borrowers.............................................53 Section 2.23 Defaulting Lenders; Limitation on Claims.................................................55 Section 2.24 Replacement of Lenders...................................................................56 ARTICLE III REPRESENTATIONS AND WARRANTIES......................................................................56 Section 3.1 Financial Condition......................................................................57 Section 3.2 No Change................................................................................57 Section 3.3 Corporate Existence; Compliance with Law.................................................57 Section 3.4 Corporate Power; Authorization; Enforceable Obligations..................................57 Section 3.5 No Legal Bar; No Default.................................................................58 Section 3.6 No Material Litigation...................................................................58 Section 3.7 Government Acts..........................................................................58 Section 3.8 Margin Regulations.......................................................................59 Section 3.9 ERISA....................................................................................59 Section 3.10 Environmental Matters....................................................................59 Section 3.11 Purpose of Loans.........................................................................60 Section 3.12 Subsidiaries.............................................................................60 Section 3.13 Ownership................................................................................61 Section 3.14 Indebtedness.............................................................................61 Section 3.15 Taxes....................................................................................61 Section 3.16 Intellectual Property....................................................................61 Section 3.17 Solvency.................................................................................62 Section 3.18 Investments..............................................................................62 Section 3.19 Location of Chief Executive Office.......................................................62 Section 3.20 No Burdensome Restrictions...............................................................62 Section 3.21 Brokers' Fees............................................................................62
i 3 Section 3.22 Labor Matters............................................................................62 Section 3.23 Accuracy and Completeness of Information.................................................62 Section 3.24 Year 2000 Issue..........................................................................63 Section 3.25 Interest Rate Protection.................................................................63 ARTICLE IV CONDITIONS PRECEDENT.................................................................................63 Section 4.1 Conditions to Closing Date and Initial Revolving Loans, SFG Revolving Loans and Term Loans....................................................................................63 Section 4.2 Conditions to All Extensions of Credit...................................................67 ARTICLE V AFFIRMATIVE COVENANTS.................................................................................69 Section 5.1 Financial Statements.....................................................................69 Section 5.2 Certificates; Other Information..........................................................71 Section 5.3 Payment of Obligations...................................................................72 Section 5.4 Conduct of Business and Maintenance of Existence.........................................72 Section 5.5 Maintenance of Property; Insurance.......................................................72 Section 5.6 Inspection of Property; Books and Records; Discussions...................................73 Section 5.7 Notices..................................................................................73 Section 5.8 Environmental Laws.......................................................................75 Section 5.9 Financial Covenants......................................................................76 Section 5.10 Obligations Regarding Subsidiaries; Additional Subsidiary Guarantors.....................77 Section 5.11 Compliance with Law......................................................................77 Section 5.12 Pledged Assets...........................................................................77 Section 5.13 Additional Credit Parties................................................................78 Section 5.14 Year 2000 Compliance.....................................................................78 Section 5.15 Joinder of Subsidiary Borrower...........................................................79 ARTICLE VI NEGATIVE COVENANTS...................................................................................79 Section 6.1 Indebtedness.............................................................................80 Section 6.2 Liens....................................................................................81 Section 6.3 Nature of Business.......................................................................81 Section 6.4 Consolidation, Merger, Sale or Purchase of Assets, etc...................................81 Section 6.5 Advances, Investments and Loans..........................................................82 Section 6.6 Transactions with Affiliates.............................................................82 Section 6.7 Ownership of Subsidiaries; Restrictions..................................................83 Section 6.8 Fiscal Year; Organizational Documents; Material Contracts................................83 Section 6.9 Limitation on Actions....................................................................83 Section 6.10 Restricted Payments......................................................................85 Section 6.11 Prepayments of Indebtedness, etc.........................................................85 Section 6.12 Sale Leasebacks..........................................................................86 Section 6.13 Use of Proceeds..........................................................................86 Section 6.14 Designated Senior Indebtedness...........................................................86 ARTICLE VII EVENTS OF DEFAULT...................................................................................86 Section 7.1 Events of Default........................................................................86 Section 7.2 Acceleration; Remedies...................................................................89 ARTICLE VIII THE AGENT..........................................................................................90 Section 8.1 Appointment..............................................................................90 Section 8.2 Delegation of Duties.....................................................................90 Section 8.3 Exculpatory Provisions...................................................................90 Section 8.4 Reliance by Administrative Agent.........................................................91 Section 8.5 Notice of Default........................................................................91 Section 8.6 Non-Reliance on Administrative Agent and Other Lenders...................................91 Section 8.7 Indemnification..........................................................................92 Section 8.8 Administrative Agent in Its Individual Capacity..........................................92 Section 8.9 Successor Administrative Agent...........................................................93
ii 4 ARTICLE IX MISCELLANEOUS........................................................................................93 Section 9.1 Amendments, Waivers and Release of Collateral............................................93 Section 9.2 Notices..................................................................................95 Section 9.3 No Waiver; Cumulative Remedies...........................................................96 Section 9.4 Survival of Representations and Warranties...............................................96 Section 9.5 Payment of Expenses and Taxes............................................................96 Section 9.6 Successors and Assigns; Participations; Purchasing Lenders...............................97 Section 9.7 Adjustments; Set-off....................................................................100 Section 9.8 Table of Contents and Section Headings..................................................101 Section 9.9 Counterparts............................................................................101 Section 9.10 Effectiveness; Designation as Senior Indebtedness.......................................101 Section 9.11 Severability............................................................................101 Section 9.12 Integration.............................................................................102 Section 9.13 Governing Law...........................................................................102 Section 9.14 Consent to Jurisdiction and Service of Process..........................................102 Section 9.15 Confidentiality.........................................................................102 Section 9.16 Acknowledgments.........................................................................103 Section 9.17 Waivers of Jury Trial and Punitive Damages..............................................103 Section 9.18 Refinancing of Existing Subsidiary Borrower Debt........................................104 ARTICLE X GUARANTY.............................................................................................104 Section 10.1 The Guaranty............................................................................104 Section 10.2 Bankruptcy..............................................................................105 Section 10.3 Nature of Liability.....................................................................105 Section 10.4 Independent Obligation..................................................................105 Section 10.5 Authorization...........................................................................106 Section 10.6 Reliance................................................................................106 Section 10.7 Waiver..................................................................................106 Section 10.8 Limitation on Enforcement...............................................................107 Section 10.9 Confirmation of Payment.................................................................107 Section 10.10 Limitations on Guaranty.................................................................108
iii 5 SCHEDULES - --------- Schedule 1.1(a) Account Designation Letter Schedule 1.1(b) Investments Schedule 1.1(c) Liens Schedule 2.1(a) Lenders and Commitments Schedule 2.1(b)(i) Form of Notice of Borrowing Schedule 2.1(d) Form of Revolving Note Schedule 2.2(d) Form of SFG Revolving Note Schedule 2.3(c) Form of Term A Note Schedule 2.4(c) Form of SFG Term Note Schedule 2.5(d) Form of Swingline Note Schedule 2.12 Form of Notice of Conversion/Extension Schedule 2.20 Section 2.20 Certificate Schedule 3.6 Litigation Schedule 3.12 Subsidiaries Schedule 3.16 Intellectual Property Schedule 3.19 Chief Executive Offices Schedule 3.22 Labor Matters Schedule 4.1(b) Form of Secretary's Certificate Schedule 4.1(h) Form of Solvency Certificate Schedule 5.10 Form of Joinder Agreement Schedule 6.1(b) Indebtedness Schedule 9.2 Lenders' Lending Offices Schedule 9.6(c) Form of Commitment Transfer Supplement iv 6 CREDIT AGREEMENT, dated as of January 4, 2000, among SUIZA FLUID DAIRY GROUP, L.P., a Delaware limited partnership (the "Parent Borrower"), SOUTHERN FOODS GROUP, L.P., a Delaware limited partnership (the "Subsidiary Borrower"; together with the Parent Borrower, the "Borrowers"), those Domestic Subsidiaries of the Parent Borrower identified as a "Guarantor" on the signature pages hereto and such other Domestic Subsidiaries of the Parent Borrower as may from time to time become a party hereto (collectively, the "Guarantors"), the several banks and other financial institutions as may from time to time become parties to this Agreement (collectively, the "Lenders"; and individually, a "Lender"), FIRST UNION NATIONAL BANK, a national banking association, as administrative agent for the Lenders hereunder (in such capacity, the "Administrative Agent" or the "Agent"), BANK ONE, NA, a national banking association, as syndication agent for the Lenders hereunder (in such capacity the "Syndication Agent") and BANK OF AMERICA, N.A., a national banking association, and FLEET NATIONAL BANK, a national banking association, as co-documentation agents for the Lenders hereunder. W I T N E S S E T H: WHEREAS, the Borrowers have requested that the Lenders make loans and other financial accommodations to the Borrowers as more particularly described herein; WHEREAS, the Lenders have agreed to make such loans and other financial accommodations to the Borrowers on the terms and conditions contained herein; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 DEFINED TERMS. As used in this Agreement, terms defined in the preamble to this Agreement have the meanings therein indicated, and the following terms have the following meanings: "Account Designation Letter" shall mean the Notice of Account Designation Letter dated the Closing Date from the Parent Borrower to the Administrative Agent substantially in the form attached hereto as Schedule 1.1(a). "Additional Credit Party" shall mean each Person that becomes a Guarantor by execution of a Joinder Agreement in accordance with Section 5.10. 7 "Additional Lender" has the meaning set forth in Section 2.8. "Administrative Agent" shall have the meaning set forth in the first paragraph of this Agreement and any successors in such capacity. "Affiliate" shall mean as to any Person, any Person that directly or indirectly controls, or is under common control with, or is controlled by, such Person and, if such Person is an individual, any member of the immediate family (including parents, spouse, children and siblings) of such individual and any trust whose principal beneficiary is such individual or one or more members of such immediate family and any Person who is controlled by any such member or trust. As used in this definition, "control" (including, with its correlative meanings, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise); provided that, in any event, any Person that owns directly or indirectly securities having 10% or more of the voting power for the election of directors or other governing body of a corporation or 10% or more of the partnership or other ownership interests of any other Person (other than as a limited partner of such other Person) will be deemed to control such corporation or other Person. Notwithstanding the foregoing, (a) no individual shall be an Affiliate solely by reason of his or her being a director, officer or employee of the Parent Borrower or any of its Subsidiaries, and (b) none of the Restricted Subsidiaries of the Parent Borrower shall be considered Affiliates. For purposes hereof, all Unrestricted Subsidiaries shall be considered Affiliates. "Agents" shall mean a collective reference to the Administrative Agent and the Syndication Agent. "Agreement" shall mean this Credit Agreement, as amended, modified or supplemented from time to time in accordance with its terms. "Alternate Base Rate" shall mean, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean, at any time, the rate of interest per annum publicly announced from time to time by First Union at its principal office in Charlotte, North Carolina as its prime rate. Each change in the Prime Rate shall be effective as of the opening of business on the day such change in the Prime Rate occurs. The parties hereto acknowledge that the rate announced publicly by First Union as its Prime Rate is an index or base rate and shall not necessarily be its lowest or best rate charged to its customers or other banks; and "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published on the next succeeding Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive in the absence of manifest error) that it is unable to ascertain the Federal Funds Effective Rate, for any reason, including the inability or failure of the Administrative Agent to 2 8 obtain sufficient quotations in accordance with the terms thereof, the Alternate Base Rate shall be determined without regard to clause (b) of the first sentence of this definition, as appropriate, until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the opening of business on the date of such change. "Alternate Base Rate Loans" shall mean Loans that bear interest at an interest rate based on the Alternate Base Rate. "Applicable Percentage" shall mean, for any day, the rate per annum set forth below opposite the applicable Level then in effect, it being understood that the Applicable Percentage for (i) Revolving Loans, SFG Revolving Loans and Term Loans which are Alternate Base Rate Loans shall be the percentage set forth under the column "Alternate Base Rate Margin for Revolving Loans, SFG Revolving Loans and Term Loans", (ii) Revolving Loans, SFG Revolving Loans and Term Loans which are LIBOR Rate Loans shall be the percentage set forth under the column "LIBOR Rate Margin for Revolving Loans, SFG Revolving Loans and Term Loans", (iii) the Letter of Credit Fees shall be the percentage set forth under the column "Letter of Credit Fees" and (iv) the Commitment Fee shall be the percentage set forth under the column "Commitment Fee":
Alternate Base Rate LIBOR Rate Margin for Margin for Revolving Loans, Revolving Loans, SFG Revolving SFG Revolving Leverage Loans and Term Loans and Term Letter of Commitment Level Ratio Loans Loans Credit Fees Fee ----- -------- ---------------- --------------- ----------- ---------- I => 3.75 to 1.0 1.25% 2.25% 2.25% 0.50% II < 3.75 to 1.0 but 1.00% 2.00% 2.00% 0.50% => 3.25 to 1.0 III < 3.25 to 1.0 but 0.75% 1.75% 1.75% 0.50% => 2.75 to 1.0 IV < 2.75 to 1.0 but 0.50% 1.50% 1.50% 0.375% => 2.25 to 1.0 V < 2.25 to 1.0 0.25% 1.25% 1.25% 0.25%
The Applicable Percentage shall, in each case, be determined and adjusted quarterly on the date (each an "Interest Determination Date") three (3) Business Days after the earlier of the 3 9 date on which the Parent Borrower provides or is required to provide to the Administrative Agent the quarterly financial information and certifications in accordance with the provisions of Sections 5.1(b) and 5.2(c). Such Applicable Percentage shall be effective from such Interest Determination Date until the next such Interest Determination Date. The initial Applicable Percentages shall be based on Level [II] until the first Interest Determination Date occurring after the Closing Date. After the Closing Date, if the Parent Borrower shall fail to provide the quarterly financial information and certifications in accordance with the provisions of Sections 5.1(b) and 5.2(c), the Applicable Percentage from such Interest Determination Date shall, on the date five (5) Business Days after the date by which the Parent Borrower was so required to provide such financial information and certifications to the Administrative Agent and the Lenders, be based on Level I until such time as such information and certifications are provided, whereupon the Level shall be determined by the then current Leverage Ratio. "Asset Disposition" shall mean the disposition of any or all of the assets (including, without limitation, the Capital Stock of a Restricted Subsidiary or any ownership interest in a joint venture) of the Parent Borrower or any Restricted Subsidiary whether by sale, lease, transfer or otherwise. The term "Asset Disposition" shall not include (i) Excluded Dispositions, (ii) the sale, lease or transfer of assets permitted by Section 6.4(c)(iii) hereof, (iii) any Equity Issuance, (iv) an Asset Disposition that constitutes a Recovery Event or (v) any sale, transfer or other disposition of Transferred Assets pursuant to a Permitted Receivables Financing. "Attributed Principal Amount" means, on any day, with respect to any Permitted Receivables Financing entered into by any Credit Party, the aggregate amount (with respect to any such transaction, the "Invested Amount") paid to, or borrowed by, such Person as of such date under such Permitted Receivables Financing, minus the aggregate amount received by the applicable Receivables Financier and applied to the reduction of the Invested Amount under such Permitted Receivables Financing. "Bankruptcy Code" shall mean the Bankruptcy Code in Title 11 of the United States Code, as amended, modified, succeeded or replaced from time to time. "Borrowers" shall have the meaning set forth in the first paragraph of this Agreement. "Borrowing Date" shall mean, in respect of any Loan, the date such Loan is made. "Business" shall have the meaning set forth in Section 3.10. "Business Day" shall mean a day other than a Saturday, Sunday or other day on which commercial banks in Charlotte, North Carolina or New York, New York are authorized or required by law to close; provided, however, that when used in connection with a rate determination, borrowing or payment in respect of a LIBOR Rate Loan, the term "Business Day" shall also exclude any day on which banks in London, England are not open for dealings in Dollar deposits in the London interbank market. 4 10 "Capital Lease" shall mean any lease of property, real or personal, the obligations with respect to which are required to be capitalized on a balance sheet of the lessee in accordance with GAAP. "Capital Lease Obligations" shall mean the capitalized lease obligations relating to a Capital Lease determined in accordance with GAAP. "Capital Stock" shall mean (i) in the case of a corporation, capital stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock, (iii) in the case of a partnership, partnership interests (whether general or limited), (iv) in the case of a limited liability company, membership interests and (v) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" shall mean (i) securities issued directly or fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition ("Government Obligations"), (ii) U.S. dollar denominated (or foreign currency fully hedged) time deposits, certificates of deposit, Eurodollar time deposits and Eurodollar certificates of deposit of (y) any domestic commercial bank of recognized standing having capital and surplus in excess of $250,000,000 or (z) any bank whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank being an "Approved Bank"), in each case with maturities of not more than one year from the date of acquisition, (iii) commercial paper and variable or fixed rate notes issued by any Approved Bank (or by the parent company thereof) or any commercial paper or variable rate notes issued by, or guaranteed by any domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody's and maturing within nine months of the date of acquisition, (iv) repurchase agreements with a bank or trust company (including a Lender) or a recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States of America, (v) obligations of any state of the United States or any political subdivision thereof rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody's having maturities of not more than one year, and (vi) auction preferred stock rated in the highest short-term credit rating category by S&P or Moody's. "Change of Control" shall mean (a) Suiza shall fail to own a majority of the Capital Stock and a majority of the Voting Stock of the Parent Borrower, (b) any Person or two or more Persons acting in concert (other than Suiza or Dairy Farmers of America, Inc. or any of their Affiliates) shall have acquired "beneficial ownership," directly or indirectly, of, or shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of, control over, Voting Stock of the Parent Borrower (or other securities convertible into such Voting Stock) representing 20% or more of the combined voting power of all Voting Stock of the Parent Borrower, (c) during any period of up to 25 consecutive months, commencing after the Closing Date, individuals who at the beginning of such 25 month period were directors of the Parent Borrower (together with any new director whose election by the Parent 5 11 Borrower's Board of Directors or whose nomination for election by the Parent Borrower's shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the directors of the Parent Borrower then in office or (d) the Parent Borrower shall fail to own a majority of the Capital Stock and a majority of the Voting Stock of the Subsidiary Borrower. As used herein, "beneficial ownership" shall have the meaning provided in Rule 13d-3 of the Securities and Exchange Commission under the Securities Act of 1934. "Closing Date" shall mean the date of this Agreement. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Collateral" shall mean a collective reference to the collateral which is identified in, and at any time will be covered by, the Security Documents. "Commitment" shall mean the Revolving Commitment, the LOC Commitment, the Swingline Commitment and the Term Loan Commitment, individually or collectively, as appropriate. "Commitment Fee" shall have the meaning set forth in Section 2.7(a). "Commitment Percentage" shall mean the Revolving Commitment Percentage, the LOC Commitment Percentage and/or the Term Loan Commitment Percentage, as appropriate. "Commitment Period" shall mean the period from and including the Closing Date to but not including the Maturity Date. "Commitment Transfer Supplement" shall mean a Commitment Transfer Supplement, substantially in the form of Schedule 9.6(c). "Commonly Controlled Entity" shall mean an entity, whether or not incorporated, which is under common control with any Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes either Borrower and which is treated as a single employer under Section 414 of the Code. "Consolidated EBITDA" means, for any period, the sum of (i) Consolidated Net Income for such period, plus (ii) an amount which, in the determination of Consolidated Net Income for such period, has been deducted for (A) Consolidated Interest Expense, (B) total federal, state, local and foreign income, value added and similar taxes, (C) depreciation, amortization expense and other non-cash charges, (D) pro forma cost savings add-backs resulting from non-recurring charges related to acquisitions permitted pursuant to Regulation S-X of the Securities Exchange Act of 1934 or as approved by the Agents, and (E) other adjustments to Consolidated EBITDA reasonably acceptable to the Agents. Except as otherwise provided herein, the applicable period shall be for the four consecutive quarters ending as of the date of computation. "Consolidated Interest Expense" means, for any period, all interest expense of the Parent Borrower and its Restricted Subsidiaries, including the interest component under Capital Leases, the interest expense associated with the Senior Subordinated Notes and the implied interest component under Permitted Receivables Financings, plus net amounts payable (or minus net amounts receivable) under Hedging Agreements, minus interest income for such period, in each case as determined in accordance with GAAP. Except as otherwise provided herein, the applicable period shall be for the four consecutive quarters ending as of the date of computation. 6 12 "Consolidated Net Income" means, for any period, net income (excluding extraordinary items) after taxes for such period of the Parent Borrower and its Restricted Subsidiaries on a consolidated basis, as determined in accordance with GAAP, including net income attributable to Permitted Acquisitions (other than acquisitions of Unrestricted Subsidiaries) after giving effect to such Permitted Acquisitions on a Pro Forma Basis. Except as otherwise provided herein, the applicable period shall be for the four consecutive quarters ending as of the date of computation. "Consolidated Net Worth" shall mean, as at any date, the sum for the Borrower and its Subsidiaries (including minority interests in any Person owned by the Borrower or any of its Subsidiaries), determined on a consolidated basis without duplication in accordance with GAAP, of (a) the amount of Capital Stock plus (b) the amount of additional paid in capital plus (c) the amount of retained earnings (or, in the case of any retained earnings deficit, minus the amount of such deficit). "Contractual Obligation" shall mean, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound. "Credit Documents" shall mean this Agreement, each of the Notes, any Joinder Agreement, the Letters of Credit, the LOC Documents and the Security Documents. "Credit Party" shall mean any of the Borrowers or the Guarantors. "Credit Party Obligations" shall mean, without duplication, (i) all of the obligations of the Credit Parties to the Lenders (including the Issuing Lender) and the Administrative Agent, whenever arising, under this Agreement, the Notes or any of the other Credit Documents (including, but not limited to, any interest accruing after the occurrence of a filing of a petition of bankruptcy under the Bankruptcy Code with respect to any Credit Party, regardless of whether such interest is an allowed claim under the Bankruptcy Code) and (ii) all liabilities and obligations, whenever arising, owing from the Parent Borrower or any of its Restricted Subsidiaries to any Lender, or any Affiliate of a Lender, arising under any Hedging Agreement. "Default" shall mean any of the events specified in Section 7.1, whether or not any requirement for the giving of notice or the lapse of time, or both, or any other condition, has been satisfied. "Defaulting Lender" shall mean, at any time, any Lender that, at such time (a) has failed to make a Loan required pursuant to the terms of this Credit Agreement, including the funding of 7 13 a Participation Interest in accordance with the terms hereof, (b) has failed to pay to the Administrative Agent or any other Lender an amount owed by such Lender pursuant to the terms of this Credit Agreement, or (c) has been deemed insolvent by its principal regulator or has become subject to a bankruptcy or insolvency proceeding or to a receiver, trustee or similar official. "Dollars" and "$" shall mean dollars in lawful currency of the United States of America. "Domestic Lending Office" shall mean, initially, the office of each Lender designated as such Lender's Domestic Lending Office shown on Schedule 9.2; and thereafter, such other office of such Lender as such Lender may from time to time specify to the Administrative Agent and the Parent Borrower as the office of such Lender at which Alternate Base Rate Loans of such Lender are to be made. "Domestic Subsidiary" shall mean any Subsidiary that is organized and existing under the laws of the United States or any state or commonwealth thereof or under the laws of the District of Columbia. "Environmental Claim" shall mean, with respect to any Person, any written notice, claim, demand or other communication (collectively, a "claim") by any other Person alleging or asserting such Person's liability for investigatory costs, cleanup costs, governmental response costs, damages to natural resources or other Property, personal injuries, fines or penalties arising out of, based on or resulting from (a) the presence, or release into the environment, of any Hazardous Material at any location, whether or not owned by such Person, or (b) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. The term "Environmental Claim" shall include, without limitation, any claim by any Governmental Authority for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and any claim by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from the presence of Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Laws" shall mean any and all applicable foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirement of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time be in effect during the term of this Agreement. "Equity Issuance" shall mean any issuance by the Parent Borrower or any of its Restricted Subsidiaries to any Person which is not a Credit Party of (a) shares of its Capital Stock, (b) any shares of its Capital Stock pursuant to the exercise of options or warrants or (c) any shares of its Capital Stock pursuant to the conversion of any debt securities to equity. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. 8 14 "ERISA Affiliate" shall mean any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which any Credit Party or any of its Subsidiaries is a member, (ii) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 4l2(c)(l1) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which any Credit Party or any of its Subsidiaries is a member and (iii) which are under common control with any Credit Party or any of its Subsidiaries within the meaning of Section 4001(a)(14) of ERISA. "Eurodollar Reserve Percentage" shall mean for any day, the percentage (expressed as a decimal and rounded upwards, if necessary, to the next higher 1/100th of 1%) which is in effect for such day as prescribed by the Federal Reserve Board (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) in respect of Eurocurrency liabilities, as defined in Regulation D of such Board as in effect from time to time, or any similar category of liabilities for a member bank of the Federal Reserve System in New York City. "Event of Default" shall mean any of the events specified in Section 7.1; provided, however, that any requirement for the giving of notice or the lapse of time, or both, or any other condition, has been satisfied. "Excluded Disposition" shall mean the sale, transfer, or other disposition of (a) any motor vehicles or other equipment no longer used or useful in the business of the Parent Borrower or any of its Restricted Subsidiaries, (b) any inventory, materials and other assets in the ordinary course of business and on ordinary business terms and (c) Permitted Investments described in clause (a) of the definition thereof. "Extension of Credit" shall mean, as to any Lender, the making of a Loan by such Lender or the issuance of, or participation in, a Letter of Credit by such Lender. "Federal Funds Effective Rate" shall have the meaning set forth in the definition of "Alternate Base Rate". "Fee Letter" shall mean the letter agreement dated October 20, 1999 addressed to the Parent Borrower from the Administrative Agent, as amended, modified or otherwise supplemented. "First Tier Foreign Subsidiary" shall mean any direct Foreign Subsidiary of a Credit Party. "First Union" shall mean First Union National Bank, a national banking association. "Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic Subsidiary. "Funded Debt" shall mean, with respect to any Person, without duplication, (a) all Indebtedness of such Person other than Indebtedness of the types referred to in clause (e), (g), (i) 9 15 and (m) of the definition of "Indebtedness" set forth in this Section 1.1, (b) all Funded Debt of others of the type referred to in clause (a) above secured by (or for which the holder of such Funded Debt has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of production from, property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (c) all Guaranty Obligations of such Person with respect to Funded Debt of the type referred to in clause (a) above of another Person and (d) Funded Debt of the type referred to in clause (a) above of any partnership or unincorporated joint venture in which such Person is legally obligated or has a reasonable expectation of being liable with respect thereto. "GAAP" shall mean generally accepted accounting principles in effect in the United States of America applied on a consistent basis, subject, however, in the case of determination of compliance with the financial covenants set out in Section 5.9 to the provisions of Section 1.3. "Government Acts" shall have the meaning set forth in Section 2.21. "Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantor" shall mean any of the Domestic Subsidiaries identified as a "Guarantor" on the signature pages hereto and the Additional Credit Parties which execute a Joinder Agreement, together with their successors and permitted assigns. "Guaranty" shall mean the guaranty of the Guarantors set forth in Article X. "Guaranty Obligations" means, with respect to any Person, without duplication, any obligations of such Person (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guaranteeing or intended to guarantee any Indebtedness of any other Person in any manner, whether direct or indirect, and including without limitation any obligation, whether or not contingent, (i) to purchase any such Indebtedness or any property constituting security therefor, (ii) to advance or provide funds or other support for the payment or purchase of any such Indebtedness or to maintain working capital, solvency or other balance sheet condition of such other Person (including without limitation keep well agreements, maintenance agreements, comfort letters or similar agreements or arrangements) for the benefit of any holder of Indebtedness of such other Person, (iii) to lease or purchase assets, securities or services primarily for the purpose of assuring the holder of such Indebtedness, or (iv) to otherwise assure or hold harmless the holder of such Indebtedness against loss in respect thereof. The amount of any Guaranty Obligation hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the Indebtedness in respect of which such Guaranty Obligation is made. "Hazardous Material" shall mean, collectively, (a) any petroleum or petroleum products, flammable materials, explosives, radioactive materials, asbestos, urea formaldehyde foam insulation, and transformers or other equipment that contain polychlorinated biphenyls ("PCB's"), (b) any chemicals or other materials or substances that are now or hereafter become 10 16 defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic substances", "toxic pollutants", "contaminants", "pollutants" or words of similar import under any Environmental Law and (c) any other chemical or other material or substance, exposure to which is now or hereafter prohibited, limited or regulated under any Environmental Law. "Hedging Agreements" shall mean, with respect to any Person, any agreement entered into to protect such Person against fluctuations in interest rates, or currency values, including, without limitation, any interest rate swap, cap or collar agreement or similar arrangement between such Person and one or more counterparties, any foreign currency exchange agreement, currency protection agreements or other interest or exchange rate hedging agreements. "Increased Commitment Date" has the meaning set forth in Section 2.8. "Indebtedness" shall mean, with respect to any Person, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, or upon which interest payments are customarily made, (c) all obligations of such Person under conditional sale or other title retention agreements relating to assets purchased by such Person (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business), (d) all obligations of such Person issued or assumed as the deferred purchase price of assets or services purchased by such Person (other than trade debt incurred in the ordinary course of business and due within six months of the incurrence thereof) which would appear as liabilities on a balance sheet of such Person, (e) all obligations of such Person under take-or-pay or similar arrangements, (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of production from, assets owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (g) all Guaranty Obligations of such Person with respect to Indebtedness of another Person, (h) the principal portion of all obligations of such Person under Capital Leases, (i) all obligations of such Person under Hedging Agreements, (j) the maximum amount of all standby letters of credit issued or bankers' acceptances facilities created for the account of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed), (k) all preferred Capital Stock issued by such Person and which by the terms thereof could be (at the request of the holders thereof or otherwise) subject to mandatory sinking fund payments, redemption or other acceleration, (l) the principal balance outstanding under any synthetic lease, tax retention operating lease, accounts receivable securitization program, off-balance sheet loan or similar off-balance sheet financing product, including without limitation, the outstanding Attributed Principal Amount under any Permitted Receivables Financing, and (m) the Indebtedness of any partnership or unincorporated joint venture in which such Person is a general partner or a joint venturer. "Indenture" shall mean that certain Indenture dated as of September 4, 1997 among the Subsidiary Borrower and SFG Capital Corporation, a Delaware corporation, as issuers and Texas Commerce Bank National Association, a national banking association, as trustee, as amended, modified or supplemented from time to time. 11 17 "Insolvency" shall mean, with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of such term as used in Section 4245 of ERISA. "Insolvent" shall mean being in a condition of Insolvency. "Intellectual Property" has the meaning set forth in Section 3.16. "Interest Coverage Ratio" means, with respect to the Parent Borrower and its Restricted Subsidiaries on a consolidated basis for the twelve month period ending on the last day of any fiscal quarter of the Parent Borrower, the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest Expense. Notwithstanding the foregoing, for purposes of calculating the Interest Coverage Ratio of the Parent Borrower and its Restricted Subsidiaries for the first three complete fiscal quarters to occur after the Closing Date, the interest component thereof shall be determined by annualizing such component such that for the first complete fiscal quarter to occur after the Closing Date such component would be multiplied by four (4), the first two complete fiscal quarters would be multiplied by two (2) and the first three complete fiscal quarters would be multiplied by one and one-third (1). "Interest Payment Date" shall mean (a) as to any Alternate Base Rate Loan or Swingline Loan, the last day of each March, June, September and December and on the applicable Maturity Date, (b) as to any LIBOR Rate Loan having an Interest Period of three months or less, the last day of such Interest Period, and (c) as to any LIBOR Rate Loan having an Interest Period longer than three months, the day which is three months after the first day of such Interest Period and the last day of such Interest Period. "Interest Period" shall mean, with respect to any LIBOR Rate Loan, (i) initially, the period commencing on the Borrowing Date or conversion date, as the case may be, with respect to such LIBOR Rate Loan and ending one, two, three or six months thereafter, as selected by a Borrower in the Notice of Borrowing or Notice of Conversion given with respect thereto; and (ii) thereafter, each period commencing on the last day of the immediately preceding Interest Period applicable to such LIBOR Rate Loan and ending one, two, three or six months thereafter, as selected by a Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that the foregoing provisions are subject to the following: (A) if any Interest Period pertaining to a LIBOR Rate Loan would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; 12 18 (B) any Interest Period pertaining to a LIBOR Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the relevant calendar month; (C) if the Borrower requesting such borrowing shall fail to give notice as provided above, such Borrower shall be deemed to have selected an Alternate Base Rate Loan to replace the affected LIBOR Rate Loan; (D) no Interest Period shall extend beyond the Maturity Date and, further with regard to the Term A Loans, no Interest Period shall extend beyond any principal amortization payment date unless the portion of such Term A Loan consisting of Alternate Base Rate Loans together with the portion of such Term A Loan consisting of LIBOR Rate Loans with Interest Periods expiring prior to or concurrently with the date such principal amortization payment date is due, is at least equal to the amount of such principal amortization payment due on such date; and (E) no more than sixteen (16) LIBOR Rate Loans may be in effect at any time. For purposes hereof, LIBOR Rate Loans with different Interest Periods shall be considered as separate LIBOR Rate Loans, even if they shall begin on the same date and have the same duration, although borrowings, extensions and conversions may, in accordance with the provisions hereof, be combined at the end of existing Interest Periods to constitute a new LIBOR Rate Loan with a single Interest Period. "Issuing Lender" shall mean First Union. "Issuing Lender Fees" shall have the meaning set forth in Section 2.7(c). "Joinder Agreement" shall mean a Joinder Agreement substantially in the form of Schedule 5.10, executed and delivered by an Additional Credit Party in accordance with the provisions of Section 5.10. "Joint and Several Obligations" shall mean that portion of the Credit Party Obligations consisting of (a) the SFG Revolving Loans and SFG Term Loans and all principal, interest and fees in connection with such Loans, (b) all fees (other than Letter of Credit Fees and Issuing Lender Fees) incurred or owed by the Subsidiary Borrower pursuant to the terms of the Credit Documents, including, without limitation, its portion of the Commitment Fees, (c) any indemnification obligations of the Subsidiary Borrower under the Credit Documents and (d) any and all other costs and expenses that the Subsidiary Borrower is liable for pursuant to the terms of the Credit Documents. "Lender" shall have the meaning set forth in the first paragraph of this Agreement. 13 19 "Letters of Credit" shall mean any letter of credit issued by the Issuing Lender pursuant to the terms hereof, as such Letters of Credit may be amended, modified, extended, renewed or replaced from time to time. "Letter of Credit Fee" shall have the meaning set forth in Section 2.7(b). "Leverage Ratio" shall mean, with respect to the Parent Borrower and its Restricted Subsidiaries on a consolidated basis for the twelve month period ending on the last day of any fiscal quarter, the ratio of (a) Funded Debt of the Parent Borrower and its Restricted Subsidiaries on a consolidated basis on the last day of such period to (b) Consolidated EBITDA for such period. "LIBOR" shall mean, for any LIBOR Rate Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the term "LIBOR" shall mean, for any LIBOR Rate Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%). If, for any reason, neither of such rates is available, then "LIBOR" shall mean the rate per annum at which, as determined by the Administrative Agent, Dollars in an amount comparable to such LIBOR Rate Loan are being offered to leading banks at approximately 11:00 A.M. London time, two (2) Business Days prior to the commencement of the applicable Interest Period for settlement in immediately available funds by leading banks in the London interbank market for a period equal to the Interest Period selected. "LIBOR Lending Office" shall mean, initially, the office of each Lender designated as such Lender's LIBOR Lending Office shown on Schedule 9.2; and thereafter, such other office of such Lender as such Lender may from time to time specify to the Administrative Agent and the Parent Borrower as the office of such Lender at which the LIBOR Rate Loans of such Lender are to be made. "LIBOR Rate" shall mean a rate per annum (rounded upwards, if necessary, to the next higher 1/100th of 1%) determined by the Administrative Agent pursuant to the following formula:
LIBOR Rate = LIBOR ------------------------------------ 1.00 - Eurodollar Reserve Percentage
"LIBOR Rate Loan" shall mean Loans the rate of interest applicable to which is based on the LIBOR Rate. 14 20 "Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Capital Lease having substantially the same economic effect as any of the foregoing). "Loan" shall mean a Revolving Loan, a SFG Revolving Loan, a Swingline Loan, the Term A Loan and/or the SFG Term Loan, or a portion of any of the foregoing, as applicable. "LOC Commitment" shall mean the commitment of the Issuing Lender to issue Letters of Credit and with respect to each Lender, the commitment of such Lender to purchase participation interests in the Letters of Credit up to such Lender's LOC Committed Amount as specified in Schedule 2.1(a), as such amount may be reduced from time to time in accordance with the provisions hereof. "LOC Commitment Percentage" shall mean, for each Lender, the percentage identified as its LOC Commitment Percentage on Schedule 2.1(a), as such percentage may be modified in connection with any assignment made in accordance with the provisions of Section 9.6(c). "LOC Committed Amount" shall mean, collectively, the aggregate amount of all of the LOC Commitments of the Lenders to issue and participate in Letters of Credit as referenced in Section 2.6 and, individually, the amount of each Lender's LOC Commitment as specified in Schedule 2.1(a). "LOC Documents" shall mean, with respect to any Letter of Credit, such Letter of Credit, any amendments thereto, any documents delivered in connection therewith, any application therefor, and any agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (i) the rights and obligations of the parties concerned or (ii) any collateral security for such obligations. "LOC Obligations" shall mean, at any time, the sum of (i) the maximum amount which is, or at any time thereafter may become, available to be drawn under Letters of Credit then outstanding, assuming compliance with all requirements for drawings referred to in such Letters of Credit plus (ii) the aggregate amount of all drawings under Letters of Credit honored by the Issuing Lender but not theretofore reimbursed. "Mandatory Borrowing" shall have the meaning set forth in Section 2.5(b)(ii) or Section 2.6(e), as the context may require. "Material Adverse Effect" shall mean a material adverse effect on (a) the business, operations, property, prospects or financial condition of the Parent Borrower and its Restricted Subsidiaries taken as a whole, (b) the ability of the Borrowers and Guarantors, taken as a whole, to perform their obligations, when such obligations are required to be performed, under this Agreement, any of the Notes or any other Credit Document or (c) the validity or enforceability of this Agreement, any of the Notes or any of the other Credit Documents or the rights or remedies of the Administrative Agent or the Lenders hereunder or thereunder. 15 21 "Material Contract" shall mean any contract or other arrangement, whether written or oral, to which the Parent Borrower or any of its Restricted Subsidiaries is a party as to which the breach, nonperformance, cancellation or failure to renew by any party thereto could reasonably be expected to have a Material Adverse Effect. "Material Subsidiary" shall mean any Restricted Subsidiary (other than a Receivables Financing SPC) of a Credit Party with assets of $100,000 or more; provided, however, if the aggregate assets of Restricted Subsidiaries (other than Receivables Financing SPCs) that are not Material Subsidiaries at any time exceeds $500,000, the Borrower shall designate one or more of such Restricted Subsidiaries as Material Subsidiaries such that, after giving effect to such designations, the aggregate assets of Restricted Subsidiaries (other than Receivables Financing SPCs) that are not Material Subsidiaries shall be less than $500,000. "Maturity Date" shall mean the fifth anniversary of the Closing Date. "Merger Agreement" shall mean that certain Amended and Restated Contribution Agreement, Plan of Merger and Purchase Agreement, dated as of November 12, 1999, among Suiza, Suiza Socal Holdings, Inc., Suiza GTL Holdings, Inc., LOS Holdings, Inc., Suiza Fluid Dairy Group Holdings, Inc., Suiza Management Corporation, Suiza Fluid Dairy Group GP, LLC, the Suiza companies identified therein, Suiza GTL, LLC, Suiza Socal, LLC, Robinson Dairy, Inc., Dairy Farmers of America, Inc., DFA Investment Company, Southern Foods Group, L.P., SFG Management Limited Liability Company, SFG Capital Corporation, the Parent Borrower, Pete Schenkel and, for certain limited purposes, Mid-Am Capital, L.L.C. "Moody's" shall mean Moody's Investors Service, Inc. "Multiemployer Plan" shall mean a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Cash Proceeds" shall mean the aggregate cash proceeds received by the Parent Borrower or any of its Restricted Subsidiaries in respect of any Asset Disposition, net of (a) direct costs (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and (b) taxes paid or payable as a result thereof; it being understood that "Net Cash Proceeds" shall include, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received by the Parent Borrower or any of its Restricted Subsidiaries in any Asset Disposition. "Note" or "Notes" shall mean the Revolving Notes, the Swingline Note and/or the Term Notes, collectively, separately or individually, as appropriate. "Notice of Borrowing" shall mean the written notice of borrowing as referenced and defined in Section 2.1(b)(i). "Notice of Conversion" shall mean the written notice of extension or conversion as referenced and defined in Section 2.12. 16 22 "Obligations" shall mean, collectively, Loans and LOC Obligations. "Parent Borrower" shall have the meaning set forth in the first paragraph of this Agreement. "Participant" shall have the meaning set forth in Section 9.6(b). "Participation Interest" shall mean the purchase by a Lender of a participation interest in Swingline Loans as provided in Section 2.5(b)(ii) or in Letters of Credit as provided in Section 2.6. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "Permitted Acquisition" shall mean an acquisition by any Credit Party (other than the Subsidiary Borrower) which (i) is an acquisition of a Person or assets of a Person in the same or a similar line of business, (ii) is in an amount not greater than $300,000,000 in total cash consideration (after deducting cash on the balance sheet of the Person acquired or included in the assets being acquired) for any single acquisition, (iii) is approved by the Board of Directors or the requisite shareholders of the Person being acquired or Person transferring the assets being acquired, (iv) if an acquisition of Capital Stock of a Person, at least 51% of all issued and outstanding Capital Stock of such Person is acquired, and (v) after giving effect to such acquisition on a Pro Forma Basis, the Parent Borrower and its Restricted Subsidiaries are in compliance with each of the financial covenants set forth in Section 5.9. "Permitted Investments" shall mean: (a) cash or Cash Equivalents; (b) investments outstanding as of the Closing Date and identified in Schedule 1.1(b) or other investments not exceeding in acquisition cost $5,000,000 in the aggregate; (c) investments of any Subsidiary of the Parent Borrower in the Parent Borrower, investments of any Restricted Subsidiary of the Parent Borrower in any other Restricted Subsidiary of the Parent Borrower or investments by the Parent Borrower in any of its Restricted Subsidiaries; provided, that, so long as the Senior Subordinated Notes remain outstanding, no investments in the Subsidiary Borrower and its Subsidiaries shall be permitted except investments used to retire or repurchase Senior Subordinated Notes; (d) Permitted Acquisitions; (e) operating deposit accounts with depository institutions; (f) Hedging Agreements; 17 23 (g) investments permitted under Section 6.4(b) hereof; (h) investments by the Parent Borrower and its Subsidiaries in the Capital Stock of their Subsidiaries to the extent outstanding as of the Closing Date; (i) loans and advances to employees in the ordinary course of business not exceeding $10,000,000 in the aggregate; (j) deposits to secure bids, tenders, utilities, vendors, leases, licenses, statutory obligations, surety and appeal bonds and other deposits of like nature arising in the ordinary course of business; (k) Investments by any Credit Party in a Receivables Financing SPC made in connection with a Permitted Receivables Financing; (l) additional investments up to but not exceeding $50,000,000 in the aggregate during each fiscal year, including investments in Unrestricted Subsidiaries; provided, however, that notwithstanding the foregoing, the Parent Borrower shall be permitted to make additional investments in Unrestricted Subsidiaries during any fiscal year in an amount equal to the aggregate amount of dividends or other distributions received by the Parent Borrower from Unrestricted Subsidiaries during such fiscal year; (m) investments by the Parent Borrower or any of its Restricted Subsidiaries, each of which (i) existed before the time of acquisition of the Person or assets of the Person who made such investment and (ii) was not made in anticipation of such acquisition; and (n) to the extent no Default or Event of Default exists at such time or would result therefrom, loans by the Parent Borrower to Suiza or its Subsidiaries in connection with acquisitions by Suiza or any of its Subsidiaries, provided that the business or assets acquired in connection with such acquisitions are then contributed to the Parent Borrower or any of its Restricted Subsidiaries. As used herein, "investment" means all investments, in cash or by delivery of assets made, directly or indirectly in, to or from any Person, whether by acquisition of shares of Capital Stock, property, assets, indebtedness or other obligations or securities or by loan advance, capital contribution or otherwise. "Permitted Liens" shall mean: (a) Liens created by or otherwise existing, under or in connection with this Agreement or the other Credit Documents in favor of the Lenders; (b) Liens in connection with Hedging Agreements, but only (i) to the extent such Liens secure obligations under Hedging Agreements with any Lender or any 18 24 Affiliate of a Lender, (ii) to the extent such Liens are on the same collateral as to which the Administrative Agent on behalf of the Lenders also has a Lien and (iii) if the provider of any such Hedging Agreement and the Lenders shall share pari passu in the collateral subject to such Liens; (c) Liens in existence on the Closing Date and listed on Schedule 1.1(c); (d) Liens imposed by any Governmental Authority for taxes, assessments or charges not yet delinquent or that are being contested in good faith and by appropriate proceedings if, unless the amount thereof is not material with respect to it or its financial condition, adequate reserves with respect thereto are maintained on the books of the Parent Borrower or the affected Subsidiaries, as the case may be, in accordance with GAAP; (e) carriers', warehousemen's, mechanics', materialmen's, landlord's, repairmen's or other like Liens arising in the ordinary course of business that are not overdue for a period of more than 30 days or that are being contested in good faith and by appropriate proceedings; (f) Liens securing judgments but only to the extent for an amount and for a period not resulting in an Event of Default under Section 7.1(f) hereof; (g) pledges or deposits under worker's compensation, unemployment insurance and other social security legislation; (h) deposits or pledges to secure the performance of bids, trade contracts (other than for Indebtedness), leases, licenses, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (i) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business and encumbrances consisting of zoning restrictions, easements, licenses, restrictions on the use of Property or minor imperfections in title thereto that, in the aggregate, are not material in amount, and that do not in any case materially detract from the value of the Property subject thereto or interfere with the ordinary conduct of the business of the Parent Borrower or any of its Subsidiaries; (j) Liens upon personal Property acquired after the date hereof (by purchase, construction or otherwise), or upon other assets acquired after the date hereof as a Capital Expenditure, by the Parent Borrower or any of its Subsidiaries, each of which Liens either (i) existed on such assets before the time of its acquisition and was not created in anticipation thereof or (ii) was created solely for the purpose of securing Indebtedness representing, or incurred to finance, refinance or refund, the cost of such assets; provided that (A) no such Lien shall extend to or cover any assets of the Parent Borrower or such Subsidiary other than the assets so acquired, (B) the principal amount of Indebtedness 19 25 secured by any such Lien shall at no time exceed the fair market value (as determined in good faith by a Responsible Officer of the Parent Borrower) of such assets at the time they were acquired, and (C) the principal amount of all Indebtedness (other than Indebtedness permitted by Section 6.1(c) hereof) secured by such Liens shall not exceed $50,000,000 in the aggregate; (k) Liens upon real Property heretofore leased or leased after the date hereof (under operating or Capital Leases) in the ordinary course of business by the Parent Borrower or any of its Subsidiaries in favor of the lessor created at the inception of the lease transaction, securing obligations of the Parent Borrower or any of its Subsidiaries under or in respect of such lease and extending to or covering only the Property subject to such lease and improvements thereon; (l) Liens of sellers or creditors of sellers of farm products encumbering such farm products when sold to any of the Parent Borrower or its Subsidiaries pursuant to the Food Security Act of 1985 or pursuant to similar state laws to the extent such Liens may be deemed to extend to the assets of such Person; (m) protective Uniform Commercial Code filings with respect to personal Property leased by, or consigned to, any of the Parent Borrower or its Subsidiaries; (n) Liens securing Indebtedness of up to $100,000,000 in the aggregate principal amount at any one time outstanding which Indebtedness is permitted under Section 6.1(g) hereof; (o) Liens upon assets of Unrestricted Subsidiaries; (p) Liens in favor of a Receivables Financing SPC or Receivables Financier created or deemed to exist in connection with a Permitted Receivables Financing (including any related filings of any financing statements), but only to the extent that any such Lien relates to the applicable Transferred Assets actually sold, contributed, financed or otherwise conveyed or pledged pursuant to such transaction; (q) any extension, renewal or replacement of the foregoing; provided, however, that the Liens permitted under this clause (q) shall not be spread to cover any additional Indebtedness or assets; and (r) Liens securing Indebtedness to the extent such Indebtedness is permitted pursuant to Section 6.1(h). "Permitted Receivables Financing" shall mean any one or more receivables financings in which (a) any Credit Party (i) sells (as determined in accordance with GAAP) any accounts receivable, notes receivable, rights to future lease payments or residuals (collectively, together with certain related property relating thereto and the right to collections thereon, being the "Transferred Assets") to any Person that is not a Subsidiary or Affiliate of a Borrower (with respect to any such transaction, the "Receivables Financier"), (ii) borrows from such Receivables 20 26 Financier and secures such borrowings by a pledge of such Transferred Assets and/or (iii) otherwise finances its acquisition of such Transferred Assets and, in connection therewith, conveys an interest in such Transferred Assets to the Receivables Financier or (b) any Credit Party sells, conveys or otherwise contributes any Transferred Assets to a Receivables Financing SPC, which Receivables Financing SPC then (i) sells (as determined in accordance with GAAP) any such receivables (or an interest therein) to any Receivables Financier, (ii) borrows from such Receivables Financier and secures such borrowings by a pledge of such receivables or (iii) otherwise finances its acquisition of such receivables and, in connection therewith, conveys an interest in such receivables to the Receivables Financier, provided that (A) the aggregate Attributed Principal Amount for all such receivables financings shall not at any time exceed $300,000,000, (B) such receivables financing shall not involve any recourse to any Credit Party for any reason other than (x) repurchases of non-eligible receivables or (y) indemnifications for losses other than credit losses related to the receivables sold in such financing, (C) the Administrative Agent shall be reasonably satisfied with the structure of and documentation for any such transaction and that the terms of such transaction, including the discount at which receivables are sold, the term of the commitment of the Receivables Financier thereunder and any termination events, shall be (in the good faith understanding of the Administrative Agent) consistent with those prevailing in the market for similar transactions involving a receivables originator/servicer of similar credit quality and a receivables pool of similar characteristics and (D) the documentation for such transaction shall not be amended or modified without the prior written approval of the Administrative Agent. "Person" shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan" shall mean, at any particular time, any employee benefit plan which is covered by Title IV of ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Pledge Agreement" shall mean the Pledge Agreement dated as of the Closing Date given by the Borrowers and the other Credit Parties to the Administrative Agent, as amended, modified or supplemented from time to time in accordance with its terms. "Prime Rate" shall have the meaning set forth in the definition of Alternate Base Rate. "Pro Forma Basis" shall mean, with respect to any Permitted Acquisition or any dividend made pursuant to Section 6.10(g), that such Permitted Acquisition or dividend shall be deemed to have occurred or made, as applicable, as of the first day of the four fiscal-quarter period ending as of the most recent fiscal quarter end preceding the date of such Permitted Acquisition or dividend. "Property" shall mean any tangible property or assets, whether real or personal. "Purchasing Lenders" shall have the meaning set forth in Section 9.6(c). 21 27 "Real Properties" shall have the meaning set forth in Section 3.10(a). "Receivables Financier" shall have the meaning set forth in the definition of Permitted Receivables Financing. "Receivables Financing SPC" shall mean, in respect of any Permitted Receivables Financing, any Subsidiary or Affiliate of a Borrower to which any Credit Party sells, contributes or otherwise conveys any Transferred Assets in connection with such Permitted Receivables Financing. "Recovery Event" shall mean the receipt by the Parent Borrower or any of its Restricted Subsidiaries of any cash insurance proceeds or condemnation award payable by reason of theft, loss, physical destruction or damage, taking or similar event with respect to any of their respective property or assets. "Register" shall have the meaning set forth in Section 9.6(d). "Reorganization" shall mean, with respect to any Multiemployer Plan, the condition that such Plan is in reorganization within the meaning of such term as used in Section 4241 of ERISA. "Reportable Event" shall mean any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty-day notice period is waived under PBGC Reg. ss.4043. "Required Lenders" shall mean (i) Lenders holding in the aggregate not less than 51% of all Revolving Loans, SFG Revolving Loans and LOC Obligations then outstanding at such time plus the aggregate unused Revolving Commitments at such time (treating for purposes hereof in the case of Swingline Loans and LOC Obligations, in the case of the Swingline Lender and the Issuing Lender, only the portion of the Swingline Loans and the LOC Obligations of the Swingline Lender and the Issuing Lender, respectively, which is not subject to the Participation Interests of the other Lenders and, in the case of the Lenders other than the Swingline Lender and the Issuing Lender, the Participation Interests of such Lenders in Swingline Loans and LOC Obligations hereunder as direct Obligations of such Lenders) and (ii) Lenders holding in the aggregate not less than 51% of all Term Loans then outstanding at such time; provided, however, that if any Lender shall be a Defaulting Lender at such time, then there shall be excluded from the determination of Required Lenders, Obligations (including Participation Interests) owing to such Defaulting Lender and such Defaulting Lender's Commitments, or after termination of the Commitments, the principal balance of the Obligations owing to such Defaulting Lender. "Requirement of Law" shall mean, as to any Person, the Certificate of Incorporation and By-laws or other organizational or governing documents of such Person, and each law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. 22 28 "Responsible Officer" of any Person shall mean the President, the Chief Executive Officer, the Chief Financial Officer or the Vice President/Treasurer of such Person. "Restricted Payment" shall mean (a) any dividend or other distribution, direct or indirect, on account of any shares of any class of Capital Stock of the Parent Borrower or any of its Restricted Subsidiaries, now or hereafter outstanding, (b) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of Capital Stock of the Parent Borrower or any of its Restricted Subsidiaries, now or hereafter outstanding, or (c) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of Capital Stock of the Parent Borrower or any of its Restricted Subsidiaries, now or hereafter outstanding. "Restricted Subsidiaries" shall mean the Subsidiaries of the Parent Borrower other than the Unrestricted Subsidiaries. "Revolving Commitment" shall mean, with respect to each Lender, the commitment of such Lender to make Revolving Loans and SFG Revolving Loans in an aggregate principal amount at any time outstanding up to such Lender's Revolving Commitment Percentage of the Revolving Committed Amount as specified in Schedule 2.1(a), as such amount may be increased or reduced from time to time in accordance with the provisions hereof or in connection with any assignment made in accordance with the provisions of Section 9.6(c). "Revolving Commitment Percentage" shall mean, for each Lender, the percentage identified as its Revolving Commitment Percentage on Schedule 2.1(a), as such percentage may be increased or reduced pursuant to Section 2.8(d) or in connection with any assignment made in accordance with the provisions of Section 9.6(c). "Revolving Committed Amount" shall mean, with respect to the Lenders collectively, the aggregate amount of all Revolving Commitments as defined in Section 2.1(a), as such amount may be increased or reduced from time to time in accordance with the provisions hereof, and, with respect to each Lender, the amount of such Lender's Revolving Commitment as specified on Schedule 2.1(a), as such amount may be increased or reduced from time to time in accordance with the provisions hereof or in connection with any assignment made in accordance with the provisions of Section 9.6(c). "Revolving Loan" shall have the meaning set forth in Section 2.1. "Revolving Note" or "Revolving Notes" shall mean the promissory notes of the Parent Borrower in favor of each of the Lenders evidencing the Revolving Loans provided pursuant to Section 2.1(d), individually or collectively, as appropriate, as such promissory notes may be amended, modified, supplemented, extended, renewed or replaced from time to time. "S&P" shall mean Standard & Poor's Ratings Group, a division of McGraw Hill, Inc. "SEC" shall mean the Securities and Exchange Commission or any successor thereto. 23 29 "Security Documents" shall mean the Pledge Agreement and such other documents executed and delivered in connection with the attachment and perfection of the Administrative Agent's security interests and Liens arising thereunder, including, without limitation, UCC financing statements. "Senior Funded Debt" shall mean, as of any date of determination for the Parent Borrower and its Restricted Subsidiaries, all Funded Debt (including, without limitation, Extensions of Credit hereunder) other than (a) the Senior Subordinated Notes and (b) other Funded Debt which is subordinate in right of payment to the Credit Party Obligations on terms approved by the Required Lenders. "Senior Leverage Ratio" shall mean, with respect to the Parent Borrower and its Restricted Subsidiaries on a consolidated basis for the twelve month period ending on the last day of any fiscal quarter, the ratio of (a) Senior Funded Debt of the Parent Borrower and its Restricted Subsidiaries on a consolidated basis on the last day of such period to (b) Consolidated EBITDA for such period. "Senior Subordinated Notes" shall mean the 9 7/8% Senior Subordinated Notes due 2007 issued pursuant to the Indenture. "SFG Revolving Loans" shall have the meaning set forth in Section 2.2. "SFG Revolving Note" or "SFG Revolving Notes" shall mean the promissory notes of the Borrowers in favor of each of the Lenders evidencing the SFG Revolving Loans provided pursuant to Section 2.2(d), individually or collectively, as appropriate, as such promissory notes may be amended, modified, supplemented, extended, renewed or replaced from time to time. "SFG Term Loan" shall have the meaning set forth in Section 2.4(a). "SFG Term Loan Commitment" shall mean, with respect to each Lender, the commitment of such Lender to make its portion of the SFG Term Loan in a principal amount equal to such Lender's Term Loan Commitment Percentage of the SFG Term Loan Committed Amount (and for purposes of making determinations of Required Lenders hereunder after the Closing Date, the principal amount outstanding on the SFG Term Loan). "SFG Term Loan Committed Amount" shall have the meaning set forth in Section 2.4(a). "SFG Term Note" or "SFG Term Notes" shall mean the promissory notes of the Borrowers in favor of each of the Lenders evidencing the portion of the SFG Term Loan provided pursuant to Section 2.4(d), individually or collectively, as appropriate, as such promissory notes may be amended, modified, restated, supplemented, extended, renewed or replaced from time to time. "Single Employer Plan" shall mean any Plan which is not a Multiemployer Plan. "Subsidiary" shall mean, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary 24 30 voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Parent Borrower and shall include the Subsidiary Borrower. "Subsidiary Borrower" shall have the meaning set forth in the first paragraph of this Agreement. "Suiza" shall mean Suiza Foods Corporation, a Delaware corporation. "Swingline Commitment" shall mean the commitment of the Swingline Lender to make Swingline Loans in an aggregate principal amount at any time outstanding up to the Swingline Committed Amount, and the commitment of the Lenders to purchase participation interests in the Swingline Loans as provided in Section 2.5(b)(ii), as such amounts may be reduced from time to time in accordance with the provisions hereof. "Swingline Committed Amount" shall mean the amount of the Swingline Lender's Swingline Commitment as specified in Section 2.5(a). "Swingline Lender" shall mean First Union, in its capacity as such. "Swingline Loan" or "Swingline Loans" shall have the meaning set forth in Section 2.5(a). "Swingline Note" shall mean the promissory note of the Parent Borrower in favor of the Swingline Lender evidencing the Swingline Loans provided pursuant to Section 2.5(d), as such promissory note may be amended, modified, supplemented, extended, renewed or replaced from time to time. "Taxes" shall have the meaning set forth in Section 2.20. "Term A Loan" shall have the meaning set forth in Section 2.3(a). "Term A Loan Commitment" shall mean, with respect to each Lender, the commitment of such Lender to make its portion of the Term A Loan in a principal amount equal to such Lender's Term Loan Commitment Percentage of the Term A Loan Committed Amount (and for purposes of making determinations of Required Lenders hereunder after the Closing Date, the principal amount outstanding on the Term A Loan). "Term A Loan Committed Amount" shall have the meaning set forth in Section 2.3(a). "Term A Note" or "Term A Notes" shall mean the promissory notes of the Parent Borrower in favor of each of the Lenders evidencing the portion of the Term A Loan provided 25 31 pursuant to Section 2.3(d), individually or collectively, as appropriate, as such promissory notes may be amended, modified, restated, supplemented, extended, renewed or replaced from time to time. "Term Loan Commitment" shall mean, collectively, the Term A Loan Commitment and the SFG Term Loan Commitment. "Term Loan Commitment Percentage" shall mean, for any Lender, the percentage identified as its Term Loan Commitment Percentage on Schedule 2.1(a), as such percentage may be modified in connection with any assignment made in accordance with the provisions of Section 9.6. "Term Loan Committed Amount" shall mean, collectively, the Term A Loan Committed Amount and the SFG Term Loan Committed Amount. "Term Loans" shall mean the Term A Loan and the SFG Term Loan. "Term Notes" shall mean, collectively, the Term A Notes and the SFG Term Notes. "Tranche" shall mean the collective reference to LIBOR Rate Loans whose Interest Periods begin and end on the same day. A Tranche may sometimes be referred to as a "LIBOR Tranche". "Transfer Effective Date" shall have the meaning set forth in each Commitment Transfer Supplement. "Transferred Assets" shall have the meaning set forth in the definition of Permitted Receivables Financing. "2.20 Certificate" shall have the meaning set forth in Section 2.20. "Type" shall mean, as to any Loan, its nature as an Alternate Base Rate Loan, LIBOR Rate Loan or Swingline Loan, as the case may be. "Unrestricted Subsidiaries" shall mean any Subsidiary (other than the Subsidiary Borrower) of the Parent Borrower designated as such in writing to the Administrative Agent. "Voting Stock" means, with respect to any Person, Capital Stock issued by such Person the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of such a contingency. "Year 2000 Compliant" shall have the meaning set forth in Section 3.25. 26 32 SECTION 1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the Notes or other Credit Documents or any certificate or other document made or delivered pursuant hereto. (b) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (c) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 1.3 ACCOUNTING TERMS. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP applied on a basis consistent with the most recent audited consolidated financial statements of the Parent Borrower delivered to the Lenders; provided that, if the Parent Borrower notifies the Administrative Agent that it wishes to amend any covenant in Section 5.9 to eliminate the effect of any change in GAAP on the operation of such covenant (or if the Administrative Agent notifies the Parent Borrower that the Required Lenders wish to amend Section 5.9 for such purpose), then the Credit Parties' compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Parent Borrower and the Required Lenders. The Parent Borrower shall deliver to the Administrative Agent and each Lender at the same time as the delivery of any annual or quarterly financial statements given in accordance with the provisions of Section 5.1, (i) a description in reasonable detail of any material change in the application of accounting principles employed in the preparation of such financial statements from those applied in the most recently preceding quarterly or annual financial statements as to which no objection shall have been made in accordance with the provisions above and (ii) a reasonable estimate of the effect on the financial statements on account of such changes in application. 27 33 ARTICLE II THE LOANS; AMOUNT AND TERMS SECTION 2.1 REVOLVING LOANS. (a) Revolving Commitment. During the Commitment Period, subject to the terms and conditions hereof, each Lender severally agrees to make revolving credit loans ("Revolving Loans") to the Parent Borrower from time to time for the purposes hereinafter set forth; provided, however, that (i) with regard to each Lender individually, the sum of such Lender's outstanding Revolving Loans and SFG Revolving Loans plus such Lender's Revolving Commitment Percentage of Swingline Loans plus such Lender's LOC Commitment Percentage of LOC Obligations shall not exceed such Lender's Revolving Commitment Percentage of the Revolving Committed Amount and (ii) with regard to the Lenders collectively, the sum of the aggregate amount of outstanding Revolving Loans plus SFG Revolving Loans plus Swingline Loans plus LOC Obligations shall not exceed the Revolving Committed Amount. For purposes hereof, the aggregate amount available under this Section 2.1(a) shall be EIGHT HUNDRED FIVE MILLION DOLLARS ($805,000,000) (as such aggregate maximum amount may be increased or reduced from time to time as provided in Section 2.8, the "Revolving Committed Amount"). Revolving Loans may consist of Alternate Base Rate Loans or LIBOR Rate Loans, or a combination thereof, as the Parent Borrower may request, and may be repaid and reborrowed in accordance with the provisions hereof. LIBOR Rate Loans shall be made by each Lender at its LIBOR Lending Office and Alternate Base Rate Loans at its Domestic Lending Office. (b) Revolving Loan Borrowings. (i) Notice of Borrowing. The Parent Borrower shall request a Revolving Loan borrowing by written notice (or telephone notice promptly confirmed in writing which confirmation may be by fax) to the Administrative Agent not later than 1:30 P.M. (Charlotte, North Carolina time) on the date of requested borrowing in the case of Alternate Base Rate Loans, and on the third Business Day prior to the date of the requested borrowing in the case of LIBOR Rate Loans. Each such request for borrowing shall be irrevocable and shall specify (A) that a Revolving Loan is requested, (B) the date of the requested borrowing (which shall be a Business Day), (C) the aggregate principal amount to be borrowed, (D) whether the borrowing shall be comprised of Alternate Base Rate Loans, LIBOR Rate Loans or a combination thereof, and if LIBOR Rate Loans are requested, the Interest Period(s) therefor. A form of Notice of Borrowing (a "Notice of Borrowing") is attached as Schedule 2.1(b)(i). If the Parent Borrower shall fail to specify in any such Notice of Borrowing (I) an applicable Interest Period in the case of a LIBOR Rate Loan, then such notice shall be deemed to be a request for an Interest Period of one month, or (II) the type of Revolving Loan requested, then such notice shall be deemed to be a request for an Alternate Base Rate Loan hereunder. The Administrative Agent 28 34 shall give notice to each Lender promptly upon receipt of each Notice of Borrowing, the contents thereof and each such Lender's share thereof. All Revolving Loans made on the Closing Date shall bear interest at the Alternate Base Rate until three (3) Business Days after the Closing Date. (ii) Advances. Each Lender will make its Revolving Commitment Percentage of each Revolving Loan borrowing available to the Administrative Agent for the account of the Parent Borrower at the office of the Administrative Agent specified in Schedule 9.2, or at such other office as the Administrative Agent may designate in writing, by 4:00 P.M. (Charlotte, North Carolina time) on the date specified in the applicable Notice of Borrowing in Dollars and in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Parent Borrower by the Administrative Agent by crediting the account of the Parent Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. (c) Repayment. The principal amount of all Revolving Loans shall be due and payable in full on the Maturity Date. (d) Revolving Notes. Each Lender's Revolving Commitment Percentage of the Revolving Loans shall be evidenced by a duly executed promissory note of the Borrower to such Lender in substantially the form of Schedule 2.1(d). SECTION 2.2 SFG REVOLVING LOANS SUBFACILITY. (a) SFG Revolving Commitment. During the Commitment Period, subject to the terms and conditions hereof, each Lender severally agrees to make revolving credit loans ("SFG Revolving Loans") to the Borrowers from time to time for the purposes hereinafter set forth; provided, however, that (i) the aggregate amount of SFG Revolving Loans outstanding at any time shall not exceed SIXTY MILLION DOLLARS ($60,000,000), (ii) with regard to each Lender individually, the sum of such Lender's outstanding SFG Revolving Loans and Revolving Loans plus such Lender's Revolving Commitment Percentage of Swingline Loans plus such Lender's LOC Commitment Percentage of LOC Obligations shall not exceed such Lender's Revolving Commitment Percentage of the Revolving Committed Amount, and (iii) with regard to the Lenders collectively, the sum of the aggregate amount of outstanding SFG Revolving Loans plus Revolving Loans plus Swingline Loans plus LOC Obligations shall not exceed the Revolving Committed Amount. SFG Revolving Loans may consist of Alternate Base Rate Loans or LIBOR Rate Loans, or a combination thereof, as a Borrower may request, and may be repaid and reborrowed in accordance with the provisions hereof. LIBOR Rate Loans shall be made by each Lender at its LIBOR Lending Office and Alternate Base Rate Loans at its Domestic Lending Office. 29 35 (b) SFG Revolving Loan Borrowings. (i) Notice of Borrowing. A Borrower shall request a SFG Revolving Loan borrowing by providing a Notice of Borrowing (or telephone notice promptly confirmed in writing by providing a Notice of Borrowing, which confirmation may be by fax) to the Administrative Agent not later than 1:30 P.M. (Charlotte, North Carolina time) on the date of requested borrowing in the case of Alternate Base Rate Loans, and on the third Business Day prior to the date of the requested borrowing in the case of LIBOR Rate Loans. Each such Notice of Borrowing shall be irrevocable and shall specify (A) that a SFG Revolving Loan is requested, (B) the date of the requested borrowing (which shall be a Business Day), (C) the aggregate principal amount to be borrowed, (D) whether the borrowing shall be comprised of Alternate Base Rate Loans, LIBOR Rate Loans or a combination thereof, and if LIBOR Rate Loans are requested, the Interest Period(s) therefor. If the Borrower requesting the SFG Revolving Loan borrowing shall fail to specify in any such Notice of Borrowing (I) an applicable Interest Period in the case of a LIBOR Rate Loan, then such notice shall be deemed to be a request for an Interest Period of one month, or (II) the type of SFG Revolving Loan requested, then such notice shall be deemed to be a request for an Alternate Base Rate Loan hereunder. The Administrative Agent shall give notice to each Lender promptly upon receipt of each Notice of Borrowing, the contents thereof and each such Lender's share thereof. All SFG Revolving Loans made on the Closing Date shall bear interest at the Alternate Base Rate until three (3) Business Days after the Closing Date. (ii) Advances. Each Lender will make its Revolving Commitment Percentage of each SFG Revolving Loan borrowing available to the Administrative Agent for the account of the Borrower requesting such borrowing at the office of the Administrative Agent specified in Schedule 9.2, or at such other office as the Administrative Agent may designate in writing, by 4:00 P.M. (Charlotte, North Carolina time) on the date specified in the applicable Notice of Borrowing in Dollars and in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower requesting the borrowing by the Administrative Agent by crediting the account of such Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. (c) Repayment. The principal amount of all SFG Revolving Loans shall be due and payable in full on the Maturity Date. (d) SFG Revolving Notes. Each Lender's Revolving Commitment Percentage of the SFG Revolving Loans shall be evidenced by a duly executed promissory note of the Borrower to such Lender in substantially the form of Schedule 2.2(d). 30 36 SECTION 2.3 TERM A LOAN. (a) Term A Loan. Subject to the terms and conditions hereof and in reliance upon the representations and warranties set forth herein, each Lender severally agrees to make available to the Parent Borrower on the Closing Date such Lender's Term Loan Commitment Percentage of a term loan in Dollars (the "Term A Loan") in the aggregate principal amount of SIX HUNDRED TWENTY-FIVE MILLION DOLLARS ($625,000,000) (the "Term A Loan Committed Amount") for the purposes hereinafter set forth. The Term A Loan may consist of Alternate Base Rate Loans or LIBOR Rate Loans, or a combination thereof, as the Parent Borrower may request; provided that the Term A Loans made on the Closing Date shall bear interest at the Alternate Base Rate until three (3) Business Days after the Closing Date. Amounts repaid on the Term A Loan may not be reborrowed. LIBOR Rate Loans shall be made by each Lender at its LIBOR Lending Office and Alternate Base Rate Loans at its Domestic Lending Office. (b) Repayment of Term A Loan. The principal amount of the Term A Loan shall be repaid in twenty (20) consecutive fiscal quarterly installments as follows, unless accelerated sooner pursuant to Section 7.2:
TERM A LOAN PRINCIPAL PRINCIPAL AMORTIZATION AMORTIZATION PAYMENT DATES PAYMENT ------------- ------------ March 31, 2000 $0 June 30, 2000 $0 September 30, 2000 $0 December 31, 2000 $0 March 31, 2001 $25,000,000 June 30, 2001 $25,000,000 September 30, 2001 $25,000,000 December 31, 2001 $25,000,000 March 31, 2002 $31,250,000 June 30, 2002 $31,250,000 September 30, 2002 $31,250,000 December 31, 2002 $31,250,000 March 31, 2003 $37,500,000 June 30, 2003 $37,500,000
31 37 September 30, 2003 $37,500,000 December 31, 2003 $37,500,000 March 31, 2004 25% of outstanding Term A Loan as of such date (up to $50,000,000) June 30, 2004 25% of outstanding Term A Loan as of such date (up to $50,000,000) September 30, 2004 25% of outstanding Term A Loan as of such date (up to $50,000,000) Maturity Date Remaining amount of outstanding Term A Loan
(c) Term A Notes. Each Lender's Term Loan Commitment Percentage of the Term A Loan outstanding as of the Closing Date shall be evidenced by a duly executed promissory note of the Parent Borrower to such Lender in substantially the form of Schedule 2.3(c). SECTION 2.4 SFG TERM LOAN. (a) SFG Term Loan. Subject to the terms and conditions hereof and in reliance upon the representations and warranties set forth herein, each Lender severally agrees to make available to the Borrowers on the Closing Date such Lender's Term Loan Commitment Percentage of a term loan in Dollars (the "SFG Term Loan") in the aggregate principal amount of ONE HUNDRED EIGHTY MILLION DOLLARS ($180,000,000) (the "SFG Term Loan Committed Amount") for the purposes hereinafter set forth. The SFG Term Loan may consist of Alternate Base Rate Loans or LIBOR Rate Loans, or a combination thereof, as the Subsidiary Borrower may request; provided that the SFG Term Loans made on the Closing Date shall bear interest at the Alternate Base Rate until three (3) Business Days after the Closing Date. Amounts repaid on the SFG Term Loan may not be reborrowed. LIBOR Rate Loans shall be made by each Lender at its LIBOR Lending Office and Alternate Base Rate Loans at its Domestic Lending Office. (b) Repayment of SFG Term Loan. The principal amount of the SFG Term Loan shall be repaid in full on or before the Maturity Date. 32 38 (c) SFG Term Notes. Each Lender's Term Loan Commitment Percentage of the SFG Term Loan outstanding as of the Closing Date shall be evidenced by a duly executed promissory note of the Borrowers to such Lender in substantially the form of Schedule 2.4(c). SECTION 2.5 SWINGLINE LOAN SUBFACILITY. (a) Swingline Commitment. During the Commitment Period, subject to the terms and conditions hereof, the Swingline Lender, in its individual capacity, agrees to make certain revolving credit loans to the Parent Borrower (each a "Swingline Loan" and, collectively, the "Swingline Loans") for the purposes hereinafter set forth; provided, however, (i) the aggregate amount of Swingline Loans outstanding at any time shall not exceed TWENTY-FIVE MILLION DOLLARS ($25,000,000) (the "Swingline Committed Amount"), and (ii) the sum of the aggregate amount of outstanding Revolving Loans plus SFG Revolving Loans plus Swingline Loans plus LOC Obligations shall not exceed the Revolving Committed Amount. Swingline Loans hereunder may be repaid and reborrowed in accordance with the provisions hereof. (b) Swingline Loan Borrowings. (i) Notice of Borrowing and Disbursement. The Swingline Lender will make Swingline Loans available to the Parent Borrower on any Business Day upon request made by the Parent Borrower not later than 3:00 P.M. (Charlotte, North Carolina time) on such Business Day. A request for a Swingline Loan borrowing shall be made in the form of a Notice of Borrowing with appropriate modifications. Swingline Loan borrowings hereunder shall be made in minimum amounts of $100,000 and integral multiples of $100,000 in excess thereof. (ii) Repayment of Swingline Loans. Each Swingline Loan borrowing shall be due and payable on the Maturity Date. The Swingline Lender may, at any time, in its sole discretion, by written notice to the Parent Borrower and the Administrative Agent, demand repayment of its Swingline Loans by way of a Revolving Loan borrowing, in which case the Parent Borrower shall be deemed to have requested a Revolving Loan borrowing comprised entirely of Alternate Base Rate Loans in the amount of such Swingline Loans; provided, however, that, in the following circumstances, any such demand shall also be deemed to have been given one Business Day prior to each of (i) the Maturity Date, (ii) the occurrence of any Event of Default described in Section 7.1(e), (iii) upon acceleration of the Credit Party Obligations hereunder, whether on account of an Event of Default described in Section 7.1(e) or any other Event of Default, and (iv) the exercise of remedies in accordance with the provisions of Section 7.2 hereof (each such Revolving Loan borrowing made on account of any such deemed request therefor as provided herein being hereinafter referred to as a "Mandatory Borrowing"). Each Lender hereby irrevocably agrees to make such Revolving Loans promptly upon any such request or deemed request on account of each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence 33 39 and on the same such date notwithstanding (I) the amount of Mandatory Borrowing may not comply with the minimum amount for borrowings of Revolving Loans otherwise required hereunder, (II) whether any conditions specified in Section 4.2 are then satisfied, (III) whether a Default or an Event of Default then exists, (IV) failure of any such request or deemed request for Revolving Loans to be made by the time otherwise required in Section 2.1(b)(i), (V) the date of such Mandatory Borrowing, or (VI) any reduction in the Revolving Committed Amount or termination of the Revolving Commitments immediately prior to such Mandatory Borrowing or contemporaneously therewith. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to the Parent Borrower), then each Lender hereby agrees that it shall forthwith purchase (as of the date the Mandatory Borrowing would otherwise have occurred, but adjusted for any payments received from the Parent Borrower on or after such date and prior to such purchase) from the Swingline Lender such participations in the outstanding Swingline Loans as shall be necessary to cause each such Lender to share in such Swingline Loans ratably based upon its respective Revolving Commitment Percentage (determined before giving effect to any termination of the Commitments pursuant to Section 7.2), provided that (A) all interest payable on the Swingline Loans shall be for the account of the Swingline Lender until the date as of which the respective participation is purchased, and (B) at the time any purchase of participations pursuant to this sentence is actually made, the purchasing Lender shall be required to pay to the Swingline Lender interest on the principal amount of such participation purchased for each day from and including the day upon which the Mandatory Borrowing would otherwise have occurred to but excluding the date of payment for such participation, at the rate equal to, if paid within two (2) Business Days of the date of the Mandatory Borrowing, the Federal Funds Effective Rate, and thereafter at a rate equal to the Alternate Base Rate. (c) Interest on Swingline Loans. Subject to the provisions of Section 2.11(b), Swingline Loans shall bear interest at a per annum rate equal to the Alternate Base Rate plus the Applicable Percentage for Revolving Loans that are Alternate Base Rate Loans. Interest on Swingline Loans shall be payable in arrears on each Interest Payment Date. (d) Swingline Note. The Swingline Loans shall be evidenced by a duly executed promissory note of the Parent Borrower to the Swingline Lender in the original amount of the Swingline Committed Amount and substantially in the form of Schedule 2.5(d). SECTION 2.6 LETTER OF CREDIT SUBFACILITY. (a) Issuance. Subject to the terms and conditions hereof and of the LOC Documents, if any, and any other terms and conditions which the Issuing Lender may reasonably require, during the Commitment Period the Issuing Lender shall issue, and the 34 40 Lenders shall participate in, Letters of Credit for the account of the Parent Borrower from time to time upon request in a form acceptable to the Issuing Lender; provided, however, that (i) the aggregate amount of LOC Obligations shall not at any time exceed ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) (the "LOC Committed Amount"), (ii) the sum of the aggregate amount of Revolving Loans plus SFG Revolving Loans plus Swingline Loans plus LOC Obligations shall not at any time exceed the Revolving Committed Amount, (iii) all Letters of Credit shall be denominated in Dollars and (iv) Letters of Credit shall be issued for lawful corporate purposes and may be issued as standby letters of credit, including in connection with workers' compensation and other insurance programs, and trade letters of credit. Except as otherwise expressly agreed upon by the Issuing Lender and the Administrative Agent, no Letter of Credit shall have an original expiry date more than twelve (12) months from the date of issuance; provided, however, so long as no Default or Event of Default has occurred and is continuing and subject to the other terms and conditions to the issuance of Letters of Credit hereunder, the expiry dates of Letters of Credit may be extended annually or periodically from time to time on the request of the Parent Borrower or by operation of the terms of the applicable Letter of Credit to a date not more than twelve (12) months from the date of extension; provided, further, that no Letter of Credit, as originally issued or as extended, shall have an expiry date extending beyond the Maturity Date. Each Letter of Credit shall comply with the related LOC Documents. The issuance and expiry date of each Letter of Credit shall be a Business Day. First Union shall be the Issuing Lender on all Letters of Credit issued on or after the Closing Date. All currently outstanding letters of credit issued by First Union for the account of the Parent Borrower, its Subsidiaries, or any predecessor-in-interest of any of them, shall, as of the Closing Date, be considered Letters of Credit issued and subject to the terms of this Credit Agreement. (b) Notice and Reports. The request for the issuance of a Letter of Credit shall be submitted to the Issuing Lender at least three (3) Business Days prior to the requested date of issuance. The Issuing Lender will promptly upon request provide to the Administrative Agent for dissemination to the Lenders a detailed report specifying the Letters of Credit which are then issued and outstanding and any activity with respect thereto which may have occurred since the date of any prior report, and including therein, among other things, the account party, the beneficiary, the face amount, expiry date as well as any payments or expirations which may have occurred. The Issuing Lender will further provide to the Administrative Agent promptly upon request copies of the Letters of Credit. The Issuing Lender will provide to the Administrative Agent promptly upon request a summary report of the nature and extent of LOC Obligations then outstanding. (c) Participations. Each Lender upon issuance of a Letter of Credit (other than a Letter of Credit in an original face amount of less than $1,000,000) shall be deemed to have purchased without recourse a risk participation from the Issuing Lender in such Letter of Credit and the obligations arising thereunder and any collateral relating thereto, in each case in an amount equal to its LOC Commitment Percentage of the obligations under such Letter of Credit and shall absolutely, unconditionally and irrevocably assume, as primary obligor and not as surety, and be obligated to pay to the 35 41 Issuing Lender therefor and discharge when due, its LOC Commitment Percentage of the obligations arising under such Letter of Credit, unless the Issuing Lender acted with gross negligence or willful misconduct in issuing such Letter of Credit. Without limiting the scope and nature of each Lender's participation in any Letter of Credit, to the extent that the Issuing Lender has not been reimbursed as required hereunder or under any LOC Document, each such Lender shall pay to the Issuing Lender its LOC Commitment Percentage of such unreimbursed drawing in same day funds on the day of notification by the Issuing Lender of an unreimbursed drawing pursuant to the provisions of subsection (d) below if such notice is received at or before 2:00 P.M. (Charlotte, North Carolina time), otherwise such payment shall be made at or before 12:00 Noon (Charlotte, North Carolina time) on the Business Day next succeeding the day such notice is received. The obligation of each Lender to so reimburse the Issuing Lender shall be absolute and unconditional and shall not be affected by the occurrence of a Default, an Event of Default or any other occurrence or event. Any such reimbursement shall not relieve or otherwise impair the obligation of the Parent Borrower to reimburse the Issuing Lender under any Letter of Credit, together with interest as hereinafter provided. (d) Reimbursement. In the event of any drawing under any Letter of Credit, the Issuing Lender will promptly notify the Parent Borrower and the Administrative Agent. The Parent Borrower shall reimburse the Issuing Lender on the day of drawing under any Letter of Credit (either with the proceeds of a Swingline Loan or Revolving Loan obtained hereunder or otherwise) in same day funds as provided herein or in the LOC Documents. If the Parent Borrower shall fail to reimburse the Issuing Lender as provided herein, the unreimbursed amount of such drawing shall bear interest at a per annum rate equal to the Alternate Base Rate plus the Applicable Percentage. Unless the Parent Borrower shall immediately notify the Issuing Lender and the Administrative Agent of its intent to otherwise reimburse the Issuing Lender, the Parent Borrower shall be deemed to have requested a Swingline Loan, or if and to the extent Swingline Loans shall not be available, a Revolving Loan in the amount of the drawing as provided in subsection (e) below, the proceeds of which will be used to satisfy the reimbursement obligations. The Parent Borrower's reimbursement obligations hereunder shall be absolute and unconditional under all circumstances irrespective of any rights of set-off, counterclaim or defense to payment the Parent Borrower may claim or have against the Issuing Lender, the Administrative Agent, the Lenders, the beneficiary of the Letter of Credit drawn upon or any other Person, including without limitation any defense based on any failure of the Parent Borrower to receive consideration or the legality, validity, regularity or unenforceability of the Letter of Credit. The Issuing Lender will promptly notify the other Lenders of the amount of any unreimbursed drawing and each Lender shall promptly pay to the Administrative Agent for the account of the Issuing Lender in Dollars and in immediately available funds, the amount of such Lender's LOC Commitment Percentage of such unreimbursed drawing, unless the Issuing Lender acted with gross negligence or willful misconduct in issuing such Letter of Credit. Such payment shall be made on the day such notice is received by such Lender from the Issuing Lender if such notice is received at or before 2:00 P.M. (Charlotte, North Carolina time), otherwise such payment shall be made at or before 12:00 Noon (Charlotte, North Carolina time) on the Business Day next succeeding the day such notice 36 42 is received. If such Lender does not pay such amount to the Issuing Lender in full upon such request, such Lender shall, on demand, pay to the Administrative Agent for the account of the Issuing Lender interest on the unpaid amount during the period from the date of such drawing until such Lender pays such amount to the Issuing Lender in full at a rate per annum equal to, if paid within two (2) Business Days of the date of drawing, the Federal Funds Effective Rate and thereafter at a rate equal to the Alternate Base Rate. Each Lender's obligation to make such payment to the Issuing Lender, and the right of the Issuing Lender to receive the same, shall be absolute and unconditional, shall not be affected by any circumstance whatsoever and without regard to the termination of this Agreement or the Commitments hereunder, the existence of a Default or Event of Default or the acceleration of the Credit Party Obligations hereunder and shall be made without any offset, abatement, withholding or reduction whatsoever. (e) Repayment with Revolving Loans. On any day on which the Borrower shall have requested, or been deemed to have requested, (i) a Swingline Loan borrowing to reimburse a drawing under a Letter of Credit, the Swingline Lender shall make the Swingline Loan advance pursuant to the terms of the request or deemed request in accordance with the provisions for Swingline Loan advances hereunder, or (ii) a Revolving Loan to reimburse a drawing under a Letter of Credit, the Administrative Agent shall give notice to the Lenders that a Revolving Loan has been requested or deemed requested in connection with a drawing under a Letter of Credit, in which case a Revolving Loan borrowing comprised entirely of Alternate Base Rate Loans (each such borrowing, a "Mandatory Borrowing") shall be immediately made (without giving effect to any termination of the Commitments pursuant to Section 7.2) pro rata based on each Lender's respective Revolving Commitment Percentage (determined before giving effect to any termination of the Commitments pursuant to Section 7.2) and in the case of both clauses (i) and (ii) the proceeds thereof shall be paid directly to the Issuing Lender for application to the respective LOC Obligations. Each Lender hereby irrevocably agrees to make such Revolving Loans immediately upon any such request or deemed request on account of each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the same such date notwithstanding (i) the amount of Mandatory Borrowing may not comply with the minimum amount for borrowings of Revolving Loans otherwise required hereunder, (ii) whether any conditions specified in Section 4.2 are then satisfied, (iii) whether a Default or an Event of Default then exists, (iv) failure for any such request or deemed request for Revolving Loan to be made by the time otherwise required in Section 2.1(b), (v) the date of such Mandatory Borrowing, or (vi) any reduction in the Revolving Committed Amount after any such Letter of Credit may have been drawn upon. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to the Parent Borrower), then each such Lender hereby agrees that it shall forthwith fund (as of the date the Mandatory Borrowing would otherwise have occurred, but adjusted for any payments received from the Parent Borrower on or after such date and prior to such purchase) its Participation Interests in the outstanding LOC Obligations; provided, further, that in the event any Lender shall fail to fund its Participation Interest on the day the Mandatory Borrowing would otherwise have occurred, then the amount of such 37 43 Lender's unfunded Participation Interest therein shall bear interest payable to the Issuing Lender upon demand, at the rate equal to, if paid within two (2) Business Days of such date, the Federal Funds Effective Rate, and thereafter at a rate equal to the Alternate Base Rate. (f) Designation of Subsidiaries as Account Parties. Notwithstanding anything to the contrary set forth in this Agreement, including without limitation Section 2.6(a), a Letter of Credit issued hereunder may contain a statement to the effect that such Letter of Credit is issued for the account of a Subsidiary of the Parent Borrower, provided that notwithstanding such statement, the Parent Borrower shall be the actual account party for all purposes of this Agreement for such Letter of Credit and such statement shall not affect the Parent Borrower's reimbursement obligations hereunder with respect to such Letter of Credit. (g) Modification, Extension. The issuance of any supplement, modification, amendment, renewal, or extension to any Letter of Credit shall, for purposes hereof, be treated in all respects the same as the issuance of a new Letter of Credit hereunder. (h) Uniform Customs and Practices/International Standby Practices 1998. The Issuing Lender shall have the Letters of Credit be subject to The Uniform Customs and Practice for Documentary Credits (the "UCP") or the International Standby Practices 1998 (the "ISP98"), in either case as published as of the date of issue by the International Chamber of Commerce, in which case the UCP or ISP98, as applicable, may be incorporated therein and deemed in all respects to be a part thereof. SECTION 2.7 FEES. (a) Commitment Fee. In consideration of the Revolving Commitment, the Borrowers jointly and severally agree to pay to the Administrative Agent for the ratable benefit of the Lenders a commitment fee (the "Commitment Fee") in an amount equal to the Applicable Percentage per annum on the average daily unused amount of the Revolving Committed Amount. For purposes of computing the Commitment Fee hereunder, (i) Swingline Loans and LOC Obligations shall be considered usage under the aggregate Revolving Committed Amount and (ii) each Swingline Loan shall be considered usage under the Revolving Commitment of the Swingline Lender only unless and until the other Lenders purchase participation interests in such Swingline Loan pursuant to Section 2.5(b)(ii). The Commitment Fee shall be payable quarterly in arrears on the 15th day following the last day of each calendar quarter for the prior calendar quarter and upon termination of the Revolving Commitments. (b) Letter of Credit Fees. In consideration of the LOC Commitments, the Parent Borrower agrees to pay to the Issuing Lender a fee (the "Letter of Credit Fee") equal to the Applicable Percentage per annum on the average daily maximum amount available to be drawn under each Letter of Credit from the date of issuance (or in the case of Letters of Credit outstanding on the Closing Date, from the Closing Date) to the date of expiration. In addition to such Letter of Credit Fee, the Issuing Lender may charge, 38 44 and retain for its own account without sharing by the other Lenders, an additional facing fee of one-eighth of one percent (1/8%) per annum on the average daily maximum amount available to be drawn under each such Letter of Credit issued by it. The Issuing Lender shall promptly pay over to the Administrative Agent for the ratable benefit of the Lenders (including the Issuing Lender) the Letter of Credit Fee. The Letter of Credit Fee shall be payable quarterly in arrears on the 15th day following the last day of each calendar quarter for the prior calendar quarter. (c) Issuing Lender Fees. In addition to the Letter of Credit Fees payable pursuant to subsection (b) above, the Parent Borrower shall pay to the Issuing Lender for its own account without sharing by the other Lenders the reasonable and customary charges from time to time of the Issuing Lender with respect to the amendment, transfer, administration, cancellation and conversion of, and drawings under, such Letters of Credit (collectively, the "Issuing Lender Fees"). (d) Administrative Fee. The Borrower agrees to pay to the Agents the annual administrative fee as described in the Fee Letter. SECTION 2.8 REDUCTION OR INCREASE OF THE REVOLVING COMMITMENTS. (a) Voluntary Reductions. The Borrowers shall have the right to terminate or permanently reduce the unused portion of the Revolving Committed Amount at any time or from time to time upon not less than three Business Days' prior notice to the Administrative Agent (which shall notify the Lenders thereof as soon as practicable) of each such termination or reduction, which notice shall specify the effective date thereof and the amount of any such reduction which shall be in a minimum amount of $2,000,000 or a whole multiple of $1,000,000 in excess thereof and shall be irrevocable and effective upon receipt by the Administrative Agent, provided that no such reduction or termination shall be permitted if after giving effect thereto, and to any prepayments of the Loans made on the effective date thereof, the sum of the then outstanding aggregate principal amount of the Revolving Loans plus SFG Revolving Loans plus Swingline Loans plus LOC Obligations would exceed the Revolving Committed Amount after such proposed reduction. (b) Mandatory Reductions. On any date that the Revolving Loans and SFG Revolving Loans are required to be prepaid pursuant to the terms of Section 2.9(b)(iv)(B)(3), the Revolving Committed Amount shall be automatically permanently reduced by the amount of Revolving Loans and SFG Revolving Loans prepaid, respectively. (c) Maturity Date. The Revolving Commitments, the LOC Commitments and the Swingline Commitment shall automatically terminate on the Maturity Date. (d) Increase of Revolving Committed Amount. The Parent Borrower shall have the right from time to time to increase the Revolving Committed Amount up to a total amount of $945,000,000 by adding to this Agreement one or more other lenders 39 45 (which may include any Lender (with the consent of such Lender)) (each such lender an "Additional Lender") with the approval of the Administrative Agent (not to be unreasonably withheld) and with notice to each Lender, each of which Additional Lenders shall have entered into an agreement in form and substance satisfactory to the Parent Borrower and the Administrative Agent pursuant to which such Additional Lender shall undertake a Revolving Commitment (and if any such Additional Lender is a Lender, its Revolving Commitment shall be in addition to such Lender's Revolving Commitment hereunder) in an amount at least equal to $10,000,000 or a larger integral multiple of $1,000,000, and upon the effectiveness of such agreement (the date of the effectiveness of any such agreement being hereinafter referred to as the "Increased Commitment Date") such Additional Lender shall thereupon become a "Lender" for all purposes of this Agreement; provided, however, any increase in the Revolving Committed Amount pursuant to this Section 2.8(d) shall not increase the aggregate amount of SFG Revolving Loans available pursuant to Section 2.2(a). On the Increased Commitment Date, each Additional Lender shall by assignments from the other Lenders (which assignments shall be deemed to occur hereunder automatically, and without any requirement for additional documentation, on the Increased Commitment Date) acquire a portion of the Revolving Loans, SFG Revolving Loans and Participation Interests of the other Lenders (and the Lenders shall, through the Administrative Agent, make such other adjustments among themselves as shall be necessary) so that after giving effect to such assignments and adjustments the Lenders shall hold Revolving Loans, SFG Revolving Loans and Participation Interests hereunder ratably in accordance with their respective Revolving Commitments and LOC Commitments. The Parent Borrower shall compensate each Lender whose outstanding Revolving Loans have decreased as a result of the foregoing assignments and adjustments as if such decrease were a payment or prepayment referred to in Section 2.17 hereof. Notwithstanding the foregoing, the increase in the aggregate Revolving Commitments hereunder pursuant to this Section 2.8 shall be effective only if: (i) the Parent Borrower shall have given the Administrative Agent notice of any such increase at least five Business Days prior to any such Increased Commitment Date; (ii) no Default or Event of Default shall have occurred and be continuing as of the date of the notice referred to in the foregoing clause (i) or on the Increased Commitment Date; and (iii) the resulting aggregate amount of the Revolving Commitments is no greater than $945,000,000. SECTION 2.9 PREPAYMENTS. (a) Optional Prepayments. The Borrowers shall have the right to prepay Loans in whole or in part from time to time; provided, however, that (i) each partial prepayment of Alternate Base Rate Loans shall be in a minimum principal amount of 40 46 $1,000,000 and integral multiples of $500,000 in excess thereof, (ii) each partial prepayment of LIBOR Rate Loans shall be in a minimum principal amount of $5,000,000 and integral multiples of $1,000,000 in excess thereof and (iii) each prepayment of Swingline Loans shall be in a minimum principal amount of $100,000 and integral multiples of $100,000 in excess thereof. The Borrower making the voluntary prepayment shall give irrevocable written notice (or telephone notice promptly confirmed in writing which confirmation may be by fax) to the Administrative Agent (which shall notify the Lenders thereof as soon as practicable) not later than 1:30 P.M. (Charlotte, North Carolina time) on the date of the requested prepayment in the case of Alternate Base Rate Loans, and on the third Business Day prior to the date of the requested prepayment in the case of LIBOR Rate Loans. Subject to the foregoing terms, amounts prepaid under this Section 2.9(a) shall be applied as the Borrower may elect; provided, however, if the Borrower shall fail to elect an order of prepayment, such amounts shall be applied (A) first to prepay Revolving Loans and/or SFG Revolving Loans outstanding at such time until paid in full without a corresponding reduction in the Revolving Commitment, (B) second pro rata to the Term A Loans (ratably to the remaining principal installments thereof) and (C) third pro rata to the SFG Term Loans (ratably to the remaining principal installments thereof). Within the parameters of the applications set forth above, prepayments shall be applied first to Alternate Base Rate Loans and then to LIBOR Rate Loans in direct order of Interest Period maturities. All prepayments under this Section 2.9(a) shall be subject to Section 2.19, but otherwise without premium or penalty. Interest on the principal amount prepaid shall be payable on the next occurring Interest Payment Date that would have occurred had such loan not been prepaid. Amounts prepaid on the Swingline Loans, the Revolving Loans and the SFG Revolving Loans may be reborrowed in accordance with the terms hereof. Amounts prepaid on the Term Loans may not be reborrowed. (b) Mandatory Prepayments. (i) Revolving Committed Amount. If at any time after the Closing Date, the sum of the aggregate principal amount of outstanding Revolving Loans plus SFG Revolving Loans plus Swingline Loans plus LOC Obligations shall exceed the Revolving Committed Amount, the Borrower immediately shall prepay the Revolving Loans and SFG Revolving Loans and (after all Revolving Loans and SFG Revolving Loans have been repaid) cash collateralize the LOC Obligations, in an amount sufficient to eliminate such excess. (ii) Asset Dispositions. Promptly following any Asset Disposition which, together with prior Asset Dispositions as to which no prepayment has been made, results in Net Cash Proceeds in excess of $20,000,000 in any fiscal year, the Borrowers shall prepay the Loans in an aggregate amount equal to one hundred percent (100%) of the Net Cash Proceeds derived from such Asset Disposition (such prepayment to be applied as set forth in clause (iv) below). (iii) Recovery Event. To the extent cash proceeds received in connection with a Recovery Event are not applied to repair, replace or relocate 41 47 damaged property or to purchase or otherwise acquire new assets or property within 270 days following the receipt by a Credit Party of such cash proceeds, the Borrowers shall prepay the Loans in an aggregate amount equal to one hundred percent (100%) of such remaining cash proceeds to the Lenders (such prepayment to be applied as set forth in clause (iv) below). (iv) Application of Mandatory Prepayments. All amounts required to be paid pursuant to this Section 2.9(b) shall be applied as follows: (A) with respect to all amounts prepaid pursuant to Section 2.9(b)(i), to Revolving Loans and SFG Revolving Loans and (after all Revolving Loans and SFG Revolving Loans have been repaid) to a cash collateral account (held by the Administrative Agent for the ratable benefit of the Lenders) in respect of LOC Obligations and (B) with respect to all amounts prepaid pursuant to Sections 2.9(b)(ii) and (iii), (1) first pro rata to the Term A Loans (ratably to the remaining principal installments thereof), unless the asset was owned by the Subsidiary Borrower, in which case, pro rata to the SFG Term Loans, (2) second pro rata to the SFG Term Loans and (3) third pro rata to the Revolving Loans and SFG Revolving Loans and (after all Revolving Loans and SFG Revolving Loans have been repaid) to a cash collateral account in respect of LOC Obligations. Within the parameters of the applications set forth above, prepayments shall be applied first to Alternate Base Rate Loans and then to LIBOR Rate Loans in direct order of Interest Period maturities. All prepayments under this Section 2.9(b) shall be subject to Section 2.19 and be accompanied by interest on the principal amount prepaid to the date of prepayment. Amounts prepaid on Swingline Loans and Revolving Loans may be reborrowed in accordance with the terms hereof. Amounts prepaid on the Term Loans may not be reborrowed. SECTION 2.10 MINIMUM BORROWING AMOUNTS AND PRINCIPAL AMOUNTS OF TRANCHES. (a) Each Alternate Base Rate Loan (other than Swingline Loans) borrowing shall be in a minimum amount of $1,000,000 and whole multiples of $500,000 in excess thereof. (b) Each LIBOR Rate Loan borrowing shall be in a minimum amount of $5,000,000 and whole multiples of $1,000,000 in excess thereof. (c) All borrowings, payments and prepayments in respect of Revolving Loans, SFG Revolving Loans and Term Loans shall be in such amounts and be made pursuant to such elections so that after giving effect thereto the aggregate principal amount of the Revolving Loans, SFG Revolving Loans and Term Loans comprising any Tranche shall either be zero or shall not be less than $5,000,000 or a whole multiple of $1,000,000 in excess thereof. 42 48 SECTION 2.11 INTEREST; INTEREST PAYMENT DATES. (a) Subject to the provisions of Section 2.11(b), all Loans (other than Swingline Loans) shall bear interest as follows: (i) Alternate Base Rate Loans. During such periods as Loans shall be comprised of Alternate Base Rate Loans, each such Alternate Base Rate Loan shall bear interest at a per annum rate equal to the sum of the Alternate Base Rate plus the Applicable Percentage; and (ii) LIBOR Rate Loans. During such periods as Loans shall be comprised of LIBOR Rate Loans, each such LIBOR Rate Loan shall bear interest at a per annum rate equal to the sum of the LIBOR Rate plus the Applicable Percentage. (b) Upon the occurrence, and during the continuance, of an Event of Default, the principal of and, to the extent permitted by law, interest on the Loans and any other amounts owing hereunder or under the other Credit Documents shall bear interest, payable on demand, at a per annum rate 2% greater than the applicable rate then in effect or, if no rate is then in effect, at a per annum rate 2% greater than the Alternate Base Rate. (c) Interest on Loans shall be payable in arrears on each Interest Payment Date, subject to Section 2.14. SECTION 2.12 CONVERSION OPTIONS. (a) Each Borrower may, in the case of Revolving Loans, SFG Revolving Loans and the Term Loans, elect from time to time to convert Alternate Base Rate Loans to LIBOR Rate Loans by giving irrevocable written notice (or telephone notice promptly confirmed in writing which confirmation may be by fax) to the Administrative Agent not later than 1:30 P.M. (Charlotte, North Carolina time) on the third Business Day prior to the date of the requested conversion. A form of Notice of Conversion/ Extension is attached as Schedule 2.12. If the date upon which an Alternate Base Rate Loan is to be converted to a LIBOR Rate Loan is not a Business Day, then such conversion shall be made on the next succeeding Business Day and during the period from such last day of an Interest Period to such succeeding Business Day such Loan shall bear interest as if it were an Alternate Base Rate Loan. All or any part of outstanding Alternate Base Rate Loans may be converted as provided herein, provided that (i) no Loan may be converted into a LIBOR Rate Loan when any Default or Event of Default has occurred and is continuing and (ii) partial conversions shall be in an aggregate principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. (b) Any LIBOR Rate Loans may be continued as such upon the expiration of an Interest Period with respect thereto by compliance by the applicable Borrower with the notice provisions contained in Section 2.12(a); provided, that no LIBOR Rate Loan may be continued as such when any Default or Event of Default has occurred and is 43 49 continuing, in which case such Loan shall be automatically converted to an Alternate Base Rate Loan at the end of the applicable Interest Period with respect thereto. If the applicable Borrower shall fail to give timely notice of an election to continue a LIBOR Rate Loan, or the continuation of LIBOR Rate Loans is not permitted hereunder, such LIBOR Rate Loans shall be automatically converted to Alternate Base Rate Loans at the end of the applicable Interest Period with respect thereto. SECTION 2.13 COMPUTATION OF INTEREST AND FEES. (a) Interest payable hereunder with respect to Alternate Base Rate Loans shall be calculated on the basis of a year of 365 days (or 366 days, as applicable) for the actual days elapsed. All other fees, interest and all other amounts payable hereunder shall be calculated on the basis of a 360 day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the applicable Borrower and the Lenders of each determination of a LIBOR Rate on the Business Day of the determination thereof. Any change in the interest rate on a Loan resulting from a change in the Alternate Base Rate shall become effective as of the opening of business on the day on which such change in the Alternate Base Rate shall become effective. The Administrative Agent shall as soon as practicable notify the Borrowers and the Lenders of the effective date and the amount of each such change. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrowers and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of a Borrower, deliver to such Borrower a statement showing the computations used by the Administrative Agent in determining any interest rate. (c) It is the intent of the Lenders and the Credit Parties to conform to and contract in strict compliance with applicable usury law from time to time in effect. All agreements between the Lenders and the Credit Parties are hereby limited by the provisions of this paragraph which shall override and control all such agreements, whether now existing or hereafter arising and whether written or oral. In no way, nor in any event or contingency (including but not limited to prepayment or acceleration of the maturity of any obligation), shall the interest taken, reserved, contracted for, charged, or received under this Credit Agreement, under the Notes or otherwise, exceed the maximum nonusurious amount permissible under applicable law. If, from any possible construction of any of the Credit Documents or any other document, interest would otherwise be payable in excess of the maximum nonusurious amount, any such construction shall be subject to the provisions of this paragraph and such interest shall be automatically reduced to the maximum nonusurious amount permitted under applicable law, without the necessity of execution of any amendment or new document. If any Lender shall ever receive anything of value which is characterized as interest on the Loans under applicable law and which would, apart from this provision, be in excess of the maximum nonusurious amount, an amount equal to the amount which would have been excessive interest shall, without penalty, be applied to the reduction of the principal amount owing on the Loans and not to the payment of interest, or refunded to the 44 50 applicable Borrower or the other payor thereof if and to the extent such amount which would have been excessive exceeds such unpaid principal amount of the Loans. The right to demand payment of the Loans or any other Indebtedness evidenced by any of the Credit Documents does not include the right to receive any interest which has not otherwise accrued on the date of such demand, and the Lenders do not intend to charge or receive any unearned interest in the event of such demand. All interest paid or agreed to be paid to the Lenders with respect to the Loans shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term (including any renewal or extension) of the Loans so that the amount of interest on account of such indebtedness does not exceed the maximum nonusurious amount permitted by applicable law. SECTION 2.14 PRO RATA TREATMENT AND PAYMENTS. Each borrowing of Revolving Loans or SFG Revolving Loans and any reduction of the Revolving Commitments shall be made pro rata according to the respective Commitment Percentages of the Lenders. Each payment under this Agreement or any Note shall be applied, first, to any fees then due and owing by the Borrowers pursuant to Section 2.7, second, to interest then due and owing in respect of the Notes of the Borrowers and, third, to principal then due and owing hereunder and under the Notes of the Borrowers. Each payment on account of any fees pursuant to Section 2.7 shall be made pro rata in accordance with the respective amounts due and owing (except as to the portion of the Letter of Credit Fee retained by the Issuing Lender, the Issuing Lender Fees and fees payable to the Agents). Each payment (other than prepayments) by the Borrowers on account of principal of and interest on the Revolving Loans, SFG Revolving Loans and on the Term Loans shall be made pro rata according to the respective amounts due and owing in accordance with Section 2.9(a) hereof. Each optional prepayment on account of principal of the Loans shall be applied to such of the Loans as the applicable Borrower may designate (to be applied pro rata among the Lenders); provided, that prepayments made pursuant to Section 2.17 shall be applied in accordance with such section. Each mandatory prepayment on account of principal of the Loans shall be applied in accordance with Section 2.9(b). All payments (including prepayments) to be made by the Borrowers on account of principal, interest and fees shall be made without defense, set-off or counterclaim (except as provided in Section 2.20(b)) and shall be made to the Administrative Agent for the account of the Lenders at the Administrative Agent's office specified on Schedule 9.2 in Dollars and in immediately available funds not later than 2:00 P.M. (Charlotte, North Carolina time) on the date when due. The Administrative Agent shall distribute such payments to the Lenders entitled thereto promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the LIBOR Rate Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a LIBOR Rate Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. 45 51 SECTION 2.15 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT. (a) Unless the Administrative Agent shall have been notified in writing by a Lender prior to the date a Loan is to be made by such Lender (which notice shall be effective upon receipt) that such Lender does not intend to make the proceeds of such Loan available to the Administrative Agent, the Administrative Agent may assume that such Lender has made such proceeds available to the Administrative Agent on such date, and the Administrative Agent may in reliance upon such assumption (but shall not be required to) make available to the applicable Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent, the Administrative Agent shall be able to recover such corresponding amount from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent will promptly notify the Borrower that received such corresponding amount, and such Borrower shall immediately pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover from the Lender or such Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to such Borrower to the date such corresponding amount is recovered by the Administrative Agent at a per annum rate equal to (i) from such Borrower at the applicable rate for the applicable borrowing pursuant to the Notice of Borrowing and (ii) from a Lender at the Federal Funds Effective Rate. (b) Unless the Administrative Agent shall have been notified in writing by a Borrower, prior to the date on which any payment is due from it hereunder (which notice shall be effective upon receipt) that such Borrower does not intend to make such payment, the Administrative Agent may assume that such Borrower has made such payment when due, and the Administrative Agent may in reliance upon such assumption (but shall not be required to) make available to each Lender on such payment date an amount equal to the portion of such assumed payment to which such Lender is entitled hereunder, and if such Borrower has not in fact made such payment to the Administrative Agent, such Lender shall, on demand, repay to the Administrative Agent the amount made available to such Lender. If such amount is repaid to the Administrative Agent on a date after the date such amount was made available to such Lender, such Lender shall pay to the Administrative Agent on demand interest on such amount in respect of each day from the date such amount was made available by the Administrative Agent to such Lender to the date such amount is recovered by the Administrative Agent at a per annum rate equal to the Federal Funds Effective Rate. (c) A certificate of the Administrative Agent submitted to any Borrower or any Lender with respect to any amount owing under this Section 2.15 shall be conclusive in the absence of manifest error. 46 52 SECTION 2.16 INABILITY TO DETERMINE INTEREST RATE. Notwithstanding any other provision of this Agreement, if (i) the Administrative Agent shall reasonably determine (which determination shall be conclusive and binding absent manifest error) that, by reason of circumstances affecting the relevant market, reasonable and adequate means do not exist for ascertaining LIBOR for an Interest Period, or (ii) the Required Lenders shall reasonably determine (which determination shall be conclusive and binding absent manifest error) that the LIBOR Rate does not adequately and fairly reflect the cost to such Lenders of funding LIBOR Rate Loans that a Borrower has requested be outstanding as a LIBOR Tranche during an Interest Period, the Administrative Agent shall forthwith give telephone notice of such determination, confirmed in writing, to such Borrower, and the Lenders at least two Business Days prior to the first day of such Interest Period. Unless the Borrower shall have notified the Administrative Agent upon receipt of such telephone notice that it wishes to rescind or modify its request regarding such LIBOR Rate Loans, any Loans that were requested to be made as LIBOR Rate Loans shall be made as Alternate Base Rate Loans and any Loans that were requested to be converted into or continued as LIBOR Rate Loans shall be converted into Alternate Base Rate Loans. Until any such notice has been withdrawn by the Administrative Agent, no further Loans shall be made as, continued as, or converted into, LIBOR Rate Loans for the Interest Periods so affected. SECTION 2.17 ILLEGALITY. Notwithstanding any other provision of this Agreement, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof by the relevant Governmental Authority to any Lender shall make it unlawful for such Lender or its LIBOR Lending Office to make or maintain LIBOR Rate Loans as contemplated by this Agreement or to obtain in the interbank eurodollar market through its LIBOR Lending Office the funds with which to make such Loans, (a) such Lender shall promptly notify the Administrative Agent and the Borrowers thereof, (b) the commitment of such Lender hereunder to make LIBOR Rate Loans or continue LIBOR Rate Loans as such shall forthwith be suspended until the Administrative Agent shall give notice that the condition or situation which gave rise to the suspension shall no longer exist, and (c) such Lender's Loans then outstanding as LIBOR Rate Loans, if any, shall be converted on the last day of the Interest Period for such Loans or within such earlier period as required by law as Alternate Base Rate Loans. The Borrowers hereby agree promptly to pay any Lender, upon its demand, any additional amounts necessary to compensate such Lender for actual and direct costs (but not including anticipated profits) reasonably incurred by such Lender in making any repayment in accordance with this Section including, but not limited to, any interest or fees payable by such Lender to lenders of funds obtained by it in order to make or maintain its LIBOR Rate Loans hereunder. A certificate as to any additional amounts payable pursuant to this Section submitted by such Lender, through the Administrative Agent, to the Borrowers shall be conclusive in the absence of manifest error. Each Lender agrees to use reasonable efforts (including reasonable efforts to change its LIBOR Lending Office) to avoid or to minimize any amounts which may otherwise be payable pursuant to this Section; provided, however, that such efforts shall not cause the imposition on such Lender of any additional costs or legal or regulatory burdens deemed by such Lender in its sole discretion to be material. 47 53 SECTION 2.18 REQUIREMENTS OF LAW. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject such Lender to any tax of any kind whatsoever with respect to any Letter of Credit or any application relating thereto, any LIBOR Rate Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for changes in the rate of tax on the overall net income of such Lender); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the LIBOR Rate hereunder; or (iii) shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender of making or maintaining LIBOR Rate Loans or the Letters of Credit or to reduce any amount receivable hereunder or under any Note and such Lender's costs have increased with respect to other customers under similar circumstances, then, in any such case, the Borrowers shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such additional cost or reduced amount receivable which such Lender reasonably deems to be material as determined by such Lender with respect to its LIBOR Rate Loans or Letters of Credit. A certificate as to any additional amounts payable pursuant to this Section submitted by such Lender, through the Administrative Agent, to the Borrowers shall be conclusive in the absence of manifest error. Each Lender agrees to use reasonable efforts (including reasonable efforts to change its Domestic Lending Office or LIBOR Lending Office, as the case may be) to avoid or to minimize any amounts which might otherwise be payable pursuant to this paragraph of this Section; provided, however, that such efforts shall not cause the imposition on such Lender of any additional costs or legal or regulatory burdens deemed by such Lender to be material. (b) If any Lender shall have reasonably determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any central bank or Governmental Authority made subsequent to the date hereof does or shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder to a 48 54 level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount reasonably deemed by such Lender to be material, and such Lender has experienced such effect with respect to other customers under similar circumstances, then from time to time, within fifteen (15) days after demand by such Lender, the Borrowers shall pay to such Lender such additional amount as shall be certified by such Lender as being required to compensate it for such reduction. Such a certificate as to any additional amounts payable under this Section submitted by a Lender (which certificate shall include a description of the basis for the computation), through the Administrative Agent, to the Borrowers shall be conclusive absent manifest error. (c) The agreements in this Section 2.18 shall survive the termination of this Agreement and payment of the Notes and all other amounts payable hereunder. SECTION 2.19 INDEMNITY. The Borrowers hereby agree to indemnify each Lender and to hold such Lender harmless from any funding loss or expense which such Lender may sustain or incur as a consequence of (a) default by a Borrower in payment of the principal amount of or interest on any Loan by such Lender in accordance with the terms hereof, (b) default by a Borrower in accepting a borrowing after such Borrower has given a notice in accordance with the terms hereof, (c) default by a Borrower in making any prepayment after such Borrower has given a notice in accordance with the terms hereof, and/or (d) the making by a Borrower of a prepayment of a Loan, or the conversion thereof, on a day which is not the last day of the Interest Period with respect thereto, in each case including, but not limited to, any such loss or expense arising from interest or fees payable by such Lender to lenders of funds obtained by it in order to maintain its Loans hereunder. A certificate as to any additional amounts payable pursuant to this Section submitted by any Lender, through the Administrative Agent, to the Borrowers (which certificate must be delivered to the Administrative Agent within thirty days following such default, prepayment or conversion) shall be conclusive in the absence of manifest error. The agreements in this Section shall survive termination of this Agreement and payment of the Notes and all other amounts payable hereunder. SECTION 2.20 TAXES. (a) All payments made by the Borrowers hereunder or under any Note will be, except as provided in Section 2.20(b), made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any Governmental Authority or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding any tax imposed on or measured by the net income or profits of a Lender) and all interest, penalties or similar liabilities with respect thereto (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as "Taxes"). If any Taxes are so levied or imposed, the Borrowers agree to pay the full amount of such Taxes, and such additional amounts as 49 55 may be necessary so that every payment of all amounts due under this Agreement or under any Note, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Note. The Borrowers will furnish to the Administrative Agent as soon as practicable after the date the payment of any Taxes is due pursuant to applicable law certified copies (to the extent reasonably available and required by law) of tax receipts evidencing such payment by the Borrowers. The Borrowers agree to indemnify and hold harmless each Lender, and reimburse such Lender upon its written request, for the amount of any Taxes so levied or imposed and paid by such Lender but excluding any interest or penalties caused by such Lender's failure to pay any such taxes when due. (b) Each Lender that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) agrees to deliver to the Borrowers and the Administrative Agent on or prior to the Closing Date, or in the case of a Lender that is an assignee or transferee of an interest under this Agreement pursuant to Section 9.6(d) (unless the respective Lender was already a Lender hereunder immediately prior to such assignment or transfer), on the date of such assignment or transfer to such Lender, (i) if the Lender is a "bank" within the meaning of Section 881(c)(3)(A) of the Code, two accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms) certifying such Lender's entitlement to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement and under any Note, or (ii) if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, either Internal Revenue Service Form 1001 or 4224 as set forth in clause (i) above, or (x) a certificate substantially in the form of Schedule 2.20 (any such certificate, a "2.20 Certificate") and (y) two accurate and complete original signed copies of Internal Revenue Service Form W-8 (or successor form) certifying such Lender's entitlement to an exemption from United States withholding tax with respect to payments of interest to be made under this Agreement and under any Note. In addition, each Lender agrees that it will deliver upon any Borrower's request updated versions of the foregoing, as applicable, whenever the previous certification has become obsolete or inaccurate in any material respect, together with such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement and any Note. Notwithstanding anything to the contrary contained in Section 2.20(a), but subject to the immediately succeeding sentence, (x) the Borrowers shall be entitled, to the extent it is required to do so by law, to deduct or withhold Taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from interest, fees or other amounts payable hereunder for the account of any Lender which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes to the extent that such Lender has not provided to the Borrowers U.S. Internal Revenue Service Forms that establish a complete exemption from such deduction or withholding and (y) the Borrowers shall not be obligated pursuant to Section 2.20(a) hereof to gross-up payments to be made to a Lender in respect of Taxes imposed by the United States if (I) such Lender has not provided to the Borrowers the Internal Revenue Service Forms required to be provided to the Borrowers pursuant to this Section 2.20(b) or (II) in the case of a 50 56 payment, other than interest, to a Lender described in clause (ii) above, to the extent that such Forms do not establish a complete exemption from withholding of such Taxes. Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this Section 2.20, the Borrowers agree to pay additional amounts and to indemnify each Lender in the manner set forth in Section 2.20(a) (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any amounts deducted or withheld by it as described in the immediately preceding sentence as a result of any changes after the Closing Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of Taxes. (c) Each Lender agrees to use reasonable efforts (including reasonable efforts to change its Domestic Lending Office or LIBOR Lending Office, as the case may be) to avoid or to minimize any amounts which might otherwise be payable pursuant to this Section; provided, however, that such efforts shall not cause the imposition on such Lender of any additional costs or legal or regulatory burdens deemed by such Lender in its sole discretion to be material. (d) If the Borrowers pay any additional amount pursuant to this Section 2.20 with respect to a Lender, such Lender shall use reasonable efforts to obtain a refund of tax or credit against its tax liabilities on account of such payment; provided that such Lender shall have no obligation to use such reasonable efforts if either (i) it is in an excess foreign tax credit position or (ii) it believes in good faith, in its sole discretion, that claiming a refund or credit would cause adverse tax consequences to it. In the event that such Lender receives such a refund or credit, such Lender shall pay to the Borrowers an amount that such Lender reasonably determines is equal to the net tax benefit obtained by such Lender as a result of such payment by the Borrowers. In the event that no refund or credit is obtained with respect to the Borrowers' payments to such Lender pursuant to this Section 2.20(d), then such Lender shall upon request provide a certification that such Lender has not received a refund or credit for such payments. Nothing contained in this Section 2.20(d) shall require a Lender to disclose or detail the basis of its calculation of the amount of any tax benefit or any other amount or the basis of its determination referred to in the proviso to the first sentence of this Section 2.20(d) to the Borrowers or any other party. (e) The agreements in this Section 2.20 shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. SECTION 2.21 INDEMNIFICATION; NATURE OF ISSUING LENDER'S DUTIES. (a) In addition to its other obligations under Section 2.6, the Parent Borrower hereby agrees to protect, indemnify, pay and save each Issuing Lender harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees) that the Issuing Lender may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit or (ii) the failure of the Issuing Lender to honor a drawing under a Letter of Credit as a 51 57 result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions, herein called "Government Acts"). (b) As between the Parent Borrower and the Issuing Lender, the Parent Borrower shall assume all risks of the acts, omissions or misuse of any Letter of Credit by the beneficiary thereof. The Issuing Lender shall not be responsible: (i) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, that may prove to be invalid or ineffective for any reason; (iii) for failure of the beneficiary of a Letter of Credit to comply fully with conditions required in order to draw upon a Letter of Credit; (iv) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) for errors in interpretation of technical terms; (vi) for any loss or delay in the transmission or otherwise of any document required in order to make a drawing under a Letter of Credit or of the proceeds thereof; and (vii) for any consequences arising from causes beyond the control of the Issuing Lender, including, without limitation, any Government Acts. None of the above shall affect, impair, or prevent the vesting of the Issuing Lender's rights or powers hereunder. (c) In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by the Issuing Lender, under or in connection with any Letter of Credit or the related certificates, if taken or omitted in good faith, shall not put such Issuing Lender under any resulting liability to the Parent Borrower. It is the intention of the parties that this Agreement shall be construed and applied to protect and indemnify the Issuing Lender against any and all risks involved in the issuance of the Letters of Credit, all of which risks are hereby assumed by the Parent Borrower, including, without limitation, any and all risks of the acts or omissions, whether rightful or wrongful, of any Government Authority. The Issuing Lender shall not, in any way, be liable for any failure by the Issuing Lender or anyone else to pay any drawing under any Letter of Credit as a result of any Government Acts or any other cause beyond the control of the Issuing Lender. (d) Nothing in this Section 2.21 is intended to limit the reimbursement obligation of the Parent Borrower contained in Section 2.6(d) hereof. The obligations of the Parent Borrower under this Section 2.21 shall survive the termination of this Agreement. No act or omissions of any current or prior beneficiary of a Letter of Credit shall in any way affect or impair the rights of the Issuing Lender to enforce any right, power or benefit under this Agreement. (e) Notwithstanding anything to the contrary contained in this Section 2.21, the Parent Borrower shall have no obligation to indemnify any Issuing Lender in respect 52 58 of any liability incurred by such Issuing Lender arising out of the gross negligence or willful misconduct of the Issuing Lender (including action not taken by an Issuing Lender), as determined by a court of competent jurisdiction. SECTION 2.22 JOINT AND SEVERAL LIABILITY OF THE BORROWERS. (a) Each of the Borrowers is accepting joint and several liability hereunder with respect to the Joint and Several Obligations in consideration of the financial accommodation to be provided by the Lenders under Sections 2.2 and 2.4 of this Agreement, for the mutual benefit, directly and indirectly, of each of the Borrowers and in consideration of the undertakings of each of the Borrowers to accept joint and several liability for the Joint and Several Obligations of each of them under Sections 2.2 and 2.4. (b) Each of the Borrowers jointly and severally hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Borrower with respect to the payment and performance of all of the Joint and Several Obligations arising under this Credit Agreement and the other Credit Documents, it being the intention of the parties hereto that all the Joint and Several Obligations shall be the joint and several obligations of each of the Borrowers without preferences or distinction among them. (c) If and to the extent that either of the Borrowers shall fail to make any payment with respect to any of the Joint and Several Obligations hereunder as and when due or to perform any of such Joint and Several Obligations in accordance with the terms thereof, then in each such event, the other Borrower will make such payment with respect to, or perform, such Joint and Several Obligations. (d) The obligations of each Borrower under the provisions of this Section 2.22 constitute full recourse obligations of such Borrower, enforceable against it to the full extent of its properties and assets, irrespective of the validity, regularity or enforceability of this Credit Agreement or any other circumstances whatsoever. (e) Except as otherwise expressly provided herein, each Borrower hereby waives notice of acceptance of its joint and several liability, notice of occurrence of any Default or Event of Default (except to the extent notice is expressly required to be given pursuant to the terms of this Credit Agreement), or of any demand for any payment under this Credit Agreement, notice of any action at any time taken or omitted by the Administrative Agent or the Lenders under or in respect of any of the Joint and Several Obligations hereunder, any requirement of diligence and, generally, all demands, notices and other formalities of every kind in connection with this Credit Agreement. Each Borrower hereby assents to, and waives notice of, any extension or postponement of the time for the payment of any of the Joint and Several Obligations hereunder, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by the Administrative Agent or the Lenders at any time or times in respect of any default by a Borrower in the performance or satisfaction of any term, covenant, condition or provision of this Credit Agreement or any other Credit Document, any and 53 59 all other indulgences whatsoever by the Administrative Agent or the Lenders in respect of any of the Joint and Several Obligations hereunder, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of such Joint and Several Obligations or the addition, substitution or release, in whole or in part, of either Borrower. Without limiting the generality of the foregoing, each Borrower assents to any other action or delay in acting or any failure to act on the part of the Administrative Agent or the Lenders, including, without limitation, any failure strictly or diligently to assert any right or to pursue any remedy or to comply fully with applicable laws or regulations thereunder which might, but for the provisions of this Section 2.22, afford grounds for terminating, discharging or relieving such Borrower, in whole or in part, from any of its obligations under this Section 2.22, it being the intention of each Borrower that, so long as any of the Joint and Several Obligations remain unsatisfied, the obligations of such Borrower under this Section 2.22 shall not be discharged except by performance and then only to the extent of such performance. The obligations of each Borrower under this Section 2.22 shall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with respect to any reconstruction or similar proceeding with respect to a Borrower or any Lender. The joint and several liability of the Borrowers hereunder shall continue in full force and effect notwithstanding any absorption, merger, amalgamation or any other change whatsoever in the name, membership, constitution or place of formation of a Borrower or any Lender. (f) The provisions of this Section 2.22 are made for the benefit of the Administrative Agent and the Lenders and their respective successors and assigns, and may be enforced by any such Person from time to time against either of the Borrowers as often as occasion therefor may arise and without requirement on the part of any Lender first to marshal any of its claims or to exercise any of its rights against the other Borrower or to exhaust any remedies available to it against the other Borrower or to resort to any other source or means of obtaining payment of any of the Joint and Several Obligations or to elect any other remedy. Without limiting the generality of the foregoing, each Borrower hereby specifically waives the benefits of N.C. Gen. Stat. ss.ss.26-7 through 26-9, inclusive, to the extent applicable. The provisions of this Section 2.22 shall remain in effect until all the Joint and Several Obligations hereunder shall have been paid in full or otherwise fully satisfied. If at any time, any payment, or any part thereof, made in respect of any of the Joint and Several Obligations, is rescinded or must otherwise be restored or returned by the Lenders upon the insolvency, bankruptcy or reorganization of either of the Borrowers, or otherwise, the provisions of this Section 2.22 will forthwith be reinstated and in effect as though such payment had not been made. (g) Notwithstanding any provision to the contrary contained herein or in any other of the Credit Documents or Hedging Agreements, the obligations of each Borrower hereunder shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the Bankruptcy Code or any comparable provisions of any applicable state law. 54 60 SECTION 2.23 DEFAULTING LENDERS; LIMITATION ON CLAIMS. (a) Generally. In addition to the rights and remedies that may be available to the Administrative Agent or the Borrowers under this Agreement or applicable law, if at any time a Lender is a Defaulting Lender such Defaulting Lender's right to participate in the administration of the Loans, this Agreement and the other Credit Documents, including without limitation, any right to vote in respect of, to consent to or to direct any action or inaction of the Administrative Agent or to be taken into account in the calculation of the Required Lenders, shall be suspended during the pendency of such failure or refusal. If a Lender is a Defaulting Lender because it has failed to make timely payment to the Administrative Agent of any amount required to be paid to the Administrative Agent hereunder (without giving effect to any notice or cure periods), in addition to other rights and remedies which the Administrative Agent or the Borrowers may have under the immediately preceding provisions or otherwise, the Administrative Agent shall be entitled (i) to collect interest from such Defaulting Lender on such delinquent payment for the period from the date on which the payment was due until the date on which the payment is made at the Federal Funds Effective Rate, (ii) to withhold or setoff and to apply in satisfaction of the defaulted payment and any related interest, any amounts otherwise payable to such Defaulting Lender under this Agreement or any other Credit Document until such defaulted payment and related interest has been paid in full and such default no longer exists and (iii) to bring an action or suit against such Defaulting Lender in a court of competent jurisdiction to recover the defaulted amount and any related interest. Any amounts received by the Administrative Agent in respect of a Defaulting Lender's Loans shall not be paid to such Defaulting Lender and shall be held uninvested by the Administrative Agent and either applied against the purchase price of such Loans under the following subsection (b) or paid to such Defaulting Lender upon the default of such Defaulting Lender being cured. (b) Purchase of Defaulting Lender's Commitment. Any Lender who is not a Defaulting Lender shall have the right, but not the obligation, in its sole discretion, to acquire all of a Defaulting Lender's Commitment. If more than one Lender exercises such right, each such Lender shall have the right to acquire such proportion of such Defaulting Lender's Commitment on a pro rata basis. Upon any such purchase, the Defaulting Lender's interest in the Loans and its rights hereunder (but not its liability in respect thereof or under the Credit Documents or this Agreement to the extent the same relate to the period prior to the effective date of the purchase) shall terminate on the date of purchase, and the Defaulting Lender shall promptly execute all documents reasonably requested to surrender and transfer such interest to the purchaser thereof subject to and in accordance with the requirements set forth in Section 9.6, including an appropriate Commitment Transfer Supplement. The purchase price for the Commitment of a Defaulting Lender shall be equal to the sum of the amount of the principal balance of the Loans outstanding and owed by the Borrowers to the Defaulting Lender, plus any accrued interest with respect thereto, plus any fees or other amounts owed by the Borrowers to the Defaulting Lender. Prior to payment of such purchase price to a Defaulting Lender, the Administrative Agent shall apply against such purchase price any amounts retained by the Administrative Agent pursuant to the last sentence of the immediately preceding 55 61 subsection (a). The Defaulting Lender shall be entitled to receive all amounts owed to it by the Borrowers on account of principal of and interest on the Loans and the Notes, and fees and other amounts due under the Credit Documents which accrued prior to the date of the default by the Defaulting Lender, to the extent the same are received by the Administrative Agent from or on behalf of the Borrowers. There shall be no recourse against any Lender or the Administrative Agent for the payment of such sums by the Borrowers except to the extent of the receipt of payments from any other party or in respect of the Loans. SECTION 2.24 REPLACEMENT OF LENDERS. If any Lender shall become affected by any of the changes or events described in Sections 2.16, 2.17, 2.18 or 2.20 (any such Lender being hereinafter referred to as a "Replaced Lender") and shall petition either Borrower for any increased cost or amounts thereunder, then in such case, either Borrower may, upon at least five (5) Business Days' notice to the Administrative Agent and such Replaced Lender, designate a replacement lender (a "Replacement Lender") acceptable to the Administrative Agent in its reasonable discretion, to which such Replaced Lender shall, subject to its receipt (unless a later date for the remittance thereof shall be agreed upon by such Borrower and the Replaced Lender) of all amounts owed to such Replaced Lender under Sections 2.16, 2.17, 218 or 2.20 assign all (but not less than all) of its rights, obligations, Loans and Commitments hereunder; provided, that all amounts owed to such Replaced Lender by the Borrowers (except liabilities which by the terms hereof survive the payment in full of the Loans and termination of this Agreement) shall be paid in full as of the date of such assignment. Upon any assignment by any Lender pursuant to this Section 2.24 becoming effective, the Replacement Lender shall thereupon be deemed to be a "Lender" for all purposes of this Agreement and such Replaced Lender shall thereupon cease to be a "Lender" for all purposes of this Agreement and shall have no further rights or obligations hereunder (other than pursuant to Sections 2.16, 2.17, 2.18, 2.20 and 9.5 while such Replaced Lender was a Lender). Notwithstanding any Replaced Lender's failure or refusal to assign its rights, obligations, Loans and Commitments under this Section 2.24, the Replaced Lender shall cease to be a "Lender" for all purposes of this Agreement and the Replacement Lender substituted therefor upon payment to the Replaced Lender by the Replacement Lender of all amounts set forth in this Section 2.24 without any further action of the Replaced Lender. ARTICLE III REPRESENTATIONS AND WARRANTIES To induce the Lenders to enter into this Agreement and to make the Extensions of Credit herein provided for, the Credit Parties hereby represent and warrant to the Administrative Agent and to each Lender that: 56 62 SECTION 3.1 FINANCIAL CONDITION. The consolidated balance sheets and the related statements of income, retained earnings and cash flows of Suiza and its Subsidiaries and of the Subsidiary Borrower and its Subsidiaries for the fiscal year ending December 31, 1998 and for the fiscal quarter ending September 30, 1999, are complete and correct and present fairly, in all material respects, the financial condition of, and the results of operations for, such Persons as of such dates. All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as disclosed therein). None of the Parent Borrower or its Subsidiaries has on the date hereof any material contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments, except as referred to or reflected or provided for in the balance sheets referred to above. SECTION 3.2 NO CHANGE. Since December 31, 1998 (and after delivery of annual audited financial statements in accordance with Section 5.1(a), from the date of the most recently delivered annual audited financial statements) there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect. SECTION 3.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of the Parent Borrower and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the requisite power and authority and the legal right to own and operate all its material property, to lease the material property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified to conduct business and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification except to the extent that the failure to so qualify or be in good standing could not, in the aggregate, reasonably be expected to have a Material Adverse Effect and except for those Subsidiaries required to be so qualified and in good standing pursuant to the terms of Section 5.16 following their reorganization or restructure on or about the Closing Date and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. SECTION 3.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each of the Borrowers and the other Credit Parties has full power and authority and the legal right to make, deliver and perform the Credit Documents to which it is party and has taken all necessary limited liability company or corporate action to authorize the execution, delivery and performance by it of the Credit Documents to which it is party. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery or performance of any Credit Document by the Borrowers and the other Credit Parties (other 57 63 than those which have been obtained) or with the validity or enforceability of any Credit Document against the Borrowers and the other Credit Parties (except such filings as are necessary in connection with the perfection of the Liens created by such Credit Documents). Each Credit Document to which it is a party has been duly executed and delivered on behalf of each of the Borrowers and the other Credit Parties, as the case may be. Each Credit Document to which it is a party constitutes a legal, valid and binding obligation of each of the Borrowers and the other Credit Parties, as the case may be, enforceable against each of the Borrowers and Credit Parties, as the case may be, in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). SECTION 3.5 NO LEGAL BAR; NO DEFAULT. The execution, delivery and performance of the Credit Documents, the borrowings thereunder and the use of the proceeds of the Loans will not violate any Requirement of Law or any Contractual Obligation of the Parent Borrower or its Subsidiaries (except those as to which waivers or consents have been obtained), and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any Requirement of Law or Contractual Obligation other than the Liens arising under or contemplated in connection with the Credit Documents. Neither the Parent Borrower nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. SECTION 3.6 NO MATERIAL LITIGATION. Except as set forth in Schedule 3.6, no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the best knowledge of the Parent Borrower, threatened by or against the Parent Borrower or any of its Subsidiaries or against any of its or their respective properties or revenues (a) with respect to the Credit Documents or any Loan or any of the transactions contemplated hereby, or (b) which, if adversely determined, could reasonably be expected to have a Material Adverse Effect. SECTION 3.7 GOVERNMENT ACTS. (a) Neither the Parent Borrower nor any Credit Party is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. (b) Neither the Parent Borrower nor any of its Subsidiaries is a "holding company", or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 58 64 SECTION 3.8 MARGIN REGULATIONS. No part of the proceeds of any Loan hereunder will be used directly or indirectly for any purpose which violates, or which would be inconsistent with, the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. The aggregate value of all "margin stock" owned by the Parent Borrower and its Subsidiaries taken as a group does not exceed 25% of the value of their assets. SECTION 3.9 ERISA. Except as could not reasonably be expected to have a Material Adverse Effect, (a) neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code; (b) no termination of a Single Employer Plan has occurred resulting in any liability that has remained underfunded, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period; (c) the present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits; and (d) neither the Parent Borrower, nor any of its Subsidiaries, nor any Commonly Controlled Entity is currently subject to any liability for a complete or partial withdrawal from a Multiemployer Plan. SECTION 3.10 ENVIRONMENTAL MATTERS. Except as to matters with respect to which the Parent Borrower and its Subsidiaries could not reasonably be expected to incur liabilities in excess of $30,000,000 in the aggregate: (a) the facilities and properties owned, leased or operated by the Parent Borrower or any of its Subsidiaries (the "Real Properties") do not contain any Hazardous Materials in amounts or concentrations which (i) constitute a violation of, or (ii) could give rise to liability under, any Environmental Law; (b) the Real Properties and all operations of the Parent Borrower and/or its Subsidiaries at the Real Properties are in compliance, and have in the last five years been in compliance, in all material respects with all applicable Environmental Laws, and there is no contamination at, under or about the Real Properties or violation of any 59 65 Environmental Law with respect to the Real Properties or the business operated by the Parent Borrower or any of its Subsidiaries (the "Business"); (c) neither the Parent Borrower nor any of its Subsidiaries has received any written or actual notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Real Properties or the Business, nor does the Parent Borrower or any of its Subsidiaries have knowledge or reason to believe that any such notice will be received or is being threatened; (d) Hazardous Materials have not been transported or disposed of from the Real Properties in violation of, or in a manner or to a location which could give rise to liability under any Environmental Law, nor have any Hazardous Materials been generated, treated, stored or disposed of at, on or under any of the Real Properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law; (e) no judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Parent Borrower, threatened, under any Environmental Law to which the Parent Borrower or any Subsidiary is or will be named as a party with respect to the Real Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Real Properties or the Business; and (f) there has been no release or threat of release of Hazardous Materials at or from the Real Properties, or arising from or related to the operations of the Parent Borrower or any Subsidiary in connection with the Real Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws. SECTION 3.11 PURPOSE OF LOANS. The proceeds of the Loans hereunder shall be used solely by the Borrowers to (i) refinance existing Indebtedness and (ii) provide for working capital, Permitted Acquisitions and other general corporate purposes. The Letters of Credit shall be used for general corporate purposes. SECTION 3.12 SUBSIDIARIES. Set forth on Schedule 3.12 is a complete and accurate list of all Subsidiaries of the Parent Borrower. Information on the attached Schedule includes state of incorporation; the number of shares of each class of Capital Stock or other equity interests outstanding; the number and percentage of outstanding shares of each class of stock owned by Parent Borrower or its Subsidiaries; and the number and effect, if exercised, of all outstanding options, warrants, rights of conversion or purchase and similar rights. The outstanding Capital Stock and other equity interests of all such Subsidiaries is validly issued, fully paid and non-assessable and is owned, 60 66 free and clear of all Liens (other than those arising under or contemplated in connection with the Credit Documents). As of the Closing Date, there are no Unrestricted Subsidiaries. SECTION 3.13 OWNERSHIP. Each of the Parent Borrower and its Subsidiaries (a) is the owner of, and has good and marketable title to, all of its respective assets, except as may be permitted pursuant to Section 6.12 hereof, and none of such assets is subject to any Lien other than Permitted Liens and (b) enjoys peaceful and undisturbed possession of all Real Properties that are necessary for the operation and conduct of its business. SECTION 3.14 INDEBTEDNESS. Except as otherwise permitted under Section 6.1, the Parent Borrower and its Subsidiaries have no Indebtedness. SECTION 3.15 TAXES. Each of the Parent Borrower and its Subsidiaries has filed, or caused to be filed, all tax returns (federal, state, local and foreign) required to be filed other than returns for which failure to file would not have a Material Adverse Effect and paid (a) all amounts of taxes shown thereon to be due (including interest and penalties) and (b) all other taxes, fees, assessments and other governmental charges (including mortgage recording taxes, documentary stamp taxes and intangibles taxes) owing by it, except for such taxes (i) which are not yet delinquent or (ii) that are being contested in good faith and by proper proceedings, and against which adequate reserves are being maintained in accordance with GAAP or (iii) for which nonpayment would not have a Material Adverse Effect. Neither the Parent Borrower nor any of its Subsidiaries is aware as of the Closing Date of any proposed tax assessments against it or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect. SECTION 3.16 INTELLECTUAL PROPERTY. Each of the Parent Borrower and its Subsidiaries owns, or has the legal right to use, all trademarks, tradenames, patents, copyrights, technology, know-how and processes (collectively, the "Intellectual Property") necessary for each of them to conduct its business as currently conducted. Except as provided on Schedule 3.16, no claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Parent Borrower or any of its Subsidiaries know of any such claim, and, to the knowledge of the Parent Borrower or any of its Subsidiaries, the use of such Intellectual Property by the Parent Borrower or any of its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 61 67 SECTION 3.17 SOLVENCY. The fair saleable value of all Credit Parties' assets, measured on a going concern basis, exceeds all probable liabilities, including those to be incurred pursuant to this Credit Agreement. The Credit Parties on a consolidated basis, will not (a) have unreasonably small capital in relation to the business in which they are engaged or (b) have incurred, or believe that they will have incurred after giving effect to the transactions contemplated by this Credit Agreement, Indebtedness beyond their ability to pay such Indebtedness as it becomes due. SECTION 3.18 INVESTMENTS. All Investments of each of the Parent Borrower and its Subsidiaries are Permitted Investments. SECTION 3.19 LOCATION OF CHIEF EXECUTIVE OFFICE. Set forth on Schedule 3.19 is the chief executive office and principal place of business of each of the Parent Borrower and its Restricted Subsidiaries. Schedule 3.19 may be updated from time to time by the Parent Borrower to include new locations by giving written notice thereof to the Administrative Agent. SECTION 3.20 NO BURDENSOME RESTRICTIONS. None of the Parent Borrower or any of its Subsidiaries is a party to any agreement or instrument or subject to any other obligation or any charter or corporate restriction or any provision of any applicable law, rule or regulation which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. SECTION 3.21 BROKERS' FEES. None of the Parent Borrower or any of its Subsidiaries has any obligation to any Person in respect of any finder's, broker's, investment banking or other similar fee in connection with any of the transactions contemplated under the Credit Documents other than the closing and other fees payable pursuant to this Credit Agreement and the Fee Letter. SECTION 3.22 LABOR MATTERS. None of the Parent Borrower or any of its Subsidiaries (i) is currently suffering any strikes, walkouts, work stoppages or other material labor difficulty, other than as set forth in Schedule 3.22 hereto or (ii) has knowledge of any potential or pending strike, walkout or work stoppage. SECTION 3.23 ACCURACY AND COMPLETENESS OF INFORMATION. All factual information heretofore, contemporaneously or hereafter furnished by or on behalf of the Parent Borrower or any of its Subsidiaries to the Administrative Agent or any 62 68 Lender for purposes of or in connection with this Agreement or any other Credit Document, or any transaction contemplated hereby or thereby, is or will be true and accurate in all material respects and not incomplete by omitting to state any material fact necessary to make such information not misleading. There is no fact now known to the Parent Borrower or any of its Subsidiaries which has, or could reasonably be expected to have, a Material Adverse Effect which fact has not been set forth herein, in the financial statements of the Parent Borrower and its Subsidiaries furnished to the Administrative Agent and/or the Lenders, or in any certificate, opinion or other written statement made or furnished by the Parent Borrower to the Administrative Agent and/or the Lenders. SECTION 3.24 YEAR 2000 ISSUE. Except as could not reasonably be expected to have a Material Adverse Effect, any reprogramming and related testing required to permit the proper functioning of the Credit Parties' computer systems in and following the year 2000 are completed (that is, the Credit Parties are "Year 2000 Compliant"), and the cost to the Credit Parties of such reprogramming and testing will not result in a Default or Event of Default or a Material Adverse Effect. The computer and management information systems of the Credit Parties and their Subsidiaries are and, with ordinary course upgrading and maintenance, will continue for the term of this Agreement to be, adequate for the conduct of its business. SECTION 3.25 INTEREST RATE PROTECTION. The Borrowers have, as of the Closing Date, Hedging Agreements in place protecting against fluctuations in interest rates which provide for coverage of not less than fifty percent (50%) of the original principal amount of the Term Loans for a period of not less than two (2) years. ARTICLE IV CONDITIONS PRECEDENT SECTION 4.1 CONDITIONS TO CLOSING DATE AND INITIAL REVOLVING LOANS, SFG REVOLVING LOANS AND TERM LOANS. This Agreement shall become effective upon, and the obligation of each Lender to make the initial Extension of Credit on the Closing Date is subject to, the satisfaction of the following conditions precedent: (a) Execution of Agreement. The Administrative Agent shall have received (i) counterparts of this Agreement, executed by a duly authorized officer of each party hereto, (ii) for the account of each Lender, Revolving Notes, SFG Revolving Notes and Term Notes, and for the account of the Swingline Lender, a Swingline Note and (iii) counterparts of the Pledge Agreement, in each case conforming to the requirements of this Agreement and executed by duly authorized officers of the Credit Parties. 63 69 (b) Authority Documents. The Administrative Agent shall have received a secretary's certificate substantially in the form of Schedule 4.1(b) with respect to the following: (i) Charter Documents. Copies of the articles of incorporation or other charter documents, as applicable, of each Credit Party and each corporate general partner of a Credit Party certified to be true and complete as of a recent date by the appropriate Governmental Authority of the state of its incorporation. (ii) Partnership Agreements; Disclosure Information. With respect to each Credit Party that is a partnership or limited partnership, a copy of the partnership agreement of such Credit Party, together with all amendments thereto, schedules and any disclosure information, in each case certified by a general partner of such Credit Party as of the Closing Date to be true and correct and in force and effect as of such date. (iii) Resolutions. Copies of resolutions or certificate of authorization of the board of directors or general partner of each Credit Party approving and adopting the Credit Documents, the transactions contemplated therein and authorizing execution and delivery thereof, certified by an officer or general partner of such Credit Party as of the Closing Date to be true and correct and in force and effect as of such date. (iv) Bylaws. A copy of the bylaws of each corporate Credit Party and each corporate general partner of a Credit Party certified by an officer of such Credit Party or corporate general partner as of the Closing Date to be true and correct and in force and effect as of such date. (v) Good Standing. Copies of (i) certificates of good standing, existence or its equivalent with respect to each Credit Party certified as of a recent date by the appropriate Governmental Authorities of the state of incorporation and each other state in which the failure to so qualify and be in good standing could reasonably be expected to have a Material Adverse Effect on the business or operations of the Parent Borrower and its Subsidiaries, taken as a whole, except for those Subsidiaries required to be so qualified and in good standing pursuant to the terms of Section 5.16 following their reorganization or restructure on or about the Closing Date, and (ii) if available, a certificate indicating payment of all corporate franchise taxes certified as of a recent date by the appropriate governmental taxing authorities. (vi) Incumbency. An incumbency certificate of each Credit Party and each corporate general partner of a Credit Party certified by a secretary or assistant secretary to be true and correct as of the Closing Date. 64 70 (c) Legal Opinions of Counsel. (i) The Administrative Agent shall have received an opinion of legal counsel for the Credit Parties, dated the Closing Date and addressed to the Administrative Agent and the Lenders, in form and substance acceptable to the Administrative Agent. (ii) The Administrative Agent shall have received an opinion of Moore & Van Allen, PLLC, dated the Closing Date and addressed to the Administrative Agent and the Lenders. (d) Personal Property Collateral. The Administrative Agent shall have received, in form and substance satisfactory to the Administrative Agent: (i) searches of Uniform Commercial Code filings in the jurisdiction of the chief executive office of each Credit Party and each jurisdiction where a filing would need to be made in order to perfect the Administrative Agent's security interest in the Collateral, copies of the financing statements on file in such jurisdictions and evidence that no Liens exist other than Permitted Liens; and (ii) duly executed UCC financing statements for each appropriate jurisdiction as is necessary, in the Administrative Agent's sole discretion, to perfect the Administrative Agent's security interest in the Collateral; (e) Liability and Casualty Insurance. The Administrative Agent shall have received copies of insurance policies or certificates of insurance evidencing liability and casualty insurance meeting the requirements set forth herein. (f) Fees. The Administrative Agent shall have received all fees, if any, owing pursuant to the Fee Letter and Section 2.7. (g) Litigation. There shall not exist any pending litigation or investigation affecting or relating to the Parent Borrower or any of its Subsidiaries, this Agreement and the other Credit Documents that in the reasonable judgment of the Administrative Agent could be expected to have a Material Adverse Effect, that has not been settled, dismissed, vacated, discharged or terminated prior to the Closing Date. (h) Solvency Evidence. The Administrative Agent shall have received an officer's certificate for the Credit Parties prepared by the chief financial officer or treasurer of the Parent Borrower as to the financial condition, solvency and related matters of the Credit Parties taken as a whole, after giving effect to the initial borrowings under the Credit Documents, in substantially the form of Schedule 4.1(h) hereto. (i) Account Designation Letter. The Administrative Agent shall have received the executed Account Designation Letter in the form of Schedule 1.1(a) hereto. 65 71 (j) Corporate Structure. The corporate capital and ownership structure of the Parent Borrower and its Subsidiaries shall be as described in Schedule 3.12. The Administrative Agent shall be satisfied with the management structure, legal structure, voting control, liquidity and capitalization of the Parent Borrower as of the Closing Date. (k) Indenture. The Administrative Agent shall have received a copy of the Indenture, all material documents executed in connection therewith and all amendments or supplements thereto, certified by an officer of the Parent Borrower to be true and correct and in full force and effect. (l) Consummation of Merger. The Administrative Agent shall have received evidence that that the transactions contemplated by the Merger Agreement have been consummated in accordance with the terms thereof and the Administrative Agent shall have received a copy of the Merger Agreement, all material documents executed in connection therewith and all amendments or supplements thereto, certified by a Responsible Officer of the Parent Borrower to be true and correct and in full force and effect. (m) Government Consent. The Administrative Agent shall have received evidence that all governmental, shareholder and material third party consents and approvals necessary in connection with the transactions contemplated by the Merger Agreement and the financings and other transactions contemplated hereby have been obtained and all applicable waiting periods have expired without any action being taken by any authority that could restrain, prevent or impose any material adverse conditions on such transactions or that could seek or threaten any of the foregoing. (n) Compliance with Laws. The financings and other transactions contemplated hereby shall be in compliance with all applicable laws and regulations (including Environmental Laws and all applicable securities and banking laws, rules and regulations). (o) Bankruptcy. There shall be no bankruptcy or insolvency proceedings with respect to the Parent Borrower or any of its Subsidiaries. (p) Financial Statements. The Administrative Agent shall have received copies of the financial statements referred to in Section 3.1 hereof. (q) Year 2000 Plan. The Administrative Agent shall have received evidence that the Parent Borrower and its Subsidiaries are Year 2000 Compliant. (r) Termination of Existing Indebtedness. All existing Indebtedness for borrowed money of the Parent Borrower and its Subsidiaries (other than the Senior Subordinated Notes and the Indebtedness listed on Schedule 6.1(b)) shall have been repaid in full with a portion of the proceeds of the initial Loans hereunder and terminated, and Indebtedness under that certain $1,000,000,000 Amended and Restated Credit Agreement dated as of May 22, 1998 among Suiza, First Union, as administrative agent, Bank One, NA (formerly The First National Bank of Chicago), as syndication agent, and 66 72 the lenders party thereto shall have been repaid in full with the proceeds of the initial Loans hereunder and such credit agreement shall have been terminated. (s) Material Adverse Change. There shall not have occurred a material adverse change since December 31, 1998 in, and each Lender shall be satisfied with (such satisfaction to be evidenced by the delivery and release by such Lender to the Administrative Agent of an executed signature page to this Agreement), the business, assets, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects of the Parent Borrower and its Subsidiaries taken as a whole, or in the facts and information regarding such entities as represented to date. (t) Officer's Certificates. The Administrative Agent shall have received a certificate or certificates executed by the chief financial officer or treasurer of the Parent Borrower on behalf of the Credit Parties as of the Closing Date stating that (A) the Credit Parties and each of their Subsidiaries are in compliance with all existing material financial obligations, (B) all governmental, shareholder and third party consents and approvals, if any, with respect to the Credit Documents and the transactions contemplated thereby have been obtained, (C) no action, suit, investigation or proceeding is pending or threatened in any court or before any arbitrator or governmental instrumentality that purports to affect a Credit Party, any of the Credit Parties' Subsidiaries or any transaction contemplated by the Credit Documents, if such action, suit, investigation or proceeding would have or be reasonably expected to have a Material Adverse Effect, (D) the Credit Party Obligations of the Subsidiary Borrower (x) comply with Section 4.03 of the Indenture and attached hereto are calculations demonstrating such compliance and (y) constitute Senior Indebtedness and/or Refinancing Indebtedness as such terms are defined in the Indenture, and (E) immediately after giving effect to this Credit Agreement, the other Credit Documents and all the transactions contemplated therein to occur on such date, (1) no Default or Event of Default exists, (2) all representations and warranties contained herein and in the other Credit Documents are true and correct in all material respects, and (3) the Credit Parties are in compliance with each of the financial covenants set forth in Section 5.9. (u) Sources and Uses of Funds. The Administrative Agent shall have received a memorandum detailing the sources and uses of the funds to be used to consummate the transactions contemplated by this Agreement and the other Credit Documents and related expenses, in form and substance reasonably satisfactory to the Administrative Agent. (v) Additional Matters. All other documents and legal matters in connection with the transactions contemplated by this Agreement shall be reasonably satisfactory in form and substance to the Administrative Agent and its counsel. SECTION 4.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT. The obligation of each Lender to make any Extension of Credit hereunder is subject to the satisfaction of the following conditions precedent on the date of making such Extension of Credit: 67 73 (a) Representations and Warranties. The representations and warranties made by the Credit Parties herein, in the Security Documents or which are contained in any certificate furnished at any time under or in connection herewith shall be true and correct in all material respects on and as of the date of such Extension of Credit as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date). (b) No Default or Event of Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Extension of Credit to be made on such date unless such Default or Event of Default shall have been waived in accordance with this Agreement. (c) Compliance with Commitments. Immediately after giving effect to the making of any such Extension of Credit (and the application of the proceeds thereof), (i) the sum of the aggregate principal amount of outstanding Revolving Loans plus SFG Revolving Loans plus Swingline Loans plus LOC Obligations shall not exceed the Revolving Committed Amount, (ii) the LOC Obligations shall not exceed the LOC Committed Amount and (iii) the Swingline Loans shall not exceed the Swingline Committed Amount. (d) Additional Conditions to Revolving Loans and SFG Revolving Loans. If such Loan is made pursuant to Section 2.1 or Section 2.2, all conditions set forth in such Sections shall have been satisfied. (e) Additional Conditions to Term Loans. If such Loan is made pursuant to Section 2.3 or Section 2.4, all conditions set forth in such Sections shall have been satisfied. (f) Additional Conditions to Swingline Loan. If such Loan is made pursuant to Section 2.5, all conditions set forth in such Section shall have been satisfied. (g) Additional Conditions to Letters of Credit. If such Extension of Credit is made pursuant to Section 2.6, all conditions set forth in such Section shall have been satisfied. Each request for an Extension of Credit and each acceptance by a Borrower of any such Extension of Credit shall be deemed to constitute a representation and warranty by such Borrower as of the date of such Extension of Credit that the applicable conditions in paragraphs (a) through (g) of this Section have been satisfied. 68 74 ARTICLE V AFFIRMATIVE COVENANTS The Parent Borrower hereby covenants and agrees that on the Closing Date, and thereafter for so long as this Agreement is in effect and until the Commitments have terminated, no Note remains outstanding and unpaid and the Credit Party Obligations, together with interest, Commitment Fees and all other amounts owing to the Administrative Agent or any Lender hereunder, are paid in full, the Parent Borrower shall, and shall cause each of its Subsidiaries to: SECTION 5.1 FINANCIAL STATEMENTS. Furnish to the Administrative Agent and each of the Lenders: (a) Annual Financial Statements. As soon as available and in any event within 90 days after the end of each fiscal year of the Parent Borrower or the Subsidiary Borrower, as applicable: (i) (A) consolidated statements of income, stockholders' equity and cash flows of the Parent Borrower and its Subsidiaries for such fiscal year and (B) the related consolidated balance sheet of the Parent Borrower and its Subsidiaries as at the end of such fiscal year, setting forth in each case in comparative form the corresponding consolidated figures for the preceding fiscal year, and accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such consolidated financial statements fairly present the consolidated financial condition and results of operations of the Parent Borrower and its Subsidiaries, as at the end of, and for, such fiscal year in accordance with GAAP, and a certificate of such accountants stating that, in making the examination necessary for their opinion, they obtained no knowledge, except as specifically stated, of any Default or Event of Default; and (ii) until the Subsidiary Borrower is no longer a Borrower hereunder or until there are no SFG Revolving Loans or SFG Term Loans outstanding, (A) consolidated statements of income, stockholders' equity and cash flows of the Subsidiary Borrower and its Subsidiaries for such fiscal year and (B) the related consolidated balance sheet of the Subsidiary Borrower and its Subsidiaries as at the end of such fiscal year, setting forth in each case in comparative form the corresponding consolidated figures for the preceding fiscal year, and accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such consolidated financial statements fairly present the consolidated financial condition and results of operations of the Subsidiary Borrower and its Subsidiaries, as at the end of, and for, such fiscal year in accordance with GAAP, and a certificate of such accountants stating that, in making the examination necessary for their opinion, 69 75 they obtained no knowledge, except as specifically stated, of any Default or Event of Default; and (iii) (A) (x) consolidated statements of income and cash flows of the Parent Borrower and its Restricted Subsidiaries and (y) consolidating statements of income of the Parent Borrower and its directly owned Subsidiaries combined in significant groups, in each case for such fiscal year, and (B) (x) the related consolidating balance sheet of the Parent Borrower and its Restricted Subsidiaries and (y) the related consolidated balance sheet of the Parent Borrower and its directly owned Subsidiaries combined in significant groups, in each case as at the end of such fiscal year, setting forth in each case (other than consolidating statements) in comparative form the corresponding consolidated figures for the preceding fiscal year, accompanied by a certificate of a Responsible Officer of the Parent Borrower, which certificate shall state that such consolidated financial statements fairly present the consolidated financial condition and results of operations of the Parent Borrower and its Subsidiaries or of the Parent Borrower and its Restricted Subsidiaries, as the case may be, and such consolidating financial statements fairly present the respective unconsolidated financial condition and results of operations of the Parent Borrower and each group of such Subsidiaries, in accordance with GAAP consistently applied, as at the end of and for such period (subject to normal year-end audit adjustments); and (b) Quarterly Financial Statements. As soon as available and in any event within 45 days after the end of each of the first three quarterly fiscal periods of each fiscal year of the Parent Borrower or the Subsidiary Borrower, as applicable: (i) (A) (x) consolidated statements of income and cash flows of the Parent Borrower and its Subsidiaries, (y) consolidated statements of income and cash flows of the Parent Borrower and its Restricted Subsidiaries, in each case for such period and for the period from the beginning of the respective fiscal year to the end of such period, and (z) consolidating statements of income of the Parent Borrower and its directly owned Subsidiaries combined in significant groups for such period, and (B) (x) the related consolidated and consolidating balance sheet of the Parent Borrower and its Subsidiaries and (y) the related consolidated balance sheet of the Parent Borrower and its Restricted Subsidiaries, in each case as at the end of such period, setting forth in each case (other than consolidating statements) in comparative form the corresponding consolidated figures for the corresponding periods in the preceding fiscal year, accompanied by a certificate of a Responsible Officer of the Parent Borrower, which certificate shall state that such consolidated financial statements fairly present the consolidated financial condition and results of operations of the Parent Borrower and its Subsidiaries or of the Parent Borrower and its Restricted Subsidiaries, as the case may be, and such consolidating financial statements fairly present the respective unconsolidated financial condition and results of operations of the Parent Borrower and each group of such Subsidiaries, in accordance with GAAP 70 76 consistently applied, as at the end of, and for, such period (subject to normal year-end audit adjustments); and (ii) until the Subsidiary Borrower is no longer a Borrower hereunder or until there are no SFG Revolving Loans or SFG Term Loans outstanding, (A) (x) consolidated statements of income and cash flows of the Subsidiary Borrower and its Subsidiaries, and (y) consolidated statements of income and cash flows of the Subsidiary Borrower and its Restricted Subsidiaries, in each case for such period and for the period from the beginning of the respective fiscal year to the end of such period, and (B) (x) the related consolidated balance sheet of the Subsidiary Borrower and its Subsidiaries and (y) the related consolidated balance sheet of the Subsidiary Borrower and its Restricted Subsidiaries, in each case as at the end of such period, setting forth in each case in comparative form the corresponding consolidated figures for the corresponding periods in the preceding fiscal year, accompanied by a certificate of a Responsible Officer of the Subsidiary Borrower, which certificate shall state that such consolidated financial statements fairly present the consolidated financial condition and results of operations of the Subsidiary Borrower and its Subsidiaries or of the Subsidiary Borrower and its Restricted Subsidiaries, as the case may be, in accordance with GAAP consistently applied, as at the end of, and for, such period (subject to normal year-end audit adjustments); and all such financial statements to be accompanied by a description of, and an estimation of the effect on the financial statements on account of, a change, if any, in the application of accounting principles as provided in Section 1.3. SECTION 5.2 CERTIFICATES; OTHER INFORMATION. Furnish to the Administrative Agent and each of the Lenders: (a) promptly upon their becoming available, copies of all registration statements and regular periodic reports, if any, that the Parent Borrower shall have filed with the SEC or any national securities exchange; (b) promptly upon mailing thereof to the shareholders of the Parent Borrower generally, copies of all financial statements, reports and proxy statements so mailed; (c) at the time it furnishes each set of financial statements pursuant to Sections 5.1(a) and 5.1(b) above, a certificate of a Responsible Officer of the Parent Borrower (i) certifying that (A) each of the Credit Parties and its Subsidiaries during such period observed or performed in all material respects all of its covenants and other agreements, and satisfied in all material respects every condition contained in this Agreement to be observed, performed or satisfied by it, and (B) no Default or Event of Default has occurred and is continuing (or, if any Default or Event of Default has occurred and is continuing, describing the same in reasonable detail and describing the action that the Parent Borrower has taken or proposes to take with respect thereto) and 71 77 (ii) setting forth in reasonable detail the computations necessary to determine whether the Credit Parties are in compliance with Section 5.9 hereof as of the end of the respective quarterly fiscal period or fiscal year; (d) within ninety (90) days after the end of each fiscal year of the Parent Borrower, a certificate containing information regarding the amount of all Asset Dispositions that were made during the prior fiscal year and amounts received in connection with any Recovery Event during the prior fiscal year; and (e) from time to time such other information regarding the financial condition, operations, business or prospects of the Parent Borrower or any of its Subsidiaries (including, without limitation, any Plan or Multiemployer Plan and any reports or other information required to be filed under ERISA) as any Lender or the Administrative Agent may reasonably request. SECTION 5.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, in accordance with industry practice (subject, where applicable, to specified grace periods) all of its material obligations of whatever nature and any additional costs that are imposed as a result of any failure to so pay, discharge or otherwise satisfy such obligations, except when the amount or validity of such obligations and costs is currently being contested in good faith by appropriate proceedings and reserves, if applicable, in conformity with GAAP with respect thereto have been provided on the books of the Parent Borrower or its Restricted Subsidiaries, as the case may be. SECTION 5.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. (a) Preserve and maintain its legal existence and all of its material rights, privileges, licenses and franchises (provided that nothing in this Section 5.4 shall prohibit any transaction expressly permitted under Section 6.4 hereof). (b) Pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its assets prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained. SECTION 5.5 MAINTENANCE OF PROPERTY; INSURANCE. (a) Keep all material property used or useful in its business in good working order and condition (ordinary wear and tear and obsolescence excepted). (b) Maintain insurance with financially sound and reputable insurance companies, and with respect to Property and risks of a character usually maintained by corporations engaged in the same or similar business similarly situated, against loss, 72 78 damage and liability of the kinds and in the amounts customarily maintained by such corporations. (c) On or before the Closing Date, deliver, to the extent not previously delivered, to the Administrative Agent certificates of insurance satisfactory to the Administrative Agent evidencing the existence of all insurance required to be maintained by the Parent Borrower and its Restricted Subsidiaries hereunder and setting forth the respective coverages, limits of liability, carrier, policy number and period of coverage. Thereafter, each year the Parent Borrower will deliver to the Administrative Agent certificates of insurance evidencing that all insurance required to be maintained by the Parent Borrower and its Restricted Subsidiaries hereunder will be in effect through the calendar year following the date of such certificates, subject only to the payment of premiums as they become due. (d) In case of any material loss, damage to or destruction of the Property of any Credit Party or any part thereof, such Credit Party shall promptly give written notice thereof to the Administrative Agent generally describing the nature and extent of such damage or destruction. In case of any loss, damage to or destruction of the Property of any Credit Party or any part thereof which occurs after the occurrence and during the continuation of an Event of Default, such Credit Party, whether or not the insurance proceeds, if any, received on account of such damage or destruction shall be sufficient for that purpose, at such Credit Party's cost and expense, will at the option of the Required Lenders, (i) promptly repair or replace the Property of such Credit Party so lost, damaged or destroyed or (ii) immediately prepay the Loans with the insurance proceeds received on account thereof in accordance with Section 2.9(b). SECTION 5.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. (a) Keep adequate records and books of account in which complete entries in accordance with GAAP consistently applied and all Requirements of Law shall be made of all dealings and transactions in relation to its businesses and activities. (b) Upon reasonable prior notice, permit representatives of any Lender or the Administrative Agent, during normal business hours, to examine, copy and make extracts from its books and records, to inspect any of its Real Properties, and to discuss its business and affairs with its officers, all to the extent reasonably requested by such Lender or the Administrative Agent (as the case may be). SECTION 5.7 NOTICES. Give prompt notice in writing to the Administrative Agent (which shall promptly transmit such notice to each Lender) of: (a) within five Business Days after any Credit Party knows or has reason to know thereof, the occurrence of any Default or Event of Default; 73 79 (b) any default or event of default under any Contractual Obligation of the Parent Borrower or any of its Restricted Subsidiaries which could reasonably be expected to have a Material Adverse Effect; (c) any legal or arbitral proceedings before any Governmental Authority and any material development in respect of such legal or other proceedings affecting the Parent Borrower or any of its Restricted Subsidiaries, except proceedings that, if adversely determined, would not (either individually or in the aggregate) have a Material Adverse Effect; (d) as soon as possible, and in any event within ten days after any Credit Party or any of its Restricted Subsidiaries knows or has reason to believe that any of the events or conditions specified below with respect to any Plan or Multiemployer Plan has occurred or exists, a statement signed by a Responsible Officer of the Parent Borrower or such Credit Party setting forth details respecting such event or condition and the action, if any, that the Parent Borrower, any Credit Party or any ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC by the Parent Borrower, any Credit Party or any ERISA Affiliate with respect to such event or condition): (i) any Reportable Event with respect to a Plan, as to which PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event (provided that a failure to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA, including, without limitation, the failure to make on or before its due date a required installment under Section 412(m) of the Code or Section 302(e) of ERISA, shall be a reportable event regardless of the issuance of any waivers in accordance with Section 412(d) of the Code) and any request for a waiver under Section 412(d) of the Code for any Plan; (ii) the distribution under Section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by any Credit Party or any of its Subsidiaries or any ERISA Affiliate to terminate any Plan; (iii) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by any Credit Party or any of its Subsidiaries or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan; (iv) the complete or partial withdrawal from a Multiemployer Plan by any Credit Party or any of its Subsidiaries or any ERISA Affiliate that results in liability under Section 4201 or 4204 of ERISA (including the obligation to satisfy secondary liability as a result of a purchaser default) or the receipt by any Credit Party or any of its Subsidiaries or any ERISA Affiliate of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to 74 80 Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA; (v) the institution of a proceeding by a fiduciary of any Multiemployer Plan against any Credit Party or any of its Subsidiaries or any ERISA Affiliate to enforce Section 515 of ERISA, which proceeding is not dismissed within 30 days; and (vi) the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of tax-exempt status of the trust of which such Plan is a part if any Credit Party or any of its Subsidiaries or any ERISA Affiliate fails to timely provide security to the Plan in accordance with the provisions of said Sections; (e) any assertion of any Environmental Claim by any Person against, or with respect to the activities of, the Parent Borrower or any of its Subsidiaries and notice of any alleged violation of or non-compliance with any Environmental Laws or any permits, licenses or authorizations, other than any Environmental Claim or alleged violation that, if adversely determined, would not (either individually or in the aggregate) have a Material Adverse Effect; and (f) any other development or event which could reasonably be expected to have a Material Adverse Effect. Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Parent Borrower proposes to take with respect thereto. In the case of any notice of a Default or Event of Default, the Parent Borrower shall specify that such notice is a Default or Event of Default notice on the face thereof. SECTION 5.8 ENVIRONMENTAL LAWS. Without limiting the general terms set forth in Section 5.11: (a) Comply in all material respects with, and ensure compliance in all material respects by all tenants and subtenants, if any, with, all applicable Environmental Laws and obtain and comply in all material respects with and maintain, and ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws except to the extent that the 75 81 same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not reasonably be expected to have a Material Adverse Effect; and (c) Defend, indemnify and hold harmless the Administrative Agent and the Lenders, and their respective employees, agents, officers and directors, from and against any and all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Parent Borrower any of its Subsidiaries or the Real Properties, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, reasonable attorney's and consultant's fees, investigation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing arise out of the gross negligence or willful misconduct of the party seeking indemnification therefor. The agreements in this paragraph shall survive repayment of the Notes and all other amounts payable hereunder. SECTION 5.9 FINANCIAL COVENANTS. Commencing on the day immediately following the Closing Date, the Parent Borrower shall, and shall cause each of its Restricted Subsidiaries to, comply with the following financial covenants: (a) Leverage Ratio. The Leverage Ratio, as of the last day of each fiscal quarter of the Parent Borrower and its Restricted Subsidiaries occurring during each of the periods set forth below, shall be less than or equal to the following:
Period Ratio ------ ----- Closing Date through and including December 31, 2001 4.25 to 1.0 January 1, 2002 through and including December 31, 2002 4.00 to 1.0 January 1, 2003 and thereafter 3.75 to 1.0
(b) Senior Leverage Ratio. The Senior Leverage Ratio, as of the last day of each fiscal quarter of the Parent Borrower and its Restricted Subsidiaries occurring during each of the periods set forth below, shall be less than or equal to the following:
Period Ratio ------ ----- Closing Date through and including December 31, 2001 3.75 to 1.0 January 1, 2002 through and including December 31, 2002 3.50 to 1.0 January 1, 2003 and thereafter 3.25 to 1.0
76 82 (c) Interest Coverage Ratio. The Interest Coverage Ratio, as of the last day of each fiscal quarter of the Parent Borrower and its Restricted Subsidiaries, shall be greater than or equal to 3.0 to 1.0. (d) Minimum Consolidated Net Worth. The Consolidated Net Worth shall at all times be equal to or greater than $940,000,000, increased on a cumulative basis as of the end of each fiscal quarter of the Parent Borrower and its Restricted Subsidiaries, commencing with the fiscal quarter ending March 31, 2000, by an amount equal to 50% of the net income (with no deduction for net losses) of the Parent Borrower and its Restricted Subsidiaries on a consolidated basis for the fiscal quarter then ended plus 75% of the amount by which the "total stockholders equity" of the Parent Borrower is increased as a result of any public or private offering of ownership interests of the Parent Borrower after the Closing Date (other than increases to the extent such increases result from Equity Issuances to, or capital contributions from, any Affiliate of the Parent Borrower or from an offering in connection with the acquisition of an Unrestricted Subsidiary). Promptly upon consummation of each such public or private offering, the Parent Borrower shall notify the Administrative Agent in writing of the amount of such increase in total stockholders equity. SECTION 5.10 OBLIGATIONS REGARDING SUBSIDIARIES; ADDITIONAL SUBSIDIARY GUARANTORS. (a) Except as permitted by Section 6.4, the Parent Borrower will, and will cause each of its Restricted Subsidiaries to take such action from time to time as shall be necessary to ensure that each of its Subsidiaries remains a Subsidiary at all times. (b) The Credit Parties will cause each of their wholly-owned Domestic Subsidiaries that are Material Subsidiaries, whether newly formed, after acquired or otherwise existing, to promptly become a Guarantor hereunder by way of execution of a Joinder Agreement and take such other action as may be required pursuant to the terms of Section 5.13. SECTION 5.11 COMPLIANCE WITH LAW. Each Credit Party will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders, and all applicable restrictions imposed by all Governmental Authorities, applicable to it and its assets if noncompliance with any such law, rule, regulation, order or restriction could reasonably be expected to have a Material Adverse Effect. SECTION 5.12 PLEDGED ASSETS. (a) Each Credit Party will cause (i) 100% of the Capital Stock (or, if less, the full amount owned by such Credit Party) of each of the direct or indirect Material Subsidiaries which are not Foreign Subsidiaries of such Person and (ii) 65% of the Capital Stock (or, if less, the full amount owned by such Credit Party) in each of the First 77 83 Tier Foreign Subsidiaries which are Material Subsidiaries of such Person, unless otherwise agreed by the Administrative Agent, to be subject at all times to a first priority, perfected Lien in favor of the Administrative Agent pursuant to the terms and conditions of the Security Documents or such other security documents as the Administrative Agent shall reasonably request; provided, however, that notwithstanding the foregoing, no Unrestricted Subsidiary shall be required to pledge the Capital Stock of its Subsidiaries. (b) Within 30 days after a Credit Party changes the location of its chief executive office, the Parent Borrower shall notify the Administrative Agent of such change and shall execute and deliver, or cause to be executed and delivered, to the Administrative Agent such UCC financing statements and other documentation as the Administrative Agent may reasonably request. SECTION 5.13 ADDITIONAL CREDIT PARTIES. As soon as practicable and in any event within 30 days after any Person (whether newly formed, acquired or otherwise) becomes a Material Subsidiary of any Credit Party, the Parent Borrower shall provide the Administrative Agent with written notice thereof setting forth information in reasonable detail describing all of the assets of such Person and shall (a) if such Person is a wholly-owned Domestic Subsidiary of a Credit Party, cause such Person to execute a Joinder Agreement in substantially the same form as Exhibit 5.13, (b) cause 100% (if such Person is a Domestic Subsidiary of a Credit Party) or, unless otherwise agreed by the Administrative Agent, 65% (if such Person is a First Tier Foreign Subsidiary of a Credit Party) of the Capital Stock of such Person owned by a Credit Party to be delivered to the Administrative Agent (together with undated stock powers signed in blank (unless, with respect to a First Tier Foreign Subsidiary, such stock powers are deemed unnecessary by the Administrative Agent in its reasonable discretion under the law of the jurisdiction of incorporation of such Person)) and pledged to the Administrative Agent pursuant to an appropriate pledge agreement(s) in substantially the form of the Pledge Agreement or joinder to the Pledge Agreement and otherwise in form acceptable to the Administrative Agent and (c) deliver such other documentation as the Administrative Agent may reasonably request in connection with the foregoing, including, without limitation, appropriate UCC-1 financing statements, certified resolutions and other organizational and authorizing documents of such Person and favorable opinions of counsel to such Person (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to above and the perfection of the Administrative Agent's liens thereunder). SECTION 5.14 YEAR 2000 COMPLIANCE. The Credit Parties will promptly notify the Administrative Agent in the event any Credit Party discovers or determines that any computer application (including those of its suppliers, vendors and customers) that is material to its or any of its Subsidiaries' business and operations will not be Year 2000 Compliant, except to the extent that such failure could not reasonably be expected to have a Material Adverse Effect. 78 84 SECTION 5.15 JOINDER OF SUBSIDIARY BORROWER. Upon the payment in full or defeasance (it being agreed that, upon the Administrative Agent's request, the Subsidiary Borrower will defease, subject to the provisions of the Indenture, the remaining portion of the Senior Subordinated Notes pursuant to Section 8.02 of the Indenture promptly after there shall be not greater than $10,000,000 of Senior Subordinated Notes at any time outstanding) of the Indebtedness evidenced by Senior Subordinated Notes, the Subsidiary Borrower shall (a) immediately notify the Administrative Agent in writing that such Indebtedness has been paid in full and all agreements and other documents executed in connection therewith (including the Indenture and the Senior Subordinated Notes) have been terminated or that all measures necessary to defease the remaining Senior Subordinated Notes pursuant to Article 8 of the Indenture shall have been completed, (b) have the right to request that (i) the Revolving Loan facility and the SFG Revolving Loan facility be combined into one revolving loan facility and (ii) the Term A Loan facility and the SFG Term Loan facility be combined into one term loan facility, (c) execute a Joinder Agreement or similar agreement, in form and substance satisfactory to the Administrative Agent, whereby the Subsidiary Borrower will agree to guarantee all Credit Party Obligations which are not Joint and Several Obligations and (d) execute such amendments and other documentation as reasonably requested by the Administrative Agent in order to combine the facilities in accordance with subsection (c), such amendments and other documentation to be in form and substance satisfactory to each of the parties hereto. SECTION 5.16 GOOD STANDING; POST-CLOSING QUALIFICATION. Within 30 days after the Closing Date, the Credit Parties will cause each of their Subsidiaries that are restructured or reorganized on or about the Closing Date to be duly qualified to conduct business and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification except to the extent that the failure to so qualify or be in good standing could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. ARTICLE VI NEGATIVE COVENANTS The Parent Borrower hereby covenants and agrees that on the Closing Date, and thereafter for so long as this Agreement is in effect and until the Commitments have terminated, no Note remains outstanding and unpaid and the Credit Party Obligations, together with interest, Commitment Fees and all other amounts owing to the Administrative Agent or any Lender hereunder, are paid in full, the Parent Borrower shall, and shall cause each of its Subsidiaries, to act in accordance with the following: 79 85 SECTION 6.1 INDEBTEDNESS. The Parent Borrower will not, nor will it permit any Restricted Subsidiary to, contract, create, incur, assume or permit to exist any Indebtedness, except: (a) Indebtedness arising or existing under this Agreement and the other Credit Documents; (b) Indebtedness of the Parent Borrower and its Restricted Subsidiaries existing as of the Closing Date as referenced in the financial statements referenced in Section 3.1 (and set out more specifically in Schedule 6.1(b)) hereto and renewals, refinancings or extensions thereof in a principal amount not in excess of that outstanding as of the date of such renewal, refinancing or extension; (c) Indebtedness (including Capital Lease Obligations) incurred to finance the purchase of equipment, and other Capital Lease Obligations, not to exceed $100,000,000 in the aggregate outstanding at any time; provided that (i) such Indebtedness when incurred shall not exceed the purchase price or cost of construction of such asset, (ii) no such Indebtedness shall be refinanced for a principal amount in excess of the principal balance outstanding thereon at the time of such refinancing and (iii) until the Subsidiary Borrower guarantees all Credit Party Obligations which are not Joint and Several Obligations in accordance with the terms of Section 5.15, the aggregate amount of such Indebtedness incurred by the Subsidiary Borrower shall not exceed $15,000,000; (d) intercompany Indebtedness of the Restricted Subsidiaries of the Parent Borrower to the Parent Borrower or to other Restricted Subsidiaries of the Parent Borrower or of the Parent Borrower to any of its Restricted Subsidiaries; (e) Indebtedness evidenced by the Senior Subordinated Notes in an aggregate amount not to exceed $130,800,000; (f) obligations in connection with any Permitted Receivables Financing, to the extent such obligations constitute Indebtedness; (g) additional Indebtedness of the Parent Borrower and its Restricted Subsidiaries (other than the Subsidiary Borrower) up to but not exceeding $100,000,000 at any one time outstanding; (h) Indebtedness of a Restricted Subsidiary consisting of tax-advantaged industrial revenue bond, industrial development bond or other similar financings assumed (or taken subject to) in connection with (but not incurred in connection with or in anticipation of) a Permitted Acquisition; and (i) Indebtedness in respect of Hedging Agreements to the extent permitted hereunder. 80 86 SECTION 6.2 LIENS. The Parent Borrower will not, nor will it permit any Restricted Subsidiary to, contract, create, incur, assume or permit to exist any Lien with respect to any of its assets, whether now owned or hereafter acquired, except for Permitted Liens. SECTION 6.3 NATURE OF BUSINESS. Neither the Parent Borrower nor any of its Restricted Subsidiaries will engage to any substantial extent in any line or lines of business activity other than operations involved in the processing or distribution of dairy products or the lines of business conducted by the Parent Borrower or any of its Restricted Subsidiaries as of the Closing Date or which are related thereto. SECTION 6.4 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC. The Parent Borrower will not, nor will it permit any Restricted Subsidiary to, (a) enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution); (b) acquire any business or assets from, or Capital Stock of, or be a party to any acquisition of, any Person except: (i) for purchases of inventory and other assets to be sold or used in the ordinary course of business; (ii) Investments permitted under Section 6.5 hereof; and (iii) Permitted Acquisitions; (c) convey, sell, lease, transfer or otherwise dispose of, in one transaction or a series of transactions, any part of its business or assets, whether now owned or hereafter acquired (including, without limitation, receivables and leasehold interests), but excluding: (i) any Excluded Disposition; (ii) obsolete or worn-out Property, tools or equipment no longer used or useful in its business (other than any Excluded Disposition) or real Property no longer used or useful in its business; (iii) any sale, lease or transfer of assets from a Credit Party to another Credit Party; (iv) any sale of Transferred Assets by such Person to a Receivables Financier in connection with a Permitted Receivables Financing; and 81 87 (v) other assets so long as the aggregate amount thereof sold or otherwise disposed of in any single fiscal year by the Parent Borrower and its Restricted Subsidiaries shall not have a book value in excess of ten percent of the book value of the total assets of the Parent Borrower and its Restricted Subsidiaries owned on the first day of such fiscal year; provided, that in each case with respect to subsections (v) and (vi) above at least 85% of the consideration received therefor by the Parent Borrower or any such Restricted Subsidiary is in the form of cash or Cash Equivalents; and (d) Notwithstanding the foregoing provisions of this Section 6.4, so long as no Default or Event of Default shall have occurred and be continuing, and after giving effect to any of the succeeding transactions, no Default or Event of Default would exist hereunder and so long as the Liens created under the Security Documents continue to be in effect: (i) any Restricted Subsidiary of the Parent Borrower may be merged or consolidated with or into: (A) the Parent Borrower if the Parent Borrower shall be the continuing or surviving corporation or (B) any other Subsidiary (so long as such surviving Subsidiary is either (x) a Credit Party or (y) an Additional Credit Party); (ii) any Restricted Subsidiary of the Parent Borrower may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Parent Borrower or a Restricted Subsidiary of the Parent Borrower; and (iii) any Unrestricted Subsidiary may be sold, liquidated, wound up or dissolved, or may sell, lease, transfer or otherwise dispose of any or all of its assets. SECTION 6.5 ADVANCES, INVESTMENTS AND LOANS. The Parent Borrower will not, nor will it permit any Restricted Subsidiary to, lend money or extend credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any Person except for Permitted Investments. SECTION 6.6 TRANSACTIONS WITH AFFILIATES. Except as expressly permitted by this Agreement, the Parent Borrower will not, nor will it permit any of its Subsidiaries to, directly or indirectly: (a) make any investment in an Affiliate other than Permitted Investments; (b) transfer, sell, lease, assign or otherwise dispose of any assets to an Affiliate; (c) merge into or consolidate with or purchase or acquire assets from an Affiliate other than Permitted Acquisitions; or (d) enter into any other transaction directly or 82 88 indirectly with or for the benefit of an Affiliate (including, without limitation, guarantees and assumptions of obligations of an Affiliate); provided that (i) any Affiliate who is an individual may serve as a director, officer or employee of the Parent Borrower or any of its Subsidiaries and receive reasonable compensation for his or her services in such capacity and (ii) the Parent Borrower and its Subsidiaries may enter into transactions (other than extensions of credit by the Parent Borrower or any of its Subsidiaries to an Affiliate) if the monetary or business consideration arising therefrom would be substantially as advantageous to the Parent Borrower and its Restricted Subsidiaries as the monetary or business consideration that would be obtained in a comparable transaction with a Person not an Affiliate. SECTION 6.7 OWNERSHIP OF SUBSIDIARIES; RESTRICTIONS. The Parent Borrower will not, nor will it permit any Subsidiary to, create, form or acquire any Subsidiaries, except for (a) wholly-owned Domestic Subsidiaries with assets of $100,000 or more (other than a Receivables Financing SPC) which are joined as Additional Credit Parties in accordance with the terms hereof, (b) other Domestic Subsidiaries which are Restricted Subsidiaries, (c) Foreign Subsidiaries or (d) Subsidiaries designated by the Parent Borrower as Unrestricted Subsidiaries. The Parent Borrower will not, nor will it permit its Restricted Subsidiaries to, sell, transfer, pledge or otherwise dispose of any Capital Stock or other equity interests in any of its Restricted Subsidiaries, nor will it permit any of its Restricted Subsidiaries to issue, sell, transfer, pledge or otherwise dispose of any of its Capital Stock or other equity interests, except in a transaction permitted by Section 6.4. SECTION 6.8 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS; MATERIAL CONTRACTS. The Parent Borrower will not, nor will it permit any of its Subsidiaries to, change its fiscal year except in the event that any such change could not reasonably be expected to have a Material Adverse Effect. The Parent Borrower will not, nor will it permit any Subsidiary to, amend, modify or change its articles of incorporation (or corporate charter or other similar organizational document) or bylaws (or other similar document) in any manner that could reasonably be expected to have a Material Adverse Effect without the prior written consent of the Required Lenders. The Parent Borrower will not, nor will it permit any of its Subsidiaries to, without the prior written consent of the Administrative Agent, amend, modify, cancel or terminate or fail to renew or extend or permit the amendment, modification, cancellation or termination of any of the Material Contracts, except in the event that such amendments, modifications, cancellations or terminations could not reasonably be expected to have a Material Adverse Effect. SECTION 6.9 LIMITATION ON ACTIONS. (a) The Parent Borrower will not, nor will it permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Person to (i) pay dividends or make any other distributions to any Credit Party on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, (ii) pay any Indebtedness or other obligation owed to any Credit Party, (iii) make loans or advances to any Credit 83 89 Party, (iv) sell, lease or transfer any of its properties or assets to any Credit Party, or (v) act as a Guarantor and pledge its assets pursuant to the Credit Documents or any renewals, refinancings, exchanges, refundings or extension thereof, except (in respect of any of the matters referred to in clauses (i)-(v) above) for such encumbrances or restrictions existing under or by reason of (A) this Agreement and the other Credit Documents, (B) applicable law, (C) any document or instrument governing Indebtedness incurred pursuant to Section 6.1(c), provided that any such restriction contained therein relates only to the asset or assets constructed or acquired in connection therewith, (D) customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary or assets pending such sale, provided such restrictions and conditions apply only to the Subsidiary or assets that are to be sold and such sale is permitted hereunder, (E) restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the assets securing such Indebtedness, (F) customary provisions in leases and other contracts restricting the assignment thereof, (G) restrictions contained in documents executed in connection with any Permitted Receivables Financing, (H) any Permitted Lien or any document or instrument governing any Permitted Lien, provided that any such restriction contained therein relates only to the asset or assets subject to such Permitted Lien, (I) restrictions or conditions existing as a result of the issuance of preferred stock by a Subsidiary pursuant to warrants outstanding as of the Closing Date for the acquisition thereof, (J) restrictions set forth in the Amended and Restated Operating Agreement of Land-O-Sun Dairies, L.L.C., a Delaware limited liability company with respect to the terms and conditions of the LOS Preferred Member Interests, and (K) any indenture agreement, instrument or other arrangement relating to the assets or business of any Subsidiary and existing prior to the consummation of the Permitted Acquisition in which such Subsidiary was acquired. (b) The Parent Borrower will not, nor will it permit any Restricted Subsidiary to, enter into, assume or become subject to any agreement prohibiting or otherwise restricting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired, or requiring the grant of any security for such obligation if security is given for some other obligation except (i) pursuant to this Agreement and the other Credit Documents, (ii) pursuant to applicable law, (iii) pursuant to any document or instrument governing Indebtedness incurred pursuant to Section 6.1(c), provided that in the case of Section 6.1(c) any such restriction contained therein relates only to the asset or assets constructed or acquired in connection therewith, (iv) customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary or assets pending such sale, provided such restrictions and conditions apply only to the Subsidiary or assets that are to be sold and such sale is permitted hereunder, (v) restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the assets securing such Indebtedness, (vi) restrictions or conditions as the result of the issuance of preferred stock by a Subsidiary pursuant to warrants outstanding as of the Closing Date for the acquisition thereof, (vii) customary provisions in leases and other contracts restricting the assignment thereof, (viii) pursuant to the documents executed in connection with any Permitted Receivables Financing (but only to the extent that the 84 90 related prohibitions against other encumbrances pertain to the applicable Transferred Assets actually sold, contributed, financed or otherwise conveyed or pledged pursuant to such Permitted Receivables Financing), (ix) restrictions in any document or instrument governing any Permitted Lien, provided that any such restriction contained therein relates only to the asset or assets subject to such Permitted Lien, (x) restrictions set forth in the Amended and Restated Operating Agreement of Land-O-Sun Dairies, L.L.C., a Delaware limited liability company, with respect to the terms and conditions of the LOS Preferred Member Interests, and (xi) any indenture agreement, instrument or other arrangement relating to the assets or business of any Subsidiary and existing prior to the consummation of the Permitted Acquisition in which such Subsidiary was acquired. SECTION 6.10 RESTRICTED PAYMENTS. The Parent Borrower will not, nor will it permit any Subsidiary to, directly or indirectly, declare, order, make or set apart any sum for or pay any Restricted Payment, except (a) to make dividends payable solely in the same class of Capital Stock of such Person, (b) to make dividends or other distributions payable to any Credit Party (directly or indirectly through Subsidiaries), (c) as permitted by Section 6.11, (d) to make dividends or repurchases on or before the Closing Date in order to consummate the transactions contemplated by the Credit Documents, (e) to make dividends to or repurchases from the Parent Borrower or the parent of such Subsidiary (provided that such parent company is a Restricted Subsidiary) the proceeds of which shall be used to pay taxes that are then due and payable or to retire outstanding Indebtedness of such Person, (f) to make dividends to holders of the Capital Stock of the Parent Borrower the proceeds of which shall be used to pay taxes that are then due and payable and (g) to make other dividends, provided that, after giving effect to such dividends on a Pro Forma Basis, no Default or Event of Default shall have occurred and or be continuing or be directly or indirectly caused as a result thereof. SECTION 6.11 PREPAYMENTS OF INDEBTEDNESS, ETC. (a) The Parent Borrower will not, nor will it permit the Subsidiary Borrower to, amend or modify (or permit the amendment or modification of) any of the terms of the Senior Subordinated Notes if such amendment or modification would add or change any terms in a manner adverse to the issuer of such Indebtedness, or shorten the final maturity or average life to maturity or require any payment to be made sooner than originally scheduled or increase the interest rate applicable thereto or change any subordination provision thereof; provided, however, so long as no Default or Event of Default has occurred and is continuing or would result therefrom, the Subsidiary Borrower shall be entitled to prepay the Senior Subordinated Notes upon a Change of Control (as defined in the Indenture) in accordance with the terms of Section 4.08 of the Indenture. (b) The Parent Borrower will furnish to the Administrative Agent a copy of each modification, supplement or waiver of any provisions of any agreement, instrument or other document evidencing or relating to the charter or bylaws of the Parent Borrower or any of its Subsidiaries promptly upon the effectiveness thereof (and the Administrative Agent will promptly furnish a copy thereof to each Lender). 85 91 SECTION 6.12 SALE LEASEBACKS. The Parent Borrower will not, nor will it permit any Subsidiary to, directly or indirectly, become or remain liable as lessee or as guarantor or other surety with respect to any lease, whether an operating lease or a Capital Lease, of any property (whether real, personal or mixed), whether now owned or hereafter acquired in excess of $50,000,000 in the aggregate on an annual basis, (a) which the Parent Borrower or any Subsidiary has sold or transferred or is to sell or transfer to a Person which is not the Parent Borrower or any Subsidiary or (b) which the Parent Borrower or any Subsidiary intends to use for substantially the same purpose as any other property which has been sold or is to be sold or transferred by the Parent Borrower or any Subsidiary to another Person which is not the Parent Borrower or any Subsidiary in connection with such lease. SECTION 6.13 USE OF PROCEEDS. The Borrowers will not use the proceeds of the Loans and Letters of Credit in a manner inconsistent with the uses permitted under Section 3.11 hereof. SECTION 6.14 DESIGNATED SENIOR INDEBTEDNESS. Other than the Indebtedness incurred by the Subsidiary Borrower hereunder, the Subsidiary Borrower will not incur any Indebtedness that will be classified as Designated Senior Indebtedness (as defined in the Indenture) or designate any of its existing Indebtedness as Designated Senior Indebtedness. ARTICLE VII EVENTS OF DEFAULT SECTION 7.1 EVENTS OF DEFAULT. An Event of Default shall exist upon the occurrence of any of the following specified events (each an "Event of Default"): (a) Any Borrower shall fail to pay any principal on any Note when due in accordance with the terms thereof or hereof; or the Parent Borrower shall fail to reimburse the Issuing Lender for any LOC Obligations when due in accordance with the terms hereof; or any Borrower shall fail to pay any interest on any Note or any fee or other amount payable hereunder when due in accordance with the terms thereof or hereof and such failure shall continue unremedied for three (3) Business Days (or any Guarantor shall fail to pay on the Guaranty in respect of any of the foregoing or in respect of any other Guaranty Obligations thereunder); or (b) Any representation or warranty made or deemed made herein, in the Security Documents or in any of the other Credit Documents or which is contained in any 86 92 certificate, document or financial or other statement furnished at any time under or in connection with this Agreement shall prove to have been incorrect, false or misleading in any material respect on or as of the date made or deemed made; or (c) (i) Any Credit Party shall fail to perform, comply with or observe any term, covenant or agreement applicable to it contained in Sections 5.4(a), 5.7(a) or 5.9 or Article VI hereof; or (ii) any Credit Party shall fail to comply with any other covenant, contained in this Credit Agreement or the other Credit Documents or any other agreement, document or instrument among any Credit Party, the Administrative Agent and the Lenders or executed by any Credit Party in favor of the Administrative Agent or the Lenders (other than as described in Sections 7.1(a) or 7.1(c)(i) above), and in the event such breach or failure to comply is capable of cure, is not cured within thirty (30) days of its occurrence; or (d) The Parent Borrower or any of its Restricted Subsidiaries shall (i) default in any payment of principal of or interest on any Indebtedness (other than the Notes) in a principal amount outstanding of at least $30,000,000 in the aggregate for the Parent Borrower and any of its Restricted Subsidiaries beyond the period of grace (not to exceed 30 days), if any, provided in the instrument or agreement under which such Indebtedness was created; or (ii) default in the observance or performance of any other agreement or condition relating to any Indebtedness in a principal amount outstanding of at least $30,000,000 in the aggregate for the Parent Borrower and its Restricted Subsidiaries or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity; or (e) (i) The Parent Borrower or any of its Restricted Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Parent Borrower or any Restricted Subsidiary shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Parent Borrower or any Restricted Subsidiary any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Parent Borrower or any Restricted Subsidiary any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have 87 93 been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Parent Borrower or any Restricted Subsidiary shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Parent Borrower or any Restricted Subsidiary shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (f) One or more judgments or decrees shall be entered against the Parent Borrower or any of its Restricted Subsidiaries involving in the aggregate a liability (to the extent not paid when due or covered by insurance) of $30,000,000 or more and all such judgments or decrees shall not have been paid and satisfied, vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or (g) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan (other than a Permitted Lien) shall arise on the assets of the Parent Borrower, any of its Restricted Subsidiaries or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a Trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Parent Borrower, any of its Restricted Subsidiaries or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, any Multiemployer Plan or (vi) any other similar event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could have a Material Adverse Effect; or (h) A reasonable basis shall exist for the assertion against the Parent Borrower or any of its Subsidiaries, or any predecessor in interest of the Parent Borrower or any of its Subsidiaries, of (or there shall have been asserted against the Parent Borrower or any of its Subsidiaries) an Environmental Claim that, in the judgment of the Required Lenders, is reasonably likely to be determined adversely to the Parent Borrower or any of its Subsidiaries, and the amount thereof (either individually or in the aggregate) is reasonably likely to have a Material Adverse Effect (insofar as such amount is payable by the Parent Borrower or any of its Subsidiaries but after deducting any portion thereof that is reasonably expected to be paid by other creditworthy Persons jointly and severally liable therefor); or (i) A Change of Control shall occur; or 88 94 (j) The Guaranty or any provision thereof shall cease to be in full force and effect or any Guarantor or any Person acting by or on behalf of any Guarantor shall deny or disaffirm any Guarantor's obligations under the Guaranty; or (k) Any other Credit Document shall fail to be in full force and effect or to give the Administrative Agent and/or the Lenders the security interests, liens, rights, powers and privileges purported to be created thereby (except as such documents may be terminated or no longer in force and effect in accordance with the terms thereof, other than those indemnities and provisions which by their terms shall survive); or (l) There shall occur and be continuing any Event of Default under and as defined in the Indenture or any other document evidencing the Senior Subordinated Notes or any of the Credit Party Obligations for any reason shall cease to be designated as senior indebtedness thereunder. SECTION 7.2 ACCELERATION; REMEDIES. Upon the occurrence of an Event of Default, then, and in any such event, (a) if such event is an Event of Default specified in Section 7.1(e) above, automatically the Commitments shall immediately terminate and the Loans (with accrued interest thereon), and all other amounts under the Credit Documents (including without limitation the maximum amount of all contingent liabilities under Letters of Credit) shall immediately become due and payable, the Administrative Agent shall have the right to enforce any and all other rights and interests created and existing under the Credit Documents, including, without limitation, all rights and remedies existing under the Security Documents, all rights and remedies against a Guarantor and all rights of set-off, and the Administrative Agent shall have the right to enforce any and all other rights and remedies of a creditor under applicable law, and (b) if such event is any other Event of Default, with the written consent of the Required Lenders, the Administrative Agent may, or upon the written request of the Required Lenders, the Administrative Agent shall, by notice to the Borrowers, take any or all of the following actions: (i) declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; (ii) declare the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes to be due and payable forthwith and direct the Borrowers to pay to the Administrative Agent cash collateral as security for the LOC Obligations for subsequent drawings under then outstanding Letters of Credit in an amount equal to the maximum amount of which may be drawn under Letters of Credit then outstanding, whereupon the same shall immediately become due and payable; (iii) enforce any and all other rights and interests created and existing under the Credit Documents, including, without limitation, all rights and remedies existing under the Security Documents, all rights and remedies against a Guarantor and all rights of set-off; and (iv) enforce any and all other rights and remedies of a creditor under applicable law. Except as expressly provided above in this Section 7.2, presentment, demand, protest and all other notices of any kind are hereby expressly waived. 89 95 ARTICLE VIII THE AGENT SECTION 8.1 APPOINTMENT. Each Lender hereby irrevocably designates and appoints First Union National Bank as the Administrative Agent of such Lender under this Agreement, and each such Lender irrevocably authorizes First Union National Bank, as the Administrative Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Administrative Agent. SECTION 8.2 DELEGATION OF DUTIES. The Administrative Agent may execute any of its duties under this Agreement by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. Without limiting the foregoing, the Administrative Agent may appoint one of its Affiliates as its agent to perform the functions of the Administrative Agent hereunder relating to the advancing of funds to the Borrower and distribution of funds to the Lenders and to perform such other related functions of the Administrative Agent hereunder as are reasonably incidental to such functions. SECTION 8.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Credit Party or any officer thereof contained in this Agreement or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of any of the Credit Documents or for any failure of any Credit Party to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance by the Credit Parties of any of the agreements contained in, or conditions of, this Agreement, or to inspect the properties, books or records of the Credit Parties. 90 96 SECTION 8.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Credit Parties), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless (a) a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent and (b) the Administrative Agent shall have received the written agreement of such assignee to be bound hereby as fully and to the same extent as if such assignee were an original Lender party hereto, in each case in form satisfactory to the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under any of the Credit Documents in accordance with a request of the Required Lenders or all of the Lenders, as may be required under this Agreement, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Notes. SECTION 8.5 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received written notice from a Lender or a Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided, however, that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders except to the extent that this Credit Agreement expressly requires that such action be taken, or not taken, only with the consent or upon the authorization of the Required Lenders, or all of the Lenders, as the case may be. SECTION 8.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representation or warranty to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Credit Parties, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the 91 97 Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrowers and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Parent Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Credit Parties which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. SECTION 8.7 INDEMNIFICATION. The Lenders agree to indemnify the Administrative Agent in its capacity hereunder (to the extent not reimbursed by the Borrowers and without limiting the obligation of the Borrowers to do so), ratably according to their respective Commitment Percentages in effect on the date on which indemnification is sought under this Section, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of any Credit Document or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided, however, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent resulting from the Administrative Agent's gross negligence or willful misconduct, as determined by a court of competent jurisdiction. The agreements in this Section 8.7 shall survive the termination of this Agreement and payment of the Notes and all other amounts payable hereunder. SECTION 8.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The Administrative Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrowers as though the Administrative Agent were not the Administrative Agent hereunder. With respect to its Loans made or renewed by it and any Note issued to it, the Administrative Agent shall have the same rights and powers under this Agreement as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall include the Administrative Agent in its individual capacity. 92 98 SECTION 8.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign as Administrative Agent upon 30 days' prior notice to the Borrowers and the Lenders. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the Notes, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall be approved by the Borrowers, so long as no Default or Event of Default has occurred and is continuing, whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Notes. If no successor Administrative Agent has accepted appointment as Administrative Agent within sixty (60) days after the retiring Administrative Agent's giving notice of resignation, the retiring Administrative Agent's resignation shall nevertheless become effective and the Lenders shall perform all duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided for above. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions of this Section 8.9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. SECTION 8.10 RESPONSIBILITY OF OTHER AGENTS. The Syndication Agent, the co-documentation agents and any other agents designated as such on the signature pages hereto (other than the Administrative Agent) shall have no responsibilities under this Agreement or the other Credit Documents other than as a Lender. ARTICLE IX MISCELLANEOUS SECTION 9.1 AMENDMENTS, WAIVERS AND RELEASE OF COLLATERAL. Neither this Agreement, nor any of the Notes, nor any of the other Credit Documents, nor any terms hereof or thereof may be amended, supplemented, waived or modified except in accordance with the provisions of this Section nor may be released except as specifically provided herein or in the Security Documents or in accordance with the provisions of this Section 9.1. The Required Lenders may, or, with the written consent of the Required Lenders, the Administrative Agent may, from time to time, (a) enter into with the Borrowers written amendments, supplements or modifications hereto and to the other Credit Documents for the purpose of adding any provisions to this Agreement or the other Credit Documents or changing in any manner the rights or obligations of the Lenders or of the Borrowers hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders may specify in such instrument, any of the requirements of this Agreement or the other Credit Documents or any Default or Event of Default and its consequences or (c) release Collateral in accordance with the 93 99 terms hereof or of any Security Document or on such other terms and conditions as the Required Lenders may agree; provided, however, that no such waiver and no such amendment, waiver, supplement, modification or release shall: (i) reduce the amount or extend the scheduled date of maturity of any Loan or Note, or extend the expiry of any Letter of Credit beyond the Maturity Date, or any installment thereon, or reduce the stated rate of any interest or fee payable hereunder (other than interest at the increased post-default rate) or extend the scheduled date of any payment thereof or increase the amount or extend the expiration date of any Lender's Commitment, in each case without the written consent of each Lender directly affected thereby; or (ii) amend, modify or waive any provision of Section 2.14, Section 9.1 or Section 9.7(a), or reduce the percentage specified in the definition of Required Lenders, without the written consent of all the Lenders; or (iii) amend, modify or waive any provision of Article VIII without the written consent of the then Administrative Agent; or (iv) release all or any substantial portion of the Guarantors from their obligations under the Guaranty without the written consent of all of the Lenders; or (v) release all or any substantial portion of the Collateral without the written consent of all of the Lenders, or (vi) without the consent of Lenders holding in the aggregate more than 50% of the outstanding Term Loans, extend the time for or the amount or the manner of application of proceeds of any mandatory prepayment required by Section 2.9(b)(ii), (iii) or (iv) hereof, or (vii) amend, modify or waive the requirement that any issue be resolved or determined with the consent, approval or upon the request of the Required Lenders or all Lenders, without the written consent of all of the Lenders to the change of such voting requirement and, provided, further, that no amendment, waiver or consent affecting the rights or duties of the Administrative Agent or the Issuing Lender under any Credit Document shall in any event be effective, unless in writing and signed by the Administrative Agent and/or the Issuing Lender, as applicable, in addition to the Lenders required hereinabove to take such action. Any such waiver, any such amendment, supplement or modification and any such release shall apply equally to each of the Lenders and shall be binding upon the Borrowers, the other Credit Parties, the Lenders, the Administrative Agent and all future holders of the Notes. In the case of any waiver, the Borrowers, the other Credit Parties, the Lenders and the Administrative Agent shall be restored to their former position and rights hereunder and under the outstanding Loans and Notes and other Credit Documents, and any Default or Event of Default waived shall 94 100 be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. Notwithstanding any of the foregoing to the contrary, the consent of the Credit Parties shall not be required for any amendment, modification or waiver of the provisions of Article VIII (other than the provisions of Section 8.9); provided, however, that the Administrative Agent will provide written notice to the Borrowers of any such amendment, modification or waiver. In addition, the Borrowers and the Lenders hereby authorize the Administrative Agent to modify this Credit Agreement by unilaterally amending or supplementing Schedule 2.1(a) from time to time in the manner requested by the Borrowers, the Administrative Agent or any Lender in order to reflect any assignments or transfers of the Loans as provided for hereunder; provided, however, that the Administrative Agent shall promptly deliver a copy of any such modification to the Borrowers and each Lender. Notwithstanding the fact that the consent of all the Lenders is required in certain circumstances as set forth above, (x) each Lender is entitled to vote as such Lender sees fit on any bankruptcy reorganization plan that affects the Loans, and each Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code supersede the unanimous consent provisions set forth herein and (y) the Required Lenders may consent to allow a Credit Party to use cash collateral in the context of a bankruptcy or insolvency proceeding. SECTION 9.2 NOTICES. Except as otherwise provided in Article II, all notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (a) when delivered by hand, (b) when transmitted via telecopy (or other facsimile device) to the number set out herein, (c) the day following the day on which the same has been delivered prepaid or pursuant to an invoice arrangement to a reputable national overnight air courier service, or (d) the fifth Business Day following the day on which the same is sent by certified or registered mail, postage prepaid, in each case, addressed as follows in the case of the Borrowers, the other Credit Parties and the Administrative Agent, and as set forth on Schedule 9.2 in the case of the Lenders, or to such other address as may be hereafter notified by the respective parties hereto and any future holders of the Notes: The Borrowers [Name of Borrower/Credit Party] and the other c/o Suiza Fluid Dairy Group, L.P. Credit Parties: 2515 McKinney Ave., Suite 1200 Dallas, Texas 75201 Attention: Treasurer Telecopier: (214) 303-3499 Telephone: (214) 303-3400 95 101 The Administrative First Union National Bank Agent: Charlotte Plaza, 23rd Floor 201 South College Street Charlotte, North Carolina 28288-0608 Attention: Syndication Agency Services Telecopier: (704) 383-0288 Telephone: (704) 374-2698 with a copy to: First Union National Bank One First Union Center, DC-5 Charlotte, North Carolina 28288-0737 Attention: Mr. Jorge Gonzalez Telecopier: (704) 374-3300 Telephone: (704) 383-8461 SECTION 9.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. SECTION 9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the Notes and the making of the Loans, provided that all such representations and warranties shall terminate on the date upon which the Commitments have been terminated and all amounts owing hereunder and under any Notes have been paid in full. SECTION 9.5 PAYMENT OF EXPENSES AND TAXES. The Credit Parties agree (a) to pay or reimburse the Administrative Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation, negotiation, printing and execution of, and any amendment, supplement or modification to, this Agreement and the other Credit Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, together with the reasonable fees and disbursements of counsel to the Administrative Agent, (b) to pay or reimburse each Lender and the Administrative Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the Notes and any such other documents, including, without limitation, the reasonable fees and disbursements of counsel to the 96 102 Administrative Agent and to the Lenders (including reasonable allocated costs of in-house legal counsel), (c) on demand, to pay, indemnify, and hold each Lender and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, the Credit Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender and the Administrative Agent and their Affiliates harmless from and against, any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of the Credit Documents and any such other documents and the use, or proposed use, of proceeds of the Loans (all of the foregoing, collectively, the "indemnified liabilities"); provided, however, that the Borrowers shall not have any obligation hereunder to the Administrative Agent or any Lender with respect to indemnified liabilities arising from the gross negligence or willful misconduct of the Administrative Agent or any such Lender, as determined by a court of competent jurisdiction. The agreements in this Section 9.5 shall survive repayment or assignment of the Loans, Notes and all other amounts payable hereunder. SECTION 9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING LENDERS. (a) This Agreement shall be binding upon and inure to the benefit of the Borrowers, the Lenders, the Administrative Agent, all future holders of the Notes and their respective successors and assigns, except that the Borrowers may not assign or transfer any of their rights or obligations under this Agreement or the other Credit Documents without the prior written consent of each Lender. (b) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment of such Lender, or any other interest of such Lender hereunder. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Note for all purposes under this Agreement, and the Borrowers and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. No Lender shall transfer or grant any participation under which the Participant shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would (i) extend the scheduled maturity of any Loan or Note, or extend the expiry date of any Letter of Credit in which such Participant is participating beyond the Maturity Date, or any installment thereon in which such Participant is participating, or reduce the stated rate or extend the time of payment of interest or fees thereon (except in connection with a waiver of interest at the increased post-default rate) 97 103 or reduce the principal amount thereof, or increase the amount of the Participant's participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without consent of any Participant if the Participant's participation is not increased as a result thereof), (ii) release all or substantially all of the Guarantors from their obligations under the Guaranty, (iii) release all or substantially all of the Collateral, or (iv) consent to the assignment or transfer by the Borrowers of any of their rights and obligations under this Agreement other than in accordance with this Agreement. In the case of any such participation, the Participant shall not have any rights under this Agreement or any of the other Credit Documents (the Participant's rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the Participant relating thereto) and all amounts payable by the Borrowers hereunder shall be determined as if such Lender had not sold such participation; provided that each Participant shall be entitled to the benefits of Sections 2.18, 2.19, 2.20 and 9.5 with respect to its participation in the Commitments and the Loans outstanding from time to time, but no Participant shall be entitled to receive any greater amount pursuant to such Sections than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time, sell or assign to any Lender or any affiliate thereof or special purpose entity created thereby and with the consent of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrowers (in each case, which consent shall not be unreasonably withheld), to one or more additional banks or financial institutions ("Purchasing Lenders"), all or any part of its rights and obligations under this Agreement and the Notes in minimum amounts of $5,000,000 with respect to its Revolving Commitment, its Revolving Loans, its SFG Revolving Loans and its Term Loans (or, if less, the entire amount of such Lender's obligations), pursuant to a Commitment Transfer Supplement, executed by such Purchasing Lender and such transferor Lender (and, in the case of a Purchasing Lender that is not then a Lender or an affiliate thereof, the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrowers), and delivered to the Administrative Agent for its acceptance and recording in the Register; provided, however, that (i) any sale or assignment to an existing Lender shall not require the consent of the Administrative Agent or the Borrowers nor shall any such sale or assignment be subject to the minimum assignment amounts specified herein and (ii) any partial assignment of the transferor Lender's Commitments shall be of an equal, pro rata percentage of such Lender's Revolving Commitment, Term A Loan Commitment and SFG Term Loan Commitment. Upon such execution, delivery, acceptance and recording, from and after the Transfer Effective Date specified in such Commitment Transfer Supplement, (x) the Purchasing Lender thereunder shall be a party hereto and, to the extent provided in such Commitment Transfer Supplement, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein, and (y) the transferor Lender thereunder shall, to the extent provided in such Commitment 98 104 Transfer Supplement, be released from its obligations under this Agreement (and, in the case of a Commitment Transfer Supplement covering all or the remaining portion of a transferor Lender's rights and obligations under this Agreement, such transferor Lender shall cease to be a party hereto). Such Commitment Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Lender and the resulting adjustment of Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender under this Agreement and the Notes. On or prior to the Transfer Effective Date specified in such Commitment Transfer Supplement, the Borrowers, at their own expense, shall execute and deliver to the Administrative Agent in exchange for the Notes delivered to the Administrative Agent pursuant to such Commitment Transfer Supplement new Notes to the order of such Purchasing Lender in an amount equal to the Commitment assumed by it pursuant to such Commitment Transfer Supplement and, unless the transferor Lender has not retained a Commitment hereunder, new Notes to the order of the transferor Lender in an amount equal to the Commitment retained by it hereunder. Such new Notes shall be dated the Closing Date and shall otherwise be in the form of the Notes replaced thereby. The Notes surrendered by the transferor Lender shall be returned by the Administrative Agent to the Parent Borrower marked "canceled". (d) The Administrative Agent shall maintain at its address referred to in Section 9.2 a copy of each Commitment Transfer Supplement delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrowers, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as the owner of the Loan recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of a duly executed Commitment Transfer Supplement, together with payment to the Administrative Agent by the transferor Lender or the Purchasing Lender, as agreed between them, of a registration and processing fee of $3,500 for each Purchasing Lender listed in such Commitment Transfer Supplement and the Notes subject to such Commitment Transfer Supplement, the Administrative Agent shall (i) accept such Commitment Transfer Supplement, (ii) record the information contained therein in the Register and (iii) give prompt notice of such acceptance and recordation to the Lenders and the Borrowers. (f) The Credit Parties authorize each Lender to disclose to any Participant or Purchasing Lender (each, a "Transferee") and any prospective Transferee any and all financial information in such Lender's possession concerning the Credit Parties, their Subsidiaries and their Affiliates which has been delivered to such Lender by or on behalf of the Credit Parties pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Credit Parties in connection with such Lender's credit 99 105 evaluation of the Credit Parties and their Affiliates prior to becoming a party to this Agreement, in each case subject to Section 9.15. (g) At the time of each assignment pursuant to this Section 9.6 to a Person which is not already a Lender hereunder and which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes, the respective assignee Lender shall provide to the Borrowers and the Administrative Agent the appropriate Internal Revenue Service Forms (and, if applicable, a 2.20 Certificate) described in Section 2.20. (h) Nothing herein shall prohibit any Lender from pledging or assigning any of its rights under this Agreement (including, without limitation, any right to payment of principal and interest under any Note) to any Federal Reserve Bank in accordance with applicable laws. SECTION 9.7 ADJUSTMENTS; SET-OFF. (a) Each Lender agrees that if any Lender (a "benefited Lender") shall at any time receive any payment of all or part of its Loans, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 7.1(e), or otherwise) in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans, or interest thereon, such benefited Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Loans, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefited Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Borrowers agree that each Lender so purchasing a portion of another Lender's Loans may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion. (b) In addition to any rights and remedies of the Lenders provided by law (including, without limitation, other rights of set-off), each Lender shall have the right, without prior notice to the Borrowers, any such notice being expressly waived by the Borrowers to the extent permitted by applicable law, upon the occurrence of any Event of Default, to setoff and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrowers, or any part thereof in such amounts as such Lender may elect, against and on account of the obligations and liabilities of the Borrowers to such Lender hereunder and claims of every nature and 100 106 description of such Lender against the Borrowers, in any currency, whether arising hereunder, under the Notes or under any documents contemplated by or referred to herein or therein, as such Lender may elect, whether or not such Lender has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The aforesaid right of set-off may be exercised by such Lender against the Borrowers or against any trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver or execution, judgment or attachment creditor of the Borrowers, or against anyone else claiming through or against the Borrowers or any such trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor, notwithstanding the fact that such right of set-off shall not have been exercised by such Lender prior to the occurrence of any Event of Default. Each Lender agrees promptly to notify the Borrowers and the Administrative Agent after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. SECTION 9.8 TABLE OF CONTENTS AND SECTION HEADINGS. The table of contents and the Section and subsection headings herein are intended for convenience only and shall be ignored in construing this Agreement. SECTION 9.9 COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrowers and the Administrative Agent. SECTION 9.10 EFFECTIVENESS; DESIGNATION AS SENIOR INDEBTEDNESS. This Credit Agreement shall become effective on the date on which all of the parties have signed a copy hereof (whether the same or different copies) and shall have delivered the same to the Administrative Agent pursuant to Section 9.2 or, in the case of the Lenders, shall have given to the Administrative Agent written, telecopied or telex notice (actually received) at such office that the same has been signed and mailed to it. Upon this Agreement becoming effective, each of the parties hereto acknowledge and agree that the Credit Party Obligations shall be "Senior Indebtedness" as defined in and for the purposes of the Indenture. SECTION 9.11 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. 101 107 SECTION 9.12 INTEGRATION. This Agreement, the Notes and the other Credit Documents represent the agreement of the Borrowers, the Administrative Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent, the Borrowers or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the Notes. SECTION 9.13 GOVERNING LAW. This Agreement and the Notes and the rights and obligations of the parties under this Agreement and the Notes shall be governed by, and construed and interpreted in accordance with, the law of the State of North Carolina. SECTION 9.14 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All judicial proceedings brought against a Borrower and/or any other Credit Party with respect to this Agreement, any Note or any of the other Credit Documents may be brought in any state or federal court of competent jurisdiction in the State of North Carolina, and, by execution and delivery of this Agreement, each of the Borrowers and the other Credit Parties accepts, for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts and irrevocably agrees to be bound by any final judgment rendered thereby in connection with this Agreement from which no appeal has been taken or is available. Each of the Borrowers and the other Credit Parties irrevocably agrees that all service of process in any such proceedings in any such court may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to it at its address set forth in Section 9.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto, such service being hereby acknowledged by each of the Borrowers and the other Credit Parties to be effective and binding service in every respect. Each of the Borrowers, the other Credit Parties, the Administrative Agent and the Lenders irrevocably waives any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens which it may now or hereafter have to the bringing of any such action or proceeding in any such jurisdiction. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of any Lender to bring proceedings against the Borrowers or the other Credit Parties in the court of any other jurisdiction. SECTION 9.15 CONFIDENTIALITY. The Administrative Agent and each of the Lenders agrees that it will use its best efforts not to disclose without the prior consent of the Borrowers (other than to its employees, affiliates, auditors or counsel or to another Lender) any information with respect to the Parent Borrower and its Subsidiaries which is furnished pursuant to this Agreement, any other Credit Document or any documents contemplated by or referred to herein or therein and which is designated by a Borrower to the Lenders in writing as confidential or as to which it is otherwise reasonably clear such information is not public, except that any Lender may disclose any such information (a) as 102 108 has become generally available to the public other than by a breach of this Section 9.15, (b) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or federal regulatory body having or claiming to have jurisdiction over such Lender or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or the OCC or the NAIC or similar organizations (whether in the United States or elsewhere) or their successors, (c) as may be required or appropriate in response to any summons or subpoena or any law, order, regulation or ruling applicable to such Lender, after notice to the Borrowers and opportunity to object to such disclosure to the extent reasonably practicable, (d) to any prospective Participant or assignee in connection with any contemplated transfer pursuant to Section 9.6, provided that such prospective transferee shall have been made aware of this Section 9.15 and shall have agreed to be bound by its provisions as if it were a party to this Agreement or (e) to Gold Sheets and other similar bank trade publications; such information to consist of deal terms and other information regarding the credit facilities evidenced by this Credit Agreement customarily found in such publications. SECTION 9.16 ACKNOWLEDGMENTS. The Borrowers and the other Credit Parties each hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of each Credit Document; (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to the Borrowers or any other Credit Party arising out of or in connection with this Agreement and the relationship between Administrative Agent and Lenders, on one hand, and the Borrowers and the other Credit Parties, on the other hand, in connection herewith is solely that of debtor and creditor; and (c) no joint venture exists among the Lenders or among the Borrowers or the other Credit Parties and the Lenders. SECTION 9.17 WAIVERS OF JURY TRIAL AND PUNITIVE DAMAGES. THE BORROWERS, THE OTHER CREDIT PARTIES, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. The parties hereto agree that they shall not have a remedy of punitive or exemplary damages against the other in any judicial proceeding, any dispute, claim or controversy arising out of, connected with or relating to this Agreement and other Credit Documents ("Disputes"), and hereby waive any right or claim to punitive or exemplary damages they have now or which may arise in the future in connection with any Dispute. 103 109 SECTION 9.18 REFINANCING OF EXISTING SUBSIDIARY BORROWER DEBT. The parties hereto acknowledge and agree that the Indebtedness incurred by the Subsidiary Borrower hereunder, for purposes of determining compliance with Section 4.03 of the Indenture, refinances and replaces the Bank Indebtedness (as defined in the Indenture). ARTICLE X GUARANTY Subject to the terms of Section 10.10 hereof, each of the Guarantors hereby agrees as follows: SECTION 10.1 THE GUARANTY. In order to induce the Lenders to enter into this Agreement and to extend credit hereunder and in recognition of the direct benefits to be received by the Guarantors from the Extensions of Credit hereunder, each of the Guarantors hereby agrees with the Administrative Agent and the Lenders as follows: each Guarantor hereby unconditionally and irrevocably jointly and severally guarantees as primary obligor and not merely as surety the full and prompt payment when due, whether upon maturity, by acceleration or otherwise, of any and all indebtedness of the Borrowers to the Administrative Agent and the Lenders. If any or all of the indebtedness of the Borrowers to the Administrative Agent and the Lenders becomes due and payable hereunder, subject to the terms of Section 10.10, each Guarantor unconditionally promises to pay such indebtedness to the Administrative Agent and the Lenders, on order, on demand, together with any and all reasonable expenses which may be incurred by the Administrative Agent or the Lenders in collecting any of the indebtedness. The word "indebtedness" is used in this Article X in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities of the Borrowers arising in connection with this Agreement, including, without limitation, Hedging Agreements permitted hereunder, in each case, heretofore, now, or hereafter made, incurred or created, whether voluntarily or involuntarily, absolute or contingent, liquidated or unliquidated, determined or undetermined, whether or not such indebtedness is from time to time reduced, or extinguished and thereafter increased or incurred, whether the Borrowers may be liable individually or jointly with others, whether or not recovery upon such indebtedness may be or hereafter become barred by any statute of limitations, and whether or not such indebtedness may be or hereafter become otherwise unenforceable. Notwithstanding any provision to the contrary contained herein or in any other of the Credit Documents, to the extent the obligations of a Guarantor shall be adjudicated to be invalid or unenforceable for any reason (including, without limitation, because of any applicable state or federal law relating to fraudulent conveyances or transfers) then the obligations of each such Guarantor hereunder shall be limited to the maximum amount that is permissible under applicable law (whether federal or state and including, without limitation, the Bankruptcy Code). 104 110 SECTION 10.2 BANKRUPTCY. Additionally, each of the Guarantors unconditionally and irrevocably guarantees jointly and severally the payment of any and all indebtedness of the Borrowers to the Lenders whether or not due or payable by the Borrowers upon the occurrence of any of the events specified in Section 7.1(e), and unconditionally promises to pay such indebtedness to the Administrative Agent for the account of the Lenders, or order, on demand, in lawful money of the United States. Each of the Guarantors further agrees that to the extent that the Borrowers or a Guarantor shall make a payment or a transfer of an interest in any property to the Administrative Agent or any Lender, which payment or transfer or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, or otherwise is avoided, and/or required to be repaid to a Borrower or a Guarantor, the estate of a Borrower or a Guarantor, a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such avoidance or repayment, the obligation or part thereof intended to be satisfied shall be revived and continued in full force and effect as if said payment had not been made. SECTION 10.3 NATURE OF LIABILITY. The liability of each Guarantor hereunder is exclusive and independent of any security for or other guaranty of the indebtedness of the Borrowers whether executed by any such Guarantor, any other guarantor or by any other party, and no Guarantor's liability hereunder shall be affected or impaired by (a) any direction as to application of payment by the Borrowers or by any other party, or (b) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other party as to the indebtedness of the Borrowers, or (c) any payment on or in reduction of any such other guaranty or undertaking, or (d) any dissolution, termination or increase, decrease or change in personnel by the Borrowers, or (e) any payment made to the Administrative Agent or the Lenders on the indebtedness which the Administrative Agent or such Lenders repay the Borrowers pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and each of the Guarantors waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding. The obligations of the Guarantors hereunder are absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Credit Documents, any Hedging Agreement entered into in connection with this Agreement, or any other agreement or instrument referred to therein, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or a guarantor. SECTION 10.4 INDEPENDENT OBLIGATION. The obligations of each Guarantor hereunder are independent of the obligations of any other Guarantor or the Borrowers, and a separate action or actions may be brought and prosecuted against each Guarantor whether or not action is brought against any other Guarantor or the Borrowers and whether or not any other Guarantor or the Borrowers is joined in any such action or actions. 105 111 SECTION 10.5 AUTHORIZATION. Each of the Guarantors authorizes the Administrative Agent and each Lender without notice or demand (except as shall be required by applicable statute and cannot be waived), and without affecting or impairing its liability hereunder, from time to time to (a) renew, compromise, extend, increase, accelerate or otherwise change the time for payment of, or otherwise change the terms of the indebtedness or any part thereof in accordance with this Agreement, including any increase or decrease of the rate of interest thereon, (b) take and hold security from any Guarantor or any other party for the payment of this Guaranty or the indebtedness and exchange, enforce, waive and release any such security, (c) apply such security and direct the order or manner of sale thereof as the Administrative Agent and the Lenders in their discretion may determine and (d) release or substitute any one or more endorsers, guarantors, the Borrowers or other obligors. SECTION 10.6 RELIANCE. It is not necessary for the Administrative Agent or the Lenders to inquire into the capacity or powers of the Borrowers or the officers, directors, partners or agents acting or purporting to act on their behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. SECTION 10.7 WAIVER. (a) Each of the Guarantors waives any right (except as shall be required by applicable statute and cannot be waived) to require the Administrative Agent or any Lender to (i) proceed against the Borrowers, any other guarantor or any other party, (ii) proceed against or exhaust any security held from the Borrowers, any other guarantor or any other party, or (iii) pursue any other remedy in the Administrative Agent's or any Lender's power whatsoever. Each of the Guarantors waives any defense based on or arising out of any defense of a Borrower, any other Guarantor or any other party other than payment in full of the indebtedness, including without limitation any defense based on or arising out of the disability of a Borrower, any other guarantor or any other party, or the unenforceability of the indebtedness or any part thereof from any cause, or the cessation from any cause of the liability of a Borrower other than payment in full of the indebtedness. Without limiting the generality of the provisions of this Article X, each of the Guarantors hereby specifically waives the benefits of N.C. Gen. Stat. Sections 26-7 through 26-9, inclusive. The Administrative Agent or any of the Lenders may, at their election, foreclose on any security held by the Administrative Agent or a Lender by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Administrative Agent and any Lender may have against the Borrowers or any other party, or any security, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the indebtedness has been paid. Each of the Guarantors waives any defense arising out of any such election by the Administrative Agent and each of the Lenders, even though such election operates to 106 112 impair or extinguish any right of reimbursement or subrogation or other right or remedy of the Guarantors against the Borrowers or any other party or any security. (b) Each of the Guarantors waives all presentments, demands for performance, protests and notices, including without limitation notices of nonperformance, notice of protest, notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation or incurring of new or additional indebtedness. Each Guarantor assumes all responsibility for being and keeping itself informed of each of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the indebtedness and the nature, scope and extent of the risks which such Guarantor assumes and incurs hereunder, and agrees that neither the Administrative Agent nor any Lender shall have any duty to advise such Guarantor of information known to it regarding such circumstances or risks. (c) Each of the Guarantors hereby agrees it will not exercise any rights of subrogation which it may at any time otherwise have as a result of this Guaranty (whether contractual, under Section 509 of the U.S. Bankruptcy Code, or otherwise) to the claims of the Lenders against the Borrowers or any other guarantor of the indebtedness of the Borrowers owing to the Lenders (collectively, the "Other Parties") and all contractual, statutory or common law rights of reimbursement, contribution or indemnity from any Other Party which it may at any time otherwise have as a result of this Guaranty until such time as the Loans hereunder shall have been paid and the Commitments have been terminated. Each of the Guarantors hereby further agrees not to exercise any right to enforce any other remedy which the Administrative Agent and the Lenders now have or may hereafter have against any Other Party, any endorser or any other guarantor of all or any part of the indebtedness of the Borrowers and any benefit of, and any right to participate in, any security or collateral given to or for the benefit of the Lenders to secure payment of the indebtedness of the Borrowers until such time as the Loans hereunder shall have been paid and the Commitments have been terminated. SECTION 10.8 LIMITATION ON ENFORCEMENT. The Lenders agree that this Guaranty may be enforced only by the action of the Administrative Agent acting upon the instructions of the Required Lenders and that no Lender shall have any right individually to seek to enforce or to enforce this Guaranty, it being understood and agreed that such rights and remedies may be exercised by the Administrative Agent for the benefit of the Lenders upon the terms of this Agreement. The Lenders further agree that this Guaranty may not be enforced against any director, officer, employee or stockholder of the Guarantors. SECTION 10.9 CONFIRMATION OF PAYMENT. The Administrative Agent and the Lenders will, upon request after payment of the indebtedness and obligations which are the subject of this Guaranty and termination of the commitments relating thereto, confirm to the Borrowers, the Guarantors or any other Person that 107 113 such indebtedness and obligations have been paid and the commitments relating thereto terminated, subject to the provisions of Section 10.2. SECTION 10.10 LIMITATIONS ON GUARANTY. Notwithstanding anything to the contrary herein, the parties hereto acknowledge and agree that, so long as the Indebtedness evidenced by the Senior Subordinated Notes remains outstanding, the Guaranty provided by the Subsidiaries of the Subsidiary Borrower shall be limited to the obligations of the Subsidiary Borrower hereunder and under the other Credit Documents. 108 114 IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement to be duly executed and delivered by its proper and duly authorized officers as of the day and year first above written. BORROWERS: SUIZA FLUID DAIRY GROUP, L.P., a Delaware limited partnership By: Suiza Fluid Dairy Group GP, LLC By: /s/ COREY M. OLSON ------------------------------------- Name: Corey M. Olson ----------------------------------- Title: Vice President ---------------------------------- SOUTHERN FOODS GROUP, L.P., a Delaware limited partnership By: SFG Management Limited Liability Company By: /s/ COREY M. OLSON ------------------------------------- Name: Corey M. Olson ----------------------------------- Title: Vice President ---------------------------------- SUIZA FLUID DAIRY GOUP, L.P. CREDIT AGREEMENT 115 GUARANTORS: SFG MANAGEMENT LIMITED LIABILITY COMPANY SUIZA SOUTHEAST, LLC BROUGHTON FOODS, LLC LAND-O-SUN DAIRIES, LLC COUNTRY DELITE FARMS, LLC DAIRY FRESH, LLC LOUIS TRAUTH DAIRY, LLC VELDA FARMS, LLC SUIZA GTL, LLC NEW ENGLAND DAIRIES, LLC TUSCAN/LEHIGH MANAGEMENT, L.L.C. SUIZA WEST, LLC ROBINSON DAIRY, LLC MODEL DAIRY, LLC SUIZA SOCAL, LLC COUNTRY FRESH, LLC OBERLIN FARMS DAIRY, LLC LONDON'S FARM DAIRY, LLC CF BURGER DAIRY, LLC By: /s/ LISA TYSON --------------------------------------------------- Name: ------------------------------------------------- Title: of each of the foregoing --------------------- limited liability companies TUSCAN/LEHIGH DAIRIES, L.P. By: Tuscan/Lehigh Management, L.L.C. its general partner By: /s/ LISA TYSON -------------------------------------------- Name: ------------------------------------------ Title: ----------------------------------------- SUIZA FLUID DAIRY GOUP, L.P. CREDIT AGREEMENT 116 FIRST UNION NATIONAL BANK, in its capacity as Administrative Agent and individually in its capacity as a Lender By: /s/ MARK B. FELKER -------------------------------------------- Name: Mark B. Felker ------------------------------------------ Title: Senior Vice President ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 117 BANK ONE, NA, in its capacity as Syndication Agent and individually in its capacity as a Lender By: /s/ KATHY TURNER -------------------------------------------- Name: Kathy Turner ------------------------------------------ Title: Director ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 118 BANK OF AMERICA, N.A., in its capacity as Documentation Agent and individually in its capacity as a Lender By: /s/ LYNN A. DURNING -------------------------------------------- Name: Lynn A. Durning ------------------------------------------ Title: Principal ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 119 FLEET NATIONAL BANK, in its capacity as Documentation Agent and individually in its capacity as a Lender By: /s/ STEVE KALN -------------------------------------------- Name: Steve Kaln ------------------------------------------ Title: Vice President ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 120 COBANK, ACB, in its capacity as Managing Agent and individually in its capacity as a Lender By: /s/ BRIAN J. KLATT -------------------------------------------- Name: Brian J. Klatt ------------------------------------------ Title: Vice President ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 121 CREDIT AGRICOLE INDOSUEZ, in its capacity as Managing Agent and individually in its capacity as a Lender By: /s/ BRADLEY C. PETERSON -------------------------------------------- Name: Bradley C. Peterson ------------------------------------------ Title: Vice President, Manager ----------------------------------------- By: /s/ THOMAS P. GILLIS -------------------------------------------- Name: Thomas P. Gillis ------------------------------------------ Title: Vice President, Manager ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 122 COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A. "RABOBANK NEDERLAND", NEW YORK BRANCH, in its capacity as Managing Agent and individually in its capacity as a Lender By: /s/ DAVID L. STREETER -------------------------------------------- Name: David L. Streeter ------------------------------------------ Title: Vice President ----------------------------------------- By: /s/ NANCY J. O'CONNOR -------------------------------------------- Name: Nancy J. O'Connor ------------------------------------------ Title: Vice President ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 123 THE INDUSTRIAL BANK OF JAPAN, LIMITED, in its capacity as Managing Agent and individually in its capacity as a Lender By: /s/ MASASHI SAKAI -------------------------------------------- Name: Masashi Sakai ------------------------------------------ Title: General Manager ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 124 WELLS FARGO BANK (TEXAS), N.A., in its capacity as Managing Agent and individually in its capacity as a Lender By: /s/ AUSTIN D. NETTLE -------------------------------------------- Name: Austin D. Nettle ------------------------------------------ Title: Assistant Vice President ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 125 BANCO POPULAR DE PUERTO RICO, in its capacity as Co-Agent and individually in its capacity as a Lender By: /s/ HECTOR A. VINA -------------------------------------------- Name: Hector A. Vina ------------------------------------------ Title: Vice President ----------------------------------------- By: /s/ ANDREW H. MELVILLE -------------------------------------------- Name: Andrew H. Melville ------------------------------------------ Title: Assistant Vice President ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 126 BANCO POPULAR NORTH AMERICA, in its capacity as Co-Agent and individually in its capacity as a Lender By: /s/ ANDREW H. MELVILLE -------------------------------------------- Name: Andrew H. Melville ------------------------------------------ Title: AVP ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 127 THE BANK OF TOKYO-MITSUBISHI, LTD., in its capacity as Co-Agent and individually in its capacity as a Lender By: /s/ D. BARNELL -------------------------------------------- Name: D. Barnell ------------------------------------------ Title: Vice President ----------------------------------------- By: /s/ JOHN M. MEARNS -------------------------------------------- Name: John M. Mearns ------------------------------------------ Title: Vice President & Manager ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 128 THE BANK OF NOVA SCOTIA, in its capacity as Co-Agent and individually in its capacity as a Lender By: /s/ F.C.H. ASHBY -------------------------------------------- Name: F.C.H. Ashby ------------------------------------------ Title: Senior Manager Loan Operations ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 129 GUARANTY FEDERAL BANK, F.S.B. in its capacity as Co-Agent and individually in its capacity as a Lender By: /s/ ROBERT S. HAYS -------------------------------------------- Name: Robert S. Hays ------------------------------------------ Title: Senior Vice President ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 130 SUNTRUST BANK, ATLANTA, in its capacity as Co-Agent and individually in its capacity as a Lender By: /s/ F. STEVEN PARRISH -------------------------------------------- Name: F. STEVEN PARRISH ------------------------------------------ Title: VICE PRESIDENT ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 131 HARRIS TRUST AND SAVINGS BANK By: /s/ DIANNA D. CARR -------------------------------------------- Name: Dianna D. Carr ------------------------------------------ Title: Vice President ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 132 BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC. By: /s/ ROBERT M. BIRINGER -------------------------------------------- Name: Robert M. Biringer ------------------------------------------ Title: Executive Vice President ----------------------------------------- By: /s/ GARY W. ANDRESEN -------------------------------------------- Name: Gary W. Andresen ------------------------------------------ Title: Senior Associate ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 133 CREDIT INDUSTRIEL ET COMMERCIAL By: -------------------------------------------- Name: ------------------------------------------ Title: ----------------------------------------- By: -------------------------------------------- Name: ------------------------------------------ Title: ----------------------------------------- SUIZA FLUID DAIRY GOUP, L.P. CREDIT AGREEMENT 134 U.S. BANCORP AG CREDIT, INC. By: /s/ JOHN W. BALL -------------------------------------------- Name: John W. Ball ------------------------------------------ Title: VP ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 135 BANK HAPOALIM B.M. By: /s/ MICHAEL J. BYRNE /s/ THOMAS J. HEPPERLE ------------------------------------------------------- Name: MICHAEL J. BYRNE THOMAS J. HEPPERLE ----------------------------------------------------- Title: VP-SR. LENDING OFFICER VICE PRESIDENT ---------------------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 136 THE BANK OF NEW YORK By: /s/ MARK T. FAMILO -------------------------------------------- Name: Mark T. Familo ------------------------------------------ Title: Vice President ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 137 BANQUE NATIONALE DE PARIS By: /s/ STEPHANIE ROGERS -------------------------------------------- Name: Stephanie Rogers ------------------------------------------ Title: Vice President ----------------------------------------- By: /s/ GREGG W. BONARD -------------------------------------------- Name: Gregg W. Bonard ------------------------------------------ Title: Vice President ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 138 THE CHASE MANHATTAN BANK By: /s/ GARY L. SEDVARK -------------------------------------------- Name: Gary L. Sedvark ------------------------------------------ Title: Vice President ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 139 CREDIT LYONNAIS NEW YORK BRANCH By: /s/ ROBERT IVOSEVICH -------------------------------------------- Name: Robert Ivosevich ------------------------------------------ Title: Senior Vice President ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 140 THE DAI-ICHI KANGYO BANK, LTD., CHICAGO BRANCH By: /s/ JOHN S. SNEED -------------------------------------------- Name: John S. Sneed ------------------------------------------ Title: Senior Vice President ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 141 THE MITSUBISHI TRUST & BANKING CORPORATION By: /s/ NOBUO TOMINAGA -------------------------------------------- Name: Nobuo Tominaga ------------------------------------------ Title: Chief Manager ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 142 NATIONAL CITY BANK OF KENTUCKY By: /s/ TOM GURBACH -------------------------------------------- Name: Tom Gurbach ------------------------------------------ Title: Vice President ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 143 THE SANWA BANK, LIMITED, NEW YORK BRANCH By: /s/ JOHN T. FEENEY -------------------------------------------- Name: John T. Feeney ------------------------------------------ Title: Vice President ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 144 THE FUJI BANK, LIMITED By: /s/ RAYMOND VENTURA -------------------------------------------- Name: Raymond Ventura ------------------------------------------ Title: Vice President & Manager ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 145 THE SAKURA BANK, LIMITED By: /s/ YOSHIKAZU NAGURA -------------------------------------------- Name: Yoshikazu Nagura ------------------------------------------ Title: Senior Vice President ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 146 MERCANTILE BANK NATIONAL ASSOCIATION By: /s/ DAVID F. HIGBEE -------------------------------------------- Name: David F. Higbee ------------------------------------------ Title: Vice President ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 147 BANK OF HAWAII By: /s/ BRENDA K. TESTERMAN ------------------------------------------- Name: Brenda K. Testerman ----------------------------------------- Title: Vice President ---------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 148 ERSTE BANK DER OESTERREICHISCHEN SPARKASSEN AG By: /s/ ARCINEE HOVANESSIAN -------------------------------------------- Name: Arcinee Hovanessian ------------------------------------------ Title: Vice President Erste Bank New York Branch ----------------------------------------- By: /s/ ANCA THIFAN -------------------------------------------- Name: Anca Thifan ------------------------------------------ Title: Vice President ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 149 MICHIGAN NATIONAL BANK By: /s/ ERIC RAEGE ------------------------------------------- Name: Eric Raege ----------------------------------------- Title: Commercial Relationship Manager ---------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 150 RZB FINANCE LLC By: /s/ DIETER BEINTREXLER -------------------------------------------- Name: Dieter Beintrexler ------------------------------------------ Title: President ----------------------------------------- By: /s/ CHRISTOPH HOEDL -------------------------------------------- Name: ------------------------------------------ Title: ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT 151 NATEXIS BANQUE BFCE By: /s/ RENAUD J. D'HERBES -------------------------------------------- Name: Renaud J. d'Herbes ------------------------------------------ Title: Senior Vice President and Regional Manager ----------------------------------------- By: /s/ DANIEL PAYER -------------------------------------------- Name: Daniel Payer ------------------------------------------ Title: Assistant Vice President ----------------------------------------- SUIZA FLUID DAIRY GROUP, L.P. CREDIT AGREEMENT EX-10.2 4 CREDIT AGREEMENT DATED 1/4/00-SUIZA FOODS CORP 1 EXHIBIT 10.2 - -------------------------------------------------------------------------------- CREDIT AGREEMENT among SUIZA FOODS CORPORATION, as Borrower, CERTAIN OF THE DOMESTIC SUBSIDIARIES OF THE BORROWER FROM TIME TO TIME PARTIES HERETO, as Guarantors, THE LENDERS PARTIES HERETO, FIRST UNION NATIONAL BANK, as Administrative Agent, BANK ONE, NA, as Syndication Agent and BANK OF AMERICA, N.A. and FLEET NATIONAL BANK, as Co-Documentation Agents Dated as of January 4, 2000 FIRST UNION SECURITIES, INC. and BANK ONE CAPITAL MARKETS, INC., as Co-Book Runners - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page ARTICLE I DEFINITIONS............................................................................................1 Section 1.1 Defined Terms.............................................................................1 Section 1.2 Other Definitional Provisions............................................................24 Section 1.3 Accounting Terms.........................................................................25 ARTICLE II THE LOANS; AMOUNT AND TERMS..........................................................................25 Section 2.1 Revolving Loans..........................................................................25 Section 2.2 Swingline Loan Subfacility...............................................................27 Section 2.3 Letter of Credit Subfacility.............................................................28 Section 2.4 Fees.....................................................................................32 Section 2.5 Reduction or Increase of the Revolving Commitments.......................................33 Section 2.6 Prepayments..............................................................................34 Section 2.7 Minimum Borrowing Amounts and Principal Amounts of Tranches..............................35 Section 2.8 Interest; Interest Payment Dates.........................................................36 Section 2.9 Conversion Options.......................................................................36 Section 2.10 Computation of Interest and Fees.........................................................37 Section 2.11 Pro Rata Treatment and Payments..........................................................38 Section 2.12 Non-Receipt of Funds by the Administrative Agent.........................................39 Section 2.13 Inability to Determine Interest Rate.....................................................39 Section 2.14 Illegality...............................................................................40 Section 2.15 Requirements of Law......................................................................40 Section 2.16 Indemnity................................................................................42 Section 2.17 Taxes....................................................................................42 Section 2.18 Indemnification; Nature of Issuing Lender's Duties.......................................44 Section 2.19 Defaulting Lenders; Limitation on Claims.................................................46 Section 2.20 Replacement of Lenders...................................................................47 ARTICLE III REPRESENTATIONS AND WARRANTIES......................................................................47 Section 3.1 Financial Condition......................................................................48 Section 3.2 No Change................................................................................48 Section 3.3 Corporate Existence; Compliance with Law.................................................48 Section 3.4 Corporate Power; Authorization; Enforceable Obligations..................................48 Section 3.5 No Legal Bar; No Default.................................................................49 Section 3.6 No Material Litigation...................................................................49 Section 3.7 Government Acts..........................................................................49 Section 3.8 Margin Regulations.......................................................................50 Section 3.9 ERISA....................................................................................50 Section 3.10 Environmental Matters....................................................................50 Section 3.11 Purpose of Loans.........................................................................51 Section 3.12 Subsidiaries.............................................................................51 Section 3.13 Ownership................................................................................52 Section 3.14 Indebtedness.............................................................................52 Section 3.15 Taxes....................................................................................52 Section 3.16 Intellectual Property....................................................................52 Section 3.17 Solvency.................................................................................53 Section 3.18 Investments..............................................................................53 Section 3.19 Location of Chief Executive Office.......................................................53 Section 3.20 No Burdensome Restrictions...............................................................53 Section 3.21 Brokers' Fees............................................................................53 Section 3.22 Labor Matters............................................................................53 Section 3.23 Accuracy and Completeness of Information.................................................53 Section 3.24 Year 2000 Issue..........................................................................54
3 ARTICLE IV CONDITIONS PRECEDENT.................................................................................54 Section 4.1 Conditions to Closing Date and Initial Revolving Loans...................................54 Section 4.2 Conditions to All Extensions of Credit...................................................58 ARTICLE V AFFIRMATIVE COVENANTS.................................................................................59 Section 5.1 Financial Statements.....................................................................59 Section 5.2 Certificates; Other Information..........................................................61 Section 5.3 Payment of Obligations...................................................................61 Section 5.4 Conduct of Business and Maintenance of Existence.........................................62 Section 5.5 Maintenance of Property; Insurance.......................................................62 Section 5.6 Inspection of Property; Books and Records; Discussions...................................63 Section 5.7 Notices..................................................................................63 Section 5.8 Environmental Laws.......................................................................65 Section 5.9 Financial Covenants......................................................................65 Section 5.10 Obligations Regarding Subsidiaries; Additional Subsidiary Guarantors.....................66 Section 5.11 Compliance with Law......................................................................66 Section 5.12 Pledged Assets...........................................................................67 Section 5.13 Additional Credit Parties................................................................67 Section 5.14 Year 2000 Compliance.....................................................................68 ARTICLE VI NEGATIVE COVENANTS...................................................................................68 Section 6.1 Indebtedness.............................................................................68 Section 6.2 Liens....................................................................................69 Section 6.3 Nature of Business.......................................................................69 Section 6.4 Consolidation, Merger, Sale or Purchase of Assets, etc...................................69 Section 6.5 Advances, Investments and Loans..........................................................71 Section 6.6 Transactions with Affiliates.............................................................71 Section 6.7 Ownership of Subsidiaries; Restrictions..................................................71 Section 6.8 Fiscal Year; Organizational Documents; Material Contracts................................72 Section 6.9 Limitation on Actions....................................................................72 Section 6.10 Restricted Payments......................................................................73 Section 6.11 Amendments, Modifications................................................................74 Section 6.12 Sale Leasebacks..........................................................................74 Section 6.13 Use of Proceeds..........................................................................74 ARTICLE VII EVENTS OF DEFAULT...................................................................................74 Section 7.1 Events of Default........................................................................74 Section 7.2 Acceleration; Remedies...................................................................77 ARTICLE VIII THE AGENT..........................................................................................78 Section 8.1 Appointment..............................................................................78 Section 8.2 Delegation of Duties.....................................................................78 Section 8.3 Exculpatory Provisions...................................................................78 Section 8.4 Reliance by Administrative Agent.........................................................79 Section 8.5 Notice of Default........................................................................79 Section 8.6 Non-Reliance on Administrative Agent and Other Lenders...................................79 Section 8.7 Indemnification..........................................................................80 Section 8.8 Administrative Agent in Its Individual Capacity..........................................80 Section 8.9 Successor Administrative Agent...........................................................81 ARTICLE IX MISCELLANEOUS........................................................................................81 Section 9.1 Amendments, Waivers and Release of Collateral............................................81 Section 9.2 Notices..................................................................................83 Section 9.3 No Waiver; Cumulative Remedies...........................................................84 Section 9.4 Survival of Representations and Warranties...............................................84 Section 9.5 Payment of Expenses and Taxes............................................................84 Section 9.6 Successors and Assigns; Participations; Purchasing Lenders...............................85
4 Section 9.7 Adjustments; Set-off.....................................................................88 Section 9.8 Table of Contents and Section Headings...................................................89 Section 9.9 Counterparts.............................................................................89 Section 9.10 Effectiveness............................................................................89 Section 9.11 Severability.............................................................................89 Section 9.12 Integration..............................................................................89 Section 9.13 Governing Law............................................................................90 Section 9.14 Consent to Jurisdiction and Service of Process...........................................90 Section 9.15 Confidentiality..........................................................................90 Section 9.16 Acknowledgments..........................................................................91 Section 9.17 Waivers of Jury Trial....................................................................91 ARTICLE X GUARANTY..............................................................................................91 Section 10.1 The Guaranty.............................................................................91 Section 10.2 Bankruptcy...............................................................................92 Section 10.3 Nature of Liability......................................................................93 Section 10.4 Independent Obligation...................................................................93 Section 10.5 Authorization............................................................................93 Section 10.6 Reliance.................................................................................94 Section 10.7 Waiver...................................................................................94 Section 10.8 Limitation on Enforcement................................................................95 Section 10.9 Confirmation of Payment..................................................................95
5
SCHEDULES Schedule 1.1(a) Account Designation Letter Schedule 1.1(b) Investments Schedule 1.1(c) Liens Schedule 2.1(a) Lenders and Commitments Schedule 2.1(b)(i) Form of Notice of Borrowing Schedule 2.1(d) Form of Revolving Note Schedule 2.2(d) Form of Swingline Note Schedule 2.9 Form of Notice of Conversion/Extension Schedule 2.17 2.17 Certificate Schedule 3.6 Litigation Schedule 3.9 ERISA Schedule 3.12 Subsidiaries Schedule 3.16 Intellectual Property Schedule 3.19 Chief Executive Offices Schedule 3.22 Labor Matters Schedule 4.1(b) Form of Secretary's Certificate Schedule 4.1(h) Form of Solvency Certificate Schedule 5.10 Form of Joinder Agreement Schedule 6.1(b) Indebtedness Schedule 9.2 Lenders' Lending Offices Schedule 9.6(c) Form of Commitment Transfer Supplement
6 CREDIT AGREEMENT, dated as of January 4, 2000, among SUIZA FOODS CORPORATION, a Delaware corporation (the "Borrower"), those Domestic Subsidiaries of the Borrower identified as a "Guarantor" on the signature pages hereto and such other Domestic Subsidiaries of the Borrower as may from time to time become a party hereto (collectively, the "Guarantors"), the several banks and other financial institutions as may from time to time become parties to this Agreement (collectively, the "Lenders"; and individually, a "Lender"), FIRST UNION NATIONAL BANK, a national banking association, as administrative agent for the Lenders hereunder (in such capacity, the "Administrative Agent" or the "Agent"), BANK ONE, NA, a national banking association, as syndication agent for the Lenders hereunder (in such capacity, the "Syndication Agent") and BANK OF AMERICA, N.A., a national banking association, and FLEET NATIONAL BANK, a national banking association, as co-documentation agents for the Lenders hereunder. W I T N E S S E T H: WHEREAS, the Borrower has requested that the Lenders make loans and other financial accommodations to the Borrower as more particularly described herein; WHEREAS, the Lenders have agreed to make such loans and other financial accommodations to the Borrower on the terms and conditions contained herein; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 DEFINED TERMS. As used in this Agreement, terms defined in the preamble to this Agreement have the meanings therein indicated, and the following terms have the following meanings: "Account Designation Letter" shall mean the Notice of Account Designation Letter dated the Closing Date from the Borrower to the Administrative Agent substantially in the form attached hereto as Schedule 1.1(a). "Additional Credit Party" shall mean each Person that becomes a Guarantor by execution of a Joinder Agreement in accordance with Section 5.10. "Additional Lender" has the meaning set forth in Section 2.5. 7 "Administrative Agent" shall have the meaning set forth in the first paragraph of this Agreement and any successors in such capacity. "Affiliate" shall mean as to any Person, any Person that directly or indirectly controls, or is under common control with, or is controlled by, such Person and, if such Person is an individual, any member of the immediate family (including parents, spouse, children and siblings) of such individual and any trust whose principal beneficiary is such individual or one or more members of such immediate family and any Person who is controlled by any such member or trust. As used in this definition, "control" (including, with its correlative meanings, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise); provided that, in any event, any Person that owns directly or indirectly securities having 10% or more of the voting power for the election of directors or other governing body of a corporation or 10% or more of the partnership or other ownership interests of any other Person (other than as a limited partner of such other Person) will be deemed to control such corporation or other Person. Notwithstanding the foregoing, (a) no individual shall be an Affiliate solely by reason of his or her being a director, officer or employee of the Borrower or any of its Subsidiaries, and (b) none of the Restricted Subsidiaries of the Borrower shall be considered Affiliates. For purposes hereof, all Unrestricted Subsidiaries shall be considered Affiliates. "Agents" shall mean a collective reference to the Administrative Agent and the Syndication Agent. "Agreement" shall mean this Credit Agreement, as amended, modified or supplemented from time to time in accordance with its terms. "Alternate Base Rate" shall mean, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean, at any time, the rate of interest per annum publicly announced from time to time by First Union at its principal office in Charlotte, North Carolina as its prime rate. Each change in the Prime Rate shall be effective as of the opening of business on the day such change in the Prime Rate occurs. The parties hereto acknowledge that the rate announced publicly by First Union as its Prime Rate is an index or base rate and shall not necessarily be its lowest or best rate charged to its customers or other banks; and "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published on the next succeeding Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive in the absence of manifest error) that it is unable to ascertain the Federal Funds Effective Rate, for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms thereof, the Alternate Base Rate shall be determined without regard to clause (b) of the first sentence of this definition, as appropriate, 2 8 until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the opening of business on the date of such change. "Alternate Base Rate Loans" shall mean Loans that bear interest at an interest rate based on the Alternate Base Rate. "Applicable Percentage" shall mean, for any day, the rate per annum set forth below opposite the applicable Level then in effect, it being understood that the Applicable Percentage for (i) Revolving Loans which are Alternate Base Rate Loans shall be the percentage set forth under the column "Alternate Base Rate Margin for Revolving Loans", (ii) Revolving Loans which are LIBOR Rate Loans shall be the percentage set forth under the column "LIBOR Rate Margin for Revolving Loans", (iii) the Letter of Credit Fees shall be the percentage set forth under the column "Letter of Credit Fees" and (iv) the Commitment Fee shall be the percentage set forth under the column "Commitment Fee":
Alternate Base Rate LIBOR Rate Leverage Margin for Margin for Letter of Credit Commitment Level Ratio Revolving Loans Revolving Loans Fees Fee ----- ----------------- --------------- --------------- ---------------- ---------- I => 2.50 to 1.0 0.75% 1.75% 1.75% 0.50% II < 2.50 to 1.0 but 0.50% 1.50% 1.50% 0.375% => 2.00 to 1.0 III < 2.00 to 1.0 but 0.25% 1.25% 1.25% 0.375% => 1.50 to 1.0 IV < 1.50 to 1.0 but 0% 1.00% 1.00% 0.375% => 1.00 to 1.0 V < 1.00 to 1.0 0% 0.75% 0.75% 0.375%
The Applicable Percentage shall, in each case, be determined and adjusted quarterly on the date (each an "Interest Determination Date") three (3) Business Days after the earlier of the date on which the Borrower provides or is required to provide to the Administrative Agent the quarterly financial information and certifications in accordance with the provisions of Sections 5.1(b) and 5.2(c). Such Applicable Percentage shall be effective from such Interest Determination Date until the next such Interest Determination Date. The initial Applicable Percentages shall be based on Level V until the first Interest Determination Date occurring after the Closing Date. After the Closing Date, if the Borrower shall fail to provide the quarterly financial information and certifications in accordance with the provisions of Sections 5.1(b) and 3 9 5.2(c), the Applicable Percentage from such Interest Determination Date shall, on the date five (5) Business Days after the date by which the Borrower was so required to provide such financial information and certifications to the Administrative Agent and the Lenders, be based on Level I until such time as such information and certifications are provided, whereupon the Level shall be determined by the then current Leverage Ratio. "Attributed Principal Amount" means, on any day, with respect to any Permitted Receivables Financing entered into by any Credit Party, the aggregate amount (with respect to any such transaction, the "Invested Amount") paid to, or borrowed by, such Person as of such date under such Permitted Receivables Financing, minus the aggregate amount received by the applicable Receivables Financier and applied to the reduction of the Invested Amount under such Permitted Receivables Financing. "Bankruptcy Code" shall mean the Bankruptcy Code in Title 11 of the United States Code, as amended, modified, succeeded or replaced from time to time. "Borrower" shall have the meaning set forth in the first paragraph of this Agreement. "Borrowing Date" shall mean, in respect of any Loan, the date such Loan is made. "Business" shall have the meaning set forth in Section 3.10. "Business Day" shall mean a day other than a Saturday, Sunday or other day on which commercial banks in Charlotte, North Carolina or New York, New York are authorized or required by law to close; provided, however, that when used in connection with a rate determination, borrowing or payment in respect of a LIBOR Rate Loan, the term "Business Day" shall also exclude any day on which banks in London, England are not open for dealings in Dollar deposits in the London interbank market. "Capital Lease" shall mean any lease of property, real or personal, the obligations with respect to which are required to be capitalized on a balance sheet of the lessee in accordance with GAAP. "Capital Lease Obligations" shall mean the capitalized lease obligations relating to a Capital Lease determined in accordance with GAAP. "Capital Stock" shall mean (i) in the case of a corporation, capital stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock, (iii) in the case of a partnership, partnership interests (whether general or limited), (iv) in the case of a limited liability company, membership interests and (v) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" shall mean (i) securities issued directly or fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities 4 10 of not more than twelve months from the date of acquisition ("Government Obligations"), (ii) U.S. dollar denominated (or foreign currency fully hedged) time deposits, certificates of deposit, Eurodollar time deposits and Eurodollar certificates of deposit of (y) any domestic commercial bank of recognized standing having capital and surplus in excess of $250,000,000 or (z) any bank whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank being an "Approved Bank"), in each case with maturities of not more than one year from the date of acquisition, (iii) commercial paper and variable or fixed rate notes issued by any Approved Bank (or by the parent company thereof) or any commercial paper or variable rate notes issued by, or guaranteed by any domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody's and maturing within nine months of the date of acquisition, (iv) repurchase agreements with a bank or trust company (including a Lender) or a recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States of America, (v) obligations of any state of the United States or any political subdivision thereof rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody's having maturities of not more than one year, and (vi) auction preferred stock rated in the highest short-term credit rating category by S&P or Moody's. "Change of Control" shall mean (a) any Person or two or more Persons acting in concert (other than Mr. Gregg L. Engles or any other shareholder of the Borrower as of the Closing Date) shall have acquired "beneficial ownership," directly or indirectly, of, or shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of, control over, Voting Stock of the Borrower (or other securities convertible into such Voting Stock, excluding for purposes hereof, the TIPES and/or the debentures issued in connection therewith) representing 20% or more of the combined voting power of all Voting Stock of the Borrower, or (b) during any period of up to 25 consecutive months, commencing after the Closing Date, individuals who at the beginning of such 25 month period were directors of the Borrower (together with any new director whose election by the Borrower's Board of Directors or whose nomination for election by the Borrower's shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the directors of the Borrower then in office. As used herein, "beneficial ownership" shall have the meaning provided in Rule 13d-3 of the Securities and Exchange Commission under the Securities Act of 1934. "Closing Date" shall mean the date of this Agreement. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Collateral" shall mean a collective reference to the collateral which is identified in, and at any time will be covered by, the Security Documents. "Commitment" shall mean the Revolving Commitment, the LOC Commitment and the Swingline Commitment, individually or collectively, as appropriate. 5 11 "Commitment Fee" shall have the meaning set forth in Section 2.4(a). "Commitment Percentage" shall mean the Revolving Commitment Percentage and/or the LOC Commitment Percentage, as appropriate. "Commitment Period" shall mean the period from and including the Closing Date to but not including the Maturity Date. "Commitment Transfer Supplement" shall mean a Commitment Transfer Supplement, substantially in the form of Schedule 9.6(c). "Commonly Controlled Entity" shall mean an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414 of the Code. "Consolidated EBITDA" means, for any period, the sum of (i) Consolidated Net Income for such period, plus (ii) an amount which, in the determination of Consolidated Net Income for such period, has been deducted for (A) Consolidated Interest Expense and interest paid on debentures issued in connection with the TIPES, (B) total federal, state, local and foreign income, value added and similar taxes, (C) depreciation, amortization expense and other non-cash charges, (D) pro forma cost savings add-backs resulting from non-recurring charges related to acquisitions permitted pursuant to Regulation S-X of the Securities Exchange Act of 1934 or as approved by the Agents, and (E) other adjustments to Consolidated EBITDA reasonably acceptable to the Agents. Except as otherwise provided herein, the applicable period shall be for the four consecutive quarters ending as of the date of computation. "Consolidated Interest Expense" means, for any period, all interest expense of the Borrower and its Restricted Subsidiaries other than interest expense associated with any TIPES or the debentures issued in connection therewith, including the interest component under Capital Leases and the implied interest component under Permitted Receivables Financings, plus net amounts payable (or minus net amounts receivable) under Hedging Agreements, minus interest income for such period, in each case as determined in accordance with GAAP. Except as otherwise provided herein, the applicable period shall be for the four consecutive quarters ending as of the date of computation. "Consolidated Net Income" means, for any period, net income (excluding extraordinary items) after taxes for such period of the Borrower and its Restricted Subsidiaries on a consolidated basis, as determined in accordance with GAAP, including net income attributable to Permitted Acquisitions (other than acquisitions of Unrestricted Subsidiaries) after giving effect to such Permitted Acquisitions on a Pro Forma Basis. Except as otherwise provided herein, the applicable period shall be for the four consecutive quarters ending as of the date of computation. "Consolidated Net Worth" shall mean, as at any date, the sum for the Borrower and its Subsidiaries(including minority interests in any Person owned by the Borrower or any of its Subsidiaries), determined on a consolidated basis without duplication in accordance with GAAP, 6 12 of (a) the amount of Capital Stock plus (b) the amount of additional paid in capital plus (c) the amount of retained earnings (or, in the case of any retained earnings deficit, minus the amount of such deficit) plus (d) the aggregate outstanding face amount of TIPES; provided, however, TIPES shall only be included in the calculation of Consolidated Net Worth if the following criteria are met: (i) at least five quarters remain during which the Borrower may defer interest payments on the subordinated debentures related to the TIPES, (ii) if a Default or an Event of Default shall have occurred and be continuing, no interest or principal is paid on the subordinated debentures related to the TIPES and (iii) the then existing Maturity Date is earlier than the date on which the Borrower may no longer defer interest payments on the subordinated debentures related to the TIPES. "Contractual Obligation" shall mean, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound. "Credit Documents" shall mean this Agreement, each of the Notes, any Joinder Agreement, the Letters of Credit, the LOC Documents and the Security Documents. "Credit Party" shall mean any of the Borrower or the Guarantors. "Credit Party Obligations" shall mean, without duplication, (i) all of the obligations of the Credit Parties to the Lenders (including the Issuing Lender) and the Administrative Agent, whenever arising, under this Agreement, the Notes or any of the other Credit Documents (including, but not limited to, any interest accruing after the occurrence of a filing of a petition of bankruptcy under the Bankruptcy Code with respect to any Credit Party, regardless of whether such interest is an allowed claim under the Bankruptcy Code) and (ii) all liabilities and obligations, whenever arising, owing from the Borrower or any of its Restricted Subsidiaries to any Lender, or any Affiliate of a Lender, arising under any Hedging Agreement. "Default" shall mean any of the events specified in Section 7.1, whether or not any requirement for the giving of notice or the lapse of time, or both, or any other condition, has been satisfied. "Defaulting Lender" shall mean, at any time, any Lender that, at such time (a) has failed to make a Loan required pursuant to the terms of this Credit Agreement, including the funding of a Participation Interest in accordance with the terms hereof, (b) has failed to pay to the Administrative Agent or any other Lender an amount owed by such Lender pursuant to the terms of this Credit Agreement, or (c) has been deemed insolvent by its principal regulator or has become subject to a bankruptcy or insolvency proceeding or to a receiver, trustee or similar official. "Dollars" and "$" shall mean dollars in lawful currency of the United States of America. "Domestic Lending Office" shall mean, initially, the office of each Lender designated as such Lender's Domestic Lending Office shown on Schedule 9.2; and thereafter, such other office of such Lender as such Lender may from time to time specify to the Administrative Agent and 7 13 the Borrower as the office of such Lender at which Alternate Base Rate Loans of such Lender are to be made. "Domestic Subsidiary" shall mean any Subsidiary that is organized and existing under the laws of the United States or any state or commonwealth thereof or under the laws of the District of Columbia. "Environmental Claim" shall mean, with respect to any Person, any written notice, claim, demand or other communication (collectively, a "claim") by any other Person alleging or asserting such Person's liability for investigatory costs, cleanup costs, governmental response costs, damages to natural resources or other Property, personal injuries, fines or penalties arising out of, based on or resulting from (a) the presence, or release into the environment, of any Hazardous Material at any location, whether or not owned by such Person, or (b) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. The term "Environmental Claim" shall include, without limitation, any claim by any Governmental Authority for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and any claim by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from the presence of Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Laws" shall mean any and all applicable foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirement of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time be in effect during the term of this Agreement. "Equity Issuance" shall mean any issuance by the Borrower or any of its Restricted Subsidiaries to any Person which is not a Credit Party of (a) shares of its Capital Stock, (b) any shares of its Capital Stock pursuant to the exercise of options or warrants or (c) any shares of its Capital Stock pursuant to the conversion of any debt securities to equity. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" shall mean any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which any Credit Party or any of its Subsidiaries is a member, (ii) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 4l2(c)(l1) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which any Credit Party or any of its Subsidiaries is a member and (iii) which are under common control with any Credit Party or any of its Subsidiaries within the meaning of Section 4001(a)(14) of ERISA. "Eurodollar Reserve Percentage" shall mean for any day, the percentage (expressed as a decimal and rounded upwards, if necessary, to the next higher 1/100th of 1%) which is in effect 8 14 for such day as prescribed by the Federal Reserve Board (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) in respect of Eurocurrency liabilities, as defined in Regulation D of such Board as in effect from time to time, or any similar category of liabilities for a member bank of the Federal Reserve System in New York City. "Event of Default" shall mean any of the events specified in Section 7.1; provided, however, that any requirement for the giving of notice or the lapse of time, or both, or any other condition, has been satisfied. "Excluded Disposition" shall mean the sale, transfer, or other disposition of (a) any motor vehicles or other equipment no longer used or useful in the business of the Borrower or any of its Restricted Subsidiaries, (b) any inventory, materials and other assets in the ordinary course of business and on ordinary business terms, (c) Permitted Investments described in clause (a) of the definition thereof and (d) an Investment Tax Credit. "Extension of Credit" shall mean, as to any Lender, the making of a Loan by such Lender or the issuance of, or participation in, a Letter of Credit by such Lender. "Federal Funds Effective Rate" shall have the meaning set forth in the definition of "Alternate Base Rate". "Fee Letter" shall mean the letter agreement dated October 20, 1999 addressed to the Borrower from the Administrative Agent, as amended, modified or otherwise supplemented. "First Tier Foreign Subsidiary" shall mean any direct Foreign Subsidiary of a Credit Party. "First Union" shall mean First Union National Bank, a national banking association. "Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic Subsidiary. "Funded Debt" shall mean, with respect to any Person, without duplication, (a) all Indebtedness of such Person other than Indebtedness of the types referred to in clause (e), (g), (i) and (m) of the definition of "Indebtedness" set forth in this Section 1.1, (b) all Funded Debt of others of the type referred to in clause (a) above secured by (or for which the holder of such Funded Debt has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of production from, property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (c) all Guaranty Obligations of such Person with respect to Funded Debt of the type referred to in clause (a) above of another Person and (d) Funded Debt of the type referred to in clause (a) above of any partnership or unincorporated joint venture in which such Person is legally obligated or has a reasonable expectation of being liable with respect thereto. 9 15 "GAAP" shall mean generally accepted accounting principles in effect in the United States of America applied on a consistent basis, subject, however, in the case of determination of compliance with the financial covenants set out in Section 5.9 to the provisions of Section 1.3. "Government Acts" shall have the meaning set forth in Section 2.18. "Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantor" shall mean any of the Domestic Subsidiaries identified as a "Guarantor" on the signature pages hereto and the Additional Credit Parties which execute a Joinder Agreement, together with their successors and permitted assigns. "Guaranty" shall mean the guaranty of the Guarantors set forth in Article X. "Guaranty Obligations" means, with respect to any Person, without duplication, any obligations of such Person (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guaranteeing or intended to guarantee any Indebtedness of any other Person in any manner, whether direct or indirect, and including without limitation any obligation, whether or not contingent, (i) to purchase any such Indebtedness or any property constituting security therefor, (ii) to advance or provide funds or other support for the payment or purchase of any such Indebtedness or to maintain working capital, solvency or other balance sheet condition of such other Person (including without limitation keep well agreements, maintenance agreements or similar agreements or arrangements) for the benefit of any holder of Indebtedness of such other Person, (iii) to lease or purchase assets, securities or services primarily for the purpose of assuring the holder of such Indebtedness, or (iv) to otherwise assure or hold harmless the holder of such Indebtedness against loss in respect thereof. The amount of any Guaranty Obligation hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the Indebtedness in respect of which such Guaranty Obligation is made. "Hazardous Material" shall mean, collectively, (a) any petroleum or petroleum products, flammable materials, explosives, radioactive materials, asbestos, urea formaldehyde foam insulation, and transformers or other equipment that contain polychlorinated biphenyls ("PCB's"), (b) any chemicals or other materials or substances that are now or hereafter become defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic substances", "toxic pollutants", "contaminants", "pollutants" or words of similar import under any Environmental Law and (c) any other chemical or other material or substance, exposure to which is now or hereafter prohibited, limited or regulated under any Environmental Law. "Hedging Agreements" shall mean, with respect to any Person, any agreement entered into to protect such Person against fluctuations in interest rates, or currency values, including, without limitation, any interest rate swap, cap or collar agreement or similar arrangement 10 16 between such Person and one or more counterparties, any foreign currency exchange agreement, currency protection agreements, or other interest or exchange rate hedging agreements. "Increased Commitment Date" has the meaning set forth in Section 2.5. "Indebtedness" shall mean, with respect to any Person, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, or upon which interest payments are customarily made, (c) all obligations of such Person under conditional sale or other title retention agreements relating to assets purchased by such Person (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business), (d) all obligations of such Person issued or assumed as the deferred purchase price of assets or services purchased by such Person (other than trade debt incurred in the ordinary course of business and due within six months of the incurrence thereof) which would appear as liabilities on a balance sheet of such Person, (e) all obligations of such Person under take-or-pay or similar arrangements, (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of production from, assets owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (g) all Guaranty Obligations of such Person with respect to Indebtedness of another Person, (h) the principal portion of all obligations of such Person under Capital Leases, (i) all obligations of such Person under Hedging Agreements, (j) the maximum amount of all standby letters of credit issued or bankers' acceptances facilities created for the account of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed), (k) all preferred Capital Stock issued by such Person and which by the terms thereof could be (at the request of the holders thereof or otherwise) subject to mandatory sinking fund payments, redemption or other acceleration, (l) the principal balance outstanding under any synthetic lease, tax retention operating lease, accounts receivable securitization program, off-balance sheet loan or similar off-balance sheet financing product, including without limitation, the outstanding Attributed Principal Amount under any Permitted Receivables Financing, and (m) the Indebtedness of any partnership or unincorporated joint venture in which such Person is a general partner or a joint venturer; provided, however, it is understood and agreed that Indebtedness shall not include the TIPES or debentures issued by the Borrower or its Subsidiaries in connection therewith. "Insolvency" shall mean, with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of such term as used in Section 4245 of ERISA. "Insolvent" shall mean being in a condition of Insolvency. "Intellectual Property" has the meaning set forth in Section 3.16. "Interest Coverage Ratio" means, with respect to the Borrower and its Restricted Subsidiaries on a consolidated basis for the twelve month period ending on the last day of any fiscal quarter of the Borrower, the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest Expense. Notwithstanding the foregoing, for purposes of calculating the Interest Coverage Ratio of the Borrower and its Restricted Subsidiaries for the first three complete fiscal quarters to occur after 11 17 the Closing Date, the interest component thereof shall be determined by annualizing such component such that for the first complete fiscal quarter to occur after the Closing Date such component would be multiplied by four (4), the first two complete fiscal quarters would be multiplied by two (2) and the first three complete fiscal quarters would be multiplied by one and one-third (1 1/3). "Interest Payment Date" shall mean (a) as to any Alternate Base Rate Loan or Swingline Loan, the last day of each March, June, September and December and on the applicable Maturity Date, (b) as to any LIBOR Rate Loan having an Interest Period of three months or less, the last day of such Interest Period, and (c) as to any LIBOR Rate Loan having an Interest Period longer than three months, the day which is three months after the first day of such Interest Period and the last day of such Interest Period. "Interest Period" shall mean, with respect to any LIBOR Rate Loan, (i) initially, the period commencing on the Borrowing Date or conversion date, as the case may be, with respect to such LIBOR Rate Loan and ending one, two, three or six months thereafter, as selected by the Borrower in the Notice of Borrowing or Notice of Conversion given with respect thereto; and (ii) thereafter, each period commencing on the last day of the immediately preceding Interest Period applicable to such LIBOR Rate Loan and ending one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that the foregoing provisions are subject to the following: (A) if any Interest Period pertaining to a LIBOR Rate Loan would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (B) any Interest Period pertaining to a LIBOR Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the relevant calendar month; (C) if the Borrower shall fail to give notice as provided above, the Borrower shall be deemed to have selected an Alternate Base Rate Loan to replace the affected LIBOR Rate Loan; (D) no Interest Period shall extend beyond the Maturity Date; and 12 18 (E) no more than six (6) LIBOR Rate Loans may be in effect at any time. For purposes hereof, LIBOR Rate Loans with different Interest Periods shall be considered as separate LIBOR Rate Loans, even if they shall begin on the same date and have the same duration, although borrowings, extensions and conversions may, in accordance with the provisions hereof, be combined at the end of existing Interest Periods to constitute a new LIBOR Rate Loan with a single Interest Period. "Investment Tax Credit" shall mean an investment tax credit to which the Parent Borrower or any of its Restricted Subsidiaries may be entitled pursuant to the Puerto Rico Agricultural Tax Incentives Act of 1995. "Issuing Lender" shall mean First Union. "Issuing Lender Fees" shall have the meaning set forth in Section 2.4(c). "Joinder Agreement" shall mean a Joinder Agreement substantially in the form of Schedule 5.10, executed and delivered by an Additional Credit Party in accordance with the provisions of Section 5.10. "Lender" shall have the meaning set forth in the first paragraph of this Agreement. "Letters of Credit" shall mean any letter of credit issued by the Issuing Lender pursuant to the terms hereof, as such Letters of Credit may be amended, modified, extended, renewed or replaced from time to time. "Letter of Credit Fee" shall have the meaning set forth in Section 2.4(b). "Leverage Ratio" shall mean, with respect to the Borrower and its Restricted Subsidiaries on a consolidated basis for the twelve month period ending on the last day of any fiscal quarter, the ratio of (a) Funded Debt of the Borrower and its Restricted Subsidiaries on a consolidated basis on the last day of such period to (b) Consolidated EBITDA for such period. "LIBOR" shall mean, for any LIBOR Rate Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the term "LIBOR" shall mean, for any LIBOR Rate Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%). If, for any reason, neither of such rates is available, then "LIBOR" shall mean the rate per annum at which, as determined by the 13 19 Administrative Agent, Dollars in an amount comparable to such LIBOR Rate Loan are being offered to leading banks at approximately 11:00 A.M. London time, two (2) Business Days prior to the commencement of the applicable Interest Period for settlement in immediately available funds by leading banks in the London interbank market for a period equal to the Interest Period selected. "LIBOR Lending Office" shall mean, initially, the office of each Lender designated as such Lender's LIBOR Lending Office shown on Schedule 9.2; and thereafter, such other office of such Lender as such Lender may from time to time specify to the Administrative Agent and the Borrower as the office of such Lender at which the LIBOR Rate Loans of such Lender are to be made. "LIBOR Rate" shall mean a rate per annum (rounded upwards, if necessary, to the next higher 1/100th of 1%) determined by the Administrative Agent pursuant to the following formula: LIBOR Rate = LIBOR ------------------------------------ 1.00 - Eurodollar Reserve Percentage "LIBOR Rate Loan" shall mean Loans the rate of interest applicable to which is based on the LIBOR Rate. "Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Capital Lease having substantially the same economic effect as any of the foregoing). "Loan" shall mean a Revolving Loan and/or a Swingline Loan, as appropriate. "LOC Commitment" shall mean the commitment of the Issuing Lender to issue Letters of Credit and with respect to each Lender, the commitment of such Lender to purchase participation interests in the Letters of Credit up to such Lender's LOC Committed Amount as specified in Schedule 2.1(a), as such amount may be reduced from time to time in accordance with the provisions hereof. "LOC Commitment Percentage" shall mean, for each Lender, the percentage identified as its LOC Commitment Percentage on Schedule 2.1(a), as such percentage may be modified in connection with any assignment made in accordance with the provisions of Section 9.6(c). "LOC Committed Amount" shall mean, collectively, the aggregate amount of all of the LOC Commitments of the Lenders to issue and participate in Letters of Credit as referenced in Section 2.3 and, individually, the amount of each Lender's LOC Commitment as specified in Schedule 2.1(a). 14 20 "LOC Documents" shall mean, with respect to any Letter of Credit, such Letter of Credit, any amendments thereto, any documents delivered in connection therewith, any application therefor, and any agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (i) the rights and obligations of the parties concerned or (ii) any collateral security for such obligations. "LOC Obligations" shall mean, at any time, the sum of (i) the maximum amount which is, or at any time thereafter may become, available to be drawn under Letters of Credit then outstanding, assuming compliance with all requirements for drawings referred to in such Letters of Credit plus (ii) the aggregate amount of all drawings under Letters of Credit honored by the Issuing Lender but not theretofore reimbursed. "Mandatory Borrowing" shall have the meaning set forth in Section 2.2(b)(ii) or Section 2.3(e), as the context may require. "Material Adverse Effect" shall mean a material adverse effect on (a) the business, operations, property, prospects or financial condition of the Borrower and its Restricted Subsidiaries taken as a whole, (b) the ability of the Borrower and Guarantors, taken as a whole, to perform their obligations, when such obligations are required to be performed, under this Agreement, any of the Notes or any other Credit Document or (c) the validity or enforceability of this Agreement, any of the Notes or any of the other Credit Documents or the rights or remedies of the Administrative Agent or the Lenders hereunder or thereunder. "Material Contract" shall mean any contract or other arrangement, whether written or oral, to which the Borrower or any of its Restricted Subsidiaries is a party as to which the breach, nonperformance, cancellation or failure to renew by any party thereto could reasonably be expected to have a Material Adverse Effect. "Material Subsidiary" shall mean any Restricted Subsidiary (other than a Receivables Financing SPC) of a Credit Party with assets of $100,000 or more; provided, however, if the aggregate assets of Restricted Subsidiaries (other than Receivables Financing SPCs) that are not Material Subsidiaries at any time exceeds $500,000, the Borrower shall designate one or more of such Restricted Subsidiaries as Material Subsidiaries such that, after giving effect to such designations, the aggregate assets of Restricted Subsidiaries (other than Receivables Financing SPCs) that are not Material Subsidiaries shall be less than $500,000. "Maturity Date" shall mean the fifth anniversary of the Closing Date. "Merger Agreement" shall mean that certain Amended and Restated Contribution Agreement, Plan of Merger and Purchase Agreement, dated as of November 12, 1999, among the Borrower, Suiza Socal Holdings, Inc., Suiza GTL Holdings, Inc., LOS Holdings, Inc., Suiza Fluid Dairy Group Holdings, Inc., Suiza Management Corporation, Suiza Fluid Dairy Group GP, LLC, the Suiza companies identified therein, Suiza GTL, LLC, Suiza Socal, LLC, Robinson Dairy, Inc., Dairy Farmers of America, Inc., DFA Investment Company, Southern Foods Group, L.P., SFG Management Limited Liability Company, SFG Capital Corporation, Suiza Fluid Dairy Group, L.P., Pete Schenkel and, for certain limited purposes, Mid-Am Capital, L.L.C. 15 21 "Moody's" shall mean Moody's Investors Service, Inc. "Multiemployer Plan" shall mean a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Note" or "Notes" shall mean the Revolving Notes and/or the Swingline Note, collectively, separately or individually, as appropriate. "Notice of Borrowing" shall mean the written notice of borrowing as referenced and defined in Section 2.1(b)(i). "Notice of Conversion" shall mean the written notice of extension or conversion as referenced and defined in Section 2.9. "Obligations" shall mean, collectively, Loans and LOC Obligations. "Participant" shall have the meaning set forth in Section 9.6(b). "Participation Interest" shall mean the purchase by a Lender of a participation interest in Swingline Loans as provided in Section 2.2(b)(ii) or in Letters of Credit as provided in Section 2.3. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "Permitted Acquisition" shall mean an acquisition by any Credit Party which (i) is an acquisition of a Person or assets of a Person in the same or a similar line of business, (ii) is in an amount not greater than $100,000,000 in total cash consideration (after deducting cash on the balance sheet of the Person acquired or included in the assets being acquired) for any single acquisition; provided, however, the total cash consideration (after deducting cash on the balance sheet of the Person acquired or included in the assets being acquired) for any single acquisition may exceed $100,000,000 with the consent of the Required Lenders or if the funds for such acquisition are provided by SFDG by a loan and the assets of the entity acquired or the assets acquired are transferred to SFDG to extinguish such loan or in exchange for a preferred ownership interest with terms matching such loan's terms, (iii) is approved by the Board of Directors or the requisite shareholders of the Person being acquired or Person transferring the assets being acquired, (iv) if an acquisition of Capital Stock of a Person, at least 51% of all issued and outstanding Capital Stock of such Person is acquired, and (v) after giving effect to such acquisition on a Pro Forma Basis, the Borrower and its Restricted Subsidiaries are in compliance with each of the financial covenants set forth in Section 5.9. "Permitted Investments" shall mean: (a) cash or Cash Equivalents; 16 22 (b) investments outstanding as of the Closing Date and identified in Schedule 1.1(b) or other investments not exceeding in acquisition cost $5,000,000 in the aggregate; (c) investments of any Subsidiary of the Borrower in the Borrower, investments of any Restricted Subsidiary of the Borrower in any other Restricted Subsidiary of the Borrower or investments by the Borrower in any of its Restricted Subsidiaries; (d) Permitted Acquisitions; (e) operating deposit accounts with depository institutions; (f) Hedging Agreements; (g) (i) investments permitted under Section 6.4(b) hereof and (ii) indemnities executed in connection with the sale of Investment Tax Credits; (h) investments by the Borrower and its Subsidiaries in the Capital Stock of their Subsidiaries to the extent outstanding as of the Closing Date; (i) loans and advances to employees in the ordinary course of business not exceeding $4,000,000 in the aggregate; (j) deposits to secure bids, tenders, utilities, vendors, leases, licenses, statutory obligations, surety and appeal bonds and other deposits of like nature arising in the ordinary course of business; (k) Investments by any Credit Party in a Receivables Financing SPC made in connection with a Permitted Receivables Financing; (l) additional investments up to but not exceeding $50,000,000 in the aggregate during each fiscal year, including investments in Unrestricted Subsidiaries; provided, however, that notwithstanding the foregoing, the Borrower shall be permitted to make additional investments in Unrestricted Subsidiaries during any fiscal year in an amount equal to the aggregate amount of dividends or other distributions received by the Borrower from Unrestricted Subsidiaries during such fiscal year; (m) additional investments in SFDG of assets of entities or assets acquired with proceeds of loans from SFDG or with the Capital Stock of the Borrower; and (n) investments by the Borrower or any of its Restricted Subsidiaries, each of which (i) existed before the time of acquisition of the Person or assets of the Person who made such investment and (ii) was not made in anticipation of such acquisition. As used herein, "investment" means all investments, in cash or by delivery of assets made, directly or indirectly in, to or from any Person, whether by acquisition of shares of Capital 17 23 Stock, property, assets, indebtedness or other obligations or securities or by loan advance, capital contribution or otherwise. "Permitted Liens" shall mean: (a) Liens created by or otherwise existing, under or in connection with this Agreement or the other Credit Documents in favor of the Lenders; (b) Liens in connection with Hedging Agreements, but only (i) to the extent such Liens secure obligations under Hedging Agreements with any Lender or any Affiliate of a Lender, (ii) to the extent such Liens are on the same collateral as to which the Administrative Agent on behalf of the Lenders also has a Lien and (iii) if the provider of any such Hedging Agreement and the Lenders shall share pari passu in the collateral subject to such Liens; (c) Liens in existence on the Closing Date and listed on Schedule 1.1(c); (d) Liens imposed by any Governmental Authority for taxes, assessments or charges not yet delinquent or that are being contested in good faith and by appropriate proceedings if, unless the amount thereof is not material with respect to it or its financial condition, adequate reserves with respect thereto are maintained on the books of the Borrower or the affected Subsidiaries, as the case may be, in accordance with GAAP; (e) carriers', warehousemen's, mechanics', materialmen's, landlord's, repairmen's or other like Liens arising in the ordinary course of business that are not overdue for a period of more than 30 days or that are being contested in good faith and by appropriate proceedings; (f) Liens securing judgments but only to the extent for an amount and for a period not resulting in an Event of Default under Section 7.1(f) hereof; (g) pledges or deposits under worker's compensation, unemployment insurance and other social security legislation; (h) deposits or pledges to secure the performance of bids, trade contracts (other than for Indebtedness), leases, licenses, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (i) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business and encumbrances consisting of zoning restrictions, easements, licenses, restrictions on the use of Property or minor imperfections in title thereto that, in the aggregate, are not material in amount, and that do not in any case materially detract from the value of the Property subject thereto or interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries; 18 24 (j) Liens upon personal Property acquired after the date hereof (by purchase, construction or otherwise), or upon other assets acquired after the date hereof as a Capital Expenditure, by the Borrower or any of its Subsidiaries, each of which Liens either (i) existed on such assets before the time of its acquisition and was not created in anticipation thereof or (ii) was created solely for the purpose of securing Indebtedness representing, or incurred to finance, refinance or refund, the cost of such assets; provided that (A) no such Lien shall extend to or cover any assets of the Borrower or such Subsidiary other than the assets so acquired, (B) the principal amount of Indebtedness secured by any such Lien shall at no time exceed the fair market value (as determined in good faith by a Responsible Officer of the Borrower) of such assets at the time they were acquired, and (C) the principal amount of all Indebtedness (other than Indebtedness permitted by Section 6.1(c) hereof) secured by such Liens shall not exceed $50,000,000 in the aggregate; (k) Liens upon real Property heretofore leased or leased after the date hereof (under operating or Capital Leases) in the ordinary course of business by the Borrower or any of its Subsidiaries in favor of the lessor created at the inception of the lease transaction, securing obligations of the Borrower or any of its Subsidiaries under or in respect of such lease and extending to or covering only the Property subject to such lease and improvements thereon; (l) Liens of sellers or creditors of sellers of farm products encumbering such farm products when sold to any of the Borrower or its Subsidiaries pursuant to the Food Security Act of 1985 or pursuant to similar state laws to the extent such Liens may be deemed to extend to the assets of such Person; (m) protective Uniform Commercial Code filings with respect to personal Property leased by, or consigned to, any of the Borrower or its Subsidiaries; (n) Liens securing Indebtedness of up to $50,000,000 in the aggregate principal amount at any one time outstanding which Indebtedness is permitted under Section 6.1(f) hereof; (o) Liens upon assets of Unrestricted Subsidiaries; (p) Liens in favor of a Receivables Financing SPC or Receivables Financier created or deemed to exist in connection with a Permitted Receivables Financing (including any related filings of any financing statements), but only to the extent that any such Lien relates to the applicable Transferred Assets actually sold, contributed, financed or otherwise conveyed or pledged pursuant to such transaction; (q) any extension, renewal or replacement of the foregoing; provided, however, that the Liens permitted under this clause (q) shall not be spread to cover any additional Indebtedness or assets; and 19 25 (r) Liens securing Indebtedness to the extent such Indebtedness is permitted pursuant to Section 6.1(g). "Permitted Receivables Financing" shall mean any one or more receivables financings in which (a) any Credit Party (i) sells (as determined in accordance with GAAP) any accounts receivable, notes receivable, rights to future lease payments or residuals (collectively, together with certain property relating thereto and the right to collections thereon, being the "Transferred Assets") to any Person that is not a Subsidiary or Affiliate of the Borrower (with respect to any such transaction, the "Receivables Financier"), (ii) borrows from such Receivables Financier and secures such borrowings by a pledge of such Transferred Assets and/or (iii) otherwise finances its acquisition of such Transferred Assets and, in connection therewith, conveys an interest in such Transferred Assets to the Receivables Financier or (b) any Credit Party sells, conveys or otherwise contributes any Transferred Assets to a Receivables Financing SPC, which Receivables Financing SPC then (i) sells (as determined in accordance with GAAP) any such receivables (or an interest therein) to any Receivables Financier, (ii) borrows from such Receivables Financier and secures such borrowings by a pledge of such receivables or (iii) otherwise finances its acquisition of such receivables and, in connection therewith, conveys an interest in such receivables to the Receivables Financier, provided that (A) the aggregate Attributed Principal Amount for all such receivables financings shall not at any time exceed $100,000,000, (B) such receivables financing shall not involve any recourse to any Credit Party for any reason other than (x) repurchases of non-eligible receivables or (y) indemnifications for losses other than credit losses related to the receivables sold in such financing, (C) the Administrative Agent shall be reasonably satisfied with the structure of and documentation for any such transaction and that the terms of such transaction, including the discount at which receivables are sold, the term of the commitment of the Receivables Financier thereunder and any termination events, shall be (in the good faith understanding of the Administrative Agent) consistent with those prevailing in the market for similar transactions involving a receivables originator/servicer of similar credit quality and a receivables pool of similar characteristics and (D) the documentation for such transaction shall not be amended or modified without the prior written approval of the Administrative Agent. "Person" shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan" shall mean, at any particular time, any employee benefit plan which is covered by Title IV of ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Pledge Agreement" shall mean the Pledge Agreement dated as of the Closing Date given by the Borrower and the other Credit Parties to the Administrative Agent, as amended, modified or supplemented from time to time in accordance with its terms. "Prime Rate" shall have the meaning set forth in the definition of Alternate Base Rate. 20 26 "Pro Forma Basis" shall mean, with respect to any Permitted Acquisition or any dividend made pursuant to Section 6.10(f), that such Permitted Acquisition or dividend shall be deemed to have occurred or made, as applicable, as of the first day of the four fiscal-quarter period ending as of the most recent fiscal quarter end preceding the date of such Permitted Acquisition or dividend. "Property" shall mean any tangible property or assets, whether real or personal. "Purchasing Lenders" shall have the meaning set forth in Section 9.6(c). "Real Properties" shall have the meaning set forth in Section 3.10(a). "Receivables Financier" shall have the meaning set forth in the definition of Permitted Receivables Financing. "Receivables Financing SPC" shall mean, in respect of any Permitted Receivables Financing, any Subsidiary or Affiliate of the Borrower to which any Credit Party sells, contributes or otherwise conveys any Transferred Assets in connection with such Permitted Receivables Financing. "Register" shall have the meaning set forth in Section 9.6(d). "Reorganization" shall mean, with respect to any Multiemployer Plan, the condition that such Plan is in reorganization within the meaning of such term as used in Section 4241 of ERISA. "Reportable Event" shall mean any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty-day notice period is waived under PBGC Reg. ss.4043. "Required Lenders" shall mean Lenders holding in the aggregate not less than 51% of all Revolving Loans and LOC Obligations then outstanding at such time plus the aggregate unused Revolving Commitments at such time (treating for purposes hereof in the case of Swingline Loans and LOC Obligations, in the case of the Swingline Lender and the Issuing Lender, only the portion of the Swingline Loans and the LOC Obligations of the Swingline Lender and the Issuing Lender, respectively, which is not subject to the Participation Interests of the other Lenders and, in the case of the Lenders other than the Swingline Lender and the Issuing Lender, the Participation Interests of such Lenders in Swingline Loans and LOC Obligations hereunder as direct Obligations of such Lenders); provided, however, that if any Lender shall be a Defaulting Lender at such time, then there shall be excluded from the determination of Required Lenders, Obligations (including Participation Interests) owing to such Defaulting Lender and such Defaulting Lender's Commitments or, after termination of the Commitments, the principal balance of the Obligations owing to such Defaulting Lender. "Requirement of Law" shall mean, as to any Person, the Certificate of Incorporation and By-laws or other organizational or governing documents of such Person, and each law, treaty, 21 27 rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer" of any Person shall mean the President, the Chief Executive Officer, the Chief Financial Officer or the Vice President/Treasurer of such Person. "Restricted Payment" shall mean (a) any dividend or other distribution, direct or indirect, on account of any shares of any class of Capital Stock of the Borrower or any of its Restricted Subsidiaries, now or hereafter outstanding, (b) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of Capital Stock of the Borrower or any of its Restricted Subsidiaries, now or hereafter outstanding, or (c) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of Capital Stock of the Borrower or any of its Restricted Subsidiaries, now or hereafter outstanding. "Restricted Subsidiaries" shall mean the Subsidiaries of the Borrower other than the Unrestricted Subsidiaries. "Revolving Commitment" shall mean, with respect to each Lender, the commitment of such Lender to make Revolving Loans in an aggregate principal amount at any time outstanding up to such Lender's Revolving Committed Amount as specified in Schedule 2.1(a), as such amount may be reduced from time to time in accordance with the provisions hereof or in connection with any assignment made in accordance with the provisions of Section 9.6(c). "Revolving Commitment Percentage" shall mean, for each Lender, the percentage identified as its Revolving Commitment Percentage on Schedule 2.1(a), as such percentage may be modified in connection with any assignment made in accordance with the provisions of Section 9.6(c). "Revolving Committed Amount" shall mean, collectively, the aggregate amount of all Revolving Commitments as referenced in Section 2.1(a), as such amount may be increased or reduced from time to time in accordance with the provisions hereof, and, individually, the amount of each Lender's Revolving Commitment as specified on Schedule 2.1(a), as such amount may be reduced from time to time in accordance with the provisions hereof or in connection with any assignment made in accordance with the provisions of Section 9.6(c). "Revolving Loan" shall have the meaning set forth in Section 2.1. "Revolving Note" or "Revolving Notes" shall mean the promissory notes of the Borrower in favor of each of the Lenders evidencing the Revolving Loans provided pursuant to Section 2.1(d), individually or collectively, as appropriate, as such promissory notes may be amended, modified, supplemented, extended, renewed or replaced from time to time. "S&P" shall mean Standard & Poor's Ratings Group, a division of McGraw Hill, Inc. 22 28 "SEC" shall mean the Securities and Exchange Commission or any successor thereto. "Security Documents" shall mean the Pledge Agreement and such other documents executed and delivered in connection with the attachment and perfection of the Administrative Agent's security interests and liens arising thereunder, including, without limitation, UCC financing statements. "SFDG" shall mean Suiza Fluid Dairy Group, L.P., a Delaware limited partnership and Subsidiary of Borrower. "Single Employer Plan" shall mean any Plan which is not a Multiemployer Plan. "Subsidiary" shall mean, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "Swingline Commitment" shall mean the commitment of the Swingline Lender to make Swingline Loans in an aggregate principal amount at any time outstanding up to the Swingline Committed Amount, and the commitment of the Lenders to purchase participation interests in the Swingline Loans as provided in Section 2.2(b)(ii), as such amounts may be reduced from time to time in accordance with the provisions hereof. "Swingline Committed Amount" shall mean the amount of the Swingline Lender's Swingline Commitment as specified in Section 2.2(a). "Swingline Lender" shall mean First Union, in its capacity as such. "Swingline Loan" or "Swingline Loans" shall have the meaning set forth in Section 2.2(a). "Swingline Note" shall mean the promissory note of the Borrower in favor of the Swingline Lender evidencing the Swingline Loans provided pursuant to Section 2.2(d), as such promissory note may be amended, modified, supplemented, extended, renewed or replaced from time to time. "Taxes" shall have the meaning set forth in Section 2.17. "TIPES" shall mean the 5-1/2% Trust Convertible Preferred Securities issued by Suiza Capital Trust II, a Delaware statutory business trust, in accordance with the terms and provisions of the Amended and Restated Declaration of Trust dated as of March 24, 1998 among the 23 29 Borrower, as Depositor, Wilmington Trust Company, as Delaware Trustee, Wilmington Trust Company, as Property Trustee, Tracy L. Noll, J. Michael Lewis, and Joseph B. Armes, each an Administrative Trustee and the Holders (as defined therein). "Tranche" shall mean the collective reference to LIBOR Rate Loans whose Interest Periods begin and end on the same day. A Tranche may sometimes be referred to as a "LIBOR Tranche". "Transfer Effective Date" shall have the meaning set forth in each Commitment Transfer Supplement. "Transferred Assets" shall have the meaning set forth in the definition of Permitted Receivables Financing. "2.17 Certificate" shall have the meaning set forth in Section 2.17. "Type" shall mean, as to any Loan, its nature as an Alternate Base Rate Loan, LIBOR Rate Loan or Swingline Loan, as the case may be. "Unrestricted Subsidiaries" shall mean (a) Suiza Fluid Dairy Group GP, LLC, Suiza Fluid Dairy Group Holdings, Inc., Suiza Fluid Dairy Group, L.P. and their respective Subsidiaries, (b) Continental Can Company and its Subsidiaries, (c) Dixie Holding, Inc. and its Subsidiaries, (d) Ferembal S.A. and its Subsidiaries, (e) Franklin Plastics, Inc. and its Subsidiaries, (f) Lockbart Realty Corp. and its Subsidiaries, (g) Viatech Espana SA and its Subsidiaries and (h) any other Subsidiary of the Borrower designated as such in writing to the Administrative Agent. "Voting Stock" means, with respect to any Person, Capital Stock issued by such Person the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of such a contingency. "Year 2000 Compliant" shall have the meaning set forth in Section 3.25. SECTION 1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the Notes or other Credit Documents or any certificate or other document made or delivered pursuant hereto. (b) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. 24 30 (c) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 1.3 ACCOUNTING TERMS. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP applied on a basis consistent with the most recent audited consolidated financial statements of the Borrower delivered to the Lenders; provided that, if the Borrower notifies the Administrative Agent that it wishes to amend any covenant in Section 5.9 to eliminate the effect of any change in GAAP on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Lenders wish to amend Section 5.9 for such purpose), then the Credit Parties' compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Lenders. The Borrower shall deliver to the Administrative Agent and each Lender at the same time as the delivery of any annual or quarterly financial statements given in accordance with the provisions of Section 5.1, (i) a description in reasonable detail of any material change in the application of accounting principles employed in the preparation of such financial statements from those applied in the most recently preceding quarterly or annual financial statements as to which no objection shall have been made in accordance with the provisions above and (ii) a reasonable estimate of the effect on the financial statements on account of such changes in application. ARTICLE II THE LOANS; AMOUNT AND TERMS SECTION 2.1 REVOLVING LOANS. (a) Revolving Commitment. During the Commitment Period, subject to the terms and conditions hereof, each Lender severally agrees to make revolving credit loans ("Revolving Loans") to the Borrower from time to time for the purposes hereinafter set forth; provided, however, that (i) with regard to each Lender individually, the sum of such Lender's share of outstanding Revolving Loans plus such Lender's Revolving Commitment Percentage of Swingline Loans plus such Lender's LOC Commitment Percentage of LOC Obligations shall not exceed such Lender's Revolving Commitment Percentage of the aggregate Revolving Committed Amount and (ii) with regard to the Lenders collectively, the sum of the aggregate amount of outstanding Revolving Loans plus Swingline Loans plus LOC Obligations shall not exceed the Revolving Committed Amount. For purposes hereof, the aggregate amount available hereunder shall be THREE HUNDRED MILLION DOLLARS ($300,000,000) (as such aggregate maximum amount may be increased or reduced from time to time as provided in Section 25 31 2.5, the "Revolving Committed Amount"). Revolving Loans may consist of Alternate Base Rate Loans or LIBOR Rate Loans, or a combination thereof, as the Borrower may request, and may be repaid and reborrowed in accordance with the provisions hereof. LIBOR Rate Loans shall be made by each Lender at its LIBOR Lending Office and Alternate Base Rate Loans at its Domestic Lending Office. (b) Revolving Loan Borrowings. (i) Notice of Borrowing. The Borrower shall request a Revolving Loan borrowing by written notice (or telephone notice promptly confirmed in writing which confirmation may be by fax) to the Administrative Agent not later than 1:30 P.M. (Charlotte, North Carolina time) on the date of requested borrowing in the case of Alternate Base Rate Loans, and on the third Business Day prior to the date of the requested borrowing in the case of LIBOR Rate Loans. Each such request for borrowing shall be irrevocable and shall specify (A) that a Revolving Loan is requested, (B) the date of the requested borrowing (which shall be a Business Day), (C) the aggregate principal amount to be borrowed, (D) whether the borrowing shall be comprised of Alternate Base Rate Loans, LIBOR Rate Loans or a combination thereof, and if LIBOR Rate Loans are requested, the Interest Period(s) therefor. A form of Notice of Borrowing (a "Notice of Borrowing") is attached as Schedule 2.1(b)(i). If the Borrower shall fail to specify in any such Notice of Borrowing (I) an applicable Interest Period in the case of a LIBOR Rate Loan, then such notice shall be deemed to be a request for an Interest Period of one month, or (II) the type of Revolving Loan requested, then such notice shall be deemed to be a request for an Alternate Base Rate Loan hereunder. The Administrative Agent shall give notice to each Lender promptly upon receipt of each Notice of Borrowing, the contents thereof and each such Lender's share thereof. All Revolving Loans made on the Closing Date shall bear interest at the Alternate Base Rate until three (3) Business Days after the Closing Date. (ii) Advances. Each Lender will make its Revolving Commitment Percentage of each Revolving Loan borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in Schedule 9.2, or at such other office as the Administrative Agent may designate in writing, by 4:00 P.M. (Charlotte, North Carolina time) on the date specified in the applicable Notice of Borrowing in Dollars and in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent by crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. (c) Repayment. The principal amount of all Revolving Loans shall be due and payable in full on the Maturity Date. 26 32 (d) Revolving Notes. Each Lender's Revolving Commitment Percentage of the Revolving Loans shall be evidenced by a duly executed promissory note of the Borrower to such Lender in substantially the form of Schedule 2.1(d). SECTION 2.2 SWINGLINE LOAN SUBFACILITY. (a) Swingline Commitment. During the Commitment Period, subject to the terms and conditions hereof, the Swingline Lender, in its individual capacity, agrees to make certain revolving credit loans to the Borrower (each a "Swingline Loan" and, collectively, the "Swingline Loans") for the purposes hereinafter set forth; provided, however, (i) the aggregate amount of Swingline Loans outstanding at any time shall not exceed TEN MILLION DOLLARS ($10,000,000) (the "Swingline Committed Amount"), and (ii) the sum of the aggregate amount of outstanding Revolving Loans plus Swingline Loans plus LOC Obligations shall not exceed the Revolving Committed Amount. Swingline Loans hereunder may be repaid and reborrowed in accordance with the provisions hereof. (b) Swingline Loan Borrowings. (i) Notice of Borrowing and Disbursement. The Swingline Lender will make Swingline Loans available to the Borrower on any Business Day upon request made by the Borrower not later than 4:00 P.M. (Charlotte, North Carolina time) on such Business Day. A request for a Swingline Loan borrowing shall be made in the form of a Notice of Borrowing with appropriate modifications. Swingline Loan borrowings hereunder shall be made in minimum amounts of $100,000 and integral multiples of $100,000 in excess thereof. (ii) Repayment of Swingline Loans. Each Swingline Loan borrowing shall be due and payable on the Maturity Date. The Swingline Lender may, at any time, in its sole discretion, by written notice to the Borrower and the Administrative Agent, demand repayment of its Swingline Loans by way of a Revolving Loan borrowing, in which case the Borrower shall be deemed to have requested a Revolving Loan borrowing comprised entirely of Alternate Base Rate Loans in the amount of such Swingline Loans; provided, however, that, in the following circumstances, any such demand shall also be deemed to have been given one Business Day prior to each of (i) the Maturity Date, (ii) the occurrence of any Event of Default described in Section 7.1(e), (iii) upon acceleration of the Credit Party Obligations hereunder, whether on account of an Event of Default described in Section 7.1(e) or any other Event of Default, and (iv) the exercise of remedies in accordance with the provisions of Section 7.2 hereof (each such Revolving Loan borrowing made on account of any such deemed request therefor as provided herein being hereinafter referred to as a "Mandatory Borrowing"). Each Lender hereby irrevocably agrees to make such Revolving Loans promptly upon any such request or deemed request on account of each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the same such date notwithstanding (I) the amount of Mandatory 27 33 Borrowing may not comply with the minimum amount for borrowings of Revolving Loans otherwise required hereunder, (II) whether any conditions specified in Section 4.2 are then satisfied, (III) whether a Default or an Event of Default then exists, (IV) failure of any such request or deemed request for Revolving Loans to be made by the time otherwise required in Section 2.1(b)(i), (V) the date of such Mandatory Borrowing, or (VI) any reduction in the Revolving Committed Amount or termination of the Revolving Commitments immediately prior to such Mandatory Borrowing or contemporaneously therewith. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to the Borrower), then each Lender hereby agrees that it shall forthwith purchase (as of the date the Mandatory Borrowing would otherwise have occurred, but adjusted for any payments received from the Borrower on or after such date and prior to such purchase) from the Swingline Lender such participations in the outstanding Swingline Loans as shall be necessary to cause each such Lender to share in such Swingline Loans ratably based upon its respective Revolving Commitment Percentage (determined before giving effect to any termination of the Commitments pursuant to Section 7.2), provided that (A) all interest payable on the Swingline Loans shall be for the account of the Swingline Lender until the date as of which the respective participation is purchased, and (B) at the time any purchase of participations pursuant to this sentence is actually made, the purchasing Lender shall be required to pay to the Swingline Lender interest on the principal amount of such participation purchased for each day from and including the day upon which the Mandatory Borrowing would otherwise have occurred to but excluding the date of payment for such participation, at the rate equal to, if paid within two (2) Business Days of the date of the Mandatory Borrowing, the Federal Funds Effective Rate, and thereafter at a rate equal to the Alternate Base Rate. (c) Interest on Swingline Loans. Subject to the provisions of Section 2.8(b), Swingline Loans shall bear interest at a per annum rate equal to the Alternate Base Rate plus the Applicable Percentage for Revolving Loans that are Alternate Base Rate Loans. Interest on Swingline Loans shall be payable in arrears on each Interest Payment Date. (d) Swingline Note. The Swingline Loans shall be evidenced by a duly executed promissory note of the Borrower to the Swingline Lender in the original amount of the Swingline Committed Amount and substantially in the form of Schedule 2.2(d). SECTION 2.3 LETTER OF CREDIT SUBFACILITY. (a) Issuance. Subject to the terms and conditions hereof and of the LOC Documents, if any, and any other terms and conditions which the Issuing Lender may reasonably require, during the Commitment Period the Issuing Lender shall issue, and the Lenders shall participate in, Letters of Credit for the account of the Borrower from time to time upon request in a form acceptable to the Issuing Lender; provided, however, that 28 34 (i) the aggregate amount of LOC Obligations shall not at any time exceed SEVENTY-FIVE MILLION DOLLARS ($75,000,000) (the "LOC Committed Amount"), (ii) the sum of the aggregate amount of Revolving Loans plus Swingline Loans plus LOC Obligations shall not at any time exceed the Revolving Committed Amount, (iii) all Letters of Credit shall be denominated in Dollars and (iv) Letters of Credit shall be issued for lawful corporate purposes and may be issued as standby letters of credit, including in connection with workers' compensation and other insurance programs, and trade letters of credit. Except as otherwise expressly agreed upon by the Issuing Lenders and the Administrative Agent, no Letter of Credit shall have an original expiry date more than twelve (12) months from the date of issuance; provided, however, so long as no Default or Event of Default has occurred and is continuing and subject to the other terms and conditions to the issuance of Letters of Credit hereunder, the expiry dates of Letters of Credit may be extended annually or periodically from time to time on the request of the Borrower or by operation of the terms of the applicable Letter of Credit to a date not more than twelve (12) months from the date of extension; provided, further, that no Letter of Credit, as originally issued or as extended, shall have an expiry date extending beyond the Maturity Date. Each Letter of Credit shall comply with the related LOC Documents. The issuance and expiry date of each Letter of Credit shall be a Business Day. First Union shall be the Issuing Lender on all Letters of Credit issued on or after the Closing Date. All currently outstanding letters of credit issued by First Union for the account of the Borrower, its Subsidiaries (other than SFDG and its Subsidiaries), or any predecessor-in-interest of any of them, shall, as of the Closing Date, be considered Letters of Credit issued and subject to the terms of this Credit Agreement. (b) Notice and Reports. The request for the issuance of a Letter of Credit shall be submitted to the Issuing Lender at least three (3) Business Days prior to the requested date of issuance. The Issuing Lender will promptly upon request provide to the Administrative Agent for dissemination to the Lenders a detailed report specifying the Letters of Credit which are then issued and outstanding and any activity with respect thereto which may have occurred since the date of any prior report, and including therein, among other things, the account party, the beneficiary, the face amount, expiry date as well as any payments or expirations which may have occurred. The Issuing Lender will further provide to the Administrative Agent promptly upon request copies of the Letters of Credit. The Issuing Lender will provide to the Administrative Agent promptly upon request a summary report of the nature and extent of LOC Obligations then outstanding. (c) Participations. Each Lender upon issuance of a Letter of Credit (other than a Letter of Credit in an original face amount of less than $1,000,000) shall be deemed to have purchased without recourse a risk participation from the Issuing Lender in such Letter of Credit and the obligations arising thereunder and any collateral relating thereto, in each case in an amount equal to its LOC Commitment Percentage of the obligations under such Letter of Credit and shall absolutely, unconditionally and irrevocably assume, as primary obligor and not as surety, and be obligated to pay to the Issuing Lender therefor and discharge when due, its LOC Commitment Percentage of the obligations arising under such Letter of Credit, unless the Issuing Lender acted with gross negligence or willful misconduct in issuing such Letter of Credit. Without limiting the 29 35 scope and nature of each Lender's participation in any Letter of Credit, to the extent that the Issuing Lender has not been reimbursed as required hereunder or under any LOC Document, each such Lender shall pay to the Issuing Lender its LOC Commitment Percentage of such unreimbursed drawing in same day funds on the day of notification by the Issuing Lender of an unreimbursed drawing pursuant to the provisions of subsection (d) below if such notice is received at or before 2:00 P.M. (Charlotte, North Carolina time), otherwise such payment shall be made at or before 12:00 Noon (Charlotte, North Carolina time) on the Business Day next succeeding the day such notice is received. The obligation of each Lender to so reimburse the Issuing Lender shall be absolute and unconditional and shall not be affected by the occurrence of a Default, an Event of Default or any other occurrence or event. Any such reimbursement shall not relieve or otherwise impair the obligation of the Borrower to reimburse the Issuing Lender under any Letter of Credit, together with interest as hereinafter provided. (d) Reimbursement. In the event of any drawing under any Letter of Credit, the Issuing Lender will promptly notify the Borrower and the Administrative Agent. The Borrower shall reimburse the Issuing Lender on the day of drawing under any Letter of Credit (either with the proceeds of a Swingline Loan or Revolving Loan obtained hereunder or otherwise) in same day funds as provided herein or in the LOC Documents. If the Borrower shall fail to reimburse the Issuing Lender as provided herein, the unreimbursed amount of such drawing shall bear interest at a per annum rate equal to the Alternate Base Rate plus the Applicable Percentage. Unless the Borrower shall immediately notify the Issuing Lender and the Administrative Agent of its intent to otherwise reimburse the Issuing Lender, the Borrower shall be deemed to have requested a Swingline Loan, or if and to the extent Swingline Loans shall not be available, a Revolving Loan in the amount of the drawing as provided in subsection (e) below, the proceeds of which will be used to satisfy the reimbursement obligations. The Borrower's reimbursement obligations hereunder shall be absolute and unconditional under all circumstances irrespective of any rights of set-off, counterclaim or defense to payment the Borrower may claim or have against the Issuing Lender, the Administrative Agent, the Lenders, the beneficiary of the Letter of Credit drawn upon or any other Person, including without limitation any defense based on any failure of the Borrower to receive consideration or the legality, validity, regularity or unenforceability of the Letter of Credit. The Issuing Lender will promptly notify the other Lenders of the amount of any unreimbursed drawing and each Lender shall promptly pay to the Administrative Agent for the account of the Issuing Lender in Dollars and in immediately available funds, the amount of such Lender's LOC Commitment Percentage of such unreimbursed drawing, unless the Issuing Lender acted with gross negligence or willful misconduct in issuing such Letter of Credit. Such payment shall be made on the day such notice is received by such Lender from the Issuing Lender if such notice is received at or before 2:00 P.M. (Charlotte, North Carolina time), otherwise such payment shall be made at or before 12:00 Noon (Charlotte, North Carolina time) on the Business Day next succeeding the day such notice is received. If such Lender does not pay such amount to the Issuing Lender in full upon such request, such Lender shall, on demand, pay to the Administrative Agent for the account of the Issuing Lender interest on the unpaid amount during the period from the date of such drawing until such Lender pays such amount to 30 36 the Issuing Lender in full at a rate per annum equal to, if paid within two (2) Business Days of the date of drawing, the Federal Funds Effective Rate and thereafter at a rate equal to the Alternate Base Rate. Each Lender's obligation to make such payment to the Issuing Lender, and the right of the Issuing Lender to receive the same, shall be absolute and unconditional, shall not be affected by any circumstance whatsoever and without regard to the termination of this Agreement or the Commitments hereunder, the existence of a Default or Event of Default or the acceleration of the Credit Party Obligations hereunder and shall be made without any offset, abatement, withholding or reduction whatsoever. (e) Repayment with Revolving Loans. On any day on which the Borrower shall have requested, or been deemed to have requested, (i) a Swingline Loan borrowing to reimburse a drawing under a Letter of Credit, the Swingline Lender shall make the Swingline Loan advance pursuant to the terms of the request or deemed request in accordance with the provisions for Swingline Loan advances hereunder, or (ii) a Revolving Loan to reimburse a drawing under a Letter of Credit, the Administrative Agent shall give notice to the Lenders that a Revolving Loan has been requested or deemed requested in connection with a drawing under a Letter of Credit, in which case a Revolving Loan borrowing comprised entirely of Alternate Base Rate Loans (each such borrowing, a "Mandatory Borrowing") shall be immediately made (without giving effect to any termination of the Commitments pursuant to Section 7.2) pro rata based on each Lender's respective Revolving Commitment Percentage (determined before giving effect to any termination of the Commitments pursuant to Section 7.2) and in the case of both clauses (i) and (ii) the proceeds thereof shall be paid directly to the Issuing Lender for application to the respective LOC Obligations. Each Lender hereby irrevocably agrees to make such Revolving Loans immediately upon any such request or deemed request on account of each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the same such date notwithstanding (i) the amount of Mandatory Borrowing may not comply with the minimum amount for borrowings of Revolving Loans otherwise required hereunder, (ii) whether any conditions specified in Section 4.2 are then satisfied, (iii) whether a Default or an Event of Default then exists, (iv) failure for any such request or deemed request for Revolving Loan to be made by the time otherwise required in Section 2.1(b), (v) the date of such Mandatory Borrowing, or (vi) any reduction in the Revolving Committed Amount after any such Letter of Credit may have been drawn upon. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to the Borrower), then each such Lender hereby agrees that it shall forthwith fund (as of the date the Mandatory Borrowing would otherwise have occurred, but adjusted for any payments received from the Borrower on or after such date and prior to such purchase) its Participation Interests in the outstanding LOC Obligations; provided, further, that in the event any Lender shall fail to fund its Participation Interest on the day the Mandatory Borrowing would otherwise have occurred, then the amount of such Lender's unfunded Participation Interest therein shall bear interest payable to the Issuing Lender upon demand, at the rate equal to, if paid within two (2) Business Days of such date, the Federal Funds Effective Rate, and thereafter at a rate equal to the Alternate Base Rate. 31 37 (f) Designation of Subsidiaries as Account Parties. Notwithstanding anything to the contrary set forth in this Agreement, including without limitation Section 2.3(a), a Letter of Credit issued hereunder may contain a statement to the effect that such Letter of Credit is issued for the account of a Subsidiary of the Borrower, provided that notwithstanding such statement, the Borrower shall be the actual account party for all purposes of this Agreement for such Letter of Credit and such statement shall not affect the Borrower's reimbursement obligations hereunder with respect to such Letter of Credit. (g) Modification, Extension. The issuance of any supplement, modification, amendment, renewal, or extension to any Letter of Credit shall, for purposes hereof, be treated in all respects the same as the issuance of a new Letter of Credit hereunder. (h) Uniform Customs and Practices. The Issuing Lender shall have the Letters of Credit be subject to The Uniform Customs and Practice for Documentary Credits, as published as of the date of issue by the International Chamber of Commerce (the "UCP"), in which case the UCP may be incorporated therein and deemed in all respects to be a part thereof. SECTION 2.4 FEES. (a) Commitment Fee. In consideration of the Revolving Commitment, the Borrower agrees to pay to the Administrative Agent for the ratable benefit of the Lenders a commitment fee (the "Commitment Fee") in an amount equal to the Applicable Percentage per annum on the average daily unused amount of the aggregate Revolving Committed Amount. For purposes of computing the Commitment Fee hereunder, (i) Swingline Loans and LOC Obligations shall be considered usage under the aggregate Revolving Committed Amount and (ii) each Swingline Loan shall be considered usage under the Revolving Commitment of the Swingline Lender only unless and until the other Lenders purchase participation interests in such Swingline Loan pursuant to Section 2.2(b)(ii). The Commitment Fee shall be payable quarterly in arrears on the 15th day following the last day of each calendar quarter for the prior calendar quarter and upon termination of the Revolving Commitments. (b) Letter of Credit Fees. In consideration of the LOC Commitments, the Borrower agrees to pay to the Issuing Lender a fee (the "Letter of Credit Fee") equal to the Applicable Percentage per annum on the average daily maximum amount available to be drawn under each Letter of Credit from the date of issuance (or in the case of Letters of Credit outstanding on the Closing Date, from the Closing Date) to the date of expiration. In addition to such Letter of Credit Fee, the Issuing Lender may charge, and retain for its own account without sharing by the other Lenders, an additional facing fee of one-eighth of one percent (1/8%) per annum on the average daily maximum amount available to be drawn under each such Letter of Credit issued by it. The Issuing Lender shall promptly pay over to the Administrative Agent for the ratable benefit of the Lenders (including the Issuing Lender) the Letter of Credit Fee. The Letter of Credit Fee shall be 32 38 payable quarterly in arrears on the 15th day following the last day of each calendar quarter for the prior calendar quarter. (c) Issuing Lender Fees. In addition to the Letter of Credit Fees payable pursuant to subsection (b) above, the Borrower shall pay to the Issuing Lender for its own account without sharing by the other Lenders the reasonable and customary charges from time to time of the Issuing Lender with respect to the amendment, transfer, administration, cancellation and conversion of, and drawings under, such Letters of Credit (collectively, the "Issuing Lender Fees"). (d) Administrative Fee. The Borrower agrees to pay to the Agents the annual administrative fee as described in the Fee Letter. SECTION 2.5 REDUCTION OR INCREASE OF THE REVOLVING COMMITMENTS. (a) Voluntary Reductions. The Borrower shall have the right to terminate or permanently reduce the unused portion of the Revolving Committed Amount at any time or from time to time upon not less than three Business Days' prior notice to the Administrative Agent (which shall notify the Lenders thereof as soon as practicable) of each such termination or reduction, which notice shall specify the effective date thereof and the amount of any such reduction which shall be in a minimum amount of $2,000,000 or a whole multiple of $1,000,000 in excess thereof and shall be irrevocable and effective upon receipt by the Administrative Agent; provided that no such reduction or termination shall be permitted if after giving effect thereto, and to any prepayments of the Revolving Loans made on the effective date thereof, the sum of the then outstanding aggregate principal amount of the Revolving Loans plus Swingline Loans plus LOC Obligations would exceed the Revolving Committed Amount. (b) Maturity Date. The Revolving Commitment, the LOC Commitment and the Swingline Commitment shall automatically terminate on the Maturity Date. (c) Increase of Revolving Committed Amount. The Borrower shall have the right from time to time to increase the Revolving Committed Amount in an amount up to but not exceeding $200,000,000 in the aggregate for a maximum aggregate Revolving Committed Amount of up to $500,000,000 by adding to this Agreement one or more other lenders (which may include any Lender (with the consent of such Lender)) (each such lender an "Additional Lender") with the approval of the Administrative Agent (not to be unreasonably withheld), each of which Additional Lenders shall have entered into an agreement in form and substance satisfactory to the Borrower and the Administrative Agent pursuant to which such Additional Lender shall undertake a Revolving Commitment (and if any such Additional Lender is a Lender, its Revolving Commitment shall be in addition to such Lender's Revolving Commitment hereunder) which such Revolving Commitment shall be in an amount at least equal to $10,000,000 or a larger integral multiple of $1,000,000, and upon the effectiveness of such agreement (the date of the effectiveness of any such agreement being hereinafter referred to as the "Increased 33 39 Commitment Date") such Additional Lender shall thereupon become a "Lender" for all purposes of this Agreement. On the Increased Commitment Date, each Additional Lender shall by assignments from the other Lenders (which assignments shall be deemed to occur hereunder automatically, and without any requirement for additional documentation, on the Increased Commitment Date) acquire a portion of the Revolving Loans of the other Lenders (and the Lenders shall, through the Administrative Agent, make such other adjustments among themselves as shall be necessary) so that after giving effect to such assignments and adjustments the Lenders shall hold Revolving Loans hereunder ratably in accordance with their respective Revolving Commitments. The Borrower shall compensate each Lender whose outstanding Revolving Loans have decreased as a result of the foregoing assignments and adjustments as if such decrease were a payment or prepayment referred to in Section 2.14 hereof. Notwithstanding the foregoing, the increase in the aggregate Revolving Commitments hereunder pursuant to this Section 2.5 shall be effective only if: (i) the Borrower shall have given the Administrative Agent notice of any such increase at least five Business Days prior to any such Increased Commitment Date; (ii) no Default or Event of Default shall have occurred and be continuing as of the date of the notice referred to in the foregoing clause (i) or on the Increased Commitment Date; and (iii) the resulting aggregate amount of the Revolving Commitments is no greater than $500,000,000. SECTION 2.6 PREPAYMENTS. (a) Optional Prepayments. The Borrower shall have the right to prepay Loans in whole or in part from time to time; provided, however, that (i) each partial prepayment of Alternate Base Rate Loans shall be in a minimum principal amount of $1,000,000 and integral multiples of $500,000 in excess thereof, (ii) each partial prepayment of LIBOR Rate Loans shall be in a minimum principal amount of $5,000,000 and integral multiples of $1,000,000 in excess thereof and (iii) each prepayment of Swingline Loans shall be in a minimum principal amount of $100,000 and integral multiples of $100,000 in excess thereof. The Borrower making the voluntary prepayment shall give irrevocable written notice (or telephone notice promptly confirmed in writing which confirmation may be by fax) to the Administrative Agent (which shall notify the Lenders thereof as soon as practicable) not later than 1:30 P.M. (Charlotte, North Carolina time) on the date of the requested prepayment in the case of Alternate Base Rate Loans, and on the third Business Day prior to the date of the requested prepayment in the case of LIBOR Rate Loans. Subject to the foregoing terms, amounts prepaid under this Section 2.6(a) shall be applied (A) first to Alternate Base Rate Loans and (B) second to LIBOR Rate Loans in direct 34 40 order of Interest Period maturities. All prepayments under this Section 2.6(a) shall be subject to Section 2.16, but otherwise without premium or penalty. Interest on the principal amount prepaid shall be payable on the next occurring Interest Payment Date that would have occurred had such loan not been prepaid. Amounts prepaid on the Swingline Loans and the Revolving Loans may be reborrowed in accordance with the terms hereof. (b) Mandatory Prepayments. (i) Revolving Committed Amount. If at any time after the Closing Date, the sum of the aggregate principal amount of outstanding Revolving Loans plus Swingline Loans plus LOC Obligations shall exceed the Revolving Committed Amount, the Borrower immediately shall prepay the Revolving Loans and (after all Revolving Loans have been repaid) cash collateralize the LOC Obligations, in an amount sufficient to eliminate such excess. (ii) Application of Mandatory Prepayments. All amounts required to be paid pursuant to this Section 2.6(b) shall be applied to Revolving Loans and (after all Revolving Loans have been repaid) to a cash collateral account (held by the Administrative Agent for the ratable benefit of the Lenders) in respect of LOC Obligations. Within the parameters of the applications set forth above, prepayments shall be applied first to Alternate Base Rate Loans and then to LIBOR Rate Loans in direct order of Interest Period maturities. All prepayments under this Section 2.6(b) shall be subject to Section 2.16 and be accompanied by interest on the principal amount prepaid to the date of prepayment. Amounts prepaid on Swingline Loans and Revolving Loans may be reborrowed in accordance with the terms hereof. SECTION 2.7 MINIMUM BORROWING AMOUNTS AND PRINCIPAL AMOUNTS OF TRANCHES. (a) Each Alternate Base Rate Loan (other than Swingline Loans) borrowing shall be in a minimum amount of $1,000,000 and whole multiples of $500,000 in excess thereof. (b) Each LIBOR Rate Loan borrowing shall be in a minimum amount of $5,000,000 and whole multiples of $1,000,000 in excess thereof. (c) All borrowings, payments and prepayments in respect of Revolving Loans shall be in such amounts and be made pursuant to such elections so that after giving effect thereto the aggregate principal amount of the Revolving Loans comprising any Tranche shall either be zero or shall not be less than $5,000,000 or a whole multiple of $1,000,000 in excess thereof. 35 41 SECTION 2.8 INTEREST; INTEREST PAYMENT DATES. (a) Subject to the provisions of Section 2.8(b), all Loans (other than Swingline Loans) shall bear interest as follows: (i) Alternate Base Rate Loans. During such periods as Loans shall be comprised of Alternate Base Rate Loans, each such Alternate Base Rate Loan shall bear interest at a per annum rate equal to the sum of the Alternate Base Rate plus the Applicable Percentage; and (ii) LIBOR Rate Loans. During such periods as Loans shall be comprised of LIBOR Rate Loans, each such LIBOR Rate Loan shall bear interest at a per annum rate equal to the sum of the LIBOR Rate plus the Applicable Percentage. (b) Upon the occurrence, and during the continuance, of an Event of Default, the principal of and, to the extent permitted by law, interest on the Loans and any other amounts owing hereunder or under the other Credit Documents shall bear interest, payable on demand, at a per annum rate 2% greater than the applicable rate then in effect or, if no rate is then in effect, at a per annum rate 2% greater than the Alternate Base Rate. (c) Interest on Loans shall be payable in arrears on each Interest Payment Date, subject to Section 2.11. SECTION 2.9 CONVERSION OPTIONS. (a) The Borrower may elect from time to time to convert Alternate Base Rate Loans to LIBOR Rate Loans by giving irrevocable written notice (or telephone notice promptly confirmed in writing which confirmation may be by fax) to the Administrative Agent not later than 1:30 P.M. (Charlotte, North Carolina time) on the third Business Day prior to the date of the requested conversion. A form of Notice of Conversion/ Extension is attached as Schedule 2.9. If the date upon which an Alternate Base Rate Loan is to be converted to a LIBOR Rate Loan is not a Business Day, then such conversion shall be made on the next succeeding Business Day and during the period from such last day of an Interest Period to such succeeding Business Day such Loan shall bear interest as if it were an Alternate Base Rate Loan. All or any part of outstanding Alternate Base Rate Loans may be converted as provided herein, provided that (i) no Loan may be converted into a LIBOR Rate Loan when any Default or Event of Default has occurred and is continuing and (ii) partial conversions shall be in an aggregate principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. (b) Any LIBOR Rate Loans may be continued as such upon the expiration of an Interest Period with respect thereto by compliance by the Borrower with the notice provisions contained in Section 2.9(a); provided, that no LIBOR Rate Loan may be continued as such when any Default or Event of Default has occurred and is continuing, in which case such Loan shall be automatically converted to an Alternate Base Rate Loan 36 42 at the end of the applicable Interest Period with respect thereto. If the Borrower shall fail to give timely notice of an election to continue a LIBOR Rate Loan, or the continuation of LIBOR Rate Loans is not permitted hereunder, such LIBOR Rate Loans shall be automatically converted to Alternate Base Rate Loans at the end of the applicable Interest Period with respect thereto. SECTION 2.10 COMPUTATION OF INTEREST AND FEES. (a) Interest payable hereunder with respect to Alternate Base Rate Loans shall be calculated on the basis of a year of 365 days (or 366 days, as applicable) for the actual days elapsed. All other fees, interest and all other amounts payable hereunder shall be calculated on the basis of a 360 day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of each determination of a LIBOR Rate on the Business Day of the determination thereof. Any change in the interest rate on a Loan resulting from a change in the Alternate Base Rate shall become effective as of the opening of business on the day on which such change in the Alternate Base Rate shall become effective. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of the effective date and the amount of each such change. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the computations used by the Administrative Agent in determining any interest rate. (c) It is the intent of the Lenders and the Credit Parties to conform to and contract in strict compliance with applicable usury law from time to time in effect. All agreements between the Lenders and the Credit Parties are hereby limited by the provisions of this paragraph which shall override and control all such agreements, whether now existing or hereafter arising and whether written or oral. In no way, nor in any event or contingency (including but not limited to prepayment or acceleration of the maturity of any obligation), shall the interest taken, reserved, contracted for, charged, or received under this Credit Agreement, under the Notes or otherwise, exceed the maximum nonusurious amount permissible under applicable law. If, from any possible construction of any of the Credit Documents or any other document, interest would otherwise be payable in excess of the maximum nonusurious amount, any such construction shall be subject to the provisions of this paragraph and such interest shall be automatically reduced to the maximum nonusurious amount permitted under applicable law, without the necessity of execution of any amendment or new document. If any Lender shall ever receive anything of value which is characterized as interest on the Loans under applicable law and which would, apart from this provision, be in excess of the maximum nonusurious amount, an amount equal to the amount which would have been excessive interest shall, without penalty, be applied to the reduction of the principal amount owing on the Loans and not to the payment of interest, or refunded to the Borrower or the other payor thereof if and to the extent such amount which would have 37 43 been excessive exceeds such unpaid principal amount of the Loans. The right to demand payment of the Loans or any other Indebtedness evidenced by any of the Credit Documents does not include the right to receive any interest which has not otherwise accrued on the date of such demand, and the Lenders do not intend to charge or receive any unearned interest in the event of such demand. All interest paid or agreed to be paid to the Lenders with respect to the Loans shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term (including any renewal or extension) of the Loans so that the amount of interest on account of such indebtedness does not exceed the maximum nonusurious amount permitted by applicable law. SECTION 2.11 PRO RATA TREATMENT AND PAYMENTS. Each borrowing of Revolving Loans and any reduction of the Revolving Commitments shall be made pro rata according to the respective Commitment Percentages of the Lenders. Each payment under this Agreement or any Note shall be applied, first, to any fees then due and owing by the Borrower pursuant to Section 2.4, second, to interest then due and owing in respect of the Notes of the Borrower and, third, to principal then due and owing hereunder and under the Notes of the Borrower. Each payment on account of any fees pursuant to Section 2.4 shall be made pro rata in accordance with the respective amounts due and owing (except as to the portion of the Letter of Credit retained by the Issuing Lender, the Issuing Lender Fees and fees payable to the Agents). Each payment (other than prepayments) by the Borrower on account of principal of and interest on the Revolving Loans shall be made pro rata according to the respective amounts due and owing in accordance with Section 2.6(a) hereof. Each optional prepayment on account of principal of the Loans shall be applied to such of the Loans as the Borrower may designate (to be applied pro rata among the Lenders); provided, that prepayments made pursuant to Section 2.14 shall be applied in accordance with such section. Each mandatory prepayment on account of principal of the Loans shall be applied in accordance with Section 2.6(b). All payments (including prepayments) to be made by the Borrower on account of principal, interest and fees shall be made without defense, set-off or counterclaim (except as provided in Section 2.17(b)) and shall be made to the Administrative Agent for the account of the Lenders at the Administrative Agent's office specified on Schedule 9.2 in Dollars and in immediately available funds not later than 2:00 P.M. (Charlotte, North Carolina time) on the date when due. The Administrative Agent shall distribute such payments to the Lenders entitled thereto promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the LIBOR Rate Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a LIBOR Rate Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. 38 44 SECTION 2.12 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT. (a) Unless the Administrative Agent shall have been notified in writing by a Lender prior to the date a Loan is to be made by such Lender (which notice shall be effective upon receipt) that such Lender does not intend to make the proceeds of such Loan available to the Administrative Agent, the Administrative Agent may assume that such Lender has made such proceeds available to the Administrative Agent on such date, and the Administrative Agent may in reliance upon such assumption (but shall not be required to) make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent, the Administrative Agent shall be able to recover such corresponding amount from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent will promptly notify the Borrower and the Borrower shall immediately pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover from the Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower to the date such corresponding amount is recovered by the Administrative Agent at a per annum rate equal to (i) from the Borrower at the applicable rate for the applicable borrowing pursuant to the Notice of Borrowing and (ii) from a Lender at the Federal Effective Funds Rate. (b) Unless the Administrative Agent shall have been notified in writing by the Borrower, prior to the date on which any payment is due from it hereunder (which notice shall be effective upon receipt) that the Borrower does not intend to make such payment, the Administrative Agent may assume that the Borrower has made such payment when due, and the Administrative Agent may in reliance upon such assumption (but shall not be required to) make available to each Lender on such payment date an amount equal to the portion of such assumed payment to which such Lender is entitled hereunder, and if the Borrower has not in fact made such payment to the Administrative Agent, such Lender shall, on demand, repay to the Administrative Agent the amount made available to such Lender. If such amount is repaid to the Administrative Agent on a date after the date such amount was made available to such Lender, such Lender shall pay to the Administrative Agent on demand interest on such amount in respect of each day from the date such amount was made available by the Administrative Agent to such Lender to the date such amount is recovered by the Administrative Agent at a per annum rate equal to the Federal Funds Effective Rate. (c) A certificate of the Administrative Agent submitted to the Borrower or any Lender with respect to any amount owing under this Section 2.12 shall be conclusive in the absence of manifest error. SECTION 2.13 INABILITY TO DETERMINE INTEREST RATE. Notwithstanding any other provision of this Agreement, if (i) the Administrative Agent shall reasonably determine (which determination shall be conclusive and binding absent manifest 39 45 error) that, by reason of circumstances affecting the relevant market, reasonable and adequate means do not exist for ascertaining LIBOR for an Interest Period, or (ii) the Required Lenders shall reasonably determine (which determination shall be conclusive and binding absent manifest error) that the LIBOR Rate does not adequately and fairly reflect the cost to such Lenders of funding LIBOR Rate Loans that the Borrower has requested be outstanding as a LIBOR Tranche during an Interest Period, the Administrative Agent shall forthwith give telephone notice of such determination, confirmed in writing, to the Borrower, and the Lenders at least two Business Days prior to the first day of such Interest Period. Unless the Borrower shall have notified the Administrative Agent upon receipt of such telephone notice that it wishes to rescind or modify its request regarding such LIBOR Rate Loans, any Loans that were requested to be made as LIBOR Rate Loans shall be made as Alternate Base Rate Loans and any Loans that were requested to be converted into or continued as LIBOR Rate Loans shall be converted into Alternate Base Rate Loans. Until any such notice has been withdrawn by the Administrative Agent, no further Loans shall be made as, continued as, or converted into, LIBOR Rate Loans for the Interest Periods so affected. SECTION 2.14 ILLEGALITY. Notwithstanding any other provision of this Agreement, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof by the relevant Governmental Authority to any Lender shall make it unlawful for such Lender or its LIBOR Lending Office to make or maintain LIBOR Rate Loans as contemplated by this Agreement or to obtain in the interbank eurodollar market through its LIBOR Lending Office the funds with which to make such Loans, (a) such Lender shall promptly notify the Administrative Agent and the Borrower thereof, (b) the commitment of such Lender hereunder to make LIBOR Rate Loans or continue LIBOR Rate Loans as such shall forthwith be suspended until the Administrative Agent shall give notice that the condition or situation which gave rise to the suspension shall no longer exist, and (c) such Lender's Loans then outstanding as LIBOR Rate Loans, if any, shall be converted on the last day of the Interest Period for such Loans or within such earlier period as required by law as Alternate Base Rate Loans. The Borrower hereby agrees promptly to pay any Lender, upon its demand, any additional amounts necessary to compensate such Lender for actual and direct costs (but not including anticipated profits) reasonably incurred by such Lender in making any repayment in accordance with this Section including, but not limited to, any interest or fees payable by such Lender to lenders of funds obtained by it in order to make or maintain its LIBOR Rate Loans hereunder. A certificate as to any additional amounts payable pursuant to this Section submitted by such Lender, through the Administrative Agent, to the Borrower shall be conclusive in the absence of manifest error. Each Lender agrees to use reasonable efforts (including reasonable efforts to change its LIBOR Lending Office) to avoid or to minimize any amounts which may otherwise be payable pursuant to this Section; provided, however, that such efforts shall not cause the imposition on such Lender of any additional costs or legal or regulatory burdens deemed by such Lender in its sole discretion to be material. SECTION 2.15 REQUIREMENTS OF LAW. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or 40 46 directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject such Lender to any tax of any kind whatsoever with respect to any Letter of Credit or any application relating thereto, any LIBOR Rate Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for changes in the rate of tax on the overall net income of such Lender); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the LIBOR Rate hereunder; or (iii) shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender of making or maintaining LIBOR Rate Loans or the Letters of Credit or to reduce any amount receivable hereunder or under any Note and such Lender's costs have increased with respect to other customers under similar circumstances, then, in any such case, the Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such additional cost or reduced amount receivable which such Lender reasonably deems to be material as determined by such Lender with respect to its LIBOR Rate Loans or Letters of Credit. A certificate as to any additional amounts payable pursuant to this Section submitted by such Lender, through the Administrative Agent, to the Borrower shall be conclusive in the absence of manifest error. Each Lender agrees to use reasonable efforts (including reasonable efforts to change its Domestic Lending Office or LIBOR Lending Office, as the case may be) to avoid or to minimize any amounts which might otherwise be payable pursuant to this paragraph of this Section; provided, however, that such efforts shall not cause the imposition on such Lender of any additional costs or legal or regulatory burdens deemed by such Lender to be material. (b) If any Lender shall have reasonably determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any central bank or Governmental Authority made subsequent to the date hereof does or shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount reasonably deemed by such Lender to be material, and such Lender has experienced such effect with respect to other customers under similar circumstances, then from time to time, within fifteen 41 47 (15) days after demand by such Lender, the Borrower shall pay to such Lender such additional amount as shall be certified by such Lender as being required to compensate it for such reduction. Such a certificate as to any additional amounts payable under this Section submitted by a Lender (which certificate shall include a description of the basis for the computation), through the Administrative Agent, to the Borrower shall be conclusive absent manifest error. (c) The agreements in this Section 2.15 shall survive the termination of this Agreement and payment of the Notes and all other amounts payable hereunder. SECTION 2.16 INDEMNITY. The Borrower hereby agrees to indemnify each Lender and to hold such Lender harmless from any funding loss or expense which such Lender may sustain or incur as a consequence of (a) default by the Borrower in payment of the principal amount of or interest on any Loan by such Lender in accordance with the terms hereof, (b) default by the Borrower in accepting a borrowing after the Borrower has given a notice in accordance with the terms hereof, (c) default by the Borrower in making any prepayment after the Borrower has given a notice in accordance with the terms hereof, and/or (d) the making by the Borrower of a prepayment of a Loan, or the conversion thereof, on a day which is not the last day of the Interest Period with respect thereto, in each case including, but not limited to, any such loss or expense arising from interest or fees payable by such Lender to lenders of funds obtained by it in order to maintain its Loans hereunder. A certificate as to any additional amounts payable pursuant to this Section submitted by any Lender, through the Administrative Agent, to the Borrower (which certificate must be delivered to the Administrative Agent within thirty days following such default, prepayment or conversion) shall be conclusive in the absence of manifest error. The agreements in this Section shall survive termination of this Agreement and payment of the Notes and all other amounts payable hereunder. SECTION 2.17 TAXES. (a) All payments made by the Borrower hereunder or under any Note will be, except as provided in Section 2.17(b), made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any Governmental Authority or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding any tax imposed on or measured by the net income or profits of a Lender) and all interest, penalties or similar liabilities with respect thereto (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as "Taxes"). If any Taxes are so levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement or under any Note, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Note. The Borrower will furnish to the Administrative Agent as soon as practicable after the date the payment of any Taxes is due pursuant to applicable law certified copies (to the extent reasonably 42 48 available and required by law) of tax receipts evidencing such payment by the Borrower. The Borrower agrees to indemnify and hold harmless each Lender, and reimburse such Lender upon its written request, for the amount of any Taxes so levied or imposed and paid by such Lender but excluding any interest or penalties caused by such Lender's failure to pay any such taxes when due. (b) Each Lender that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) agrees to deliver to the Borrower and the Administrative Agent on or prior to the Closing Date, or in the case of a Lender that is an assignee or transferee of an interest under this Agreement pursuant to Section 9.6(d) (unless the respective Lender was already a Lender hereunder immediately prior to such assignment or transfer), on the date of such assignment or transfer to such Lender, (i) if the Lender is a "bank" within the meaning of Section 881(c)(3)(A) of the Code, two accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms) certifying such Lender's entitlement to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement and under any Note, or (ii) if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, either Internal Revenue Service Form 1001 or 4224 as set forth in clause (i) above, or (x) a certificate substantially in the form of Schedule 2.17 (any such certificate, a "2.17 Certificate") and (y) two accurate and complete original signed copies of Internal Revenue Service Form W-8 (or successor form) certifying such Lender's entitlement to an exemption from United States withholding tax with respect to payments of interest to be made under this Agreement and under any Note. In addition, each Lender agrees that it will deliver upon the Borrower's request updated versions of the foregoing, as applicable, whenever the previous certification has become obsolete or inaccurate in any material respect, together with such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement and any Note. Notwithstanding anything to the contrary contained in Section 2.17(a), but subject to the immediately succeeding sentence, (x) the Borrower shall be entitled, to the extent it is required to do so by law, to deduct or withhold Taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from interest, fees or other amounts payable hereunder for the account of any Lender which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes to the extent that such Lender has not provided to the Borrower U.S. Internal Revenue Service Forms that establish a complete exemption from such deduction or withholding and (y) the Borrower shall not be obligated pursuant to Section 2.17(a) hereof to gross-up payments to be made to a Lender in respect of Taxes imposed by the United States if (I) such Lender has not provided to the Borrower the Internal Revenue Service Forms required to be provided to the Borrower pursuant to this Section 2.17(b) or (II) in the case of a payment, other than interest, to a Lender described in clause (ii) above, to the extent that such Forms do not establish a complete exemption from withholding of such Taxes. Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this Section 2.17, the Borrower agrees to pay additional amounts and to indemnify each Lender in the manner set forth in Section 2.17(a) (without regard to the identity of the jurisdiction 43 49 requiring the deduction or withholding) in respect of any amounts deducted or withheld by it as described in the immediately preceding sentence as a result of any changes after the Closing Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of Taxes. (c) Each Lender agrees to use reasonable efforts (including reasonable efforts to change its Domestic Lending Office or LIBOR Lending Office, as the case may be) to avoid or to minimize any amounts which might otherwise be payable pursuant to this Section; provided, however, that such efforts shall not cause the imposition on such Lender of any additional costs or legal or regulatory burdens deemed by such Lender in its sole discretion to be material. (d) If the Borrower pays any additional amount pursuant to this Section 2.17 with respect to a Lender, such Lender shall use reasonable efforts to obtain a refund of tax or credit against its tax liabilities on account of such payment; provided that such Lender shall have no obligation to use such reasonable efforts if either (i) it is in an excess foreign tax credit position or (ii) it believes in good faith, in its sole discretion, that claiming a refund or credit would cause adverse tax consequences to it. In the event that such Lender receives such a refund or credit, such Lender shall pay to the Borrower an amount that such Lender reasonably determines is equal to the net tax benefit obtained by such Lender as a result of such payment by the Borrower. In the event that no refund or credit is obtained with respect to the Borrower' payments to such Lender pursuant to this Section 2.17(d), then such Lender shall upon request provide a certification that such Lender has not received a refund or credit for such payments. Nothing contained in this Section 2.17(d) shall require a Lender to disclose or detail the basis of its calculation of the amount of any tax benefit or any other amount or the basis of its determination referred to in the proviso to the first sentence of this Section 2.17(d) to the Borrower or any other party. (e) The agreements in this Section 2.17 shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. SECTION 2.18 INDEMNIFICATION; NATURE OF ISSUING LENDER'S DUTIES. (a) In addition to its other obligations under Section 2.6, the Borrower hereby agrees to protect, indemnify, pay and save the Issuing Lender harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees) that the Issuing Lender may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit or (ii) the failure of the Issuing Lender to honor a drawing under a Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions, herein called "Government Acts"). (b) As between the Borrower and the Issuing Lender, the Borrower shall assume all risks of the acts, omissions or misuse of any Letter of Credit by the 44 50 beneficiary thereof. The Issuing Lender shall not be responsible: (i) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, that may prove to be invalid or ineffective for any reason; (iii) for failure of the beneficiary of a Letter of Credit to comply fully with conditions required in order to draw upon a Letter of Credit; (iv) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) for errors in interpretation of technical terms; (vi) for any loss or delay in the transmission or otherwise of any document required in order to make a drawing under a Letter of Credit or of the proceeds thereof; and (vii) for any consequences arising from causes beyond the control of the Issuing Lender, including, without limitation, any Government Acts. None of the above shall affect, impair, or prevent the vesting of the Issuing Lender's rights or powers hereunder. (c) In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by the Issuing Lender, under or in connection with any Letter of Credit or the related certificates, if taken or omitted in good faith, shall not put such Issuing Lender under any resulting liability to the Borrower. It is the intention of the parties that this Agreement shall be construed and applied to protect and indemnify the Issuing Lender against any and all risks involved in the issuance of the Letters of Credit, all of which risks are hereby assumed by the Borrower, including, without limitation, any and all risks of the acts or omissions, whether rightful or wrongful, of any Government Authority. The Issuing Lender shall not, in any way, be liable for any failure by the Issuing Lender or anyone else to pay any drawing under any Letter of Credit as a result of any Government Acts or any other cause beyond the control of the Issuing Lender. (d) Nothing in this Section 2.18 is intended to limit the reimbursement obligation of the Borrower contained in Section 2.3(d) hereof. The obligations of the Borrower under this Section 2.18 shall survive the termination of this Agreement. No act or omissions of any current or prior beneficiary of a Letter of Credit shall in any way affect or impair the rights of the Issuing Lender to enforce any right, power or benefit under this Agreement. (e) Notwithstanding anything to the contrary contained in this Section 2.18, the Borrower shall have no obligation to indemnify any Issuing Lender in respect of any liability incurred by such Issuing Lender arising out of the gross negligence or willful misconduct of the Issuing Lender (including action not taken by an Issuing Lender), as determined by a court of competent jurisdiction. 45 51 SECTION 2.19 DEFAULTING LENDERS; LIMITATION ON CLAIMS. (a) Generally. In addition to the rights and remedies that may be available to the Administrative Agent or the Borrower under this Agreement or applicable law, if at any time a Lender is a Defaulting Lender such Defaulting Lender's right to participate in the administration of the Loans, this Agreement and the other Credit Documents, including without limitation, any right to vote in respect of, to consent to or to direct any action or inaction of the Administrative Agent or to be taken into account in the calculation of the Required Lenders, shall be suspended during the pendency of such failure or refusal. If a Lender is a Defaulting Lender because it has failed to make timely payment to the Administrative Agent of any amount required to be paid to the Administrative Agent hereunder (without giving effect to any notice or cure periods), in addition to other rights and remedies which the Administrative Agent or the Borrower may have under the immediately preceding provisions or otherwise, the Administrative Agent shall be entitled (i) to collect interest from such Defaulting Lender on such delinquent payment for the period from the date on which the payment was due until the date on which the payment is made at the Federal Funds Effective Rate, (ii) to withhold or setoff and to apply in satisfaction of the defaulted payment and any related interest, any amounts otherwise payable to such Defaulting Lender under this Agreement or any other Credit Document until such defaulted payment and related interest has been paid in full and such default no longer exists and (iii) to bring an action or suit against such Defaulting Lender in a court of competent jurisdiction to recover the defaulted amount and any related interest. Any amounts received by the Administrative Agent in respect of a Defaulting Lender's Loans shall not be paid to such Defaulting Lender and shall be held uninvested by the Administrative Agent and either applied against the purchase price of such Loans under the following subsection (b) or paid to such Defaulting Lender upon the default of such Defaulting Lender being cured. (b) Purchase of Defaulting Lender's Commitment. Any Lender who is not a Defaulting Lender shall have the right, but not the obligation, in its sole discretion, to acquire all of a Defaulting Lender's Commitment. If more than one Lender exercises such right, each such Lender shall have the right to acquire such proportion of such Defaulting Lender's Commitment on a pro rata basis. Upon any such purchase, the Defaulting Lender's interest in the Loans and its rights hereunder (but not its liability in respect thereof or under the Credit Documents or this Agreement to the extent the same relate to the period prior to the effective date of the purchase) shall terminate on the date of purchase, and the Defaulting Lender shall promptly execute all documents reasonably requested to surrender and transfer such interest to the purchaser thereof subject to and in accordance with the requirements set forth in Section 9.6, including an appropriate Commitment Transfer Supplement. The purchase price for the Commitment of a Defaulting Lender shall be equal to the sum of the amount of the principal balance of the Loans outstanding and owed by the Borrower to the Defaulting Lender, plus any accrued interest with respect thereto, plus any fees or other amounts owed by the Borrower to the Defaulting Lender. Prior to payment of such purchase price to a Defaulting Lender, the Administrative Agent shall apply against such purchase price any amounts retained by the Administrative Agent pursuant to the last sentence of the immediately preceding 46 52 subsection (a). The Defaulting Lender shall be entitled to receive amounts owed to it by the Borrower on account of principal of and interest on the Loans and the Notes, and fees and other amounts due under the Credit Documents which accrued prior to the date of the default by the Defaulting Lender, to the extent the same are received by the Administrative Agent from or on behalf of the Borrower. There shall be no recourse against any Lender or the Administrative Agent for the payment of such sums by the Borrower except to the extent of the receipt of payments from any other party or in respect of the Loans. SECTION 2.20 REPLACEMENT OF LENDERS. If any Lender shall become affected by any of the changes or events described in Sections 2.13, 2.14, 2.15 or 2.17 (any such Lender being hereinafter referred to as a "Replaced Lender") and shall petition the Borrower for any increased cost or amounts thereunder, then in such case, the Borrower may, upon at least five (5) Business Days' notice to the Administrative Agent and such Replaced Lender, designate a replacement lender (a "Replacement Lender") acceptable to the Administrative Agent in its reasonable discretion, to which such Replaced Lender shall, subject to its receipt (unless a later date for the remittance thereof shall be agreed upon by the Borrower and the Replaced Lender) of all amounts owed to such Replaced Lender under Sections 2.13, 2.14, 2.15 or 2.17 assign all (but not less than all) of its rights, obligations, Loans and Commitments hereunder; provided, that all amounts owed to such Replaced Lender by the Borrower (except liabilities which by the terms hereof survive the payment in full of the Loans and termination of this Agreement) shall be paid in full as of the date of such assignment. Upon any assignment by any Lender pursuant to this Section 2.20 becoming effective, the Replacement Lender shall thereupon be deemed to be a "Lender" for all purposes of this Agreement and such Replaced Lender shall thereupon cease to be a "Lender" for all purposes of this Agreement and shall have no further rights or obligations hereunder (other than pursuant to Sections 2.13, 2.14, 2.15, 2.17 and 9.5 while such Replaced Lender was a Lender). Notwithstanding any Replaced Lender's failure or refusal to assign its rights, obligations, Loans and Commitments under this Section 2.20, the Replaced Lender shall cease to be a "Lender" for all purposes of this Agreement and the Replacement Lender substituted therefor upon payment to the Replaced Lender by the Replacement Lender of all amounts set forth in this Section 2.20 without any further action of the Replaced Lender. ARTICLE III REPRESENTATIONS AND WARRANTIES To induce the Lenders to enter into this Agreement and to make the Extensions of Credit herein provided for, the Credit Parties hereby represent and warrant to the Administrative Agent and to each Lender that: 47 53 SECTION 3.1 FINANCIAL CONDITION. The consolidated balance sheets and the related statements of income, retained earnings and cash flows of the Borrower and its Subsidiaries for the fiscal year ending December 31, 1998 and for the fiscal quarter ending September 30, 1999, are complete and correct and present fairly, in all material respects, the financial condition of, and the results of operations for, such Persons as of such dates. All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as disclosed therein). None of the Borrower, any of its Restricted Subsidiaries or, any of its Unrestricted Subsidiaries which are not Foreign Subsidiaries has on the date hereof any material contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments, except as referred to or reflected or provided for in the balance sheets referred to above. SECTION 3.2 NO CHANGE. Since December 31, 1998 (and after delivery of annual audited financial statements in accordance with Section 5.1(a), from the date of the most recently delivered annual audited financial statements) there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect. SECTION 3.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of the Borrower and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the requisite power and authority and the legal right to own and operate all its material property, to lease the material property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified to conduct business and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification except to the extent that the failure to so qualify or be in good standing could not, in the aggregate, reasonably be expected to have a Material Adverse Effect and except for those Subsidiaries required to be so qualified and in good standing pursuant to the terms of Section 5.15 following their reorganization or restructure on or about the Closing Date and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. SECTION 3.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each of the Borrower and the other Credit Parties has full power and authority and the legal right to make, deliver and perform the Credit Documents to which it is party and has taken all necessary limited liability company or corporate action to authorize the execution, delivery and performance by it of the Credit Documents to which it is party. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery or performance of any Credit Document by the Borrower and the other Credit Parties (other than those which have been obtained) or with the validity or enforceability of any Credit Document 48 54 against the Borrower and the other Credit Parties (except such filings as are necessary in connection with the perfection of the Liens created by such Credit Documents). Each Credit Document to which it is a party has been duly executed and delivered on behalf of each of the Borrower and the other Credit Parties, as the case may be. Each Credit Document to which it is a party constitutes a legal, valid and binding obligation of each of the Borrower and the other Credit Parties, as the case may be, enforceable against each of the Borrower and Credit Parties, as the case may be, in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). SECTION 3.5 NO LEGAL BAR; NO DEFAULT. The execution, delivery and performance of the Credit Documents, the borrowings thereunder and the use of the proceeds of the Loans will not violate any Requirement of Law or any Contractual Obligation of the Borrower or its Subsidiaries (except those as to which waivers or consents have been obtained), and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any Requirement of Law or Contractual Obligation other than the Liens arising under or contemplated in connection with the Credit Documents. Neither the Borrower nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. SECTION 3.6 NO MATERIAL LITIGATION. Except as set forth in Schedule 3.6, no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the best knowledge of the Borrower, threatened by or against the Borrower or any of its Subsidiaries or against any of its or their respective properties or revenues (a) with respect to the Credit Documents or any Loan or any of the transactions contemplated hereby, or (b) which, if adversely determined, could reasonably be expected to have a Material Adverse Effect. SECTION 3.7 GOVERNMENT ACTS. (a) Neither the Borrower nor any Credit Party is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. (b) Neither the Borrower nor any of its Subsidiaries is a "holding company", or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 49 55 SECTION 3.8 MARGIN REGULATIONS. No part of the proceeds of any Loan hereunder will be used directly or indirectly for any purpose which violates, or which would be inconsistent with, the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. The aggregate value of all "margin stock" owned by the Borrower and its Subsidiaries taken as a group does not exceed 25% of the value of their assets. SECTION 3.9 ERISA. Except as could not reasonably be expected to have a Material Adverse Effect, (a) neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code; (b) no termination of a Single Employer Plan has occurred resulting in any liability that has remained underfunded, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period; (c) the present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits; and (d) neither the Borrower, nor any of its Subsidiaries, nor any Commonly Controlled Entity is currently subject to any liability for a complete or partial withdrawal from a Multiemployer Plan. SECTION 3.10 ENVIRONMENTAL MATTERS. Except as to matters with respect to which the Borrower and its Subsidiaries (other than SFDG and its Subsidiaries) could not reasonably be expected to incur liabilities in excess of $20,000,000 in the aggregate: (a) the facilities and properties owned, leased or operated by the Borrower or any of its Subsidiaries (the "Real Properties") do not contain any Hazardous Materials in amounts or concentrations which (i) constitute a violation of, or (ii) could give rise to liability under, any Environmental Law; (b) the Real Properties and all operations of the Borrower and/or its Subsidiaries at the Real Properties are in compliance, and have in the last five years been in compliance, in all material respects with all applicable Environmental Laws, and there is no contamination at, under or about the Real Properties or violation of any 50 56 Environmental Law with respect to the Real Properties or the business operated by the Borrower or any of its Subsidiaries (the "Business"); (c) neither the Borrower nor any of its Subsidiaries has received any written or actual notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Real Properties or the Business, nor does the Borrower or any of its Subsidiaries have knowledge or reason to believe that any such notice will be received or is being threatened; (d) Hazardous Materials have not been transported or disposed of from the Real Properties in violation of, or in a manner or to a location which could give rise to liability under any Environmental Law, nor have any Hazardous Materials been generated, treated, stored or disposed of at, on or under any of the Real Properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law; (e) no judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which the Borrower or any Subsidiary is or will be named as a party with respect to the Real Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Real Properties or the Business; and (f) there has been no release or threat of release of Hazardous Materials at or from the Real Properties, or arising from or related to the operations of the Borrower or any Subsidiary in connection with the Real Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws. SECTION 3.11 PURPOSE OF LOANS. The proceeds of the Loans hereunder shall be used solely by the Borrower to (i) refinance existing Indebtedness and (ii) provide for working capital, Permitted Acquisitions and other general corporate purposes (including stock and the TIPES repurchase programs). The Letters of Credit shall be used for general corporate purposes. SECTION 3.12 SUBSIDIARIES. Set forth on Schedule 3.12 is a complete and accurate list of all Subsidiaries of the Borrower. Information on the attached Schedule includes jurisdiction of incorporation; the number of shares of each class of Capital Stock or other equity interests outstanding; the number and percentage of outstanding shares of each class of stock owned by Borrower or its Subsidiaries; and the number and effect, if exercised, of all outstanding options, warrants, rights of conversion or purchase and similar rights. The outstanding Capital Stock and other equity 51 57 interests of all such Subsidiaries is validly issued, fully paid and non-assessable and is owned, free and clear of all Liens (other than those arising under or contemplated in connection with the Credit Documents). As of the Closing Date, there are no Unrestricted Subsidiaries other than the Unrestricted Subsidiaries specifically listed in the definition thereof. SECTION 3.13 OWNERSHIP. Each of the Borrower and its Restricted Subsidiaries (a) is the owner of, and has good and marketable title to, all of its respective assets, except as may be permitted pursuant to Section 6.12 hereof, and none of such assets is subject to any Lien other than Permitted Liens and (b) enjoys peaceful and undisturbed possession of all Real Properties that are necessary for the operation and conduct of its business. SECTION 3.14 INDEBTEDNESS. Except as otherwise permitted under Section 6.1, the Borrower and its Restricted Subsidiaries have no Indebtedness. SECTION 3.15 TAXES. Each of the Borrower and its Subsidiaries has filed, or caused to be filed, all tax returns (federal, state, local and foreign) required to be filed other than returns for which failure to file would not have a Material Adverse Effect and paid (a) all amounts of taxes shown thereon to be due (including interest and penalties) and (b) all other taxes, fees, assessments and other governmental charges (including mortgage recording taxes, documentary stamp taxes and intangibles taxes) owing by it, except for such taxes (i) which are not yet delinquent or (ii) that are being contested in good faith and by proper proceedings, and against which adequate reserves are being maintained in accordance with GAAP or (iii) for which nonpayment would not have a Material Adverse Effect. Neither the Borrower nor any of its Subsidiaries is aware as of the Closing Date of any proposed tax assessments against it or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect. SECTION 3.16 INTELLECTUAL PROPERTY. Each of the Borrower and its Subsidiaries owns, or has the legal right to use, all trademarks, tradenames, patents, copyrights, technology, know-how and processes (collectively, the "Intellectual Property") necessary for each of them to conduct its business as currently conducted. Except as provided on Schedule 3.16, no claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower or any of its Subsidiaries know of any such claim, and, to the knowledge of the Borrower or any of its Subsidiaries, the use of such Intellectual Property by the Borrower or any of its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 52 58 SECTION 3.17 SOLVENCY. The fair saleable value of all Credit Parties' assets, measured on a going concern basis, exceeds all probable liabilities, including those to be incurred pursuant to this Credit Agreement. The Credit Parties on a consolidated basis, will not (a) have unreasonably small capital in relation to the business in which they are engaged or (b) have incurred, or believe that they will have incurred after giving effect to the transactions contemplated by this Credit Agreement, Indebtedness beyond their ability to pay such Indebtedness as it become due. SECTION 3.18 INVESTMENTS. All Investments of each of the Borrower and its Restricted Subsidiaries are Permitted Investments. SECTION 3.19 LOCATION OF CHIEF EXECUTIVE OFFICE. Set forth on Schedule 3.19 is the chief executive office and principal place of business of each of the Borrower and its Restricted Subsidiaries. Schedule 3.19 may be updated from time to time by the Borrower to include new locations by giving written notice thereof to the Administrative Agent. SECTION 3.20 NO BURDENSOME RESTRICTIONS. None of the Borrower or any of its Subsidiaries is a party to any agreement or instrument or subject to any other obligation or any charter or corporate restriction or any provision of any applicable law, rule or regulation which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. SECTION 3.21 BROKERS' FEES. None of the Borrower or any of its Subsidiaries has any obligation to any Person in respect of any finder's, broker's, investment banking or other similar fee in connection with any of the transactions contemplated under the Credit Documents other than the closing and other fees payable pursuant to this Credit Agreement and the Fee Letter. SECTION 3.22 LABOR MATTERS. None of the Borrower or any of its Restricted Subsidiaries (i) is currently suffering any strikes, walkouts, work stoppages or other material labor difficulty, other than as set forth in Schedule 3.22 hereto or (ii) has knowledge of any potential or pending strike, walkout or work stoppage. SECTION 3.23 ACCURACY AND COMPLETENESS OF INFORMATION. All factual information heretofore, contemporaneously or hereafter furnished by or on behalf of the Borrower or any of its Subsidiaries to the Administrative Agent or any Lender for 53 59 purposes of or in connection with this Agreement or any other Credit Document, or any transaction contemplated hereby or thereby, is or will be true and accurate in all material respects and not incomplete by omitting to state any material fact necessary to make such information not misleading. There is no fact now known to the Borrower or any of its Subsidiaries which has, or could reasonably be expected to have, a Material Adverse Effect which fact has not been set forth herein, in the financial statements of the Borrower and its Subsidiaries furnished to the Administrative Agent and/or the Lenders, or in any certificate, opinion or other written statement made or furnished by the Borrower to the Administrative Agent and/or the Lenders. SECTION 3.24 YEAR 2000 ISSUE. Except as could not reasonably be expected to have a Material Adverse Effect, any reprogramming and related testing required to permit the proper functioning of the Credit Parties' computer systems in and following the year 2000 are completed (that is, the Credit Parties are "Year 2000 Compliant"), and the cost to the Credit Parties of such reprogramming and testing will not result in a Default or Event of Default or a Material Adverse Effect. The computer and management information systems of the Credit Parties and their Subsidiaries are and, with ordinary course upgrading and maintenance, will continue for the term of this Agreement to be, adequate for the conduct of its business. ARTICLE IV CONDITIONS PRECEDENT SECTION 4.1 CONDITIONS TO CLOSING DATE AND INITIAL REVOLVING LOANS. This Agreement shall become effective upon, and the obligation of each Lender to make the initial Extension of Credit on the Closing Date is subject to, the satisfaction of the following conditions precedent: (a) Execution of Agreement. The Administrative Agent shall have received (i) counterparts of this Agreement, executed by a duly authorized officer of each party hereto, (ii) for the account of each Lender, Revolving Notes, and for the account of the Swingline Lender, a Swingline Note and (iii) counterparts of the Pledge Agreement, in each case conforming to the requirements of this Agreement and executed by duly authorized officers of the Credit Parties. (b) Authority Documents. The Administrative Agent shall have received a secretary's certificate substantially in the form of Schedule 4.1(b) with respect to the following: (i) Charter Documents. Copies of the articles of incorporation or other charter documents, as applicable, of each Credit Party and each corporate general partner of a Credit Party certified to be true and complete as of a recent date by the appropriate Governmental Authority of the state of its incorporation. 54 60 (ii) Partnership Agreements; Disclosure Information. With respect to each Credit Party that is a partnership or limited partnership, a copy of the partnership agreement of such Credit Party, together with all amendments thereto, schedules and any disclosure information, in each case certified by a general partner of such Credit Party as of the Closing Date to be true and correct and in force and effect as of such date. (iii) Resolutions. Copies of resolutions or certificate of authorization of the board of directors or general partner of each Credit Party approving and adopting the Credit Documents, the transactions contemplated therein and authorizing execution and delivery thereof, certified by an officer or general partner of such Credit Party as of the Closing Date to be true and correct and in force and effect as of such date. (iv) Bylaws. A copy of the bylaws of each corporate Credit Party and each corporate general partner of a Credit Party certified by an officer of such Credit Party or corporate general partner as of the Closing Date to be true and correct and in force and effect as of such date. (v) Good Standing. Copies of (i) certificates of good standing, existence or its equivalent with respect to each Credit Party certified as of a recent date by the appropriate Governmental Authorities of the state of incorporation and each other state in which the failure to so qualify and be in good standing could reasonably be expected to have a Material Adverse Effect on the business or operations of the Borrower and its Subsidiaries, taken as a whole, except for those Subsidiaries required to be so qualified and in good standing pursuant to the terms of Section 5.15 following their reorganization or restructure on or about the Closing Date, and (ii) if available, a certificate indicating payment of all corporate franchise taxes certified as of a recent date by the appropriate governmental taxing authorities. (vi) Incumbency. An incumbency certificate of each Credit Party and each corporate general partner of a Credit Party certified by a secretary or assistant secretary to be true and correct as of the Closing Date. 55 61 (c) Legal Opinions of Counsel. (i) The Administrative Agent shall have received an opinion of legal counsel for the Credit Parties, dated the Closing Date and addressed to the Administrative Agent and the Lenders, in form and substance acceptable to the Administrative Agent. (ii) The Administrative Agent shall have received an opinion of Moore & Van Allen, PLLC, dated the Closing Date and addressed to the Administrative Agent and the Lenders. (d) Personal Property Collateral. The Administrative Agent shall have received, in form and substance satisfactory to the Administrative Agent: (i) searches of Uniform Commercial Code filings in the jurisdiction of the chief executive office of each Credit Party and each jurisdiction where a filing would need to be made in order to perfect the Administrative Agent's security interest in the Collateral, copies of the financing statements on file in such jurisdictions and evidence that no Liens exist other than Permitted Liens; and (ii) duly executed UCC financing statements for each appropriate jurisdiction as is necessary, in the Administrative Agent's sole discretion, to perfect the Administrative Agent's security interest in the Collateral. (e) Liability and Casualty Insurance. The Administrative Agent shall have received copies of insurance policies or certificates of insurance evidencing liability and casualty insurance meeting the requirements set forth herein. (f) Fees. The Administrative Agent shall have received all fees, if any, owing pursuant to the Fee Letter and Section 2.4. (g) Litigation. There shall not exist any pending litigation or investigation affecting or relating to the Borrower or any of its Subsidiaries, this Agreement and the other Credit Documents that in the reasonable judgment of the Administrative Agent could be expected to have a Material Adverse Effect, that has not been settled, dismissed, vacated, discharged or terminated prior to the Closing Date. (h) Solvency Evidence. The Administrative Agent shall have received an officer's certificate for the Credit Parties prepared by the chief financial officer or treasurer of the Borrower as to the financial condition, solvency and related matters of the Credit Parties taken as a whole, after giving effect to the initial borrowings under the Credit Documents, in substantially the form of Schedule 4.1(h) hereto. (i) Account Designation Letter. The Administrative Agent shall have received the executed Account Designation Letter in the form of Schedule 1.1(a) hereto. 56 62 (j) Corporate Structure. The corporate capital and ownership structure of the Borrower and its Subsidiaries shall be as described in Schedule 3.12. The Administrative Agent shall be satisfied with the management structure, legal structure, voting control, liquidity and capitalization of the Borrower as of the Closing Date. (k) Consummation of Merger. The Administrative Agent shall have received evidence that that the transactions contemplated by the Merger Agreement have been consummated in accordance with the terms thereof and the Administrative Agent shall have received a copy of the Merger Agreement, all material documents executed in connection therewith and all amendments or supplements thereto, certified by a Responsible Officer of the Borrower to be true and correct and in full force and effect. (l) Government Consent. The Administrative Agent shall have received evidence that all governmental, shareholder and material third party consents and approvals necessary in connection with the transactions contemplated by the Merger Agreement and the financings and other transactions contemplated hereby have been obtained and all applicable waiting periods have expired without any action being taken by any authority that could restrain, prevent or impose any material adverse conditions on such transactions or that could seek or threaten any of the foregoing. (m) Compliance with Laws. The financings and other transactions contemplated hereby shall be in compliance with all applicable laws and regulations (including Environmental Laws and all applicable securities and banking laws, rules and regulations). (n) Bankruptcy. There shall be no bankruptcy or insolvency proceedings with respect to the Borrower or any of its Subsidiaries. (o) Financial Statements. The Administrative Agent shall have received copies of the financial statements referred to in Section 3.1 hereof. (p) Year 2000 Plan. The Administrative Agent shall have received evidence that the Borrower and its Subsidiaries are Year 2000 Compliant. (q) Termination of Existing Indebtedness. All existing Indebtedness for borrowed money of the Borrower and its Restricted Subsidiaries (other than the Indebtedness listed on Schedule 6.1(b)) shall have been repaid in full with the proceeds of the initial Loans hereunder and terminated, and Indebtedness under that certain $1,000,000,000 Amended and Restated Credit Agreement dated as of May 22, 1998 among the Borrower, First Union, as administrative agent, Bank One, NA (formerly The First National Bank of Chicago), as syndication agent, and the lenders party thereto shall have been repaid in full and such credit agreement shall have been terminated. (r) Material Adverse Change. There shall not have occurred a material adverse change since December 31, 1998 in, and each Lender shall be satisfied with (such satisfaction to be evidenced by the delivery and release by such Lender to the 57 63 Administrative Agent of an executed signature page to this Agreement), the business, assets, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole, or in the facts and information regarding such entities as represented to date. (s) Officer's Certificates. The Administrative Agent shall have received a certificate or certificates executed by the chief financial officer or treasurer of the Borrower on behalf of the Credit Parties as of the Closing Date stating that (A) the Credit Parties and each of their Subsidiaries are in compliance with all existing material financial obligations, (B) all governmental, shareholder and third party consents and approvals, if any, with respect to the Credit Documents and the transactions contemplated thereby have been obtained, (C) no action, suit, investigation or proceeding is pending or threatened in any court or before any arbitrator or governmental instrumentality that purports to affect a Credit Party, any of the Credit Parties' Subsidiaries or any transaction contemplated by the Credit Documents, if such action, suit, investigation or proceeding would have or be reasonably expected to have a Material Adverse Effect, and (D) immediately after giving effect to this Credit Agreement, the other Credit Documents and all the transactions contemplated therein to occur on such date, (1) no Default or Event of Default exists, (2) all representations and warranties contained herein and in the other Credit Documents are true and correct in all material respects, and (3) the Credit Parties are in compliance with each of the financial covenants set forth in Section 5.9. (t) Sources and Uses of Funds. The Administrative Agent shall have received a memorandum detailing the sources and uses of the funds to be used to consummate the transactions contemplated by this Agreement and the other Credit Documents and related expenses, in form and substance reasonably satisfactory to the Administrative Agent. (u) Additional Matters. All other documents and legal matters in connection with the transactions contemplated by this Agreement shall be reasonably satisfactory in form and substance to the Administrative Agent and its counsel. SECTION 4.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT. The obligation of each Lender to make any Extension of Credit hereunder is subject to the satisfaction of the following conditions precedent on the date of making such Extension of Credit: (a) Representations and Warranties. The representations and warranties made by the Credit Parties herein, in the Security Documents or which are contained in any certificate furnished at any time under or in connection herewith shall be true and correct in all material respects on and as of the date of such Extension of Credit as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date). (b) No Default or Event of Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Extension of Credit 58 64 to be made on such date unless such Default or Event of Default shall have been waived in accordance with this Agreement. (c) Compliance with Commitments. Immediately after giving effect to the making of any such Extension of Credit (and the application of the proceeds thereof), (i) the sum of the aggregate principal amount of outstanding Revolving Loans plus Swingline Loans plus LOC Obligations shall not exceed the Revolving Committed Amount, (ii) the LOC Obligations shall not exceed the LOC Committed Amount and (iii) the Swingline Loans shall not exceed the Swingline Committed Amount. (d) Additional Conditions to Revolving Loans. If such Loan is made pursuant to Section 2.1, all conditions set forth in such Section shall have been satisfied. (e) Additional Conditions to Swingline Loan. If such Loan is made pursuant to Section 2.2, all conditions set forth in such Section shall have been satisfied. (f) Additional Conditions to Letters of Credit. If such Extension of Credit is made pursuant to Section 2.3, all conditions set forth in such Section shall have been satisfied. Each request for an Extension of Credit and each acceptance by the Borrower of any such Extension of Credit shall be deemed to constitute a representation and warranty by the Borrower as of the date of such Extension of Credit that the applicable conditions in paragraphs (a) through (f) of this Section have been satisfied. ARTICLE V AFFIRMATIVE COVENANTS The Borrower hereby covenants and agrees that on the Closing Date, and thereafter for so long as this Agreement is in effect and until the Commitments have terminated, no Note remains outstanding and unpaid and the Credit Party Obligations, together with interest, Commitment Fees and all other amounts owing to the Administrative Agent or any Lender hereunder, are paid in full, the Borrower shall, and shall cause each of its Subsidiaries to: SECTION 5.1 FINANCIAL STATEMENTS. Furnish to the Administrative Agent and each of the Lenders: (a) Annual Financial Statements. As soon as available and in any event within 90 days after the end of each fiscal year of the Borrower: (i) (A) consolidated statements of income, stockholders' equity and cash flows of the Borrower and its Subsidiaries for such fiscal year and (B) the related consolidated balance sheet of the Borrower and its Subsidiaries as at 59 65 the end of such fiscal year, setting forth in each case in comparative form the corresponding consolidated figures for the preceding fiscal year, and accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such consolidated financial statements fairly present the consolidated financial condition and results of operations of the Borrower and its Subsidiaries, as at the end of, and for, such fiscal year in accordance with GAAP, and a certificate of such accountants stating that, in making the examination necessary for their opinion, they obtained no knowledge, except as specifically stated, of any Default or Event of Default; and (ii) (A) (x) consolidated statements of income and cash flows of the Borrower and its Restricted Subsidiaries and (y) consolidating statements of income of the Borrower and its directly owned Subsidiaries combined in significant groups, in each case for such fiscal year, and (B) (x) the related consolidating balance sheet of the Borrower and its Restricted Subsidiaries and (y) the related consolidated balance sheet of the Borrower and its directly owned Subsidiaries combined in significant groups, in each case as at the end of such fiscal year, setting forth in each case (other than consolidating statements) in comparative form the corresponding consolidated figures for the preceding fiscal year, accompanied by a certificate of a Responsible Officer of the Borrower, which certificate shall state that such consolidated financial statements fairly present the consolidated financial condition and results of operations of the Borrower and its Subsidiaries or of the Borrower and its Restricted Subsidiaries, as the case may be, and such consolidating financial statements fairly present the respective unconsolidated financial condition and results of operations of the Borrower and each group of such Subsidiaries, in accordance with GAAP consistently applied, as at the end of and for such period (subject to normal year-end audit adjustments); and (b) Quarterly Financial Statements. As soon as available and in any event within 45 days after the end of each of the first three quarterly fiscal periods of each fiscal year of the Borrower, (i) (A) consolidated statements of income and cash flows of the Borrower and its Subsidiaries, (B) consolidated statements of income and cash flows of the Borrower and its Restricted Subsidiaries, in each case for such period and for the period from the beginning of the respective fiscal year to the end of such period, and (C) consolidating statements of income of the Borrower and its directly owned Subsidiaries combined in significant groups for such period, and (ii) (A) the related consolidated and consolidating balance sheet of the Borrower and its Subsidiaries and (B) the related consolidated balance sheet of the Borrower and its Restricted Subsidiaries, in each case as at the end of such period, setting forth in each case (other than consolidating statements) in comparative form the corresponding consolidated figures for the corresponding periods in the preceding fiscal year, accompanied by a certificate of a Responsible Officer of the Borrower, which certificate shall state that such consolidated financial statements fairly present the consolidated financial condition and results of operations of the Borrower and its Subsidiaries or of the Borrower and its Restricted Subsidiaries, as the case may be, and such consolidating financial statements fairly 60 66 present the respective unconsolidated financial condition and results of operations of the Borrower and each group of such Subsidiaries, in accordance with GAAP consistently applied, as at the end of, and for, such period (subject to normal year-end audit adjustments); all such financial statements to be accompanied by a description of, and an estimation of the effect on the financial statements on account of, a change, if any, in the application of accounting principles as provided in Section 1.3. SECTION 5.2 CERTIFICATES; OTHER INFORMATION. Furnish to the Administrative Agent and each of the Lenders: (a) promptly upon their becoming available, copies of all registration statements and regular periodic reports, if any, that the Borrower shall have filed with the SEC or any national securities exchange; (b) promptly upon mailing thereof to the shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; (c) at the time it furnishes each set of financial statements pursuant to Sections 5.1(a) and 5.1(b) above, a certificate of a Responsible Officer of the Borrower (i) certifying that (A) each of the Credit Parties and its Subsidiaries during such period observed or performed in all material respects all of its covenants and other agreements, and satisfied in all material respects every condition contained in this Agreement to be observed, performed or satisfied by it, and (B) no Default or Event of Default has occurred and is continuing (or, if any Default or Event of Default has occurred and is continuing, describing the same in reasonable detail and describing the action that the Borrower has taken or proposes to take with respect thereto) and (ii) setting forth in reasonable detail the computations necessary to determine whether the Credit Parties are in compliance with Section 5.9 hereof as of the end of the respective quarterly fiscal period or fiscal year; and (d) from time to time such other information regarding the financial condition, operations, business or prospects of the Borrower or any of its Subsidiaries (including, without limitation, any Plan or Multiemployer Plan and any reports or other information required to be filed under ERISA) as any Lender or the Administrative Agent may reasonably request. SECTION 5.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, in accordance with industry practice (subject, where applicable, to specified grace periods) all of its material obligations of whatever nature and any additional costs that are imposed as a result of any failure to so pay, discharge or otherwise satisfy such obligations, except when the amount or validity of such obligations and costs is currently being 61 67 contested in good faith by appropriate proceedings and reserves, if applicable, in conformity with GAAP with respect thereto have been provided on the books of the Borrower or its Restricted Subsidiaries, as the case may be. SECTION 5.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. (a) Preserve and maintain its legal existence and all of its material rights, privileges, licenses and franchises (provided that nothing in this Section 5.4 shall prohibit any transaction expressly permitted under Section 6.4 hereof). (b) Pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its assets prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained. SECTION 5.5 MAINTENANCE OF PROPERTY; INSURANCE. (a) Keep all material property used or useful in its business in good working order and condition (ordinary wear and tear and obsolescence excepted). (b) Maintain insurance with financially sound and reputable insurance companies, and with respect to Property and risks of a character usually maintained by corporations engaged in the same or similar business similarly situated, against loss, damage and liability of the kinds and in the amounts customarily maintained by such corporations. (c) On or before the Closing Date, deliver, to the extent not previously delivered, to the Administrative Agent certificates of insurance satisfactory to the Administrative Agent evidencing the existence of all insurance required to be maintained by the Borrower and its Restricted Subsidiaries hereunder and setting forth the respective coverages, limits of liability, carrier, policy number and period of coverage. Thereafter, each year the Borrower will deliver to the Administrative Agent certificates of insurance evidencing that all insurance required to be maintained by the Borrower and its Restricted Subsidiaries hereunder will be in effect through the calendar year following the date of such certificates, subject only to the payment of premiums as they become due. (d) In case of any material loss, damage to or destruction of the Property of any Credit Party or any part thereof, such Credit Party shall promptly give written notice thereof to the Administrative Agent generally describing the nature and extent of such damage or destruction. 62 68 SECTION 5.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. (a) Keep adequate records and books of account in which complete entries in accordance with GAAP consistently applied and all Requirements of Law shall be made of all dealings and transactions in relation to its businesses and activities. (b) Upon reasonable prior notice, permit representatives of any Lender or the Administrative Agent, during normal business hours, to examine, copy and make extracts from its books and records, to inspect any of its Real Properties, and to discuss its business and affairs with its officers, all to the extent reasonably requested by such Lender or the Administrative Agent (as the case may be). SECTION 5.7 NOTICES. Give prompt notice in writing to the Administrative Agent (which shall promptly transmit such notice to each Lender) of: (a) within five Business Days after any Credit Party knows or has reason to know thereof, the occurrence of any Default or Event of Default; (b) any default or event of default under any Contractual Obligation of the Borrower or any of its Restricted Subsidiaries which could reasonably be expected to have a Material Adverse Effect; (c) any legal or arbitral proceedings before any Governmental Authority and any material development in respect of such legal or other proceedings affecting the Borrower or any of its Restricted Subsidiaries, except proceedings that, if adversely determined, would not (either individually or in the aggregate) have a Material Adverse Effect; (d) as soon as possible, and in any event within ten days after any Credit Party or any of its Restricted Subsidiaries knows or has reason to believe that any of the events or conditions specified below with respect to any Plan or Multiemployer Plan has occurred or exists, a statement signed by a Responsible Officer of the Borrower or such Credit Party setting forth details respecting such event or condition and the action, if any, that the Borrower, any Credit Party or any ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC by the Borrower, any Credit Party or any ERISA Affiliate with respect to such event or condition): (i) any Reportable Event with respect to a Plan, as to which PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event (provided that a failure to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA, including, without limitation, the failure to make on or before its due date a required installment under Section 412(m) of the Code or Section 302(e) of 63 69 ERISA, shall be a reportable event regardless of the issuance of any waivers in accordance with Section 412(d) of the Code) and any request for a waiver under Section 412(d) of the Code for any Plan; (ii) the distribution under Section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by any Credit Party or any of its Subsidiaries or any ERISA Affiliate to terminate any Plan; (iii) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by any Credit Party or any of its Subsidiaries or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan; (iv) the complete or partial withdrawal from a Multiemployer Plan by any Credit Party or any of its Subsidiaries or any ERISA Affiliate that results in liability under Section 4201 or 4204 of ERISA (including the obligation to satisfy secondary liability as a result of a purchaser default) or the receipt by any Credit Party or any of its Subsidiaries or any ERISA Affiliate of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA; (v) the institution of a proceeding by a fiduciary of any Multiemployer Plan against any Credit Party or any of its Subsidiaries or any ERISA Affiliate to enforce Section 515 of ERISA, which proceeding is not dismissed within 30 days; and (vi) the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of tax-exempt status of the trust of which such Plan is a part if any Credit Party or any of its Subsidiaries or any ERISA Affiliate fails to timely provide security to the Plan in accordance with the provisions of said Sections; (e) any assertion of any Environmental Claim by any Person against, or with respect to the activities of, the Borrower or any of its Subsidiaries and notice of any alleged violation of or non-compliance with any Environmental Laws or any permits, licenses or authorizations, other than any Environmental Claim or alleged violation that, if adversely determined, would not (either individually or in the aggregate) have a Material Adverse Effect; and (f) any other development or event which could reasonably be expected to have a Material Adverse Effect. Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the 64 70 Borrower proposes to take with respect thereto. In the case of any notice of a Default or Event of Default, the Borrower shall specify that such notice is a Default or Event of Default notice on the face thereof. SECTION 5.8 ENVIRONMENTAL LAWS. Without limiting the general terms set forth in Section 5.11: (a) Comply in all material respects with, and ensure compliance in all material respects by all tenants and subtenants, if any, with, all applicable Environmental Laws and obtain and comply in all material respects with and maintain, and ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not reasonably be expected to have a Material Adverse Effect; and (c) Defend, indemnify and hold harmless the Administrative Agent and the Lenders, and their respective employees, agents, officers and directors, from and against any and all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Borrower any of its Subsidiaries or the Real Properties, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, reasonable attorney's and consultant's fees, investigation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing arise out of the gross negligence or willful misconduct of the party seeking indemnification therefor. The agreements in this paragraph shall survive repayment of the Notes and all other amounts payable hereunder. SECTION 5.9 FINANCIAL COVENANTS. Commencing on the day immediately following the Closing Date, the Borrower shall, and shall cause each of its Restricted Subsidiaries to, comply with the following financial covenants: 65 71 (a) Leverage Ratio. The Leverage Ratio, as of the last day of each fiscal quarter of the Borrower and its Restricted Subsidiaries occurring during each of the periods set forth below, shall be less than or equal to 3.25 to 1.00. (b) Interest Coverage Ratio. The Interest Coverage Ratio, as of the last day of each fiscal quarter of the Borrower and its Restricted Subsidiaries, shall be greater than or equal to 3.0 to 1.0. (c) Minimum Consolidated Net Worth. The Consolidated Net Worth shall at all times be equal to or greater than $1,100,000,000, increased on a cumulative basis as of the end of each fiscal quarter of the Borrower and its Restricted Subsidiaries, commencing with the fiscal quarter ending March 31, 2000, by an amount equal to 50% of the net income (with no deduction for net losses) of the Borrower and its Restricted Subsidiaries on a consolidated basis for the fiscal quarter then ended plus 75% of the amount by which the "total stockholders equity" of the Borrower is increased as a result of any public or private offering of ownership interests of the Borrower after the Closing Date (other than increases to the extent such increases result from Equity Issuances to, or capital contributions from, any Affiliate of the Borrower or from an offering in connection with the acquisition of an Unrestricted Subsidiary or Equity Issuances pursuant to an employee or director stock option or incentive plan or other employee benefit plan). Promptly upon consummation of each such public or private offering, the Borrower shall notify the Administrative Agent in writing of the amount of such increase in total stockholders equity. SECTION 5.10 OBLIGATIONS REGARDING SUBSIDIARIES; ADDITIONAL SUBSIDIARY GUARANTORS. (a) Except as permitted by Section 6.4, the Borrower will, and will cause each of its Restricted Subsidiaries to take such action from time to time as shall be necessary to ensure that each of its Subsidiaries remains a Subsidiary at all times. (b) The Credit Parties will cause each of their wholly-owned Domestic Subsidiaries that are Material Subsidiaries (other than Suiza Capital Trust II), whether newly formed, after acquired or otherwise existing, to promptly become a Guarantor hereunder by way of execution of a Joinder Agreement and take such other action as may be required pursuant to the terms of Section 5.13. SECTION 5.11 COMPLIANCE WITH LAW. Each Credit Party will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders, and all applicable restrictions imposed by all Governmental Authorities, applicable to it and its assets if noncompliance with any such law, rule, regulation, order or restriction could reasonably be expected to have a Material Adverse Effect. 66 72 SECTION 5.12 PLEDGED ASSETS. (a) Each Credit Party will cause (i) 100% of the Capital Stock (or, if less, the full amount owned by such Credit Party) of each of the direct or indirect Domestic Subsidiaries which are Material Subsidiaries of such Person and which are Restricted Subsidiaries and (ii) 65% of the Capital Stock (or, if less, the full amount owned by such Credit Party) of each of the First Tier Foreign Subsidiaries which are Material Subsidiaries of such Person and which are Restricted Subsidiaries, unless otherwise agreed by the Administrative Agent, to be subject at all times to a first priority, perfected Lien in favor of the Administrative Agent pursuant to the terms and conditions of the Security Documents or such other security documents as the Administrative Agent shall reasonably request; provided, however, that notwithstanding the foregoing, no Unrestricted Subsidiary shall be required to pledge the Capital Stock of its Subsidiaries and the Borrower shall not be required to pledge the Capital Stock of Suiza Capital Trust II. (b) Within 30 days after a Credit Party changes the location of its chief executive office, the Borrower shall notify the Administrative Agent of such change and shall execute and deliver, or cause to be executed and delivered, to the Administrative Agent such UCC financing statements and other documentation as the Administrative Agent may reasonably request. SECTION 5.13 ADDITIONAL CREDIT PARTIES. As soon as practicable and in any event within 30 days after any Person (whether newly formed, acquired or otherwise) becomes a Material Subsidiary that is a Restricted Subsidiary of any Credit Party, the Borrower shall provide the Administrative Agent with written notice thereof setting forth information in reasonable detail describing all of the assets of such Person and shall (a) if such Person is a wholly-owned Domestic Subsidiary of a Credit Party, cause such Person to execute a Joinder Agreement in substantially the same form as Exhibit 5.13, (b) cause 100% (if such Person is a Domestic Subsidiary of a Credit Party) or, unless otherwise agreed by the Administrative Agent, 65% (if such Person is a First Tier Foreign Subsidiary of a Credit Party that is also a Material Subsidiary) of the Capital Stock of such Person owned by a Credit Party to be delivered to the Administrative Agent (together with undated stock powers signed in blank (unless, with respect to a First Tier Foreign Subsidiary, such stock powers are deemed unnecessary by the Administrative Agent in its reasonable discretion under the law of the jurisdiction of incorporation of such Person)) and pledged to the Administrative Agent pursuant to an appropriate pledge agreement(s) in substantially the form of the Pledge Agreement or joinder to the Pledge Agreement and otherwise in form acceptable to the Administrative Agent and (c) deliver such other documentation as the Administrative Agent may reasonably request in connection with the foregoing, including, without limitation, appropriate UCC-1 financing statements, certified resolutions and other organizational and authorizing documents of such Person and favorable opinions of counsel to such Person (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to above and the perfection of the Administrative Agent's liens thereunder). 67 73 SECTION 5.14 YEAR 2000 COMPLIANCE. The Credit Parties will promptly notify the Administrative Agent in the event any Credit Party discovers or determines that any computer application (including those of its suppliers, vendors and customers) that is material to its or any of its Subsidiaries' business and operations will not be Year 2000 Compliant, except to the extent that such failure could not reasonably be expected to have a Material Adverse Effect. SECTION 5.15 GOOD STANDING; POST-CLOSING QUALIFICATION. Within 30 days after the Closing Date, the Credit Parties will cause each of their Subsidiaries that are restructured or reorganized on or about the Closing Date to be duly qualified to conduct business and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification except to the extent that the failure to so qualify or be in good standing could not, in the aggregate, reasonably be expected to have a Material Adverse Effect ARTICLE VI NEGATIVE COVENANTS The Borrower hereby covenants and agrees that on the Closing Date, and thereafter for so long as this Agreement is in effect and until the Commitments have terminated, no Note remains outstanding and unpaid and the Credit Party Obligations, together with interest, Commitment Fees and all other amounts owing to the Administrative Agent or any Lender hereunder, are paid in full, the Borrower shall, and shall cause each of its Subsidiaries, to act in accordance with the following: SECTION 6.1 INDEBTEDNESS. The Borrower will not, nor will it permit any Restricted Subsidiary to, contract, create, incur, assume or permit to exist any Indebtedness, except: (a) Indebtedness arising or existing under this Agreement and the other Credit Documents; (b) Indebtedness of the Borrower and its Restricted Subsidiaries existing as of the Closing Date as referenced in the financial statements referenced in Section 3.1 (and set out more specifically in Schedule 6.1(b)) hereto and renewals, refinancings or extensions thereof in a principal amount not in excess of that outstanding as of the date of such renewal, refinancing or extension; (c) Indebtedness (including Capital Lease Obligations) incurred to finance the purchase of equipment, and other Capital Lease Obligations, not to exceed $30,000,000 in the aggregate outstanding at any time; provided that 68 74 (i) such Indebtedness when incurred shall not exceed the purchase price or cost of construction of such asset and (ii) no such Indebtedness shall be refinanced for a principal amount in excess of the principal balance outstanding thereon at the time of such refinancing; (d) intercompany Indebtedness of the Restricted Subsidiaries of the Borrower to the Borrower or to other Restricted Subsidiaries of the Borrower or of the Borrower to any of its Restricted Subsidiaries; (e) obligations in connection with any Permitted Receivables Financing, to the extent such obligations constitute Indebtedness; (f) additional Indebtedness of the Borrower and its Restricted Subsidiaries (other than the Subsidiary Borrower) up to but not exceeding $40,000,000 at any one time outstanding; (g) Indebtedness of a Restricted Subsidiary consisting of tax-advantaged industrial revenue bond, industrial development bond or other similar financings assumed (or taken subject to) in connection with (but not incurred in connection with or in anticipation of) a Permitted Acquisition; and (h) Indebtedness in respect of Hedging Agreements to the extent permitted hereunder. SECTION 6.2 LIENS. The Borrower will not, nor will it permit any Restricted Subsidiary to, contract, create, incur, assume or permit to exist any Lien with respect to any of its assets, whether now owned or hereafter acquired, except for Permitted Liens. SECTION 6.3 NATURE OF BUSINESS. Neither the Borrower nor any of its Restricted Subsidiaries will engage to any substantial extent in any line or lines of business activity other than operations involved in the manufacture, processing and distribution of food or packaging products or the lines of business conducted by the Borrower or any of its Restricted Subsidiaries as of the Closing Date or which are related thereto. SECTION 6.4 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC. The Borrower will not, nor will it permit any Restricted Subsidiary to, (a) enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution); 69 75 (b) acquire any business or assets from, or Capital Stock of, or be a party to any acquisition of, any Person except: (i) for purchases of inventory and other assets to be sold or used in the ordinary course of business; (ii) Investments permitted under Section 6.5 hereof; and (iii) Permitted Acquisitions; (c) convey, sell, lease, transfer or otherwise dispose of, in one transaction or a series of transactions, any part of its business or assets, whether now owned or hereafter acquired (including, without limitation, receivables and leasehold interests), but excluding: (i) any Excluded Disposition; (ii) obsolete or worn-out Property, tools or equipment no longer used or useful in its business (other than any Excluded Disposition) or real Property no longer used or useful in its business; (iii) any sale, lease or transfer of assets from a Credit Party to another Credit Party; (iv) any sale of Transferred Assets by such Person to a Receivables Financier in connection with a Permitted Receivables Financing; and (v) other assets so long as the aggregate amount thereof sold or otherwise disposed of in any single fiscal year by the Borrower and its Restricted Subsidiaries shall not have a book value in excess of ten percent of the book value of the total assets of the Borrower and its Restricted Subsidiaries owned on the first day of such fiscal year; provided, that in each case with respect to subsections (v) and (vi) above at least 85% of the consideration received therefor by the Borrower or any such Restricted Subsidiary is in the form of cash or Cash Equivalents; and (d) Notwithstanding the foregoing provisions of this Section 6.4, so long as no Default or Event of Default shall have occurred and be continuing, and after giving effect to any of the succeeding transactions, no Default or Event of Default would exist hereunder and so long as the Liens created under the Security Documents continue to be in effect: (i) any Restricted Subsidiary of the Borrower may be merged or consolidated with or into: (A) the Borrower if the Borrower shall be the 70 76 continuing or surviving corporation or (B) any other Subsidiary (so long as such surviving Subsidiary is either (x) a Credit Party or (y) an Additional Credit Party); (ii) any Restricted Subsidiary of the Borrower may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or a Restricted Subsidiary of the Borrower; and (iii) any Unrestricted Subsidiary may be sold, liquidated, wound up or dissolved, or may sell, lease, transfer or otherwise dispose of any or all of its assets. SECTION 6.5 ADVANCES, INVESTMENTS AND LOANS. The Borrower will not, nor will it permit any Restricted Subsidiary to, lend money or extend credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any Person except for Permitted Investments. SECTION 6.6 TRANSACTIONS WITH AFFILIATES. Except as expressly permitted by this Agreement, the Borrower will not, nor will it permit any of its Subsidiaries to, directly or indirectly: (a) make any investment in an Affiliate other than Permitted Investments; (b) transfer, sell, lease, assign or otherwise dispose of any assets to an Affiliate other than Permitted Investments; (c) merge into or consolidate with or purchase or acquire assets from an Affiliate other than Permitted Acquisitions; or (d) enter into any other transaction directly or indirectly with or for the benefit of an Affiliate (including, without limitation, guarantees and assumptions of obligations of an Affiliate); provided that (i) any Affiliate who is an individual may serve as a director, officer or employee of the Borrower or any of its Subsidiaries and receive reasonable compensation for his or her services in such capacity and (ii) the Borrower and its Subsidiaries may enter into transactions (other than extensions of credit by the Borrower or any of its Subsidiaries to an Affiliate) if the monetary or business consideration arising therefrom would be substantially as advantageous to the Borrower and its Restricted Subsidiaries as the monetary or business consideration that would be obtained in a comparable transaction with a Person not an Affiliate. SECTION 6.7 OWNERSHIP OF SUBSIDIARIES; RESTRICTIONS. The Borrower will not, nor will it permit any Subsidiary to, create, form or acquire any Subsidiaries, except for (a) wholly-owned Domestic Subsidiaries with assets of $100,000 or more (other than a Receivables Financing SPC) which are joined as Additional Credit Parties in accordance with the terms hereof, (b) other Domestic Subsidiaries which are Restricted Subsidiaries, (c) Foreign Subsidiaries or (d) Subsidiaries designated by the Borrower as Unrestricted Subsidiaries. The Borrower will not, nor will it permit its Restricted Subsidiaries to, sell, transfer, pledge or otherwise dispose of any Capital Stock or other equity interests in any of its Restricted Subsidiaries, nor will it permit any of its Restricted Subsidiaries to issue, sell, 71 77 transfer, pledge or otherwise dispose of any of its Capital Stock or other equity interests, except in a transaction permitted by Section 6.4. SECTION 6.8 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS; MATERIAL CONTRACTS. The Borrower will not, nor will it permit any of its Subsidiaries to, change its fiscal year except in the event that any such change could not reasonably be expected to have a Material Adverse Effect. The Borrower will not, nor will it permit any Subsidiary to, amend, modify or change its articles of incorporation (or corporate charter or other similar organizational document) or bylaws (or other similar document) in any manner that could reasonably be expected to have a Material Adverse Effect without the prior written consent of the Required Lenders. The Borrower will not, nor will it permit any of its Subsidiaries to, without the prior written consent of the Administrative Agent, amend, modify, cancel or terminate or fail to renew or extend or permit the amendment, modification, cancellation or termination of any of the Material Contracts, except in the event that such amendments, modifications, cancellations or terminations could not reasonably be expected to have a Material Adverse Effect. SECTION 6.9 LIMITATION ON ACTIONS. (a) The Borrower will not, nor will it permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Person to (i) pay dividends or make any other distributions to any Credit Party on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, (ii) pay any Indebtedness or other obligation owed to any Credit Party, (iii) make loans or advances to any Credit Party, (iv) sell, lease or transfer any of its properties or assets to any Credit Party, or (v) act as a Guarantor and pledge its assets pursuant to the Credit Documents or any renewals, refinancings, exchanges, refundings or extension thereof, except (in respect of any of the matters referred to in clauses (i)-(v) above) for such encumbrances or restrictions existing under or by reason of (A) this Agreement and the other Credit Documents, (B) applicable law, (C) any document or instrument governing Indebtedness incurred pursuant to Section 6.1(c), provided that any such restriction contained therein relates only to the asset or assets constructed or acquired in connection therewith, (D) customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary or assets pending such sale, provided such restrictions and conditions apply only to the Subsidiary or assets that are to be sold and such sale is permitted hereunder, (E) restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the assets securing such Indebtedness, (F) customary provisions in leases and other contracts restricting the assignment thereof, (G) restrictions contained in documents executed in connection with any Permitted Receivables Financing, (H) any Permitted Lien or any document or instrument governing any Permitted Lien, provided that any such restriction contained therein relates only to the asset or assets subject to such Permitted Lien, (I) restrictions or conditions existing as a result of the issuance of preferred stock by a Subsidiary pursuant to warrants outstanding as of the Closing Date for the acquisition thereof, and (J) any indenture agreement, instrument or other arrangement relating to the 72 78 assets or business of any Subsidiary and existing prior to the consummation of the Permitted Acquisition in which such Subsidiary was acquired. (b) The Borrower will not, nor will it permit any Restricted Subsidiary to, enter into, assume or become subject to any agreement prohibiting or otherwise restricting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired, or requiring the grant of any security for such obligation if security is given for some other obligation except (i) pursuant to this Agreement and the other Credit Documents, (ii) pursuant to applicable law, (iii) pursuant to any document or instrument governing Indebtedness incurred pursuant to Section 6.1(c), provided that in the case of Section 6.1(c) any such restriction contained therein relates only to the asset or assets constructed or acquired in connection therewith, (iv) customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary or assets pending such sale, provided such restrictions and conditions apply only to the Subsidiary or assets that are to be sold and such sale is permitted hereunder, (v) restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the assets securing such Indebtedness, (vi) restrictions or conditions as the result of the issuance of preferred stock by a Subsidiary pursuant to warrants outstanding as of the Closing Date for the acquisition thereof, (vii) customary provisions in leases and other contracts restricting the assignment thereof, (viii) pursuant to the documents executed in connection with any Permitted Receivables Financing (but only to the extent that the related prohibitions against other encumbrances pertain to the applicable Transferred Assets actually sold, contributed, financed or otherwise conveyed or pledged pursuant to such Permitted Receivables Financing), (ix) restrictions in any document or instrument governing any Permitted Lien, provided that any such restriction contained therein relates only to the asset or assets subject to such Permitted Lien, and (x) any indenture agreement, instrument or other arrangement relating to the assets or business of any Subsidiary and existing prior to the consummation of the Permitted Acquisition in which such Subsidiary was acquired. SECTION 6.10 RESTRICTED PAYMENTS. The Borrower will not, nor will it permit any Restricted Subsidiary to, directly or indirectly, declare, order, make or set apart any sum for or pay any Restricted Payment, except (a) to make dividends payable solely in the same class of Capital Stock of such Person, (b) to make dividends or other distributions payable to any Credit Party (directly or indirectly through Subsidiaries), (c) as permitted by Section 6.11, (d) to make dividends or repurchases on or before the Closing Date in order to consummate the transactions contemplated by the Credit Documents, (e) to make dividends to or repurchases from the Borrower or the holders of ownership interests of such Subsidiary the proceeds of which shall be used to pay taxes that are then due and payable or to retire outstanding Indebtedness of such Person, and (f) to make other dividends, provided that, after giving effect to such dividends on a Pro Forma Basis, no Default or Event of Default shall have occurred and or be continuing or be directly or indirectly caused as a result thereof. 73 79 SECTION 6.11 AMENDMENTS, MODIFICATIONS. The Borrower will furnish to the Administrative Agent a copy of each modification, supplement or waiver of any provisions of any agreement, instrument or other document evidencing or relating to the charter or bylaws of the Borrower or any of its Restricted Subsidiaries promptly upon the effectiveness thereof (and the Administrative Agent will promptly furnish a copy thereof to each Lender). SECTION 6.12 SALE LEASEBACKS. The Borrower will not, nor will it permit any Restricted Subsidiary to, directly or indirectly, become or remain liable as lessee or as guarantor or other surety with respect to any lease, whether an operating lease or a Capital Lease, of any property (whether real, personal or mixed), whether now owned or hereafter acquired in excess of $20,000,000 in the aggregate on an annual basis, (a) which the Borrower or any Subsidiary has sold or transferred or is to sell or transfer to a Person which is not the Borrower or any Subsidiary or (b) which the Borrower or any Subsidiary intends to use for substantially the same purpose as any other property which has been sold or is to be sold or transferred by the Borrower or any Subsidiary to another Person which is not the Borrower or any Subsidiary in connection with such lease. SECTION 6.13 USE OF PROCEEDS. The Borrower will not use the proceeds of the Loans and Letters of Credit in a manner inconsistent with the uses permitted under Section 3.11 hereof. ARTICLE VII EVENTS OF DEFAULT SECTION 7.1 EVENTS OF DEFAULT. An Event of Default shall exist upon the occurrence of any of the following specified events (each an "Event of Default"): (a) The Borrower shall fail to pay any principal on any Note when due in accordance with the terms thereof or hereof; or the Borrower shall fail to reimburse the Issuing Lender for any LOC Obligations when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Note or any fee or other amount payable hereunder when due in accordance with the terms thereof or hereof and such failure shall continue unremedied for three (3) Business Days (or any Guarantor shall fail to pay on the Guaranty in respect of any of the foregoing or in respect of any other Guaranty Obligations thereunder); or (b) Any representation or warranty made or deemed made herein, in the Security Documents or in any of the other Credit Documents or which is contained in any 74 80 certificate, document or financial or other statement furnished at any time under or in connection with this Agreement shall prove to have been incorrect, false or misleading in any material respect on or as of the date made or deemed made; or (c) (i) Any Credit Party shall fail to perform, comply with or observe any term, covenant or agreement applicable to it contained in Sections 5.4(a), 5.7(a) or 5.9 or Article VI hereof; or (ii) any Credit Party shall fail to comply with any other covenant, contained in this Credit Agreement or the other Credit Documents or any other agreement, document or instrument among any Credit Party, the Administrative Agent and the Lenders or executed by any Credit Party in favor of the Administrative Agent or the Lenders (other than as described in Sections 7.1(a) or 7.1(c)(i) above), and in the event such breach or failure to comply is capable of cure, is not cured within thirty (30) days of its occurrence; or (d) The Borrower or any of its Restricted Subsidiaries shall (i) default in any payment of principal of or interest on any Indebtedness (other than the Notes) in a principal amount outstanding of at least $10,000,000 in the aggregate for the Borrower and any of its Restricted Subsidiaries beyond the period of grace (not to exceed 30 days), if any, provided in the instrument or agreement under which such Indebtedness was created; or (ii) default in the observance or performance of any other agreement or condition relating to any Indebtedness in a principal amount outstanding of at least $10,000,000 in the aggregate for the Borrower and its Restricted Subsidiaries or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity; or (e) (i) The Borrower or any of its Restricted Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower or any Restricted Subsidiary shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any Restricted Subsidiary any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Borrower or any Restricted Subsidiary any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or 75 81 stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Borrower or any Restricted Subsidiary shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any Restricted Subsidiary shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (f) One or more judgments or decrees shall be entered against the Borrower or any of its Restricted Subsidiaries involving in the aggregate a liability (to the extent not paid when due or covered by insurance) of $10,000,000 or more and all such judgments or decrees shall not have been paid and satisfied, vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or (g) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan (other than a Permitted Lien) shall arise on the assets of the Borrower, any of its Restricted Subsidiaries or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a Trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower, any of its Restricted Subsidiaries or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, any Multiemployer Plan or (vi) any other similar event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could have a Material Adverse Effect; or (h) A reasonable basis shall exist for the assertion against the Borrower or any of its Subsidiaries, or any predecessor in interest of the Borrower or any of its Subsidiaries, of (or there shall have been asserted against the Borrower or any of its Subsidiaries) an Environmental Claim that, in the judgment of the Required Lenders, is reasonably likely to be determined adversely to the Borrower or any of its Subsidiaries, and the amount thereof (either individually or in the aggregate) is reasonably likely to have a Material Adverse Effect (insofar as such amount is payable by the Borrower or any of its Subsidiaries but after deducting any portion thereof that is reasonably expected to be paid by other creditworthy Persons jointly and severally liable therefor); or (i) A Change of Control shall occur; or 76 82 (j) The Guaranty or any provision thereof shall cease to be in full force and effect or any Guarantor or any Person acting by or on behalf of any Guarantor shall deny or disaffirm any Guarantor's obligations under the Guaranty; or (k) Any other Credit Document shall fail to be in full force and effect or to give the Administrative Agent and/or the Lenders the security interests, liens, rights, powers and privileges purported to be created thereby (except as such documents may be terminated or no longer in force and effect in accordance with the terms thereof, other than those indemnities and provisions which by their terms shall survive). SECTION 7.2 ACCELERATION; REMEDIES. Upon the occurrence of an Event of Default, then, and in any such event, (a) if such event is an Event of Default specified in Section 7.1(e) above, automatically the Commitments shall immediately terminate and the Loans (with accrued interest thereon), and all other amounts under the Credit Documents (including without limitation the maximum amount of all contingent liabilities under Letters of Credit) shall immediately become due and payable, the Administrative Agent shall have the right to enforce any and all other rights and interests created and existing under the Credit Documents, including, without limitation, all rights and remedies existing under the Security Documents, all rights and remedies against a Guarantor and all rights of set-off, and the Administrative Agent shall have the right to enforce any and all other rights and remedies of a creditor under applicable law, and (b) if such event is any other Event of Default, with the written consent of the Required Lenders, the Administrative Agent may, or upon the written request of the Required Lenders, the Administrative Agent shall, by notice to the Borrowers, take any or all of the following actions: (i) declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; (ii) declare the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes to be due and payable forthwith and direct the Borrowers to pay to the Administrative Agent cash collateral as security for the LOC Obligations for subsequent drawings under then outstanding Letters of Credit in an amount equal to the maximum amount of which may be drawn under Letters of Credit then outstanding, whereupon the same shall immediately become due and payable; (iii) enforce any and all other rights and interests created and existing under the Credit Documents, including, without limitation, all rights and remedies existing under the Security Documents, all rights and remedies against a Guarantor and all rights of set-off; and (iv) enforce any and all rights and remedies of a creditor under applicable law. Except as expressly provided above in this Section 7.2, presentment, demand, protest and all other notices of any kind are hereby expressly waived. 77 83 ARTICLE VIII THE AGENT SECTION 8.1 APPOINTMENT. Each Lender hereby irrevocably designates and appoints First Union National Bank as the Administrative Agent of such Lender under this Agreement, and each such Lender irrevocably authorizes First Union National Bank, as the Administrative Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Administrative Agent. SECTION 8.2 DELEGATION OF DUTIES. The Administrative Agent may execute any of its duties under this Agreement by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. Without limiting the foregoing, the Administrative Agent may appoint one of its Affiliates as its agent to perform the functions of the Administrative Agent hereunder relating to the advancing of funds to the Borrower and distribution of funds to the Lenders and to perform such other related functions of the Administrative Agent hereunder as are reasonably incidental to such functions. SECTION 8.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Credit Party or any officer thereof contained in this Agreement or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of any of the Credit Documents or for any failure of any Credit Party to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance by the Credit Parties of any of the agreements contained in, or conditions of, this Agreement, or to inspect the properties, books or records of the Credit Parties. 78 84 SECTION 8.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Credit Parties), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless (a) a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent and (b) the Administrative Agent shall have received the written agreement of such assignee to be bound hereby as fully and to the same extent as if such assignee were an original Lender party hereto, in each case in form satisfactory to the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under any of the Credit Documents in accordance with a request of the Required Lenders or all of the Lenders, as may be required under this Agreement, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Notes. SECTION 8.5 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided, however, that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders except to the extent that this Credit Agreement expressly requires that such action be taken, or not taken, only with the consent or upon the authorization of the Required Lenders, or all of the Lenders, as the case may be. SECTION 8.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representation or warranty to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Credit Parties, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the 79 85 Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Credit Parties which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. SECTION 8.7 INDEMNIFICATION. The Lenders agree to indemnify the Administrative Agent in its capacity hereunder (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Commitment Percentages in effect on the date on which indemnification is sought under this Section, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of any Credit Document or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided, however, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent resulting from the Administrative Agent's gross negligence or willful misconduct, as determined by a court of competent jurisdiction. The agreements in this Section 8.7 shall survive the termination of this Agreement and payment of the Notes and all other amounts payable hereunder. SECTION 8.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The Administrative Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Administrative Agent were not the Administrative Agent hereunder. With respect to its Loans made or renewed by it and any Note issued to it, the Administrative Agent shall have the same rights and powers under this Agreement as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall include the Administrative Agent in its individual capacity. 80 86 SECTION 8.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign as Administrative Agent upon 30 days' prior notice to the Borrower and the Lenders. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the Notes, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall be approved by the Borrower, so long as no Default or Event of Default has occurred and is continuing, whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Notes. If no successor Administrative Agent has accepted appointment as Administrative Agent within sixty (60) days after the retiring Administrative Agent's giving notice of resignation, the retiring Administrative Agent's resignation shall nevertheless become effective and the Lenders shall perform all duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided for above. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions of this Section 8.9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. SECTION 8.10 RESPONSIBILITY OF OTHER AGENTS. The Syndication Agent, the co-documentation agents and any other agents designated as such on the signature pages hereto (other than the Administrative Agent) shall have no responsibilities under this Agreement or the other Credit Documents other than as a Lender. ARTICLE IX MISCELLANEOUS SECTION 9.1 AMENDMENTS, WAIVERS AND RELEASE OF COLLATERAL. Neither this Agreement, nor any of the Notes, nor any of the other Credit Documents, nor any terms hereof or thereof may be amended, supplemented, waived or modified except in accordance with the provisions of this Section nor may be released except as specifically provided herein or in the Security Documents or in accordance with the provisions of this Section 9.1. The Required Lenders may, or, with the written consent of the Required Lenders, the Administrative Agent may, from time to time, (a) enter into with the Borrower written amendments, supplements or modifications hereto and to the other Credit Documents for the purpose of adding any provisions to this Agreement or the other Credit Documents or changing in any manner the rights of the Lenders or of the Borrower hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders may specify in such instrument, any of the requirements of this Agreement or the other Credit Documents or any Default or Event of Default and its consequences or (c) release Collateral in accordance with the terms hereof or of 81 87 any Security Document or on such other terms and conditions as the Required Lenders may agree; provided, however, that no such waiver and no such amendment, waiver, supplement, modification or release shall: (i) reduce the amount or extend the scheduled date of maturity of any Loan or Note, or extend the expiry of any Letter of Credit beyond the Maturity Date, or any installment thereon, or reduce the stated rate of any interest or fee payable hereunder (other than interest at the increased post-default rate) or extend the scheduled date of any payment thereof or increase the amount or extend the expiration date of any Lender's Commitment, in each case without the written consent of each Lender directly affected thereby; or (ii) amend, modify or waive any provision of this Section 2.11, Section 9.1 or Section 9.7(a), or reduce the percentage specified in the definition of Required Lenders, without the written consent of all the Lenders; or (iii) amend, modify or waive any provision of Article VIII without the written consent of the then Administrative Agent; or (iv) release all or any substantial portion of the Guarantors from their obligations under the Guaranty without the written consent of all of the Lenders; or (v) release all or any substantial portion of the Collateral without the written consent of all of the Lenders, or (vi) amend, modify or waive the requirement that any issue be resolved or determined with the consent, approval or upon the request of the Required Lenders or all Lenders, without the written consent of all of the Lenders to the change of such voting requirement and, provided, further, that no amendment, waiver or consent affecting the rights or duties of the Administrative Agent or the Issuing Lender under any Credit Document shall in any event be effective, unless in writing and signed by the Administrative Agent and/or the Issuing Lender, as applicable, in addition to the Lenders required hereinabove to take such action. Any such waiver, any such amendment, supplement or modification and any such release shall apply equally to each of the Lenders and shall be binding upon the Borrower, the other Credit Parties, the Lenders, the Administrative Agent and all future holders of the Notes. In the case of any waiver, the Borrower, the other Credit Parties, the Lenders and the Administrative Agent shall be restored to their former position and rights hereunder and under the outstanding Loans and Notes and other Credit Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. Notwithstanding any of the foregoing to the contrary, the consent of the Credit Parties shall not be required for any amendment, modification or waiver of the provisions of Article VIII 82 88 (other than the provisions of Section 8.9); provided, however, that the Administrative Agent will provide written notice to the Borrower of any such amendment, modification or waiver. In addition, the Borrower and the Lenders hereby authorize the Administrative Agent to modify this Credit Agreement by unilaterally amending or supplementing Schedule 2.1(a) from time to time in the manner requested by the Borrower, the Administrative Agent or any Lender in order to reflect any assignments or transfers of the Loans as provided for hereunder; provided, however, that the Administrative Agent shall promptly deliver a copy of any such modification to the Borrower and each Lender. Notwithstanding the fact that the consent of all the Lenders is required in certain circumstances as set forth above, (x) each Lender is entitled to vote as such Lender sees fit on any bankruptcy reorganization plan that affects the Loans, and each Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code supersede the unanimous consent provisions set forth herein and (y) the Required Lenders may consent to allow a Credit Party to use cash collateral in the context of a bankruptcy or insolvency proceeding. SECTION 9.2 NOTICES. Except as otherwise provided in Article II, all notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (a) when delivered by hand, (b) when transmitted via telecopy (or other facsimile device) to the number set out herein, (c) the day following the day on which the same has been delivered prepaid or pursuant to an invoice arrangement to a reputable national overnight air courier service, or (d) the fifth Business Day following the day on which the same is sent by certified or registered mail, postage prepaid, in each case, addressed as follows in the case of the Borrower, the other Credit Parties and the Administrative Agent, and as set forth on Schedule 9.2 in the case of the Lenders, or to such other address as may be hereafter notified by the respective parties hereto and any future holders of the Notes: The Borrower [Borrower/Name of Credit Party] and the other c/o Suiza Foods Corporation Credit Parties: 2515 McKinney Ave., Suite 1200 Dallas, Texas 75201 Attention: Treasurer Telecopier: (214) 303-3499 Telephone: (214) 303-3400 The Administrative First Union National Bank Agent: Charlotte Plaza, 23rd Floor 201 South College Street Attention: Syndication Agency Services Telecopier: (704) 383-0288 Telephone: (704) 374-2698 83 89 with a copy to: First Union National Bank One First Union Center, DC-5 Charlotte, North Carolina 28288-0737 Attention: Mr. Jorge Gonzalez Telecopier: (704) 374-3300 Telephone: (704) 383-8461 SECTION 9.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. SECTION 9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the Notes and the making of the Loans, provided that all such representations and warranties shall terminate on the date upon which the Commitments have been terminated and all amounts owing hereunder and under any Notes have been paid in full. SECTION 9.5 PAYMENT OF EXPENSES AND TAXES. The Credit Parties agree (a) to pay or reimburse the Administrative Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation, negotiation, printing and execution of, and any amendment, supplement or modification to, this Agreement and the other Credit Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, together with the reasonable fees and disbursements of counsel to the Administrative Agent, (b) to pay or reimburse each Lender and the Administrative Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the Notes and any such other documents, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent and to the Lenders (including reasonable allocated costs of in-house legal counsel), (c) on demand, to pay, indemnify, and hold each Lender and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, the Credit Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender and 84 90 the Administrative Agent and their Affiliates harmless from and against, any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of the Credit Documents and any such other documents and the use, or proposed use, of proceeds of the Loans (all of the foregoing, collectively, the "indemnified liabilities"); provided, however, that the Borrower shall not have any obligation hereunder to the Administrative Agent or any Lender with respect to indemnified liabilities arising from the gross negligence or willful misconduct of the Administrative Agent or any such Lender, as determined by a court of competent jurisdiction. The agreements in this Section 9.5 shall survive repayment or assignment of the Loans, Notes and all other amounts payable hereunder. SECTION 9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING LENDERS. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Administrative Agent, all future holders of the Notes and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement or the other Credit Documents without the prior written consent of each Lender. (b) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment of such Lender, or any other interest of such Lender hereunder. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Note for all purposes under this Agreement, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. No Lender shall transfer or grant any participation under which the Participant shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would (i) extend the scheduled maturity of any Loan or Note, or extend the expiry date of any Letter of Credit in which such Participant is participating beyond the Maturity Date, or any installment thereon in which such Participant is participating, or reduce the stated rate or extend the time of payment of interest or fees thereon (except in connection with a waiver of interest at the increased post-default rate) or reduce the principal amount thereof, or increase the amount of the Participant's participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without consent of any Participant if the Participant's participation is not increased as a result thereof), (ii) release all or substantially all of the Guarantors from their obligations under the Guaranty, (iii) release all or substantially all of the Collateral, or (iv) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this 85 91 Agreement other than in accordance with this Agreement. In the case of any such participation, the Participant shall not have any rights under this Agreement or any of the other Credit Documents (the Participant's rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the Participant relating thereto) and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation; provided that each Participant shall be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 9.5 with respect to its participation in the Commitments and the Loans outstanding from time to time, but no Participant shall be entitled to receive any greater amount pursuant to such Sections than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time, sell or assign to any Lender or any affiliate thereof or special purpose entity created thereby and with the consent of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower (in each case, which consent shall not be unreasonably withheld), to one or more additional banks or financial institutions ("Purchasing Lenders"), all or any part of its rights and obligations under this Agreement and the Notes in minimum amounts of $5,000,000 with respect to its Revolving Commitment and its Revolving Loans (or, if less, the entire amount of such Lender's obligations), pursuant to a Commitment Transfer Supplement, executed by such Purchasing Lender and such transferor Lender (and, in the case of a Purchasing Lender that is not then a Lender or an affiliate thereof, the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower), and delivered to the Administrative Agent for its acceptance and recording in the Register; provided, however, that any sale or assignment to an existing Lender shall not require the consent of the Administrative Agent or the Borrower nor shall any such sale or assignment be subject to the minimum assignment amounts specified herein. Upon such execution, delivery, acceptance and recording, from and after the Transfer Effective Date specified in such Commitment Transfer Supplement, (x) the Purchasing Lender thereunder shall be a party hereto and, to the extent provided in such Commitment Transfer Supplement, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein, and (y) the transferor Lender thereunder shall, to the extent provided in such Commitment Transfer Supplement, be released from its obligations under this Agreement (and, in the case of a Commitment Transfer Supplement covering all or the remaining portion of a transferor Lender's rights and obligations under this Agreement, such transferor Lender shall cease to be a party hereto). Such Commitment Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Lender and the resulting adjustment of Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender under this Agreement and the Notes. On or prior to the Transfer Effective Date specified in such Commitment Transfer Supplement, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent in exchange for the Notes delivered to the Administrative Agent pursuant to such 86 92 Commitment Transfer Supplement new Notes to the order of such Purchasing Lender in an amount equal to the Commitment assumed by it pursuant to such Commitment Transfer Supplement and, unless the transferor Lender has not retained a Commitment hereunder, new Notes to the order of the transferor Lender in an amount equal to the Commitment retained by it hereunder. Such new Notes shall be dated the Closing Date and shall otherwise be in the form of the Notes replaced thereby. The Notes surrendered by the transferor Lender shall be returned by the Administrative Agent to the Borrower marked "canceled". (d) The Administrative Agent shall maintain at its address referred to in Section 9.2 a copy of each Commitment Transfer Supplement delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as the owner of the Loan recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of a duly executed Commitment Transfer Supplement, together with payment to the Administrative Agent by the transferor Lender or the Purchasing Lender, as agreed between them, of a registration and processing fee of $3,500 for each Purchasing Lender listed in such Commitment Transfer Supplement and the Notes subject to such Commitment Transfer Supplement, the Administrative Agent shall (i) accept such Commitment Transfer Supplement, (ii) record the information contained therein in the Register and (iii) give prompt notice of such acceptance and recordation to the Lenders and the Borrower. (f) The Credit Parties authorize each Lender to disclose to any Participant or Purchasing Lender (each, a "Transferee") and any prospective Transferee any and all financial information in such Lender's possession concerning the Credit Parties, their Subsidiaries and their Affiliates which has been delivered to such Lender by or on behalf of the Credit Parties pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Credit Parties in connection with such Lender's credit evaluation of the Credit Parties and their Affiliates prior to becoming a party to this Agreement, in each case subject to Section 9.15. (g) At the time of each assignment pursuant to this Section 9.6 to a Person which is not already a Lender hereunder and which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes, the respective assignee Lender shall provide to the Borrower and the Administrative Agent the appropriate Internal Revenue Service Forms (and, if applicable, a 2.17 Certificate) described in Section 2.17. 87 93 (h) Nothing herein shall prohibit any Lender from pledging or assigning any of its rights under this Agreement (including, without limitation, any right to payment of principal and interest under any Note) to any Federal Reserve Bank in accordance with applicable laws. SECTION 9.7 ADJUSTMENTS; SET-OFF. (a) Each Lender agrees that if any Lender (a "benefited Lender") shall at any time receive any payment of all or part of its Loans, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 7.1(e), or otherwise) in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans, or interest thereon, such benefited Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Loans, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefited Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Borrower agrees that each Lender so purchasing a portion of another Lender's Loans may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion. (b) In addition to any rights and remedies of the Lenders provided by law (including, without limitation, other rights of set-off), each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon the occurrence of any Event of Default, to setoff and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower, or any part thereof in such amounts as such Lender may elect, against and on account of the obligations and liabilities of the Borrower to such Lender hereunder and claims of every nature and description of such Lender against the Borrower, in any currency, whether arising hereunder, under the Notes or under any documents contemplated by or referred to herein or therein, as such Lender may elect, whether or not such Lender has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The aforesaid right of set-off may be exercised by such Lender against the Borrower or against any trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver or execution, judgment or attachment creditor of the Borrower, or against anyone else claiming through or against the Borrower or any such trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor, notwithstanding the fact that such right of 88 94 set-off shall not have been exercised by such Lender prior to the occurrence of any Event of Default. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. SECTION 9.8 TABLE OF CONTENTS AND SECTION HEADINGS. The table of contents and the Section and subsection headings herein are intended for convenience only and shall be ignored in construing this Agreement. SECTION 9.9 COUNTERPARTS. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent. SECTION 9.10 EFFECTIVENESS. This Credit Agreement shall become effective on the date on which all of the parties have signed a copy hereof (whether the same or different copies) and shall have delivered the same to the Administrative Agent pursuant to Section 9.2 or, in the case of the Lenders, shall have given to the Administrative Agent written, telecopied or telex notice (actually received) at such office that the same has been signed and mailed to it. SECTION 9.11 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. SECTION 9.12 INTEGRATION. This Agreement, the Notes and the other Credit Documents represent the agreement of the Borrower, the Administrative Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent, the Borrower or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the Notes. 89 95 SECTION 9.13 GOVERNING LAW. This Agreement and the Notes and the rights and obligations of the parties under this Agreement and the Notes shall be governed by, and construed and interpreted in accordance with, the law of the State of North Carolina. SECTION 9.14 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All judicial proceedings brought against the Borrower and/or any other Credit Party with respect to this Agreement, any Note or any of the other Credit Documents may be brought in any state or federal court of competent jurisdiction in the State of North Carolina, and, by execution and delivery of this Agreement, each of the Borrower and the other Credit Parties accepts, for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts and irrevocably agrees to be bound by any final judgment rendered thereby in connection with this Agreement from which no appeal has been taken or is available. Each of the Borrower and the other Credit Parties irrevocably agrees that all service of process in any such proceedings in any such court may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to it at its address set forth in Section 9.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto, such service being hereby acknowledged by each of the Borrower and the other Credit Parties to be effective and binding service in every respect. Each of the Borrower, the other Credit Parties, the Administrative Agent and the Lenders irrevocably waives any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens which it may now or hereafter have to the bringing of any such action or proceeding in any such jurisdiction. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of any Lender to bring proceedings against the Borrower or the other Credit Parties in the court of any other jurisdiction. SECTION 9.15 CONFIDENTIALITY. The Administrative Agent and each of the Lenders agrees that it will use its best efforts not to disclose without the prior consent of the Borrower (other than to its employees, affiliates, auditors or counsel or to another Lender) any information with respect to the Borrower and its Subsidiaries which is furnished pursuant to this Agreement, any other Credit Document or any documents contemplated by or referred to herein or therein and which is designated by the Borrower to the Lenders in writing as confidential or as to which it is otherwise reasonably clear such information is not public, except that any Lender may disclose any such information (a) as has become generally available to the public other than by a breach of this Section 9.15, (b) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or federal regulatory body having or claiming to have jurisdiction over such Lender or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or the OCC or the NAIC or similar organizations (whether in the United States or elsewhere) or their successors, (c) as may be required or appropriate in response to any summons or subpoena or any law, order, regulation or ruling applicable to such Lender, after notice to the Borrower and opportunity to object to such disclosure to the extent reasonably practicable, (d) to any prospective Participant or assignee in connection with any contemplated transfer pursuant to Section 9.6, provided that 90 96 such prospective transferee shall have been made aware of this Section 9.15 and shall have agreed to be bound by its provisions as if it were a party to this Agreement or (e) to Gold Sheets and other similar bank trade publications; such information to consist of deal terms and other information regarding the credit facilities evidenced by this Credit Agreement customarily found in such publications. SECTION 9.16 ACKNOWLEDGMENTS. The Borrower and the other Credit Parties each hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of each Credit Document; (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to the Borrower or any other Credit Party arising out of or in connection with this Agreement and the relationship between Administrative Agent and Lenders, on one hand, and the Borrower and the other Credit Parties, on the other hand, in connection herewith is solely that of debtor and creditor; and (c) no joint venture exists among the Lenders or among the Borrower or the other Credit Parties and the Lenders. SECTION 9.17 WAIVERS OF JURY TRIAL. THE BORROWER, THE OTHER CREDIT PARTIES, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. The parties hereto agree that they shall not have a remedy of punitive or exemplary damages against the other in any judicial proceeding, any dispute, claim or controversy arising out of, connected with or relating to this Agreement and other Credit Documents ("Disputes"), and hereby waive any right or claim to punitive or exemplary damages they have now or which may arise in the future in connection with any Dispute. ARTICLE X GUARANTY Each of the Guarantors hereby agrees as follows: SECTION 10.1 THE GUARANTY. In order to induce the Lenders to enter into this Agreement and to extend credit hereunder and in recognition of the direct benefits to be received by the Guarantors from the Extensions of 91 97 Credit hereunder, each of the Guarantors hereby agrees with the Administrative Agent and the Lenders as follows: each Guarantor hereby unconditionally and irrevocably jointly and severally guarantees as primary obligor and not merely as surety the full and prompt payment when due, whether upon maturity, by acceleration or otherwise, of any and all indebtedness of the Borrower to the Administrative Agent and the Lenders. If any or all of the indebtedness of the Borrower to the Administrative Agent and the Lenders becomes due and payable hereunder, each Guarantor unconditionally promises to pay such indebtedness to the Administrative Agent and the Lenders, on order, on demand, together with any and all reasonable expenses which may be incurred by the Administrative Agent or the Lenders in collecting any of the indebtedness. The word "indebtedness" is used in this Article X in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities of the Borrower arising in connection with this Agreement, including, without limitation, Hedging Agreements, including, without limitation, Hedging Agreements permitted hereunder, in each case, heretofore, now, or hereafter made, incurred or created, whether voluntarily or involuntarily, absolute or contingent, liquidated or unliquidated, determined or undetermined, whether or not such indebtedness is from time to time reduced, or extinguished and thereafter increased or incurred, whether the Borrower may be liable individually or jointly with others, whether or not recovery upon such indebtedness may be or hereafter become barred by any statute of limitations, and whether or not such indebtedness may be or hereafter become otherwise unenforceable. Notwithstanding any provision to the contrary contained herein or in any other of the Credit Documents, to the extent the obligations of a Guarantor shall be adjudicated to be invalid or unenforceable for any reason (including, without limitation, because of any applicable state or federal law relating to fraudulent conveyances or transfers) then the obligations of each such Guarantor hereunder shall be limited to the maximum amount that is permissible under applicable law (whether federal or state and including, without limitation, the Bankruptcy Code). SECTION 10.2 BANKRUPTCY. Additionally, each of the Guarantors unconditionally and irrevocably guarantees jointly and severally the payment of any and all indebtedness of the Borrower to the Lenders whether or not due or payable by the Borrower upon the occurrence of any of the events specified in Section 7.1(e), and unconditionally promises to pay such indebtedness to the Administrative Agent for the account of the Lenders, or order, on demand, in lawful money of the United States. Each of the Guarantors further agrees that to the extent that the Borrower or a Guarantor shall make a payment or a transfer of an interest in any property to the Administrative Agent or any Lender, which payment or transfer or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, or otherwise is avoided, and/or required to be repaid to the Borrower or a Guarantor, the estate of the Borrower or a Guarantor, a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such avoidance or repayment, the obligation or part thereof intended to be satisfied shall be revived and continued in full force and effect as if said payment had not been made. 92 98 SECTION 10.3 NATURE OF LIABILITY. The liability of each Guarantor hereunder is exclusive and independent of any security for or other guaranty of the indebtedness of the Borrower whether executed by any such Guarantor, any other guarantor or by any other party, and no Guarantor's liability hereunder shall be affected or impaired by (a) any direction as to application of payment by the Borrower or by any other party, or (b) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other party as to the indebtedness of the Borrower, or (c) any payment on or in reduction of any such other guaranty or undertaking, or (d) any dissolution, termination or increase, decrease or change in personnel by the Borrower, or (e) any payment made to the Administrative Agent or the Lenders on the indebtedness which the Administrative Agent or such Lenders repay the Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and each of the Guarantors waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding. The obligations of the Guarantors hereunder are absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Credit Documents, any Hedging Agreement entered into in connection with this Agreement, or any other agreement or instrument referred to therein, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or a guarantor. SECTION 10.4 INDEPENDENT OBLIGATION. The obligations of each Guarantor hereunder are independent of the obligations of any other Guarantor or the Borrower, and a separate action or actions may be brought and prosecuted against each Guarantor whether or not action is brought against any other Guarantor or the Borrower and whether or not any other Guarantor or the Borrower is joined in any such action or actions. SECTION 10.5 AUTHORIZATION. Each of the Guarantors authorizes the Administrative Agent and each Lender without notice or demand (except as shall be required by applicable statute and cannot be waived), and without affecting or impairing its liability hereunder, from time to time to (a) renew, compromise, extend, increase, accelerate or otherwise change the time for payment of, or otherwise change the terms of the indebtedness or any part thereof in accordance with this Agreement, including any increase or decrease of the rate of interest thereon, (b) take and hold security from any Guarantor or any other party for the payment of this Guaranty or the indebtedness and exchange, enforce, waive and release any such security, (c) apply such security and direct the order or manner of sale thereof as the Administrative Agent and the Lenders in their discretion may determine and (d) release or substitute any one or more endorsers, guarantors, the Borrower or other obligors. 93 99 SECTION 10.6 RELIANCE. It is not necessary for the Administrative Agent or the Lenders to inquire into the capacity or powers of the Borrower or the officers, directors, partners or agents acting or purporting to act on their behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. SECTION 10.7 WAIVER. (a) Each of the Guarantors waives any right (except as shall be required by applicable statute and cannot be waived) to require the Administrative Agent or any Lender to (i) proceed against the Borrower, any other Guarantor or any other party, (ii) proceed against or exhaust any security held from the Borrower, any other Guarantor or any other party, or (iii) pursue any other remedy in the Administrative Agent's or any Lender's power whatsoever. Each of the Guarantors waives any defense based on or arising out of any defense of the Borrower, any other Guarantor or any other party other than payment in full of the indebtedness, including without limitation any defense based on or arising out of the disability of the Borrower, any other Guarantor or any other party, or the unenforceability of the indebtedness or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower other than payment in full of the indebtedness. Without limiting the generality of the provisions of this Article X, each of the Guarantors hereby specifically waives the benefits of N.C. Gen. Stat. ss. 26-7 through 26-9, inclusive. The Administrative Agent or any of the Lenders may, at their election, foreclose on any security held by the Administrative Agent or a Lender by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Administrative Agent and any Lender may have against the Borrower or any other party, or any security, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the indebtedness has been paid. Each of the Guarantors waives any defense arising out of any such election by the Administrative Agent and each of the Lenders, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of the Guarantors against the Borrower or any other party or any security. (b) Each of the Guarantors waives all presentments, demands for performance, protests and notices, including without limitation notices of nonperformance, notice of protest, notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation or incurring of new or additional indebtedness. Each Guarantor assumes all responsibility for being and keeping itself informed of each of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the indebtedness and the nature, scope and extent of the risks which such Guarantor assumes and incurs hereunder, and agrees that neither the Administrative Agent nor any Lender shall have any duty to advise such Guarantor of information known to it regarding such circumstances or risks. 94 100 (c) Each of the Guarantors hereby agrees it will not exercise any rights of subrogation which it may at any time otherwise have as a result of this Guaranty (whether contractual, under Section 509 of the U.S. Bankruptcy Code, or otherwise) to the claims of the Lenders against the Borrower or any other guarantor of the indebtedness of the Borrower owing to the Lenders (collectively, the "Other Parties") and all contractual, statutory or common law rights of reimbursement, contribution or indemnity from any Other Party which it may at any time otherwise have as a result of this Guaranty until such time as the Loans hereunder shall have been paid and the Commitments have been terminated. Each of the Guarantors hereby further agrees not to exercise any right to enforce any other remedy which the Administrative Agent and the Lenders now have or may hereafter have against any Other Party, any endorser or any other guarantor of all or any part of the indebtedness of the Borrower and any benefit of, and any right to participate in, any security or collateral given to or for the benefit of the Lenders to secure payment of the indebtedness of the Borrower until such time as the Loans hereunder shall have been paid and the Commitments have been terminated. SECTION 10.8 LIMITATION ON ENFORCEMENT. The Lenders agree that this Guaranty may be enforced only by the action of the Administrative Agent acting upon the instructions of the Required Lenders and that no Lender shall have any right individually to seek to enforce or to enforce this Guaranty, it being understood and agreed that such rights and remedies may be exercised by the Administrative Agent for the benefit of the Lenders upon the terms of this Agreement. The Lenders further agree that this Guaranty may not be enforced against any director, officer, employee or stockholder of the Guarantors. SECTION 10.9 CONFIRMATION OF PAYMENT. The Administrative Agent and the Lenders will, upon request after payment of the indebtedness and obligations which are the subject of this Guaranty and termination of the commitments relating thereto, confirm to the Borrower, the Guarantors or any other Person that such indebtedness and obligations have been paid and the commitments relating thereto terminated, subject to the provisions of Section 10.2. 95 101 IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement to be duly executed and delivered by its proper and duly authorized officers as of the day and year first above written. BORROWER: SUIZA FOODS CORPORATION, a Delaware corporation By: /s/ COREY M. OLSON ------------------------------------ Name: ---------------------------------- Title: Vice President --------------------------------- GUARANTORS: MORNINGSTAR FOODS INC. MORNINGSTAR SERVICES INC. NEPTUNE DELAWARE CORPORATION NEVA PLASTICS MANUFACTURING CORP. SUIZA DAIRY CORPORATION SUIZA FRUIT CORPORATION SUIZA MANAGEMENT CORPORATION THE MORNINGSTAR GROUP INC. By: /s/ LISA TYSON ------------------------------------ Name: ---------------------------------- Title: Vice President --------------------------------- SUIZA FOODS CORPORATION CREDIT AGREEMENT 102 FIRST UNION NATIONAL BANK, in its capacity as Administrative Agent and individually in its capacity as a Lender By: /s/ MARK B. FELKER ------------------------------------ Name: Mark B. Felker ---------------------------------- Title: Senior Vice President --------------------------------- SUIZA FOODS CORPORATION CREDIT AGREEMENT 103 BANK ONE, NA, in its capacity as Syndication Agent and individually in its capacity as a Lender By: /s/ KATHY TURNER ------------------------------------ Name: Kathy Turner ---------------------------------- Title: Director --------------------------------- SUIZA FOODS CORPORATION CREDIT AGREEMENT 104 BANK OF AMERICA, N.A., in its capacity as Documentation Agent and individually in its capacity as a Lender By: /s/ LYNN A. DURNING ------------------------------------ Name: Lynn A. Durning ---------------------------------- Title: Principal --------------------------------- SUIZA FOODS CORPORATION CREDIT AGREEMENT 105 FLEET NATIONAL BANK, in its capacity as Documentation Agent and individually in its capacity as a Lender By: /s/ STEVE KALIN ------------------------------------ Name: STEVE KALIN ---------------------------------- Title: VICE PRESIDENT --------------------------------- SUIZA FOODS CORPORATION CREDIT AGREEMENT 106 COBANK, ACB, in its capacity as Managing Agent and individually in its capacity as a Lender By: /s/ BRIAN J. KLATT ------------------------------------ Name: BRIAN J. KLATT ---------------------------------- Title: Vice President --------------------------------- SUIZA FOODS CORPORATION CREDIT AGREEMENT 107 CREDIT AGRICOLE INDOSUEZ, in its capacity as Managing Agent and individually in its capacity as a Lender By: /s/ BRADLEY C. PETERSON ------------------------------------ Name: Bradley C. Peterson ---------------------------------- Title: Vice President, Manager --------------------------------- By: /s/ THOMAS P. GILLIS ------------------------------------ Name: Thomas P. Gillis ---------------------------------- Title: Vice President, Manager --------------------------------- SUIZA FOODS CORPORATION CREDIT AGREEMENT 108 THE INDUSTRIAL BANK OF JAPAN, LIMITED By: /s/ MASASHI SAKAI ------------------------------------ Name: Masashi Sakai ---------------------------------- Title: General Manager --------------------------------- SUIZA FOODS CORPORATION CREDIT AGREEMENT 109 WELLS FARGO BANK (TEXAS), N.A., in its capacity as Managing Agent and individually in its capacity as a Lender By: /s/ AUSTIN D. NETTLE ------------------------------------ Name: Austin D. Nettle ---------------------------------- Title: Assistant Vice President --------------------------------- SUIZA FOODS CORPORATION CREDIT AGREEMENT 110 BANCO POPULAR DE PUERTO RICO, in its capacity as Co-Agent and individually in its capacity as a Lender By: /s/ HECTOR A. VINA ------------------------------------ Name: Hector A. Vina ---------------------------------- Title: Vice President --------------------------------- By: /s/ ANDREW H. MELVILLE ------------------------------------ Name: Andrew H. Melville ---------------------------------- Title: Assistant Vice President --------------------------------- SUIZA FOODS CORPORATION CREDIT AGREEMENT 111 THE BANK OF TOKYO-MITSUBISHI, LTD. By: /s/ D. BARNELL ----------------------------------- Name: D. BARNELL --------------------------------- Title: Vice President -------------------------------- By: /s/ JOHN M. MEARNS ----------------------------------- Name: J. MEARNS --------------------------------- Title: VP & Manager -------------------------------- SUIZA FOODS CORPORATION CREDIT AGREEMENT 112 THE BANK OF NOVA SCOTIA, in its capacity as Managing Agent and individually in its capacity as a Lender By: /s/ F.C.H. ASHBY ------------------------------------ Name: ---------------------------------- Title: Senior Manager Loan Operations --------------------------------- SUIZA FOODS CORPORATION CREDIT AGREEMENT 113 SUNTRUST BANK, ATLANTA, in its capacity as Co-Agent and individually in its capacity as a Lender By: /s/ F. STEVEN PARRISH ------------------------------------ Name: F. Steven Parrish ---------------------------------- Title: Vice President --------------------------------- SUIZA FOODS CORPORATION CREDIT AGREEMENT 114 CITIBANK, N.A., in its capacity as Managing Agent and individually in its capacity as a Lender By: /s/ [ILLEGIBLE] ------------------------------------ Name: [ILLEGIBLE] ---------------------------------- Title: Vice President --------------------------------- SUIZA FOODS CORPORATION CREDIT AGREEMENT EX-10.3 5 AMENDED/RESTATED LTD. PARTNERSHIP OF SUIZA FLUID 1 EXHIBIT 10.3 AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF SUIZA FLUID DAIRY GROUP, L.P. 2 AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF SUIZA FLUID DAIRY GROUP, L.P. TABLE OF CONTENTS
PAGE ---- ARTICLE I ORGANIZATIONAL MATTERS..........................................................................1 1.1 Formation..............................................................................................1 1.2 Name...................................................................................................1 1.3 Registered Office and Principal Office of Partnership; Addresses of Partners...........................1 1.4 Term...................................................................................................2 1.5 Assumed Name Certificate...............................................................................2 1.6 Ownership..............................................................................................2 1.7 No Individual Authority................................................................................2 1.8 Title to Partnership Property..........................................................................2 1.9 Limits of Partnership..................................................................................2 ARTICLE II DEFINITIONS...................................................................................2 ARTICLE III PURPOSE......................................................................................11 3.1 Purposes and Scope....................................................................................11 ARTICLE IV CAPITAL CONTRIBUTIONS........................................................................11 4.1 Initial Capital Contributions.........................................................................11 4.2 Non-Contemplated Contributions........................................................................12 4.3 New Investment Contributions..........................................................................13 4.4 Capital Accounts......................................................................................14 4.5 Interest..............................................................................................17 4.6 No Withdrawal.........................................................................................17 4.7 Limitation on Capital Contributions and Loans.........................................................17 ARTICLE V ALLOCATIONS..................................................................................18 5.1 Allocation of Profits and Losses......................................................................18 5.2 Special Allocations...................................................................................20 5.3 Curative Allocations..................................................................................21 5.4 Tax Allocations: Code Section 704(c)..................................................................21 5.5 Other Allocation Rules................................................................................22
i 3 ARTICLE VI DISTRIBUTIONS................................................................................22 6.1 Distributions of Available Cash.......................................................................22 6.2 Amounts Withheld......................................................................................23 6.3 Excess Distributions..................................................................................23 6.4 Tax Distributions.....................................................................................24 6.5 Payments Not Deemed Distributions.....................................................................24 ARTICLE VII MANAGEMENT OF THE PARTNERSHIP..............................................................25 7.1 Management Committee..................................................................................25 7.2 Major Decisions.......................................................................................25 7.3 Approval of Major Decisions...........................................................................26 7.4 Officers..............................................................................................27 7.5 Certificate of Limited Partnership; Qualifications to do Business.....................................28 7.6 Compensation and Reimbursement of Partner Expenses; Other Agreements with Partners........................................................................28 7.7 Outside Activities; Noncompetition....................................................................28 7.8 Partnership Funds.....................................................................................30 7.9 Transactions with Affiliates..........................................................................30 7.10 Indemnification......................................................................................30 7.11 Liability of the Partnership.........................................................................30 7.12 Suiza Foods Board Seat...............................................................................31 ARTICLE VIII RIGHTS AND OBLIGATIONS OF PARTNERS.........................................................31 8.1 Limitation of Liability...............................................................................31 8.2 Return of Capital.....................................................................................31 ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS.......................................................31 9.1 Records and Accounting................................................................................31 9.2 Fiscal Year...........................................................................................31 9.3 Reports...............................................................................................32 9.4 Documents.............................................................................................32 ARTICLE X TAX MATTERS..................................................................................32 10.1 Tax Matters Partner..................................................................................32 10.2 Annual Tax Returns...................................................................................32 10.3 Notice and Limitations on Authority..................................................................33 10.4 Tax Elections........................................................................................34 10.5 Actions in Event of Audit............................................................................34 10.6 Organizational Expenses..............................................................................34 10.7 Taxation as a Partnership............................................................................34 ARTICLE XI TRANSFERS OF PARTNER INTERESTS...............................................................34 11.1 Transfer Restrictions................................................................................34 11.2 Consent of the Management Committee..................................................................35 11.3 Tax Opinion..........................................................................................35 11.4 Registration.........................................................................................35
ii 4 11.5 Prohibited Transfers.................................................................................35 11.6 Rights of Assignee...................................................................................35 11.7 Admission as a Partner...............................................................................36 11.8 Distributions and Allocations in Respect of Transferred Partner Interests............................36 11.9 Suiza Buy-Out Option.................................................................................37 11.10 DFA Registration Right...............................................................................37 ARTICLE XII DISSOLUTION AND LIQUIDATION.................................................................38 12.1 Dissolution..........................................................................................38 12.2 Continuation of the Partnership......................................................................38 12.3 Liquidation..........................................................................................39 12.4 Reserves.............................................................................................40 12.5 Distribution in Kind.................................................................................40 12.6 Disposition of Documents and Records.................................................................40 12.7 Negative Capital Accounts............................................................................40 12.8 Filing of Certificate of Cancellation................................................................41 12.9 Return of Capital....................................................................................41 12.10 Waiver of Partition..................................................................................41 ARTICLE XIII AMENDMENT OF AGREEMENT.....................................................................41 13.1 Amendment Procedures.................................................................................41 ARTICLE XIV GENERAL PROVISIONS.........................................................................41 14.1 Addresses and Notices................................................................................41 14.2 Titles and Captions..................................................................................42 14.3 Pronouns and Plurals.................................................................................42 14.4 Further Action.......................................................................................43 14.5 Binding Effect.......................................................................................43 14.6 Integration..........................................................................................43 14.7 No Third Party Beneficiary...........................................................................43 14.8 Waiver...............................................................................................43 14.9 Counterparts.........................................................................................43 14.10 Applicable Law.......................................................................................43 14.11 Invalidity of Provisions.............................................................................43 14.12 Confidentiality......................................................................................44
iii 5 AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF SUIZA FLUID DAIRY GROUP, L.P. This AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT of SUIZA FLUID DAIRY GROUP, L.P. (the "Agreement") is entered into as of the ___ day of ___________, 2000, by and among Suiza Fluid Dairy Group GP, L.L.C., a Delaware limited liability company, as the General Partner ("Suiza GP" or the "General Partner"), and Suiza Fluid Dairy Group Holdings, Inc., a Nevada corporation ("SFDG Holdings"), Dairy Farmers of America, Inc., a Kansas cooperative marketing association ("DFA"), Mid-Am Capital, L.L.C., a Delaware limited liability company ("Mid-Am") as Limited Partners (together, the "Limited Partners," and with Suiza Management, the "Partners"), together with any Person who becomes a Partner as provided herein. ARTICLE I ORGANIZATIONAL MATTERS 1.1 Formation. The Partnership was formed as a limited partnership in accordance with the Delaware Act on September 20, 1999, pursuant to the provisions of the Delaware Act. The Partners hereby enter into this Agreement in order to set forth the rights and obligations of the Partners and certain matters related thereto. Except as expressly provided and permitted herein to the contrary, the rights and obligations of the Partners and the administration and termination of the Partnership shall be governed by the Delaware Act. 1.2 Name. The name of the Partnership shall be, and the business of the Partnership shall be conducted under the name of, "Suiza Fluid Dairy Group, L.P." The Partnership's business may also be conducted under any additional name or names approved by the Management Committee from time to time. 1.3 Registered Office and Principal Office of Partnership; Addresses of Partners. (a) The registered office of the Partnership in the State of Delaware shall be 1013 Centre Road, Wilmington, DE 19805, and the registered agent for service of process on the Partnership at such registered office shall be Corporation Service Partnership, 1013 Centre Road, Wilmington, DE 19805. The principal place of business of the Partnership shall be at 2515 McKinney Ave., LB 30, Suite 1200, Dallas, Texas 75201, or such other location as determined by the Management Committee. The Partnership may also maintain offices at such additional locations as the Management Committee deems advisable. 1 6 (b) The addresses of the Partners as of the Closing Date are set forth in Section 14.1. The address of a Partner may be changed in accordance with the requirements set forth in Section 14.1. 1.4 Term. The existence of the Partnership commenced on the Commencement Date, and the Partnership shall continue in existence until the dissolution of the Partnership pursuant to the express provisions of Article XII hereof (other than a dissolution that is followed by the reconstitution of the Partnership pursuant to Section 12.2). 1.5 Assumed Name Certificate. The Partners shall execute and file any assumed or fictitious name certificate or certificates or any similar documents required by law to be filed in connection with the formation and operation of the Partnership. 1.6 Ownership. The interest of each Partner in the Partnership shall be personal property for all purposes. All property and interests in property, real or personal, owned by the Partnership shall be deemed owned by the Partnership as an entity, and no Partner, individually, shall have any ownership of such property or interest except by having an ownership interest in the Partnership as a Partner. Each of the Partners irrevocably waives, during the term of the Partnership and during any period of its liquidation following any dissolution, any right that it may have to maintain any action for partition with respect to any of the assets of the Partnership. 1.7 No Individual Authority. No Partner, acting alone, shall have any authority to act for, or to undertake or assume, any obligation, debt, duty or responsibility on behalf of any other Partner or the Partnership except as otherwise expressly provided in this Agreement. 1.8 Title to Partnership Property. It is the desire and intention of the Partners that legal title to all property of the Partnership shall be held and conveyed in the name of the Partnership. 1.9 Limits of Partnership. The relationship between the parties hereto shall be limited to the carrying on of the business of the Partnership in accordance with the terms of this Agreement. Such relationship shall be construed and deemed to be a limited partnership for the sole and limited purpose of carrying on such business. Except as otherwise provided for or contemplated in this Agreement, nothing herein shall be construed to create a partnership between the Partners or to authorize any Partner to act as general agent for any other Partner. ARTICLE II DEFINITIONS The following definitions shall for all purposes, unless otherwise clearly indicated to the contrary, apply to the terms used in this Agreement. "Adjusted Capital Account" means, with respect to any Partner, a special account maintained for such Partner, the balance of which shall equal such Partner's Capital Account 2 7 balance, increased by the amount (if any) of such Partner's share of the Partnership Minimum Gain and Partner Minimum Gain of the Partnership. "Adjusted Capital Account Deficit" means, with respect to any Partner, the deficit balance, if any, in such Partner's Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments: (a) Credit to such Capital Account any amounts which such Partner is obligated to restore pursuant to any provision of this Agreement or is deemed to be obligated to restore pursuant to Regulations Section 1.704-1(b)(2)(iv)(c), the penultimate sentence of Regulations Section 1.704-2(g)(1), or the penultimate sentence of Regulations Section 1.704-2(i)(5); and (b) Debit to such Capital Account the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5), and (6). The foregoing definition of Adjusted Capital Account Deficit is intended to comply with Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. "Affiliate" means, with respect to a particular Person, any other Person directly or indirectly Controlling, Controlled by, or under common Control with such Person. "Agreement" means this Limited Partnership Agreement of Suiza Fluid Dairy Group, L.P., as it may be further amended, supplemented or restated from time to time in accordance with the terms of this Agreement. "Available Cash" of the Partnership as of any date means all cash funds of the Partnership on hand as of such date after: (a) payment of all expenditures of any kind, including operating expenses and capital expenditures, that are due and payable as of such date or that are expected to become due and payable in the next 30 days; and (b) provision for adequate reserves (working capital and capital), with the amount of such reserves to be determined by the Management Committee (acting reasonably and in good faith). "Book Depreciation" has the meaning set forth in Section 4.4(b)(v). "Book Value" has the meaning set forth in Section 4.4(c). "Business Day" means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States shall not be regarded as a Business Day. "Capital Account" means the capital account maintained for a Partner pursuant to Section 4.4. 3 8 "Capital Contribution" means, with respect to any Partner, the amount of money and the initial Book Value of any property (other than money) contributed to the Partnership with respect to the interest in the Partnership held by such Partner, reduced by the amount of any liabilities of the Partner assumed by the Partnership or which are secured by any property contributed by such Partner to the Partnership. "Capital Transaction" means any transaction in which the Partnership (a) sells, assigns or otherwise conveys one or more of its Dairy Operations, or (b) refinances all, substantially all or a material portion of the Partnership's debt which is secured by assets of the Partnership. "Certificate" means the Certificate of Limited Partnership of the Partnership filed with the Secretary of State of Delaware, as it may be amended or restated from time to time. "Closing Date" means the date of this Agreement. "Code" means the Internal Revenue Code of 1986, as amended and in effect from time to time. All references herein to the Code shall include any corresponding provision or provisions of succeeding law. "Commencement Date" means the date that the Certificate of Limited Partnership was filed with the Secretary of State of Delaware. "Contribution Agreement" means the Contribution Agreement, Plan of Merger, and Purchase Agreement dated as of September 20, 1999, by and among Suiza Foods, Suiza SoCal Holdings, Inc., a Nevada corporation, Suiza GTL Holdings, Inc., a Delaware corporation, LOS Holdings, Inc., a Delaware Corporation, SFDG Holdings, Suiza Management Corporation, a Delaware corporation, Suiza GP, the Suiza Companies, Suiza GTL, Suiza SoCal, Robinson Dairy, DFA, DFA Investment, SFG, SFG Management, SFG Capital, the Partnership, Pete Schenkel, and, for the limited purposes indicated on the signature pages thereto, Mid-Am. "Contributions" means the Contributions, as defined in the Contribution Agreement. "Control" (and derivations thereof) means, with respect to a particular Person, the ownership, directly or indirectly, of more than 50% of the equity or voting interests in such Person. "Dairy Operation" means any fluid milk processing operation, other than any fluid milk processing operation where the primary product or products in terms of sales or production is UHT milk or any other ultra pasteurized or extended shelf-life fluid milk product, or bottled water operation located in the Territory. "Default Rate" means a per annum interest rate equal to the lesser of: (a) ten percent (10%) per annum, compounded annually; and (b) the maximum rate of interest permitted to be charged by applicable law. 4 9 "Delaware Act" means the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. Sections 17-101, et seq., as amended from time to time. "DFA" means Dairy Farmers of America, Inc., a Kansas cooperative marketing association. "DFA Companies" means SFG, SFG Management and SFG Capital. "DFA Interests" has the meaning set forth in Section 11.9 hereof. "DFA Investment" means DFA Investment Company, a Kansas cooperative marketing association. "DFA Manager" means the member of the Management Committee designated by DFA pursuant to Section 7.1. "DFA Parents" means DFA, DFA Investment and Mid-Am. "DFA Partners" means DFA, Mid-Am and any assignees or transferees of their Partner Interests, to the extent each holds any Partner Interest in the Partnership. Any right or power granted to DFA or the DFA Partners may be exercised by DFA or, if DFA no longer owns any Partner Interests, then by any group of DFA Partners holding a majority of the Percentage Interests held by all DFA Persons. "DFA Price" means, as of any date, the sum of (a) the aggregate Preferred Returns plus the aggregate Preferred Capital Balance for all DFA Partners, plus (b) the aggregate Formula Value of the DFA Partners. "DFA Veto" means any occasion on which the Management Committee fails to approve a Major Decision proposed by Suiza due solely to a vote (or failure to vote) by the DFA Manager. "Dissolution Event" has the meaning set forth in Section 12.1(b). "EBITDA" means, for any period, the sum, for the Partnership and its subsidiaries on a consolidated basis, without duplication in accordance with generally accepted accounting principles of the following: (a) Net Income, plus (b) income taxes, interest expense, depreciation and amortization, to the extent deducted in calculating Net Income, plus (c) any Unusual Items of loss included in calculating Net Income, minus (d) any Unusual Items of income included in calculating Net Income. "Event of Bankruptcy" means, with respect to any Partner or the Partnership, any of the following acts or events: (a) making an assignment for the benefit of creditors; 5 10 (b) filing a voluntary petition in bankruptcy; (c) becoming the subject of an order for relief or being declared insolvent or bankrupt in any federal or state bankruptcy or insolvency proceeding; (d) filing a petition or answer seeking a reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulations; (e) filing an answer or other pleading admitting or failing to contest the material allegations of a petition filed against it in a proceeding of the type described in parts (a) through (d) of the definition; (f) seeking, consenting to, or acquiescing in the appointment of a trustee, receiver, or liquidator of all or any substantial part of its properties; or (g) the expiration of 90 days after the date of the commencement of a proceeding against such Person seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation if the proceeding has not been previously dismissed or the expiration of 60 days after the date of the appointment, without such Person's consent or acquiescence, of a trustee or receiver for the liquidation of such Person or of all or any substantial part of such Person's properties, if the appointment has not been previously vacated or stayed, or the expiration of 60 days after the date of expiration of a stay, if the appointment has not been previously vacated. "Fiscal Year" means the 12-month period ending December 31 of each year; provided that the initial Fiscal Year shall be the period beginning on the Commencement Date and ending December 31, 1999, and the last Fiscal Year shall be the period beginning on January 1 of the calendar year in which the final liquidation and termination of the Partnership is completed and ending on the date such final liquidation and termination is completed (to the extent any computation or other provision hereof provides for an action to be taken on a Fiscal Year basis, an appropriate proration or other adjustment shall be made in respect of the initial and final Fiscal Years to reflect that such periods are less than full calendar year periods). "Formula Value" for a particular Partner as of a particular date means (a) the Percentage Interest of such Partner, multiplied by (b) the sum of (i) 7.5 times the EBITDA of the Partnership over the 12 full calendar months immediately preceding such date, minus (ii) any indebtedness for borrowed money of the Partnership, including the Preferred Interests, as of such date; provided, that the Formula Value shall not be less than the average annual EBITDA computed over the 24 months preceding the date of determination. "Indemnitee" has the meaning set forth in Section 7.10. 6 11 "Independent Accountants" means any of the five largest nationally recognized accounting firms in the United States, as selected by the Management Committee. Deloitte & Touche LLP shall be the initial Independent Accountant. "Limited Partner" means SFDG Holdings, DFA, Mid-Am, and any other Person who is admitted as a Limited Partner in the Partnership on and after the Closing Date and whose admission has been reflected on the books and records of the Partnership. "Liquidator" has the meaning set forth in Section 14.3. "Losses" has the meaning set forth in Section 4.4(b). "Major Decision" has the meaning set forth in Section 7.2. "Management Committee" means the management committee of the General Partner, whose members will be designated by Suiza and DFA in accordance with Section 7.1 hereof. "Mergers" means the Mergers, as defined in the Contribution Agreement, pursuant to which the Suiza Companies will be merged into the Partnership or into one or more limited liability companies owned, directly or indirectly, by the Partnership. "Mid-Am" means Mid-Am Capital, L.L.C., a Delaware limited liability company. "Net Income" of a Person means the net income of such Person, determined in accordance with generally accepted accounting principles, applied in a manner consistent with the manner in which Suiza Foods (or its successor) calculates its consolidated net income at such time. "Nonrecourse Deductions" has the meaning set forth in Section 1.704-2(b)(1) of the Regulations. "Partner" means SFDG Holdings, DFA, Mid-Am, and any other Person who is admitted as a Partner in the Partnership on and after the Closing Date and whose admission has been reflected on the books and records of the Partnership. "Partner Interest" means the interest of a Partner in the Partnership, including, without limitation, such Partner's right: (a) to a distributive share of the Profits, Losses, and other items of income, gain, loss, deduction, and credit of the Partnership; (b) to a distributive share of the assets of the Partnership; and (c) with respect to certain Partners, to participate in the management and operation of the Partnership as provided in this Agreement. "Partner Minimum Gain" shall mean partner nonrecourse debt minimum gain as determined under the rules of Regulations Section 1.704-2(i). "Partner Nonrecourse Deduction" has the meaning set forth in Regulations Section 1.704-2(i)(1) and (2). 7 12 "Partnership" means Suiza Fluid Dairy Group, L.P., a Delaware limited partnership established by filing of the Certificate with the Secretary of State of Delaware. "Partnership Estimated Net Taxable Income" has the meaning set forth in Section 6.4(a). "Partnership Minimum Gain" has the meaning set forth in Regulations Section 1.704-2(d). "Percentage Interest" means the percentage interest of a Regular Partner in certain allocations of Profits, Losses, and other items of income, gain, loss, or deduction and certain distributions of cash and property. The initial Percentage Interest of each Regular Partner is set forth below:
----------------------------------------------------------------------- REGULAR PARTNER INITIAL PERCENTAGE INTEREST ----------------------------------------------------------------------- SFDG Holdings 66.1% ----------------------------------------------------------------------- DFA 33.8% ----------------------------------------------------------------------- Suiza Management 0.1% ----------------------------------------------------------------------- TOTAL 100.0% -----------------------------------------------------------------------
The Percentage Interest of a Regular Partner may be adjusted pursuant to Section 4.3 hereof. After such adjustment, the Percentage Interest of such Regular Partner, as adjusted, shall constitute such Regular Partner's Percentage Interest for all purposes under this Agreement. Neither Mid-Am nor Suiza Preferred Partner shall have a Percentage Interest. "Person" means an individual, corporation, partnership, limited liability company, trust, estate, unincorporated organization, association, or other entity. "Preferred Capital Balance" means: (a) with respect to Suiza Preferred Partner, the excess of (i) $176,272,000 plus the amount of the Preferred Capital Balance of any additional Partner Interests issued to Suiza Preferred Partner pursuant to Section 4.3(a), over (ii) total Preferred Capital Balance Distributions to Suiza Preferred Partner since the Closing Date; and (b) with respect to Mid-Am, the excess of (i) $90,000,000, over (ii) total Preferred Capital Balance Distributions to Mid-Am since the Closing Date. "Preferred Capital Balance Distribution" means any distribution of cash to the Priority Partners which reduces their respective Preferred Capital Balances. Each Preferred Capital Balance Distribution shall (a) be made to the Priority Partners in proportion to their Preferred Capital Balances, and (b) be identified by the Managers as a Preferred Capital Balance Distribution and not a distribution under Section 6.1(a) or (b) hereof. With the approval of the Management Committee in accordance with the provisions of Section 7.3 hereof, a Preferred Capital Balance Distribution may be made at any time. "Preferred Return" means, with respect to a particular Priority Partner, an aggregate amount, computed like simple interest, compounded annually, at a rate equal to 10% per annum 8 13 on such Priority Partner's Preferred Capital Balance, or as contemplated by Section 4.3(a), reduced by distributions made to such Priority Partner pursuant to Section 6.1(a) below. "Priority Partner" means Suiza Preferred Partner and Mid-Am, and any permitted successors and assigns thereof. "Profits" has the meaning set forth in Section 4.4(b). "Regular Partner" means the Suiza Regular Partners, DFA, and any other Partner with a Percentage Interest greater than zero that may be admitted to the Company in accordance with this Agreement. "Regulations" means the Treasury Regulations promulgated under the Code, as amended and in effect (including corresponding provisions of any succeeding regulations). "Regulatory Allocations" has the meaning set forth in Section 5.3. "Robinson Dairy" means Robinson Dairy, Inc., a Colorado corporation. "Settlement Notice" has the meaning set forth in Section 7.10(c). "Schenkel" means Pete Schenkel. "SFG" means Southern Foods Group, L.P., a Delaware limited partnership. "SFG Management" means SFG Management Limited Liability Company, a Delaware limited liability company. "SFG Capital" means SFG Capital Corporation, a Delaware corporation. "Suiza" means Suiza Management and any assignees or transferees of its Partner Interests, to the extent each holds any Partner Interest in the Partnership. Any right or power granted to Suiza Management or Suiza may be exercised by Suiza Management or, if Suiza Management no longer owns any Partner Interests, then by any Persons included within the foregoing definition of "Suiza" holding a majority of the Percentage Interests held by all Persons included within such definition. "SFDG Holdings" means Suiza Fluid Dairy Group Holdings, Inc., a Nevada corporation. "Suiza Common Stock" means the common stock, $.01 par value per share, of Suiza Foods, or any securities issued in exchange for or in substitution of such common stock in connection with any merger, consolidation, recapitalization or similar event. "Suiza Companies" means the following companies and any additional dairy operations contributed by the Suiza Parents pursuant to the Contribution Agreement: Broughton Foods 9 14 Company, an Ohio corporation; Burger Dairy Company, an Indiana corporation; CFI-TMP, Inc., a Michigan corporation; Country Delite Farms, Inc., a Delaware corporation; Country Fresh, Inc., a Michigan corporation; Country Fresh Wesley, Inc., a Michigan corporation; Dairy Fresh, Inc., a Delaware corporation; Dairy Products of Michigan, Inc., a Michigan corporation; East Coast Ice Cream, LLC, a Michigan limited liability company; Frostbite Brands, Inc., a Michigan corporation; Land-O-Sun Dairies, LLC, a Delaware limited liability company, LFD Holding Company, a Delaware corporation; London Farms Dairy, Inc., a Delaware corporation; Louis Trauth Dairy, Inc., a Delaware corporation; Model Dairy, Inc., a Delaware corporation; Northern Falls Water Company, Inc., a Delaware corporation; Oberlin Farms Dairy, Inc., an Ohio corporation; Southeastern Juice Packers, Inc., a Michigan corporation; and Velda Farms, Inc., a Delaware corporation. "Suiza Foods" means Suiza Foods Corporation, a Delaware corporation. "Suiza GP" means Suiza Fluid Dairy Group GP, LLC, a Delaware limited liability company. "Suiza GTL" means Suiza GTL, LLC, a Delaware limited liability company. "Suiza Managers" means the members of the Management Committee designated by Suiza pursuant to Section 7.1. "Suiza Parents" means Suiza Foods, Suiza SoCal Holdings, Inc., a Nevada corporation, Suiza GTL Holdings, Inc., a Delaware corporation, LOS Holdings, Inc., a Delaware Corporation, and SFDG Holdings. "Suiza Preferred Partner" means SFDG Holdings as the holder of a Preferred Capital Balance and as the owner of rights to distributions in respect thereof under Section 6.1(a), and allocations of Profits and Losses in connection therewith. "Suiza Regular Partners" means Suiza Management and SFDG Holdings as the holders of Percentage Interests greater than zero and as the owner of rights to distributions under Section 6.1(b) hereof, and allocations of Profits and Losses in connection therewith. "Suiza SoCal" means Suiza SoCal, LLC, a Delaware limited liability company. "Tax Matters Partner" has the meaning set forth in Section 11.1. "Territory" means the continental United States, Alaska and Hawaii. "Territory Dairy Investment" means any acquisition after the Closing Date of a Dairy Operation located in the Territory, whether through asset purchase, stock purchase, merger or otherwise. 10 15 "Unusual Items" of income or loss mean any extraordinary items of income or loss, any nonoperating gains or losses resulting from the sale of assets, any merger or acquisition expenses and any restructuring charges. ARTICLE III PURPOSE 3.1 Purposes and Scope. Subject to the provisions of this Agreement, the purposes of the Partnership are to: (a) acquire (i) the operations of the DFA Companies, the Suiza Companies, Suiza GTL, Suiza SoCal and Robinson Dairy through the Mergers and the Contributions and (ii) such other assets and liabilities as are contemplated to be acquired by the Partnership pursuant to the terms of the Contribution Agreement; (b) own, operate, manage, maintain, improve, develop, purchase, sell, exchange, and otherwise acquire or dispose of Dairy Operations in the Territory; (c) borrow money in furtherance of any or all of the objectives of the Partnership business, and to secure the same by mortgage, pledge, or other liens; and (d) do any and all other acts or things which may be incidental or necessary to carry on the business of the Partnership as herein contemplated. The Partnership shall not engage in any other business or activity not intended to implement the foregoing without the prior written consent of the Management Committee. ARTICLE IV CAPITAL CONTRIBUTIONS 4.1 Initial Capital Contributions. Prior to the date of this Agreement, the Suiza Parents owned, directly or indirectly, all of the outstanding equity interests in each of the Suiza Companies (except Land-O-Sun Dairies, LLC) and Robinson Dairy, 75% of the outstanding common member interests and $120 million aggregate stated amount of preferred member interests in Suiza GTL, 75% of the outstanding common member interests and $95 million aggregate stated amount of preferred member interests in Suiza SoCal, and, together with DFA Investment, all of the outstanding equity interests in Land-O-Sun Dairies, LLC. Prior to the date of this Agreement, the DFA Parents owned, directly or indirectly, all of the outstanding limited partner interests in the Partnership, 25% of the outstanding common member interests and $40 million aggregate stated amount of preferred member interests in Suiza GTL, 25% of the outstanding common member interests and $21 million aggregate stated amount of preferred member interests in Suiza SoCal, and $20 million stated amount of preferred interests in Land-O-Sun Dairies, LLC. Prior to the date of this Agreement, Suiza Management has been the sole general partner of the Partnership. The DFA Parents and Schenkel own, directly or indirectly, all 11 16 of the outstanding equity interests in SFG, SFG Management and SFG Capital. Pursuant to the Contribution Agreement, (i) the Partnership purchased from Schenkel the entire equity interests in SFG held by Schenkel for the sum of $99 million in cash; (ii) Suiza Management purchased from Schenkel all of the member interests in SFG Management owned by Schenkel for the sum of $1 million in cash; (iii) DFA contributed its member interest in SFG Management to the Partnership; (iv) the DFA Parents contributed, or caused the contribution of, their equity interests in SFG, their membership interests in Suiza GTL and in Suiza SoCal, the SFG Subordinated Notes held by them, and their preferred interests in Land-O-Sun Dairies, LLC to the Partnership in exchange for common and preferred limited partner interests in the Partnership; (v) the Suiza Parents contributed or merged the Suiza Companies and Robinson Dairy into, and contributed their membership interests in Suiza GTL and Suiza SoCal to, the Partnership in exchange for common and preferred limited partner interests in the Partnership; (vi) Suiza Management contributed 90% of the member interests in SFG Management it purchased from Schenkel to the Partnership in respect of its .1% general partner interest in the Partnership; and (vii) DFA made an additional cash contribution to, or Suiza Foods received an additional cash distribution from, a loan from, or additional preferred interests in, the Partnership in respect of certain additional fluid dairy operations contributed by the Suiza Parents as contemplated therein, including, without limitation, the operations of Robinson Dairy. The Partners hereby agree that they will take all reasonable steps to determine each Partner's Capital Account as of the Closing Date within 30 days after the Closing Date; provided that it is hereby agreed that (a) Mid-Am's Capital Account as of the Closing Date shall be equal to $90 million, (b) Suiza Preferred Partner's Capital Account as of the Closing Date shall be equal to $176.272 million, and (c) SFDG Holdings' Capital Account plus Suiza Management's Capital Account as of the Closing Date shall be equal to .662 times, and DFA's Capital Account as of the Closing shall be equal to .338 times, the aggregate Capital Accounts of all of the Partners. 4.2 Non-Contemplated Contributions. (a) If the Management Committee approves (in accordance with the Major Decision provisions of Section 7.3) any additional Capital Contributions beyond those described in Section 4.1, the Partnership shall deliver a written notice to all of the Partners (although only Partners shall be required to make, and can make, such additional Capital Contributions) (a "Contribution Notice") requesting such additional Capital Contributions. Each Contribution Notice shall specify the following information: (i) the aggregate amount of Capital Contributions requested in the Contribution Notice; (ii) the amount of additional cash funds each Partner is required to contribute to the Partnership (which Capital Contributions shall be made by the Partners in proportion to their Percentage Interests); (iii) the date on which such additional Capital Contributions are due, which date shall be approved in advance by the Management Committee; and 12 17 (iv) wiring or other instructions for the bank account into which the required Capital Contribution is to be deposited. (b) Any Capital Contributions made pursuant to Section 4.2(a) shall be spent by the Partnership in accordance with the general directions of the Management Committee, as approved in connection with the approval of such Capital Contributions. (c) Except as provided in Sections 4.1 and 4.3 hereof and in the foregoing provisions of this Section 4.2, no Partner shall be required to make any Capital Contribution. 4.3 New Investment Contributions. (a) If the Management Committee decides to make a Territory Dairy Investment and determines that it is desirable to purchase the target business (i) in a qualified stock purchase (within the meaning of Section 338 of the Code) followed by a Section 338(h)(10) election, (ii) in a transaction taxed as taxable purchase of the target's stock, or (iii) in a transaction qualifying as a reorganization under Section 368 of the Code, Suiza Foods shall carry out the purchase and shall transfer the assets and liabilities of the acquired business to the Partnership. If the acquisition is effected by a transaction as to which a Section 338(h)(10) election is made, the Partnership shall loan the purchase price (including the related acquisition costs and expenses recorded as purchase price) to Suiza Foods, and the transfer of the assets and liabilities of the acquired business shall constitute repayment of the loan that funded the acquisition. If the acquisition is effected by a transaction taxed as a taxable purchase of the target's stock, the Partnership shall loan the purchase price (including the related acquisition costs and expenses recorded as purchase price) to Suiza Foods, and Suiza Foods shall transfer the assets and liabilities of the acquired business in exchange for a preferred Partner Interest with a Preferred Capital Balance equal to the amount of the loan and a Preferred Return equal to the interest rate on the loan from the Partnership to Suiza Foods. If the acquisition is effected by a transaction qualifying as a reorganization under Section 368 of the Code, Suiza Foods, through SFDG Holdings, shall transfer the assets and liabilities of the acquired business to the Partnership as a capital contribution. In such event, DFA shall elect (i) whether to contribute to the Partnership an amount of cash equal to DFA's Percentage Interest multiplied by the value (determined using the closing trading price on the date issued) of the Suiza Common Stock transferred to the stockholders of the acquired corporation, plus the related acquisition costs and expenses recorded as purchase price, and divided by the SFDG Holdings' Percentage Interests, or (ii) whether, with the mutual agreement of the Partners, the Partnership shall loan the purchase price (including the related acquisition costs and expenses recorded as purchase price) to Suiza Foods, and Suiza Foods shall transfer the assets and liabilities of the acquired business in exchange for a preferred Partner Interest with a Preferred Capital Balance equal to the amount of the loan and a Preferred Return equal to the interest rate on the loan from the Partnership to Suiza Foods. If DFA elects not to contribute such amount of cash and the Partnership does not make a loan to Suiza Foods in exchange for such additional preferred Partner Interest, 13 18 SFDG Holdings' Percentage Interest shall be increased to equal the quotient (expressed as a percentage) of (i) the Formula Value for SFDG Holdings immediately prior to the acquisition, plus the value (determined using the closing trading price on the date issued) of the Suiza Common Stock transferred to the stockholders of the acquired corporation, plus the related cash purchase price, if any, acquisition costs and expenses recorded as purchase price, divided by (ii) the total Formula Value for all Partners immediately prior to the Partnership's participation in the relevant Territory Dairy Investment, plus the value (determined using the closing trading price on the date issued) of the Suiza Common Stock transferred to the stockholders of the acquired corporation, plus the related cash purchase price, if any, acquisition costs and expenses recorded as purchase price, and DFA's Percentage Interest shall be correspondingly reduced. (b) Notwithstanding any provision in this Agreement to the contrary, if Suiza desires for the Partnership to participate in a Territory Dairy Investment and the Management Committee rejects such Territory Dairy Investment due solely to a DFA Veto, then, in addition to any other options available to Suiza as a result of such DFA Veto (i.e., its rights under Sections 7.7(b)(iii) and 11.9), Suiza may, in its sole discretion, cause the Partnership to participate in such Territory Dairy Investment if Suiza (and any other Partners who agree to participate) make any and all Capital Contributions necessary to enable the Partnership to participate in such Territory Dairy Investment (a "New Investment Contribution") (which New Investment Contribution shall be treated as being made by SFDG Holdings). Each time SFDG Holdings (and any other Partners) makes a New Investment Contribution, the Percentage Interest of each Partner shall be adjusted to equal the quotient (expressed as a percentage) of (i) the Formula Value for such Partner immediately prior to the Partnership's participation in the relevant Territory Dairy Investment, plus the amount of the New Investment Contributions (if any) made by such Partner with respect to the relevant Territory Dairy Investment, divided by (ii) the total Formula Value for all Partners immediately prior to the Partnership's participation in the relevant Territory Dairy Investment, plus the total amount of the total New Investment Contributions made by all Partners with respect to the relevant Territory Dairy Investment. 4.4 Capital Accounts. (a) Maintenance Rules. The Partnership shall maintain for each Partner a separate Capital Account in accordance with this Section 4.4, which shall control the division of assets upon liquidation of the Partnership as provided in Section 12.3. The Capital Account shall be maintained in accordance with the following provisions: (i) Such Capital Account shall be increased by the cash amount or Book Value of any property contributed by such Partner to the Partnership pursuant to this Agreement, such Partner's allocable share of Profits and any items in the nature of income or gain which are specially allocated to such Partner pursuant to Section 5.2 or Section 5.3 hereof, and the amount of any Partnership 14 19 liabilities assumed by such Partner or which are secured by any property distributed to such Partner. (ii) Such Capital Account shall be decreased by the cash amount or Book Value of any property distributed to such Partner pursuant to this Agreement, such Partner's allocable share of Losses and any items in the nature of deductions or losses which are specially allocated to such Partner pursuant to Section 5.2 or Section 5.3 hereof, and the amount of any liabilities of the Partner assumed by the Partnership or which are secured by any property contributed by such Partner to the Partnership. (iii) In the event all or a portion of an interest in the Partnership is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred interest; provided, however, that if the transfer causes a termination of the Partnership under Section 708(b)(1)(B) of the Code, then the Partnership shall be deemed to have contributed its assets to a new limited partnership in exchange for interests in the new limited partnership, followed by a distribution of the interests in the new limited partnership to the Partnership and liquidation of the Partnership. Such deemed liquidation and reconstitution shall not cause the Partnership to be dissolved or reconstituted for purposes other than maintenance of the Capital Accounts and federal income tax, unless otherwise provided in Article XII. The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts generally are intended to comply with Section 1.704-1(b) of the Regulations and shall be interpreted and applied in a manner consistent with such Regulations. If the Management Committee reasonably determines that it is prudent to modify the manner in which the Capital Accounts, or any increases or decreases to the Capital Accounts, are computed in order to comply with such Regulations, the Management Committee may authorize such modifications, provided that it does not have any effect on the amounts distributable to any Person pursuant to Section 12.3 hereof upon the dissolution of the Partnership. (b) Definition of Profits and Losses. "Profits" and "Losses" mean, for each Fiscal Year or other period, an amount equal to the Partnership's taxable income or loss for such year or period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments: (i) Income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Profits and Losses pursuant to this Section 4.4(b) shall be added to such taxable income or loss; 15 20 (ii) Any expenditures of the Partnership described in Code Section 705(a)(2)(B), or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits and Losses pursuant to this Section 4.4(b) shall be subtracted from such taxable income or loss; (iii) In the event the Book Value of any Partnership asset is adjusted pursuant to Section 4.4(c)(ii) or Section 4.4(c)(iii), the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Profits and Losses; (iv) Gain or loss resulting from any disposition of property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Book Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Book Value; (v) In lieu of the deduction for depreciation, cost recovery or amortization taken into account in computing such taxable income or loss, there shall be taken into account "Book Depreciation" as defined in this Section 4.4(b)(v). "Book Depreciation" for any asset means for any Fiscal Year or other period an amount that bears the same ratio to the Book Value of that asset at the beginning of such Fiscal Year or other period as the federal income tax depreciation, amortization or other cost recovery deduction allowable for that asset for such year or other period bears to the adjusted tax basis of that asset at the beginning of such year or other period. If the federal income tax depreciation, amortization, or other cost recovery deduction allowable for any asset for such year or other period is zero, then Book Depreciation for that asset shall be determined with reference to such beginning Book Value using any reasonable method selected by the Management Committee; and (vi) Notwithstanding any other provision of this Section 4.4(b), any items that are specially allocated pursuant to Section 5.2 or Section 5.3 shall not be taken into account in computing Profits and Losses. (c) Definition of Book Value. "Book Value" means for any asset the asset's adjusted basis for federal income tax purposes, except as follows: (i) The initial Book Value of any asset contributed by a Partner to the Partnership shall be the gross fair market value of such asset, as determined by the Management Committee. (ii) The Book Values of all Partnership assets shall be adjusted to equal their respective gross fair market values, as determined by the Management Committee, as of the following times: (A) the acquisition of an additional interest 16 21 in the Partnership by any new or existing Partner in exchange for more than a de minimis capital contribution if the Management Committee reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership; (B) the distribution by the Partnership to a Partner of more than a de minimis amount of Partnership property as consideration for an interest in the Partnership if the Management Committee reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership; and (C) the liquidation of the Partnership within the meaning of Regulation Section 1.704-1(b)(2)(ii)(g); (iii) The Book Value of any Partnership asset distributed to any Partner shall be the gross fair market value of such asset on the date of distribution, as determined by the Management Committee. (iv) The Book Values of Partnership assets shall be increased (or decreased) to reflect any adjustment to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and Section 5.2(d) hereof; provided, however, that Book Values shall not be adjusted pursuant to this Section 4.4(c)(iv) to the extent the Management Committee determines that an adjustment pursuant to Section 4.4(c)(ii) is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this Section 4.4(c)(iv). (v) If the Book Value of an asset has been determined or adjusted pursuant to Section 4.4(c)(i), Section 4.4(c)(ii), or Section 4.4(c)(iv) hereof, such Book Value shall thereafter be adjusted by the Book Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses. 4.5 Interest. Except as otherwise provided in this Agreement, no interest shall be paid by the Partnership on Capital Contributions or on balances in Capital Accounts. 4.6 No Withdrawal. No Partner shall be entitled to withdraw any part of its Capital Contribution or its Capital Account or to receive any distribution from the Partnership, except as provided in Articles IV, VI, and XII. 4.7 Limitation on Capital Contributions and Loans. Except as specifically provided in this Article IV, Article VIII, or Article XII hereof, no Partner may contribute capital, loan, or advance money to the Partnership. 17 22 ARTICLE V ALLOCATIONS 5.1 Allocation of Profits, Losses and Certain Deductions. (a) Allocation of Profit Generally. After giving effect to the allocations set forth in Section 5.2 and Section 5.3, and after giving effect to all distributions of cash or property (other than cash or property to be distributed pursuant to Article XII), Profits for any Fiscal Year shall be allocated to the Partners in the following manner: (i) First, to each Partner with a negative balance in its Adjusted Capital Account, pro rata in accordance with such negative Adjusted Capital Account balances, until such negative Adjusted Capital Account balances have been eliminated; (ii) Next, to SFDG Holdings and from DFA in an amount equal to (W) DFA's Percentage Interest multiplied by (X) the amount of any income or gain allocated to SFDG Holdings during the Fiscal Year pursuant to Section 5.4 arising out of a Territory Dairy Investment effected by either a transaction taxed as a taxable acquisition of the target corporation's stock or a transaction qualifying as a reorganization under Section 368 of the Code ("COB Acquisition"), plus any loss or deduction allocated to SFDG Holdings pursuant to Section 5.4 arising out of a COB Acquisition that has not previously been taken into account in a computation pursuant to this Section 5.1(a)(ii), multiplied by (Y) the sum of the highest marginal federal income tax rate applicable to corporations for the Fiscal Year and the highest marginal state income tax rate applicable to Suiza Foods for the Fiscal Year, expressed as a percentage, divided by (Z) one minus the sum of the highest marginal federal income tax rate applicable to corporations for the Fiscal Year and the highest marginal state income tax rate applicable to Suiza Foods for the Fiscal Year, expressed as a percentage. (iii) Next, to each Priority Partner in the minimum amount necessary to cause such Priority Partner's positive Adjusted Capital Account balance to equal the sum of such Priority Partner's (A) Preferred Return plus (B) Preferred Capital Balance, in proportion to such deficiencies; (iv) Next, to the Partners in proportion to their Percentage Interests. (b) Allocation of Losses. (i) After giving effect to the provisions of Section 5.2 and Section 5.3, and subject to the limitation set forth in Section 5.1(b)(ii), Losses for any Fiscal Year shall be allocated to the Partners in the following manner: 18 23 (A) First, to the Partners until each of their Adjusted Capital Account balances is reduced to zero dollars ($0), in proportion to their Adjusted Capital Account balances; (B) Next, in the minimum amount necessary to cause each Priority Partner's positive Adjusted Capital Account balance to equal the sum of such Priority Partner's Preferred Return and Preferred Capital Balance, in proportion to the excess of each such Priority Partner's Adjusted Capital Account over the amount of its Preferred Return and Preferred Capital Balance; (C) Next, to each Priority Partner, in proportion to their positive Adjusted Capital Account balances, until such positive Adjusted Capital Account balances have been eliminated; and (D) Next, to the Partners in proportion to their Percentage Interests. (ii) Notwithstanding anything to the contrary in Section 5.1(b)(i): (A) The Losses allocated pursuant to Section 5.1(b)(i) hereof to any Partner for any Fiscal Year shall not exceed the maximum amount of Losses that may be allocated to such Partner without causing such Partner to have an Adjusted Capital Account Deficit at the end of such Fiscal Year. (B) If some but not all of the Partners would have an Adjusted Capital Account Deficit as a consequence of an allocation of Losses pursuant to Section 5.1(b)(i) hereof, the limitations set forth in this Section 5.1(b)(ii) shall be applied by allocating Losses pursuant to this Section 5.1(b)(ii) only to those Partners who would not have an Adjusted Capital Account Deficit as a consequence of receiving such an allocation of Losses (with the allocation of such Losses among such Partners to be determined by the Management Committee, based on the allocation that is most likely to effectuate the distribution priorities set forth in Section 6.1 hereof). (C) If no Partner may receive an additional allocation of Losses pursuant to Section 5.1(b)(ii)(B) above, such additional Losses not allocated pursuant to Section 5.1(b)(ii)(B) shall be allocated solely to the Partners in proportion to their Percentage Interests. (c) Allocation of Certain Deductions. Any deductions allocated to the Partnership by SFG that arise out of payment of bond tender premiums by SFG with respect to the SFG Subordinated Notes (as defined in the Contribution Agreement) shall 19 24 be allocated to DFA in an amount equal to the amount of such bond tender premium economically borne by DFA pursuant to Section 2.6 of the Contribution Agreement. 5.2 Special Allocations. (a) Minimum Gain Chargeback--Partnership Nonrecourse Liabilities. If there is a net decrease in Partnership Minimum Gain during any Fiscal Year, certain items of income and gain shall be allocated (on a gross basis) to the Partners in the amounts and manner described in Regulations Section 1.704-2(f) and (j)(2)(i) and (ii), subject to the exemptions set forth in Regulations Section 1.704-2(f)(2), (3), (4), and (5). This Section 5.2(a) is intended to comply with the minimum gain chargeback requirement (set forth in Regulations Section 1.704-2(f)) relating to Partnership nonrecourse liabilities (as defined in Regulations Section 1.704-2(b)(3)) and shall be so interpreted. (b) Minimum Gain Chargeback--Partner Nonrecourse Debt. If there is a net decrease in Partner Minimum Gain during any Partnership Fiscal Year, certain items of income and gain shall be allocated (on a gross basis) as quickly as possible to those Partners who had a share of the Partner Minimum Gain (determined pursuant to Regulations Section 1.704-2(i)(5)) in the amounts and manner described in Regulations Section 1.704-2(i)(4), (j)(2)(ii), and (j)(2)(iii). This Section 5.2(b) is intended to comply with the minimum gain chargeback requirement (set forth in Regulations Section 1.704-2(i)(4)) relating to partner nonrecourse debt (as defined in Regulations Section 1.704-2(b)(4)) and shall be so interpreted. (c) Qualified Income Offset. If, after applying Section 5.2(a) and Section 5.2(b), any Partner has an Adjusted Capital Account Deficit, items of Partnership income and gain shall be specially allocated (on a gross basis) to each such Partner in an amount and manner sufficient to eliminate, to the extent required by the Regulations, the Adjusted Capital Account Deficit of such Partner as quickly as possible. (d) Optional Basis Adjustments. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Code Sections 734(b) or 743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Regulations. (e) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year shall be specially allocated among the Partners in proportion to their Percentage Interests. (f) Partner Nonrecourse Deductions. Partner nonrecourse deductions shall be allocated pursuant to Regulations Section 1.704-2(b)(4) and (i)(1) to the Partner who bears the economic risk of loss with respect to the deductions. 20 25 (g) Special Allocation: Economic Sharing Arrangement. Notwithstanding anything to the contrary in this Article V, the Partners acknowledge and agree that the manner in which distributions are to be made pursuant to Section 6.1 correctly reflects the Partners' economic sharing arrangement in the Partnership. To the extent that allocations of Profits, Losses, and other items of income, gain, loss, and deduction set forth in this Article V (other than this Section 5.2(g)) could produce an economic sharing arrangement among the Partners different than that described in Section 6.1, then the Partnership shall specially allocate items of gross income, gain, loss, and deduction among the Partners in any manner that may be required to cause the allocations of Profits, Losses, and other items of income, gain, loss, and deduction described in Article V to be consistent with the economic sharing arrangement described in Section 6.1. 5.3 Curative Allocations. The allocations set forth in Section 5.1(b)(ii) and Section 5.2(a) through Section 5.2(f) hereof (the "Regulatory Allocations") are intended to comply with certain requirements of the Regulations. It is the intent of the Partners that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Partnership income, gain, loss, or deduction pursuant to this Section 5.3. Therefore, notwithstanding any other provisions of this Article V (other than the Regulatory Allocations), the Management Committee shall make such offsetting special allocations of Partnership income, gain, loss, or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Partner's Capital Account balance is, to the extent possible, equal to the Capital Account balance such Partner would have had if the Regulatory Allocations were not part of the Agreement and all Partnership items were allocated pursuant to Section 5.1(a), Section 5.1(b)(i), and Section 5.2(g) hereof. In exercising its discretion under this Section 5.3, the Management Committee shall take into account future Regulatory Allocations under Sections 5.2(a) and 5.2(b) that, although not yet made, are likely to offset other Regulatory Allocations previously made under Sections 5.2(e) and 5.2(f). 5.4 Tax Allocations: Code Section 704(c). (a) In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss and deduction with respect to any property contributed to the capital of the Partnership shall, solely for tax purposes, be allocated among the Partners so as to take account of any variation between the adjusted basis of such property to the Partnership for federal income tax purposes and its initial Book Value (computed in accordance with Section 4.4(c)(i) hereof). (b) If the Book Value of any Partnership asset is adjusted pursuant to Section 4.4(c)(ii) hereof, subsequent allocations of income, gain, loss, and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Book Value in the same manner as under Code Section 704(c) and the Regulations thereunder. 21 26 (c) Any elections or other decisions relating to such allocation shall be made by the Management Committee. (d) Allocations pursuant to this Section 5.4 are solely for purposes of federal, state, and local taxes and shall not affect or in any way be taken into account in computing any Person's Capital Account, Adjusted Capital Account, or share of Profits, Losses, and other items or distributions pursuant to any provision of this Agreement. (e) It is intended that the allocations in Sections 5.1, 5.2, 5.3 and 5.4 effect an allocation for federal income tax purposes consistent with Section 704 of the Code and comply with any limitations or restrictions therein. 5.5 Other Allocation Rules. (a) For purposes of determining the Profits, Losses, or any other item allocable to any period, Profits, Losses, and any such other item shall be determined on a daily, monthly, or other basis, as determined by the Management Committee using any permissible method under Code Section 706 and the Regulations thereunder. (b) For federal income tax purposes, every item of income, gain, loss and deduction shall be allocated among the Partners in accordance with the allocations under Sections 5.1, 5.2, 5.3, and 5.4. (c) The Partners are aware of the income tax consequences of the allocations made by this Article V and hereby agree to be bound by the provisions of this Article V in reporting their shares of Partnership income and loss for income tax purposes. (d) The Partners agree that the Partners' Percentage Interests represent the Partners' respective interests in Partnership profits for purposes of allocating excess nonrecourse liabilities (as defined in Regulations Section 1.752-3(a)(3)) pursuant to Regulations Section 1.752-3(a)(3). ARTICLE VI DISTRIBUTIONS 6.1 Distributions of Available Cash. The Management Committee shall review the Partnership's accounts at the end of each calendar quarter to determine whether distributions are appropriate. Subject to Sections 17-607 of the Delaware Act, the Management Committee shall authorize such distributions of Available Cash as it may determine in its sole discretion; provided, however, to the extent there is sufficient Available Cash to make distributions under Section 6.1(a) hereof, such distributions shall be made. All such distributions of cash shall be made in the manner set forth below: 22 27 (a) First, to SFDG Holdings in an amount equal to (W) DFA's Percentage Interest multiplied by (X) the amount of any income or gain allocated to SFDG Holdings during the Fiscal Year pursuant to Section 5.4 arising out of a Territory Dairy Investment effected by either a transaction taxed as a taxable acquisition of the target corporation's stock or a transaction qualifying as a reorganization under Section 368 of the Code ("COB Acquisition"), plus any loss or deduction allocated to SFDG Holdings pursuant to Section 5.4 arising out of a COB Acquisition that has not previously been taken into account in a computation pursuant to Section 5.1(a)(ii), multiplied by (Y) the sum of the highest marginal federal income tax rate applicable to corporations for the Fiscal Year and the highest state income tax applicable to Suiza Foods during the Fiscal Year, expressed as a percentage, divided by (Z) one minus the sum of the highest marginal federal income tax rate applicable to corporations for the Fiscal Year and the highest state income tax rate applicable to Suiza Foods during the Fiscal Year, expressed as a percentage. (b) First, to each Priority Partner with a Preferred Return, in proportion to the Preferred Return of each such Priority Partner, in an amount up to the Preferred Return of each such Priority Partner; and (c) Next, to the Partners in proportion to their Percentage Interests. (d) Notwithstanding anything to the contrary above, (i) any Preferred Capital Account Balance Distribution made by the Partnership shall be treated as a distribution by the Partnership in reduction of the Priority Partners' Preferred Capital Balances but shall not be made or taken into account under clause (a) or (b) above; and (ii) if Available Cash is derived from a transaction that occurs in connection with the dissolution, termination and liquidation of the Partnership, any Available Cash that is derived from or attributable to such a transaction shall be distributed to the Partners in accordance with Section 12.3 hereof. 6.2 Amounts Withheld. Notwithstanding any other provision of this Agreement to the contrary, each Partner hereby authorizes the Partnership to withhold and to pay over, or otherwise pay, any withholding or other taxes payable by the Partnership with respect to such Partner as a result of such Partner's participation in the Partnership. If and to the extent that the Partnership shall be required to withhold or pay any such taxes, such Partner shall be deemed for all purposes of this Agreement to have received a payment from the Partnership as of the time such withholding or tax is paid, which payment shall be deemed to be a distribution with respect to such Partner's Partner Interest to the extent that the Partner (or any successor to such Partner's Partner Interest) is entitled to receive a distribution. Any withholdings authorized by this Section 6.2 shall be made at the maximum applicable statutory rate under the applicable tax law unless the Partnership shall have received an opinion of counsel or other evidence satisfactory to the Management Committee to the effect that a lower rate is applicable, or that no withholding is applicable. 6.3 Excess Distributions. To the extent that the aggregate of actual and deemed distributions to a Partner under this Article VI for any period exceeds the distributions to which 23 28 such Partner is entitled for such period, the amount of such excess shall be considered a loan from the Partnership to such Partner. Such loan shall bear interest (which interest shall be treated as an item of income to the Partnership) at the Default Rate, accruing from and after the date which is ten (10) days after a Partner, on behalf of the Partnership, makes demand for repayment of any such excess, and such interest shall accrue until discharged by such Partner by repayment, which shall be made out of distributions to which such Partner would otherwise be subsequently entitled if the Partner does not otherwise repay such loan. 6.4 Tax Distributions. (a) Notwithstanding anything to the contrary in Section 6.1, the Managers shall cause the Partnership from time to time to distribute to each Partner an amount equal to the excess of (i) the Partnership's Estimated Net Taxable Income (defined below) for the applicable Fiscal Year (or portion thereof) to which such distribution relates which is allocable to such Partner, multiplied by the maximum marginal federal income and the state tax rate applicable to the relevant corporation in effect during the Fiscal Year to which such distribution relates, over (ii) the sum of distributions already made to such Partner during the relevant Fiscal Year. For these purposes, "Partnership Estimated Net Taxable Income" means the excess of (Y) the estimate of the aggregate amount of items of taxable income and gain of the Partnership for the applicable Fiscal Year (or portion thereof) to which such distribution relates, over (Z) the estimate of the aggregate amount of items of taxable deduction and loss for such Fiscal Year (or portion thereof) to which such distribution relates. The Managers shall determine the Partnership Estimated Net Taxable Income and each Partner's allocable share of Partnership Estimated Net Taxable Income. The Partners acknowledge and agree that the sole purpose of this Section 6.4(a) is to enable the Partnership to distribute sufficient cash to each Partner to permit each Partner to timely satisfy its estimated income tax obligations, if any, arising from the Partner's allocable share of the Partnership's taxable income. The Manager shall make such distributions on or about April 15, June 15, September 15 and December 15 of each year and/or on any other date that similarly coincides with the due date of any estimated income tax obligation of any Partner. (b) Notwithstanding any provision in this Section 6.4 to the contrary, no distributions shall be made pursuant to this Section 6.4 to the extent there is not sufficient Available Cash to make such distributions. (c) For purposes of this Agreement, amounts distributed to the Partners pursuant to Section 6.4 shall be deemed to be advance distributions of amounts to be distributed pursuant to Section 6.1. 6.5 Payments Not Deemed Distributions. Any amounts paid pursuant to Section 7.6 shall not be considered distributions for purposes of this Agreement. 24 29 ARTICLE VII MANAGEMENT OF THE PARTNERSHIP 7.1 Management Committee. (a) The Partnership shall be managed by the Management Committee of the General Partner, which will consist of three individuals (the "Managers"). Two Managers shall be designated by Suiza, and one Manager shall be designated by DFA, and the General Partner shall cause such persons to be elected to the Management Committee. Suiza and DFA shall have the right to designate replacements of those Managers designated by them. Each Manager designated by Suiza must be a director, officer or employee of Suiza, and each Manager designated by DFA must be a director, officer or employee of DFA. The initial Suiza Managers shall be Gregg L. Engles and Tracy L. Noll, and the initial DFA Manager shall be Gary E. Hanman. Suiza may designate one of the Suiza Managers as the Chairman of the Management Committee, and such Manager will preside (when present) at all meetings of the Management Committee. (b) The limited liability company agreement of the General Partner shall be in substantially the form attached hereto as Exhibit A. 7.2 Major Decisions. The term "Major Decision" means any decision by the Management Committee with respect to any of the following matters: (a) admitting any Person as a Partner of the Partnership; (b) accepting or requiring any Partner to make any additional Capital Contribution to the Partnership or otherwise issuing additional equity interests in the Partnership except for Capital Contributions specified in Section 4.3 of less than $100 million; (c) incurring indebtedness for borrowed money (which expressly excludes trade payables incurred in the ordinary course of business) in excess of $250 million; (d) selling, leasing, pledging or granting a security interest or encumbrance in all or substantially all of the Partnership's assets, except in connection with the incurrence of indebtedness for borrowed money that does not involve a Major Decision under the preceding paragraph; (e) approving an increase in the annual capital expenditure budget of $50 million or more over the previous annual capital expenditure budget for the Partnership or making any capital expenditure, or series of related capital expenditures, in excess of $50 million that are not contemplated by a previously approved capital expenditure budget; 25 30 (f) acquiring (whether through an asset purchase, merger, equity purchase or otherwise) any Dairy Operations or other assets (excluding acquisitions of raw materials and supplies in the ordinary course of business) having a value, individually or in the aggregate for any series of related transactions, in excess of $250 million; (g) selling or otherwise disposing of any Dairy Operations or other assets (excluding sales or other dispositions of inventory in the ordinary course of business) having a value, individually or in the aggregate for any series of related transactions, in excess of $250 million; (h) consenting to the transfer of a Partner Interest pursuant to Section 11.2; (i) except as otherwise permitted in Section 7.6(b) or Section 7.9, entering into any transaction or agreement between the Partnership and a Partner or an Affiliate of a Partner, including any change in the percentage used to determine the Management Fee in Section 7.6(b), except for loans specified in Section 4.3 of less than $100 million between the Partnership and a Partner or an Affiliate of a Partner; (j) making any material election or other decision pursuant to Section 5.4(c), which relates to Code Section 704(c); (k) any change in the purpose or scope of the Partnership pursuant to Article III; (l) amending or granting a waiver with respect to this Agreement; (m) authorizing any consolidation, dissolution, or liquidation of the Partnership or any merger in which the Partnership does not survive; (n) executing or delivering any assignment for the benefit of creditors of the Partnership; (o) filing any voluntary petition in bankruptcy or receivership with respect to the Partnership; or (p) making a Preferred Capital Balance Distribution, and the amount of any such Preferred Capital Balance Distribution. 7.3 Approval of Major Decisions. Notwithstanding any contrary provisions of Section 7.1, the limited liability company agreement of the General Partner shall provide the following with respect to approval of Major Decisions: (a) Any Major Decision must be approved by unanimous vote of the Managers present and entitled to vote at a meeting of the Management Committee at which a quorum is present. 26 31 (b) The Management Committee may not approve any Major Decision unless at least one Suiza Manager and one DFA Manager are present at the meeting; provided that the Suiza Manager entitled to vote may approve any Major Decision at a meeting at which no DFA Manager is present if the following provisions have been satisfied with respect to such meeting: (i) the notice of such meeting included a statement indicating that a Major Decision would be addressed at such meeting and describing in general terms the nature of such Major Decision; and (ii) if no DFA Manager is present at the originally scheduled meeting, the meeting is adjourned, and a second notice is delivered to DFA and to the DFA Manager, marked "CONFIDENTIAL/URGENT" indicating the time at which the meeting will be reconvened and including a statement notifying DFA and the DFA Manager that if the DFA Manager fails to attend the reconvened meeting specified in the second notice, then the Major Decision to be considered at such meeting may be approved without any vote by the DFA Manager. This second notice shall be delivered at least two Business Days prior to the date of the reconvened meeting. At such reconvened meeting, the only business that may be conducted is that described in the notice of such meeting. 7.4 Officers. The officers of the General Partner shall include a President, a Secretary and such other officers as the Management Committee in its discretion may appoint, and such officers will have any powers delegated to them by the Management Committee (subject to any limitations on the authority of the Management Committee set forth in this Agreement). The initial President of the General Partner shall be Pete Schenkel. The President of the General Partner and certain other key employees of the General Partner and Partnership, as determined from time to time by the Management Committee, shall be entitled to receive options (the "New Options") to purchase Suiza Common Stock on terms consistent with Suiza Foods' stock option program for executives then in effect. At the time that any New Options are granted, the Partnership shall pay to Suiza Foods in cash the value of such New Options determined under the Black-Scholes formula using the closing trading price of Suiza Common Stock on the date upon which such New Options are granted (the "Black-Scholes Prepayment"). Certain current employees of the Suiza Companies, Suiza GTL, Suiza SoCal and Robinson Dairy hold options to purchase Suiza Common Stock (the "Existing Options"). When any New Options or Existing Options are exercised, the Partnership shall purchase from Suiza Foods for cash the number of shares of Suiza Common Stock that the persons exercising such options are entitled to receive at a price equal to the closing trading price of Suiza Common Stock on the date upon which such options are exercised, minus the amount of any Black-Scholes Prepayment made with respect to such options, and shall transfer such shares to the exercising optionees. If any New Options expire without being exercised, Suiza Foods shall repay to the Partnership the amount of any Black-Scholes Prepayment made with respect to such New Options. 27 32 7.5 Certificate of Limited Partnership; Qualifications to do Business. The President or another officer of the General Partner shall cause to be filed on behalf of and at the Partnership's expense such certificates or documents (including, without limitation, copies, renewals, amendments or restatements of the Certificate) as may be determined by such officer to be reasonable and necessary or appropriate for the qualification and operation of a limited partnership in the State of Delaware and in any other state in which the Partnership may elect to do business. 7.6 Compensation and Reimbursement of Partner Expenses; Other Agreements with Partners. (a) Except as provided in Section 7.6(b) and Section 7.10, no Partner shall be compensated for any services rendered to the Partnership by such Partner or its designees on the Management Committee. Notwithstanding anything to the contrary in this Agreement, each Partner shall be reimbursed for out-of-pocket expenses that such Partner makes for or on behalf of the Partnership, to the extent such expenses are authorized by the Management Committee. (b) Suiza Management and DFA will perform corporate overhead services for the Partnership of substantially the same type and to substantially the same extent provided by Suiza Management to the Suiza Companies, Suiza GTL, Suiza SoCal and Robinson Dairy, and by DFA to SFG and to SFG Management, prior to the date hereof (the "Services"). In consideration for the Services, the Partnership shall pay Suiza Management and DFA a quarterly management fee (the "Management Fee"), payable within 45 days after the end of each calendar quarter. From the Closing Date through December 31, 2000, the quarterly Management Fee payable to Suiza Management and to DFA will be $7,500,000 and $250,000, respectively (pro rated for any partial quarter). Thereafter, the quarterly Management Fee payable to Suiza Management and to DFA will be an amount equal to .164% and .005%, respectively, of the Partnership's budgeted gross revenues for that quarter, which percentage will be reviewed annually by the Management Committee and may be changed annually, which changes, other than changes caused by a material change in the duties and responsibilities of a party providing services or by a material increase in the costs of providing services, may be made only in accordance with Section 7.2(i). (c) Suiza Foods, the Partnership and DFA will enter into one or more milk supply agreements pursuant to which DFA will provide raw milk to certain Dairy Operations of the Partnership and to The Morningstar Group, Inc. 7.7 Outside Activities; Noncompetition. (a) Subject to Section 7.7(b), a Partner, any Affiliates of a Partner, and any director, officer, partner, or employee of a Partner or any Affiliate thereof, may have business interests and engage in business activities in addition to those relating to the Partnership and may engage in any businesses and activities for its own account and for 28 33 the accounts of others without having or incurring any obligation to offer any interest in or funds from such properties, businesses or activities to the Partnership or any Partner, and no other provision of this Agreement shall be deemed to prohibit the Partners or any such other Person from conducting such other businesses and activities. Neither the Partnership nor any Partner shall have any rights by virtue of this Agreement or the limited liability Partnership relationship created hereby in any business Partnerships of the other Partner or any Affiliate of such Partner or any director, officer, partner, or employee of the other Partner or any Affiliate thereof. (b) No Partner may, directly or indirectly, engage or participate in any Dairy Operations within the Territory; provided that: (i) nothing in this Section 7.7(b) shall restrict the business operations of any current affiliate of DFA that is not Controlled by DFA; (ii) nothing in this Section 7.7(b) shall be construed as preventing any Partner from (A) engaging in any business after the Closing Date that it engaged in within the Territory prior to the Closing Date solely through entities other than the DFA Companies, or the Suiza Companies and Robinson Dairy, (as applicable), including without limitation the business operations of The Morningstar Group, Inc. and its subsidiaries, Continental Can Company, Inc. and its subsidiaries, and Horizon Organic Holding Corporation; (B) engaging in any business outside the Territory, including Suiza Foods' dairy operations in Puerto Rico; (C) engaging in any business within the Territory in products and services not provided by the Partnership; or (D) being a passive investor or security holder of an interest constituting less than 5% of the equity ownership, voting rights or debt of any of the foregoing; and (iii) if Suiza desires for the Partnership to participate in a Territory Dairy Investment and the Management Committee rejects such Territory Dairy Investment due to a DFA Veto, then Suiza or any of its Affiliates may engage or participate in such Territory Dairy Investment on terms which are no more favorable to Suiza or such Affiliate than those rejected by the Management Committee due to such DFA Veto, and thereafter Suiza or such Affiliate may operate the Dairy Operations acquired in such Territory Dairy Investment. (c) The Partners acknowledge and agree that their respective obligations under Section 7.7(b) are a material inducement and condition to this Agreement and the obligations of the parties hereunder and that the restrictions and remedies contained in this Section 7.7 are reasonable as to time, geographic area and scope of activity and do not impose a greater restraint than is necessary to protect the goodwill and other legitimate business interests of the Partnership. It is the intent of all parties hereto that the foregoing restrictions against unlawful and unfair competitive activities be given the fullest effect consistent with applicable law. 29 34 (d) If the provisions of Section 7.7(b) are found by a court of competent jurisdiction to contain unreasonable or unnecessary limitations as to time, geographic area or scope of activity, then such court is hereby directed to reform such provisions to the minimum extent necessary to cause the limitations contained therein as to time, geographical area and scope of activity to be reasonable and enforceable. (e) The Partners acknowledge and agree that the Partnership would be irreparably harmed by any violation of their respective obligations under Section 7.7(b) and that, in addition to all other rights or remedies available at law or in equity, the parties will be entitled to injunctive and other equitable relief to prevent or enjoin any such violation, without posting any bond whatsoever. 7.8 Partnership Funds. The funds of the Partnership shall be deposited in such segregated money-market Partnership account or Partnership accounts as are designated by the President. The officers of the Partnership shall be authorized to sign checks or drafts against any Partnership account, and representatives of Suiza shall be listed as an alternate signatory with respect to any such account. Any withdrawals from or charges against such accounts may be made by officers or agents of the Partnership in accordance with the terms of the Agreement. 7.9 Transactions with Affiliates. Except as otherwise permitted in Section 4.3, Section 7.6(b) and Section 7.6(c) and except for any transaction or agreement approved as a Major Decision pursuant to Section 7.3, the Partnership may not enter into any transaction or agreement with any Partner or any Affiliate of a Partner if the terms of such transaction or agreement are materially less favorable to the Partnership than the terms that could be obtained by the Partnership through an arms-length transaction or agreement with an unrelated party. 7.10 Indemnification. The Partnership shall indemnify and hold harmless the General Partner and any director, officer, employee, agent, or representative of the General Partner, against all liabilities, losses, and damages incurred by any of them by reason of any act performed or omitted to be performed in the name of or on behalf of the Partnership, or in connection with the Partnership's business, including attorneys' fees and any amounts expended in the settlement of any claims or liabilities, losses, or damages, to the fullest extent permitted by the Delaware Act. The Partnership shall indemnify and hold harmless any Limited Partner, employee, agent, or representative of the Partnership, any Person who is or was serving at the request of the Partnership acting through the General Partner as a director, officer, partner, trustee, employee, agent, or representative of another corporation, partnership, joint venture, trust, or other enterprise, but in no event shall such indemnification exceed the indemnification permitted by the Delaware Act. Notwithstanding anything to the contrary in this Section 7.10, in no event shall Limited Partners be subject to personal liability by reason of the indemnification provisions of this Agreement. 7.11 Liability of the Partners. (a) Neither the Partners nor their respective owners, directors, officers, employees, or agents nor their designated Managers shall be liable to the Partnership or to 30 35 the other Partners for errors in judgment or for any acts or omissions that do not constitute gross negligence or willful or wanton misconduct. (b) Each Partner may exercise any of the powers granted to them by this Agreement and perform any of the duties imposed upon them hereunder either directly or by or through agents. 7.12 Suiza Foods Board Seat. For so long as the DFA Partners own at least 10 % of the Partner Interests, Suiza shall nominate an individual designated by DFA for election to the Board of Directors of Suiza Foods. ARTICLE VIII RIGHTS AND OBLIGATIONS OF PARTNERS 8.1 Limitation of Liability. The Limited Partners shall have no liability under this Agreement except as provided in Article IV and Sections 6.3, 7.7, 11.9, 11.10 and 14.12 of this Agreement. 8.2 Return of Capital. No Partner shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent, if any, that distributions made pursuant to this Agreement or upon termination of the Partnership may be considered as such by law and then only to the extent provided for in this Agreement. ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS 9.1 Records and Accounting. The officers of the Partnership shall keep or cause to be kept appropriate books and records with respect to the Partnership's business (including without limitation, any books, records, statements, or information required to be maintained by the Partnership under the Delaware Act), which shall at all times be kept at the principal office of the Partnership or such other office as the Management Committee may approve for such purposes. Any books and records maintained by the Partnership in the regular course of its business, including books of account and records of Partnership proceedings, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, micrographics or any other information storage device, provided that the books and records so kept are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained for financial reporting purposes on the accrual basis of accounting. 9.2 Fiscal Year. The Fiscal Year of the Partnership shall be the calendar year for tax and accounting purposes. 31 36 9.3 Reports. (a) The officers of the Partnership shall deliver to each Partner, not later than 90 days following the end of each Fiscal Year, a balance sheet, an income statement, and an annual statement of source and application of funds of the Partnership for such Fiscal Year. (b) No later than 45 days after the last day of each fiscal quarter during the term of this Agreement, the officers of the Partnership shall use reasonable efforts to cause the Partnership to prepare, or cause to be prepared and delivered to each Partner a balance sheet together with a profit and loss statement for such fiscal quarter together with a cumulative profit and loss statement for the year- end with comparative statements for the previous year if applicable. 9.4 Documents. Each Partner shall have the right to inspect, review and make copies (with such copies at Partnership expense) of documents relating to the business of the Partnership. ARTICLE X TAX MATTERS 10.1 Tax Matters Partner. Suiza shall be the "Tax Matters Partner" for Federal income tax purposes pursuant to Section 6231 of the Code with respect to each applicable taxable year of the Partnership. Suiza is authorized to do whatever is necessary to qualify as such. 10.2 Annual Tax Returns. (a) Suiza shall prepare or cause the Independent Accountants to prepare, at the Partnership's expense, and shall timely file, or cause the timely filing of, all tax returns and shall, on behalf of the Partnership, timely file, or cause the timely filing of, all other writings required by any governmental authority having jurisdiction to require such filing. Suiza shall submit the proposed returns to each Partner for its review and approval no later than 15 days prior to the due date of the returns, after giving effect to any extensions of time unless an extension would effectively make or make unavailable a material tax election. (b) If a Partner disagrees with the treatment of any partnership item (within the meaning of Section 6231(a)(3) of the Code and Regulations) on a tax return of the Partnership, then such Partner shall give written notice to Suiza. If, after good faith consultation, an agreement regarding the treatment of such item cannot be reached within ten (10) days after the receipt of notice, the Partnership shall seek written advice from a mutually agreed upon independent tax counsel or mutually agreed upon Independent Accountants. Such advice shall recommend the treatment which is consistent with the terms of this Agreement, the respective interests of the Partners, and for which there exists 32 37 substantial authority in support thereof. Such recommended treatment shall be the one reported on the return. (c) Without the prior approval of the Management Committee, no Partner shall file an amended return of the Partnership or a request for an administrative adjustment under Section 6227 of the Code, nor shall any Partner (other than the Tax Matters Partner, as provided herein) commence any administrative or judicial proceeding relating to a return of the Partnership. If, after good faith consultation, such approval is not provided, no Partner shall file such return or request, or commence such proceeding unless a mutually agreed upon independent tax counsel renders an opinion that there is substantial authority for the proposed treatment of the tax items with respect to which such return, request, or proceeding relates. Nothing herein shall be construed to prevent a Partner from undertaking any administrative or judicial proceeding with respect to its own return. 10.3 Notice and Limitations on Authority. (a) Each Partner shall notify the other Partners upon receipt of any notice regarding a material audit or tax examination of the Partnership and upon any request for material information by United States federal, state, local, or other tax authorities. (b) Suiza shall, within ten (10) days after the receipt thereof, forward to each Partner a photocopy of any material correspondence relating to the Partnership received from the Internal Revenue Service. Suiza shall, within ten (10) days thereof, advise each Partner in writing of the substance of any material conversation affecting the Partnership held with any representative of the Internal Revenue Service. (c) Suiza shall have all the authority granted by the Code and Regulations to the Tax Matters Partner, including the authority: (i) to enter into a settlement agreement with the Internal Revenue Service which purports to bind Partners other than the Tax Matters Partner; (ii) to file a petition as contemplated in Section 6226(a) or 6228 of the Code; (iii) to intervene in any action as contemplated in Section 6226(b)(5) of the Code; (iv) to file any request contemplated in Section 6227(b) of the Code; and (v) to enter into an agreement extending the period of limitations as contemplated in Section 6229(b)(1)(B) of the Code. 33 38 10.4 Tax Elections. Suiza shall do all acts, make all elections and take whatever reasonable steps are required to maximize, in the aggregate, the federal, state, and local income tax advantages available to the Partnership and shall defend all tax audits and litigation with respect thereto at the expense of the Partnership. Suiza shall maintain the books, records, and tax returns of the Partnership in a manner consistent with the acts, elections and steps taken by the Partnership. In making any election for each Fiscal Year for tax purposes, Suiza shall make such election, to the extent reasonably possible, in a manner that maximizes the benefit and minimizes the detriment of each such election to each Partner. 10.5 Actions in Event of Audit. If an audit of the Partnership's tax returns occurs, Suiza shall, at the expense of the Partnership, notify the Partners thereof, participate in the audit and contest, and settle or otherwise compromise assertions of the auditing agent which may be adverse to the Partnership in accordance with this Article X. Suiza may, if it determines that the retention of accountants or other professionals would be in the best interests of the Partnership, retain such accountants or other professionals to assist in such audits. The Partnership shall indemnify and reimburse Suiza for all reasonable expenses, including legal and accounting fees, claims, liabilities, losses and damages borne by Suiza or its Affiliates which were incurred in connection with any administrative or judicial proceeding with respect to any audit of the Partnership's tax returns, except to the extent caused by the gross negligence or willful misconduct of Suiza. 10.6 Organizational Expenses. The Partnership shall elect to deduct expenses incurred in organizing the Partnership ratably over a 60-month period as provided in Section 709 of the Code. 10.7 Taxation as a Partnership. No election shall be made by the Partnership or any Partner for the Partnership to be excluded from the application of any of the provisions of Subchapter K, Chapter 1 of Subtitle A of the Code or from any similar provisions of any state tax laws. ARTICLE XI TRANSFERS OF PARTNER INTERESTS 11.1 Transfer Restrictions. A Partner may not transfer any portion of its Partner Interest unless such Partner has otherwise complied with the provisions of Sections 11.2, 11.3, and 11.4 hereof; provided that the provisions of Sections 11.2, 11.3 and 11.4 will not apply to (a) a transfer pursuant to Section 11.9 or 11.10; or (b) a pledge by a Partner of its Partner Interest to secure bona fide indebtedness to such Partner or its Affiliates or any transfer of such Partner Interest to or by the pledgee in connection with or following foreclosure of such pledge. For purposes of this Article XI, the term "transfer," when used with respect to a Partner Interest, includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange, or any other disposition. 34 39 11.2 Consent of the Management Committee. Except for a transfer by a Partner to an Affiliate of such Partner, the Partner Interest of a Partner may not be transferred without the written consent of the Management Committee, which consent may be unreasonably withheld. 11.3 Tax Opinion. The transferor of any Partner Interests shall provide an opinion of counsel, satisfactory to the other Partner, that the proposed assignment, transfer, or sale would not cause the termination of the Partnership for federal income tax purposes. 11.4 Registration. If any Partner Interest is to be assigned, transferred or sold, either: (a) such Partner Interest shall be registered under the Securities Act of 1933, as amended, and any applicable state securities laws; or (b) the transferor shall provide an opinion of counsel that the proposed assignment, transfer, or sale is exempt from such registration requirements, which opinion shall not be deemed provided unless and until it is accepted by the Management Committee. Except as otherwise provided in Section 11.10, the Partnership and the Partners have no obligation or intention whatsoever either to register Partner Interests for resale under any federal or state securities laws or to take any action which would make available to any Person any exemption from the registration requirements of such laws. 11.5 Prohibited Transfers. Any transfer or purported transfer, whether by operation of law or otherwise, of a Partner Interest shall be null and void and of no legal effect if such transfer is prohibited by this Article XI or by other provisions of this Agreement. 11.6 Rights of Assignee. (a) Except as provided in this Article XI, and as required by operation of law, the Partnership shall not be obligated for any purpose whatsoever to recognize the transfer by any Partner of a Partner Interest if such transfer violates the terms of this Article XI. (b) Any transfer of Partner Interests must be in writing, may not contravene any of the provisions of this Agreement or the Delaware Act, and must be executed by the transferor and delivered to the Partnership and recorded on the books of the Partnership. Any transfer which contravenes any of the provisions of this Agreement or the Delaware Act shall be of no force and effect and shall not be recognized by the Partnership. (c) A transferee of Partner Interests who is not already a Partner or is not admitted as a Partner pursuant to Section 11.7 shall have no right to require any information or account of the Partnership's transactions or to inspect the Partnership books or to vote, but shall only be entitled to receive the allocations and distributions to which his transferor would otherwise be entitled under this Agreement. (d) Any transferee who does not become a Partner and desires to make a further transfer of such Partner Interest shall be subject to all of the provisions of this Article XI to the same extent and in the same manner as any Partner desiring to transfer his Partner Interest. 35 40 11.7 Admission as a Partner. (a) Subject to the other provisions of this Article XI, a permitted transferee of a Partner Interest (if such transferee is not already a Partner) shall be admitted as a Partner only after the satisfactory completion of items (i) through (iv) below, and if applicable, item (v): (i) The transferee accepts and agrees to be bound by the terms and provisions of this Agreement; (ii) a counterpart of this Agreement and such other documents or instruments as the Management Committee may reasonably require is executed by the transferee to evidence such acceptance and agreement; (iii) the transferee pays or reimburses the Partnership for all reasonable legal fees, filing, and publication costs incurred by the Partnership in connection with the admission of the transferee as a Partner; (iv) the Management Committee approves the admission of such permitted transferee, which approval may be withheld in the unreasonable discretion of such Management Committee; and (v) if the transferee is not an individual, the transferee provides the Partnership with evidence satisfactory to counsel for the Partnership of the authority of such transferee to become a Partner under the terms and provisions of this Agreement. (b) The Management Committee or officers of the Partnership shall make all official filings and publications as promptly as practicable after the satisfaction by the transferee of the conditions contained in this Article XI to the admission of such transferee as a Partner. 11.8 Distributions and Allocations in Respect of Transferred Partner Interests. If any Partner Interest is sold, assigned, or transferred during any Fiscal Year without violating the provisions of this Article XI, Profits, Losses, and all other items attributable to the transferred (or adjusted) interest for such period shall be divided and allocated between the affected Persons by taking into account their varying interests during the period in accordance with Code Section 706(d), using any conventions permitted by law and approved by the Management Committee. All distributions on or before the date of such transfer shall be made to the transferor. Solely for purposes of making such allocations and distributions in the case of a transfer, the Partnership shall recognize such transfer not later than the end of the calendar month during which it is given notice of such transfer, provided that if the Partnership does not receive a notice stating the date such Partner Interest was transferred and such other information as the Management Committee may reasonably require within 30 days after the end of the Fiscal Year during which the transfer occurs, then all of such items shall be allocated, and all distributions 36 41 shall be made, to the Person who, according to the books and records of the Partnership, on the last day of the Fiscal Year during which the transfer occurs, was the owner of the Partner Interest. Neither the Partnership nor any Partner shall incur any liability for making allocations and distributions in accordance with the provisions of this Section 11.8, whether or not any Partner or the Partnership has knowledge of any transfer of ownership of any interest. 11.9 Suiza Buy-Out Option. (a) If Suiza proposes any Major Decision and the Management Committee rejects such Major Decision solely due to a DFA Veto, then Suiza, or an Affiliate of Suiza, shall have the option, exercisable by written notice to DFA (the "Buy-Sell Notice") within thirty (30) Business Days following the date of the DFA Veto, to purchase all the Partner Interests held by the DFA Partners (the "DFA Interests") in exchange for the DFA Price, calculated as of the date of the Buy-Sell Notice. Any portion of the DFA Price may, at the election of Suiza, be paid in shares of Suiza Common Stock; provided such Suiza Common Stock is then traded on a national securities exchange or the Nasdaq Stock Market. For purposes of this paragraph, each share of Suiza Common Stock shall be deemed to have a value equal to the average closing price of the Suiza Common Stock over the twenty (20) trading days commencing ten (10) business days preceding the date of the Buy-Sell Notice. The DFA Price will be allocated among the DFA Partners as follows: (i) first to Priority Partners, in an amount equal to their aggregate Preferred Returns plus their aggregate Preferred Capital Balances, and (ii) second, to all DFA Partners, in proportion to their Percentage Interests. (b) If Suiza timely elects to acquire the DFA Interests in connection with any DFA Veto, the closing of the transfer of the DFA Interests shall occur within 45 days after the date of the Buy-Sell Notice or such longer period as may be necessary to satisfy applicable legal requirements. At the closing, the DFA Partners shall assign all of their DFA Interests to Suiza, or any designated Affiliate of Suiza, by written assignment with special warranty of title in a form reasonably acceptable to Suiza. The DFA Partners shall convey their entire interest in the Partnership, free and clear of all liens, claims, and encumbrances, and the DFA Partners shall execute and deliver to Suiza, or any designated Affiliate of Suiza, all documents which may be reasonably required to give effect to the sale and purchase of such DFA Interests. The DFA Partners shall have a right to demand a shelf registration of any Suiza Common Stock issued in payment of the DFA Price as set forth in the Registration Rights Agreement (Suiza Common Stock) of even date herewith. 11.10 DFA Registration Right. DFA shall have a right to demand registration of its Percentage Interest as set forth in the Registration Rights Agreement (Venture Interests) of even date herewith. 37 42 ARTICLE XII DISSOLUTION AND LIQUIDATION 12.1 Dissolution. (a) Except as set forth in this Agreement, no Partner shall have the right to terminate this Agreement or to dissolve the Partnership by its express will or by withdrawal without the consent of the other Partners. (b) The Partnership shall be dissolved upon the first to occur of any of the following events: (each such event is referred to as a "Dissolution Event"): (i) the expiration of its term as provided in Section 1.4; (ii) any Partner suffers an Event of Bankruptcy or is otherwise liquidated and dissolved; (iii) an election to dissolve the Partnership is unanimously approved in writing by the Partners; (iv) any other event occurs that, under the Delaware Act, would cause the Partnership's dissolution; or (v) any pledgee or transferee of a pledgee of Partner Interests having the right to vote more than 50% of the Percentage Interests elects in writing to dissolve the Partnership. 12.2 Continuation of the Partnership. Upon the occurrence of an event described in Section 12.1(b)(ii) or Section 12.1(b)(iv), the Partnership shall be carried on without dissolution if approved by Partners holding 50% or more of the Percentage Interests. In all other cases, upon the occurrence of an event described in Section 12.1(b), the Partnership shall be deemed to be dissolved and reconstituted only if Partners holding 100% of the Percentage Interests (excluding for these purposes any Percentage Interests held by the Partner with respect to which such Dissolution Event occurred) elect to continue the Partnership within 90 days of such event. If no election to continue the Partnership is made within 90 days of such event, the Partnership shall conduct only those activities necessary to wind up its affairs. If an election to continue the Partnership is made upon the occurrence of an event described in Section 12.1(b), then: (a) the Partnership shall be deemed to be reconstituted and shall continue until the end of the term for which it is formed unless earlier dissolved in accordance with this Article XII; and (b) all necessary steps shall be taken to amend or restate this Agreement and the Certificate of Limited Partnership, provided that the right of Partners holding 100% of 38 43 the Percentage Interests (excluding for these purposes any Percentage Interests held by a Partner with respect to which such Dissolution Event occurred) to continue the Partnership shall not exist and may not be exercised unless the Partnership has received an opinion of counsel acceptable to the Management Committee that (i) the exercise of the right would not result in the loss of limited liability of any Partner; and (ii) neither the Partnership nor the reconstituted Partnership would be treated as an association taxable as a corporation for federal income tax purposes upon the exercise of such right to continue. 12.3 Liquidation. (a) Upon the dissolution of the Partnership, unless an election to continue the Partnership is made pursuant to Section 12.2, Suiza shall serve as liquidator ("Liquidator") of the Partnership. (b) Upon dissolution or resignation of the Liquidator, a successor and substitute Liquidator (who shall have and succeed to all rights, powers and duties of the original Liquidator) shall within 30 days thereafter be approved by the Partners holding 60% of the Percentage Interests. The right to appoint a successor or substitute Liquidator in the manner provided herein shall be recurring and continuing for so long as the functions and services of the Liquidator are authorized to continue under the provisions hereof, and every reference herein to the Liquidator will be deemed to refer also to any such successor or substitute Liquidator appointed in the manner herein provided. (c) Except as expressly provided in this Article XII, the Liquidator appointed in the manner provided herein shall have and may exercise, without further authorization or consent of any of the parties hereto, all of the powers conferred upon the Management Committee under the terms of this Agreement (but subject to all of the applicable limitations, contractual and otherwise, upon the exercise of such powers, including the limitations set forth in Section 7.3) to the extent necessary or desirable in the good faith judgment of the Liquidator to carry out the duties and functions of the Liquidator hereunder for and during such period of time as shall be reasonably required in the good faith judgment of the Liquidator to complete the winding up and liquidation of the Partnership as provided for herein. (d) Except as otherwise provided in this Article XII (including Section 12.5 below), the Liquidator shall liquidate the assets of the Partnership, and, after making all allocations and distributions otherwise required by this Agreement, shall apply and distribute the net proceeds of such liquidation in the following order of priority: (i) to the creditors of the Partnership, including Partners, in the order of priority provided by applicable law; (ii) then, to each Priority Partner with a Preferred Return, in proportion to the Preferred Return of each such Priority Partner, in an amount up to the Preferred Return of each Priority Partner; 39 44 (iii) then, to each Priority Partner, in proportion to the Preferred Capital Balance of each such Priority Partner, in an amount up to the Preferred Capital Balance of each Priority Partner; and (iv) finally, the remaining balance of the liquidation proceeds, if any, to the Partners in accordance with their respective positive Capital Account balances, after taking into account all allocations of Profit, Loss and other items of income, gain, loss and deduction, and distributions for all periods, including prior distributions made pursuant to this Article XII; provided, however, that, notwithstanding anything in this Article XII to the contrary, the Liquidator may place in escrow a reserve of cash or other assets of the Partnership for contingent liabilities in an amount determined by the Liquidator to be appropriate for such purposes. 12.4 Reserves. After all of the assets of the Partnership have been distributed, the Partnership shall terminate. If at any time thereafter any funds in any cash reserve fund referred to in Section 12.3(d) are released because the need for such cash reserve fund has ended, such funds shall be distributed to the Partners in the same manner as if such distribution had been made pursuant to Section 12.3(d). 12.5 Distribution in Kind. Notwithstanding the provisions of Section 12.3 which require the liquidation of the assets of the Partnership, but subject to the order of priorities set forth therein and subject also to Section 12.4, if upon the dissolution of the Partnership the Management Committee determines that an immediate sale of part or all of the Partnership's assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in good faith, defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Partnership (other than those to Partners). The Liquidator may distribute to the Partners, in lieu of cash, such Partnership assets as the Liquidator deems not suitable for liquidation. Any distributions in kind shall be subject to such conditions relating to the disposition and management thereof as the Liquidator and the Management Committee deem reasonable and equitable. The Liquidator shall value any property distributed in kind based upon such property's fair market value as determined using such reasonable method of valuation as it may adopt. 12.6 Disposition of Documents and Records. All documents and records of the Partnership, including, without limitation, all financial records, vouchers, canceled checks and bank statements, shall be delivered to Suiza upon termination of the Partnership. Suiza shall retain such documents and records for a period of not less than six (6) years and shall make such documents and records available during normal business hours to any other Partner for inspection and copying at the other Partner's cost and expense. 12.7 Negative Capital Accounts. If, after the allocations of Profit, Loss, and other items of income, gain, loss, deduction or credit under Article V and after distributions of cash under Article VI, any Partner shall ever have a negative balance in such Partner's Capital Account, no Partner shall have any obligation to restore such negative balance, or to make any 40 45 contribution to the capital of the Partnership by reason thereof, and such negative balance shall under no circumstances be considered a liability of the Partnership or of any Partner. 12.8 Filing of Certificate of Cancellation. Upon the completion of the distribution of Partnership property as provided in Sections 12.3, 12.4, and 12.5, the Partnership shall be terminated, and the Liquidator (or the Partners if necessary) shall cause the Certificate to be canceled and will take such other actions as may be necessary to terminate the Partnership. 12.9 Return of Capital. No Partner shall be personally liable for the return of the Capital Contributions of any other Partners, or any portion thereof, it being expressly understood that any such return shall be made solely from Partnership assets. 12.10 Waiver of Partition. Each Partner hereby waives any rights to partition of the Partnership property. ARTICLE XIII AMENDMENT OF AGREEMENT 13.1 Amendment Procedures. (a) Amendments to this Agreement may be proposed by any Partner, which shall give written notice to all Partners of the text of such amendment, together with a statement of the purpose of such amendment. (b) Proposed amendments to this Agreement shall be adopted if they have been approved in writing by Partners holding 90% of the Percentage Interests; provided that any amendment that affects the Preferred Partners in any material respect must also be approved in writing by Partners with aggregate Preferred Capital Balances equal to at least 90% of the aggregate Preferred Capital Balances of all Priority Partners. The President shall, within a reasonable time after the adoption of any amendment to this Agreement, make official filings or publications required or desirable to reflect such amendment, including any required filing for recordation of any parallel amendment to the Certificate. ARTICLE XIV GENERAL PROVISIONS 14.1 Addresses and Notices. Any notice provided in or permitted under this Agreement shall be made in writing and may be given or served by: (a) delivering the same in person to the party to be notified; (b) depositing the same in the mail, postage prepaid, registered or certified with return receipt requested, and addressed to the party to be notified at the address herein specified; (c) delivering the same on a prepaid basis via a nationally recognized courier service, such as Federal Express; or (d) sending the same by facsimile transmission, followed by delivery 41 46 of a hard copy via a nationally recognized courier service, such as Federal Express. If notice is deposited in the mail pursuant to this Section 14.1, it will be deemed received on the third (3rd) Business Day after it is so deposited. Notice given in any other manner shall be deemed received only if and when actually received by the party to be notified. For the purpose of notice, the address of the parties shall be, until changed as hereinafter provided for, as follows: If to any DFA Partner: with a copy to: Dairy Farmers of America, Inc. McDermott, Will & Emery Northpointe Tower, Suite 1000 227 West Monroe Street 10220 N. Executive Hills B-1 Chicago, Illinois 60606-5096 Kansas City, MO 64153 Attention: Michael R. Fayhee Attention: President and General Counsel Telecopy: (312) 984-7700 Telecopy: 816-801-6593 If to any Suiza Parent: with a copy to: Suiza Foods Corporation Hughes & Luce, L.L.P. 2515 McKinney Ave., LB 30, Suite 1200 1717 Main Street, Suite 2800 Dallas, Texas 75201 Dallas, Texas 75201 Attention: Chief Executive Officer Attention: William A. McCormack and General Counsel Telecopy: (214) 303-3499 Telecopy: (214) 939-5849 The parties shall have the right from time to time and at any time to change their respective addresses and each shall have the right to specify as its address any other address by at least 15 days' prior written notice to the other parties. Each party shall have the right from time to time to specify additional parties (not to exceed two additional parties) to whom notice hereunder must be given by delivering to the other party 15 days' prior written notice thereof, setting forth the address of such additional parties. Notice required to be delivered hereunder to any party shall not be deemed to be effective until the additional parties, if any, designated by such party have been given notice in a manner deemed effective pursuant to the terms of this Section 14.1. 14.2 Titles and Captions. All article and section titles and captions in this Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Except as specifically provided otherwise, references to "Articles" and "Sections" are to Articles and Sections of this Agreement. 14.3 Pronouns and Plurals. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa. The locative adverbs "hereof," "herein," "hereafter," etc. refer to this Agreement as a whole. 42 47 14.4 Further Action. The parties shall execute all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement. 14.5 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives, and permitted assigns. 14.6 Integration. This Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto. 14.7 No Third Party Beneficiary. This Agreement is made solely and specifically between and for the benefit of the parties hereto, and their respective successors and assigns subject to the express provisions hereof relating to successors and assigns, and no other Person whatsoever shall have any rights, interest, or claims hereunder or be entitled to any benefits under or on account of this Agreement as a third party beneficiary or otherwise. It is expressly understood that the right of the Partnership or the Partners to require any additional Capital Contributions under the terms of this Agreement shall not be construed as conferring any rights or benefits to or upon any Person not a party to this Agreement, or the holder of any obligations secured by a mortgage, deed of trust, security interest or other lien or encumbrance upon or affecting the Partnership or any interest of a Partner therein. 14.8 Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition. 14.9 Counterparts. This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto or, in the case of a transferee, upon executing and delivering such documents as required by the Management Committee. 14.10 APPLICABLE LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW. 14.11 Invalidity of Provisions. If any provision of this Agreement is declared or found to be illegal, unenforceable or void, in whole or in part, then the parties shall be relieved of all obligations arising under such provision, but only to extent that it is illegal, unenforceable or void, it being the intent and agreement of the parties that this Agreement shall be deemed amended by modifying such provision to the extent necessary to make it legal and enforceable while preserving 43 48 its intent or, if that is not possible, by substituting therefor another provision that is legal and enforceable and achieves the same objectives. 14.12 Confidentiality. Each party to this Agreement agrees to keep confidential the terms of this Agreement and any materials provided in connection with this Agreement. Notwithstanding the foregoing, each party to this Agreement may disclose the terms, and any and all materials provided in connection with this Agreement (a) to its counsel, accountants, auditors or other agents whose custom it is to hold such information confidential, (b) as may be required by any statute, court order, administrative order or decree of governmental ruling or regulation of the United States or other applicable jurisdiction, including Internal Revenue Service auditors, or as may be requested by the Internal Revenue Service or any other governmental entity, or (c) to such other Persons as are reasonably deemed necessary by such party to protect the interests of such party or for the purposes of enforcing such documents. SIGNATURE PAGES ARE ATTACHED HERETO 44 49 IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have executed this Agreement as of the day and year first above written. PARTNERS: SUIZA FLUID DAIRY GROUP HOLDINGS, INC., a Nevada corporation By: /s/ GREGG L. ENGLES -------------------------------------- Name: ------------------------------------- Title: ------------------------------------ DAIRY FARMERS OF AMERICA, INC., a Kansas cooperative marketing association By: /s/ GARY E. HANMAN -------------------------------------- Name: ------------------------------------- Title: President & Chief Executive Officer ------------------------------------ MID-AM CAPITAL, L.L.C., a Delaware limited liability company By: /s/ GERALD L. BOS -------------------------------------- Name: ------------------------------------- Title: Chief Executive Officer ------------------------------------ GENERAL PARTNER: SUIZA FLUID DAIRY GROUP GP, LLC, a Delaware limited liability company By: /s/ GREGG L. ENGLES -------------------------------------- Name: ------------------------------------- Title: ------------------------------------ 45 EX-99.1 6 PRESS RELEASE DATED AS OF 1/4/00 1 EXHIBIT 99.1 [SUIZA FOODS LOGO] NEWS RELEASE Contact: Cory Olson Vice President and Treasurer (214) 303-3645 FOR IMMEDIATE RELEASE - -------------------------------------------------------------------------------- SUIZA FOODS COMPLETES ACQUISITION OF SOUTHERN FOODS GROUP AND RELEASES UPDATED SHARE REPURCHASE DATA DALLAS, TEXAS, January 4, 2000 - Suiza Foods Corporation (NYSE:SZA) announced today the completion of its acquisition of Southern Foods Group, L.P. Southern Foods, whose well-known regional dairy brands include Meadow Gold(R), rights to Borden(R), Elsie(R), and Foremost(R) in several states, Oak Farms(R), Schepps(R) Barbe's(R), Brown's Velvet Dairy(R), and Hygeia(R), is the nation's third largest fluid milk processor, with operations in 11 states including Alabama, Colorado, Hawaii, Idaho, Louisiana, Mississippi, Montana, Nebraska, Oklahoma, Texas and Utah. The transaction was effected through a joint venture with Dairy Farmers of America, which previously owned interests in Southern Foods and in Suiza's southern California and northeastern operations. The joint venture, which encompasses all of Suiza's domestic fluid milk operations and the operations of Southern Foods, is owned 66.2% by Suiza, and 33.8% by Dairy Farmers of America. Suiza's Morningstar subsidiary, which manufactures and sells value added products such as coffee creamers, whipped toppings, and cultured dairy products, and its international businesses, which includes its Puerto Rico dairy and its European packaging operations, will continue to operate as wholly-owned subsidiaries of the company. Suiza also continues to hold a minority interest in Consolidated Container Company. With the closing of the transaction, Pete Schenkel, formerly President and Chief Executive Officer of Southern Foods, became the President of the new joint venture, and Vice Chairman of Suiza's Board of Directors. Rick Beaman, former Executive Vice President of Southern Foods, will serve as Chief Operating Officer of Southern Foods. The company also announced the retirement of Bill Brick, Chief Operating Officer of Suiza's U.S. fluid milk division. Simultaneously with the closing of the acquisition, the joint venture obtained a new credit facility with borrowing capacity of up to $1.6 billion, $240 million of which is available for borrowing by Southern Foods. Approximately $1.1 billion was borrowed under this facility at closing, $180 million of which was borrowed by Southern Foods. Remaining capacity under this credit facility will be used to fund future domestic dairy 2 [SUIZA FOODS LOGO] acquisitions and for general corporate purposes. In addition, Suiza terminated its previously existing senior credit facility and replaced it with a new corporate facility with borrowing capacity of up to $300 million. This facility is currently undrawn, and will be used to fund future acquisitions, for stock repurchases and for general corporate purposes. Suiza also announced that during the fourth quarter it had repurchased a total of 3,486,508 shares of its common stock under its open market share repurchase program. Suiza Foods Corporation is the nation's leading dairy processor and distributor, producing a full line of company-branded and customer-branded products such as fluid milk, ice cream and novelties, coffee creamers, half-and-half, whipping cream, sour cream, cottage cheese and yogurt. Suiza also manufactures and distributes fruit juices and other flavored drinks, bottled water and coffee. In addition to the newly acquired Southern Foods brands, Suiza sells its dairy products under various brands including national brands (such as International Delight(R), Sun Soy(R), Second Nature(R), Naturally Yours(R) and Mocha Mix(R)), strong regional brands (such as Broughton(R), Country Fresh(R), Dairymens(R), Lehigh Valley Farms(R), London's(R), Model(TM), Natural by Garelick Farms(R), Suiza(TM), Louis Trauth(TM), Tuscan(R), Velda Farms(R) and West Lynn Creamery(R)) and partner or licensed brands in certain regions (including Lactaid(R), Flav-O-Rich(R) and Pet(R)). Suiza also has holdings in the consumer goods packaging industry. ### -----END PRIVACY-ENHANCED MESSAGE-----