CONFORMED COPY
ESCROW AGREEMENT
This ESCROW AGREEMENT ("Escrow Agreement"), dated as of May 7, 1999, is
made among SMITHFIELD FOODS, INC., a Virginia corporation ("Buyer"), CARROLL M.
BAGGETT, JAMES O. MATTHEWS, JEFFREY S. MATTHEWS (collectively, the
"Shareholders"), and McGUIRE, WOODS, BATTLE & BOOTHE LLP, a Virginia limited
liability partnership (the "Escrow Agent").
RECITALS
A. Buyer and the Shareholders are parties to an Acquisition Agreement, dated as
of May 3, 1999 (the "Acquisition Agreement"), pursuant to which Buyer
effectively will acquire substantially all of the assets and operations of the
Carroll's Companies, Carroll's Brazil and CPI. Capitalized terms used in this
Escrow Agreement and not otherwise defined herein have the meanings given to
them in the Acquisition Agreement.
B. The Acquisition Agreement requires that Buyer deposit the Escrow Deposit with
the Escrow Agent to be held and disbursed in accordance with the terms of this
Escrow Agreement.
C. The Escrow Agent has agreed to serve as Escrow Agent, subject to the terms
and conditions of this Escrow Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Appointment of the Escrow Agent. Buyer and the Shareholders hereby appoint
and engage the Escrow Agent, and by its execution hereof the Escrow Agent hereby
agrees, to hold and administer the Escrow Fund in accordance with the terms of
this Escrow Agreement.
2. Deposit of Escrow Deposit. Simultaneously with the execution of this Escrow
Agreement, Buyer has delivered the Escrow Deposit to the Escrow Agent. The
receipt of the Escrow Deposit is hereby acknowledged by the Escrow Agent.
3. Holding of Escrow Fund. The Escrow Agent will hold the Escrow Fund in escrow
upon the terms and conditions set forth in this Escrow Agreement.
4. Claim Submission Procedure. After the resolution of all disputes with respect
to the Final Closing Date Adjustment Schedules pursuant to and in accordance
with the Acquisition Agreement, Buyer and the Shareholders' Representative shall
deliver to the Escrow Agent a statement (the "Consideration Adjustment
Statement") signed by both Buyer and the Shareholders' Representative setting
forth (i) the Estimated Consideration, (ii) the Consideration as set forth in
the Final Closing Date Adjustment Schedules, (iii) the Consideration Adjustment
and (iv) the date the Final Closing Date Adjustment Schedules were delivered.
5. Release of Escrow Funds and Termination. The Escrow Agent shall not release
or distribute all or any part of the Escrow Fund except upon the conditions set
forth below in this Section 5. Upon delivery to the Escrow Agent of the
Consideration Adjustment Statement signed by both Buyer and the Shareholders'
Representative contemplated by Section 4 hereof:
(a) If the Consideration as set forth in the Consideration Adjustment Statement
is greater than the Estimated Consideration, the entire Escrow Fund shall be
distributed to the Shareholders' Representative for distribution to the
Shareholders as their interests shall appear;
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(b) If the Consideration as set forth in the Consideration Adjustment Statement
is less than the Estimated Consideration, and the Consideration Adjustment is
not more than the number of Buyer Common Shares held in the Escrow Fund (i)
there shall be delivered to Buyer from the Escrow Fund such whole number of
Buyer Common Shares as equals the amount of the Consideration Adjustment
(ignoring for this purpose any fractional share calculated), and the balance, if
any, of the Escrow Fund shall be delivered to the Shareholders' Representative
for distribution to the Shareholders as their interests shall appear.
(c) If the Consideration as set forth in the Consideration Adjustment Statement
is less than the Estimated Consideration, and the Consideration Adjustment is
more than the number of Buyer Common Shares held in the Escrow Fund there shall
be delivered to Buyer the entire Escrow Fund
All deliveries and payments contemplated by this Section 5 shall be made
within ten (10) Business Days after delivery of the Consideration Adjustment
Statement. This Escrow Agreement shall terminate at such time as all of the
Escrow Fund has been distributed by the Escrow Agent in accordance with this
Section 5.
6. Concerning the Escrow Agent.
(a) The Escrow Agent may resign at any time by giving notice to Buyer and the
Shareholders' Representative, specifying a date on which its resignation is to
take effect. Upon receipt of such notice Buyer and the Shareholders'
Representative shall appoint a successor Escrow Agent, such successor Escrow
Agent to become the Escrow Agent when the resignation of the former Escrow Agent
becomes effective. If Buyer and the Shareholders' Representative are unable to
agree upon a successor Escrow Agent within 30 days after receipt of such notice,
the Escrow Agent shall appoint its own successor. The Escrow Agent shall
continue to serve until its successor accepts its appointment by adoption of
this Escrow Agreement in writing and receives the Escrow Fund. Buyer and the
Shareholders' Representative shall have the right, at any time, by agreement, to
substitute a new Escrow Agent by giving
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30 days notice thereof to the Escrow Agent then acting. Any successor Escrow
Agent shall be bound by the provisions of this Escrow Agreement as if it were
the original Escrow Agent.
(b) The Escrow Agent shall not be liable for any action it takes or fails to
take which it reasonably believes is within the rights or powers conferred upon
it hereunder, or for action which it takes, or fails to take, in good faith and
in accordance with advice of counsel (which counsel may be of the Escrow Agent's
own choosing but may not be McGuire, Woods, Battle & Boothe LLP itself). The
Escrow Agent shall not be liable for any mistake it may make or for any acts or
omissions of any kind unless caused by its willful misconduct or gross
negligence.
(c) Buyer and the Shareholders each agree to indemnify and hold harmless the
Escrow Agent against any and all liabilities incurred by the Escrow Agent as a
consequence of its, his or her own respective actions and, in the case of the
Shareholders, the actions of the Shareholders' Representative. Buyer and the
Shareholders agree jointly to indemnify and hold harmless the Escrow Agent from
any and all liabilities incurred by the Escrow Agent that are not a consequence
of the action of any party to this Escrow Agreement. However, the Escrow Agent
shall be responsible for any liability incurred by it which is the result of its
own willful misconduct or gross negligence.
(d) The Shareholders acknowledge that the Escrow Agent has served as counsel to
Buyer in connection with the Acquisition Agreement and the transactions
contemplated thereby, and agree that nothing herein shall affect in any way
Escrow Agent's continued representation of Buyer or other persons affiliated
therewith and that in the event of a dispute between the Shareholders and Buyer
with respect to any matter, including the Acquisition
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Agreement, the transactions contemplated thereby or this Escrow Agreement, the
Escrow Agent may represent Buyer in such dispute. Such representation shall not,
in and of itself, cause the disqualification of the Escrow Agent.
7. Notices. All notices required to be given hereunder shall be in writing and
shall be deemed to have been given if (i) delivered personally or by documented
courier or delivery service, (ii) transmitted by facsimile during normal
business hours or (iii) mailed by registered or certified mail (return receipt
requested and postage prepaid) to the following listed persons at the addresses
and facsimile numbers specified below, or to such other persons, addresses or
facsimile numbers as a party entitled to notice shall give, in the manner
hereinabove described, to the others entitled to notice:
If to the Shareholders or the Shareholders' Representative, to:
Jeffrey S. Matthews
Carroll M. Bagett
James O. Matthews
Post Office Box 707
Warsaw, North Carolina 28398
and
F. J. Faison, Jr.
Carroll's Foods, Inc.
2822 Highway #24 West
Warsaw, North Carolina 28398
Facsimile No.: (910) 293-6957
with a copy to
:
Ward and Smith, P.A.
1001 College Court
New Bern, North Carolina 28563-0867
Attention: J. Troy Smith, Jr.
Facsimile No.: (252) 636-2121
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If to Buyer, to:
Smithfield Foods, Inc.
200 Commerce Street
Smithfield, Virginia 23430
Attention: Richard J. M. Poulson
Facsimile No.: (757) 365-3017
and to:
Smithfield Foods, Inc.
200 Commerce Street
Smithfield, Virginia 23430
Attention: Michael H. Cole
Facsimile No.: (757) 365-3025
with a copy to:
McGuire, Woods, Battle & Boothe LLP
One James Center
Richmond, Virginia 23219
Attention: Leslie A. Grandis
Facsimile No.: 804-775-1061
If to the Escrow Agent to:
McGuire, Woods, Battle & Boothe LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219
Attention: Leslie A. Grandis
Facsimile No.: 804-775-1061
If given personally or by documented courier or delivery service, or transmitted
by facsimile, a notice shall be deemed to have been given when it is received.
If given by mail, it shall be deemed to have been given on the third Business
Day following the day on which it was posted.
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8. Miscellaneous. This Escrow
Agreement together with the Acquisition Agreement (i) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof;
(ii) is not intended to and shall not confer upon any other person or business
entity, other than the parties hereto, any rights or remedies with respect to
the subject matter hereof; (iii) shall not be assigned by operation of law or
otherwise; and (iv) shall be governed in all respects by the laws of the State
of North Carolina without regard to its choice of law rules.
WITNESS the following signatures.
SMITHFIELD FOODS, INC.
By: /s/ Richard J. M. Poulson
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Title: Vice President
/s/ Carroll M. Baggett
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Carroll M. Baggett
/s/ James O. Matthews
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James O. Matthews
/s/ Jeffrey S. Matthews
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Jeffrey S. Matthews
McGUIRE, WOODS, BATTLE & BOOTHE LLP
By: /s/ Sam Young Garrett
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Title: Partner