CONFORMED COPY
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is made and entered into as of May 7,
1999, by and between SMITHFIELD FOODS, INC., a Virginia corporation (the
"Company") and each of JEFFREY S. MATTHEWS, CARROLL M. BAGGETT and JAMES O.
MATTHEWS (each individually an "Investor" and collectively "the Investors").
W I T N E S S E T H :
WHEREAS, the Company, the Investors and certain entities wholly-owned by
the Investors are parties to an Acquisition Agreement dated as of May 3, 1999
(the "Acquisition Agreement"); and
WHEREAS, upon the closing of the transactions contemplated thereby, such
Investors will then hold respectively 2,185,333 shares, 2,185,333 shares and
2,185,334 shares of Common Stock (as defined below); and
WHEREAS, the parties thereto and hereto desire, in view of the Acquisition
Agreement and this Registration Rights Agreement, to cause to be cancelled the
registration rights provided for in the Subscription Agreement dated as of
September 3, 1992 between the Company and Carroll's Foods, Inc., a North
Carolina corporation all of the stock of which is owned by the Investors
("Carroll's Foods");
NOW, THEREFORE, for good and valuable consideration, the delivery and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I.
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following capitalized
terms shall have the meanings ascribed to them below:
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly controls, is controlled by or is under common control
with such person. For purposes of this definition, the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting stock, by contract or otherwise.
"Agreement with Shareholders" means the Agreement with Shareholders
dated as of the date hereof between the Company and each of the Investors.
"Common Stock" means the Common Stock, par value $.50 per share, of
the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Holder" means, as of any time, a signatory hereto who is the
registered holder (or who holds such securities in "street name" or otherwise
through a nominee) and the beneficial owner of Registrable Securities.
"Person" means an individual, partnership, joint venture,
corporation, trust, unincorporated organization or government or any department
or agency thereof.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement or any other amendments and supplements
to such prospectus, including without limitation any preliminary prospectus, any
pre-effective or post-effective amendment and all material incorporated by
reference in any prospectus.
"Registrable Securities" means (i) the 2,185,333, the 2,185,333 and
the 2,185,334 shares of Common Stock held on the date hereof by Jeffrey S.
Matthews, Carroll M. Baggett and James O. Matthews, respectively, (including for
purposes of this definition the numbers of such shares initially held in escrow
and eventually delivered to such Investors, and excluding any such escrowed
shares returned to the Company, in each case pursuant to the terms of such
escrow and the Acquisition Agreement), plus any further shares issued to them
pursuant to post-closing adjustments contemplated by the Acquisition Agreement,
in each case so long as such Investor is continuously a Holder thereof
thereafter, and (ii) any securities issued or issuable in respect of or in
exchange for any Registrable Securities referred to in clause (i) by way of a
stock dividend or other distribution, stock split, reverse stock split or other
combination of shares, recapitalization, reclassification, merger, consolidation
or exchange offer and continuously held by such Investor thereafter. As to any
particular Registrable Securities, such securities shall cease to be Registrable
Securities when (i) a Registration Statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such Registration
Statement, (ii) such securities shall have been sold or otherwise transferred,
or (iii) such securities shall have ceased to be outstanding.
"Registration Expenses" has the meaning set forth in Section 2.4.
"Registration Statement" means any registration statement of the
Company which covers Registrable Securities pursuant to the provisions of this
Agreement, all amendments and supplements to such Registration Statement,
including post-effective amendments, and all exhibits and all material
incorporated by reference in such Registration Statement.
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"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
ARTICLE II.
REGISTRATION RIGHTS
2.1 Demand Registration.
(a) Requests for Registration. Subject to the provisions of paragraphs (b)
and (c) of this Section 2.1, any Holder or Holders may at any time during the
period beginning on the date hereof (subject to the share transfer restrictions
provided for in the Agreement with Shareholders) and ending on the earlier to
occur of (i) the first date that there are no Holders or fewer than 500,000
Registrable Securities and (ii) the seventh anniversary of the date hereof (the
"Demand Registration Period") make a written request for registration under the
Securities Act of all or any part of such Holder's or Holders' Registrable
Securities (a "Demand Registration"). Such request shall specify the amount of
Registrable Securities to be registered and the intended method or methods of
disposition. If the Holders of a majority of the Registrable Securities to be
registered in connection with a Demand Registration so elect (either in such
written demand, and/or in their responses to the Company notice provided for in
the next sentence), the offering of such Registrable Securities pursuant to such
Demand Registration shall be in the form of an underwritten offering, subject to
the further provisions herein concerning underwritten offerings. Within 10 days
after receipt of such request, the Company shall send written notice of such
request to all Holders and shall, subject to the provisions of paragraphs (b),
(c), (d) and (e) of this Section 2.1, include in such Demand Registration all
Registrable Securities with respect to which the Company receives written
requests (specifying the amount of Registrable Securities to be registered and
the intended method or methods of disposition) for inclusion therein within 20
days after such notice is sent; provided, however, that if all of the holders of
Registrable Securities then outstanding acted together in making the initial
request for a demand registration, the Company shall not be required to send any
such notices and such notice periods shall not apply. The Company shall
thereafter use reasonable best efforts to file with the SEC within the
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applicable period specified in Section 2.3(a)(i) a Registration Statement
registering all Registrable Securities that any Holders have requested the
Company to register, for disposition in accordance with the intended method or
methods set forth in their notices to the Company; provided, however, that
nothing in this Agreement shall require the Company to file or maintain any
registration statement pursuant to "Rule 415" or "shelf" procedures. The Company
shall use reasonable best efforts to cause such Registration Statement to be
declared effective as soon as reasonably practicable after filing and to remain
effective until the date on which all of the Registrable Securities covered
thereby are disposed of in accordance with the method or methods of disposition
stated therein; provided, however, that, the Company shall not be required to
use such efforts to cause the filing to remain effective for a period greater
than 30 days following the date on which it was declared effective.
(b) Number of Registrations. The Holders shall be entitled to request, and
if requested the Company need effect only, an aggregate of six (6) Demand
Registrations during the Demand Registration Period; provided, however, that the
Company will not be obligated to comply with any such request unless (i) not
less than 500,000 shares of Common Stock which are Registrable Securities are
proposed to be registered in such Demand Registration, and (ii) at least 60 days
have elapsed from the effective date of any registration statement for Common
Stock of the Company (other than a registration statement on Form S-8 or any
successor form), whether such registration statement was filed pursuant to any
Demand Registration or otherwise by the Company.
(c) Suspension of Registration. The Company shall have the right to delay
the filing or effectiveness of a Registration Statement for any Demand
Registration or to withdraw or require the Holders not to sell under any such
Registration Statement, during up to two periods of not more than 90 days each
in any consecutive twelve-month period during the Demand Registration Period if
(A) (i) the Company would, in accordance with the advice of its outside counsel,
find it appropriate to disclose in the Prospectus information not otherwise then
required by law to be publicly disclosed and (ii) in the judgment of the
Company's Board of Directors, as such judgment is set forth in a resolution of
the Board of Directors, there is a reasonable likelihood that such disclosure,
or any other action to be taken in connection with the Prospectus, would
materially and adversely affect any existing or prospective material business
situation, transaction or negotiation or otherwise materially and adversely
affect the Company, or (B) the Company determines, in its reasonable business
judgment, that such registration and offering would interfere with any
financing, acquisition, corporate reorganization, or other material transaction
involving the Company or any of its subsidiaries; provided, however, that the
Company promptly gives the Holders requesting registration thereof pursuant to
paragraph (a) of Section 2.1 hereof a written notice of such finding, judgment
or determination containing a general statement of the reasons for such
postponement and an approximation of the anticipated delay. In the event of such
a Company notice, the Holders of a majority of the Registrable Securities to be
offered and sold may by written notice to the Company, given prior to receiving
a Company notice that such suspension has ended, withdraw the request for
registration, and the request for registration shall not be counted for purposes
of paragraph (b) of Section 2.1 hereof , and the Company shall be required (A)
to pay in connection therewith all Registration Expenses and (B) to reimburse
all out-of-pocket expenses incurred by the selling Holders to pay the reasonable
fees and disbursements of their counsel and, to the extent the selling Holders
prior to receiving the Company's notice have already agreed in writing so to
reimburse the underwriters, if any, under such circumstances for their
reasonable out-of-pocket costs and the reasonable fees and disbursements of
their counsel, to reimburse such underwriters accordingly, in each case
notwithstanding anything to the contrary contained herein (including Section
2.4).
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(d) Offering by the Company. The Company may include in any Demand
Registration additional shares of capital stock to be sold for the Company's
account pursuant to such registration; provided, however, that if the managing
underwriter for a Demand Registration that involves an underwritten offering
shall advise the Company that, in its or their opinion, the inclusion of the
amount and kind of shares of capital stock to be sold for the Company's account
would adversely affect the success of the offering for the selling Holders, then
the number and kind of shares of capital stock to be sold for the Company's
account shall be reduced (and may be reduced to zero) in accordance with the
managing underwriter's recommendation.
(e) Reduction of Offering. In the event of a Demand Registration which is
to be underwritten as contemplated by Section 2.1(a), if the managing
underwriter or underwriters of such offering advise the Company in writing, with
a copy to such Holders, that in its or their opinion the amount of Registrable
Securities requested to be included in such Demand Registration is sufficiently
large or otherwise likely to materially adversely affect the success of such
offering (including, but not limited to, the offering price per share), the
Company (i) will include in such registration the aggregate amount of
Registrable Securities which in the opinion of such managing underwriter or
underwriters can be sold without any such material adverse effect (such amount
to be allocated pro rata among the Holders of Registrable Securities on the
basis of the total amount of Registrable Securities which had been requested to
be included in such registration by such Holders) and (ii) will allow any
securities other than Registrable Securities to be included in such registration
only if all Registrable Securities requested to be included shall have been
included.
2.2 [Intentionally Omitted.]
2.3 Registration Procedures.
(a) The Company to Use Reasonable Best Efforts. In connection with the
Company's Demand Registration obligations pursuant to Section 2.1 hereof, the
Company shall use reasonable best efforts to effect such registrations to permit
the sale of such Registrable Securities in accordance with the intended method
or methods of disposition thereof, and pursuant thereto the Company shall use
reasonable best efforts:
(i) to prepare (and to offer the selling Holders, any managing
underwriter and their respective counsels reasonable opportunity to participate
in the preparation of) and to file with the SEC within 45 days after the
delivery of the relevant request under Section 2.1 a Registration Statement or
Registration Statements relating to
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Demand Registrations on any appropriate form under the Securities Act, and to
cause such Registration Statements to become effective as soon as reasonably
practicable and to remain continuously effective for the time period required by
this Agreement to the extent permitted under applicable law; provided, however,
that nothing in this Agreement shall require the Company to file or maintain any
registration statement pursuant to "Rule 415" or "shelf" procedures;
(ii) with respect to Demand Registrations, to prepare and file with
the SEC such amendments and post-effective amendments to each Registration
Statement as may be necessary to keep such Registration Statement effective for
the applicable period set forth in paragraph (a) of Section 2.1 and to cause the
related Prospectus to be supplemented by any required Prospectus supplement, and
as so supplemented to be filed in accordance with the Securities Act and any
rules and regulations promulgated thereunder; and otherwise to comply with the
provisions of the Securities Act as may be necessary to facilitate the
disposition of all Registrable Securities covered by such Registration Statement
during the applicable period in accordance with the intended method or methods
of disposition by the selling Holders thereof set forth in such Registration
Statement or such Prospectus or Prospectus Supplement;
(iii) to notify the selling Holders and the managing underwriters, if
any, promptly if at any time (A) any Prospectus, Registration Statement or
amendment or supplement thereto is filed, (B) any Registration Statement, or any
post-effective amendment thereto, becomes effective, (C) the SEC requests any
amendment or supplement to, or any additional information in respect of, any
Registration Statement or Prospectus, (D) the SEC issues any stop order
suspending the effectiveness of a Registration Statement or initiates any
proceedings for that purpose, (E) the Company receives any notice that the
qualification of any Registrable Securities for the sale in any jurisdiction has
been suspended or that any proceeding has been initiated for the purpose of
suspending such qualifications, or (F) any event occurs which requires that any
changes be made in such Registration Statement or any related Prospectus so that
such Registration Statement or Prospectus will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
(iv) to make every reasonable best effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement, or the
qualification of any Registrable Securities for sale in any U.S. jurisdiction,
as soon as reasonably practicable;
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(v) to furnish each selling Holder a signed counterpart, addressed to
it, of (i) an opinion of counsel for the Company, dated the effective date of
such registration statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement), and (ii) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement), signed by the independent public accountants who have certified the
Company's financial statements included in such registration statement, covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of securities
and, in the case of the accountants' letter, such other financial matters, as
the selling Holders and the managing underwriter may reasonably request; and to
furnish to each selling Holder and each managing underwriter, if any, one signed
copy of the Registration Statement or Registration Statements or any
post-effective amendment thereto, including all financial statements and
schedules thereto, all documents incorporated therein by reference and all
exhibits thereto (including exhibits incorporated by reference);
(vi) to deliver to each selling Holder and each underwriter, if any,
as many copies of the Prospectus or Prospectuses (including each preliminary
Prospectus) and any amendment or supplement thereto as such Persons may
reasonably request; and to consent to the use of such Prospectus or any
amendment or supplement thereto by each such selling Holder and underwriter, if
any, in connection with the offering and sale of the Registrable Securities
covered by such Prospectus, amendment or supplement;
(vii) prior to any public offering of Registrable Securities, to
register or qualify, or to cooperate with the selling Holders, the underwriters,
if any, 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 U.S. jurisdictions as may be requested by
the Holders of a majority of the Registrable Securities included in such
Registration Statement; with respect to Demand Registrations, to keep each such
registration or qualification effective during the period set forth in paragraph
(a) of Section 2.1 that the applicable Registration Statement is required to be
kept effective and to do any and all other acts or things reasonably necessary
to enable the disposition in such jurisdictions of the Registrable Securities
covered by such
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Registration Statement; provided, however, that the Company will not be required
to qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process or taxation in any jurisdiction where it is not then so subject;
(viii) to cooperate with the selling Holders and the underwriters, if
any, in the preparation and delivery of certificates representing the
Registrable Securities to be sold, such certificates to be in such denominations
and registered in such names as such selling Holders or managing underwriters
may request at least two Business Days prior to any sale of Registrable
Securities represented by such certificates;
(ix) upon the occurrence of any event described in subclause (F) of
clause (iii) of this paragraph (a), promptly to prepare and file a supplement or
post-effective amendment to the applicable Registration Statement or Prospectus
or any document incorporated therein by reference, and any other required
document, so that such Registration Statement and Prospectus will not thereafter
contain an untrue statement of a material fact or omit to state any material
fact necessary to make the statement therein not misleading, and to cause such
supplement or post-effective amendment to be filed or be effective as soon as
reasonably practicable;
(x) to take all other actions in connection therewith as are
reasonably necessary or desirable in order to facilitate the disposition of the
Registrable Securities included in such Registration Statement and, in the case
of an underwritten offering to enter into an underwriting agreement in customary
form, including, without limitation, customary indemnities;
(xi) to make available for inspection by representatives of the
Holders of Registrable Securities being sold pursuant to any Demand Registration
and of the underwriters, if any, participating in such sale, copies or extracts
of all pertinent financial and other records, corporate documents and properties
of the Company as shall be reasonably necessary to enable such representatives
to fulfill their due diligence responsibilities, and to cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such representatives in connection with such Demand Registration;
provided, however, that all information regarding such records, documents and
properties shall be kept confidential by such Persons unless disclosure of such
information is required by court or administrative order;
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(xii) to comply with all applicable rules and regulations of the SEC
relating to such Registration Statement and the distribution of the securities
being offered or otherwise necessary in order to perform the Company's
obligations under this paragraph (a);
(xiii) to cooperate and assist in any filings required to be made with
the National Association of Securities Dealers, Inc. (the "NASD"); and
(xiv) to take all other reasonable steps necessary and appropriate to
effect such registration in the manner contemplated by this Agreement.
(b) Holders' Obligation to Furnish Information. The Company may require
each Holder of Registrable Securities as to which any registration is being
effected to furnish to the Company such information regarding the distribution
of such securities as the Company may from time to time reasonably request. If
the failure by a Holder of Registrable Securities to furnish such information as
expeditiously as possible would prevent (i) the Registration Statement relating
to such registration from being declared effective by the SEC or (ii) members of
the NASD from participating in the distribution of the Registrable Securities,
the Company may exclude such Holder's Registrable Securities from such
registration.
(c) Suspension of Sales Pending Amendment of Prospectus. Each Holder
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in subclause (C), (D), (E) or (F) of clause (iii) of
paragraph (a) of this Section 2.3, such Holder will forthwith forego or delay
the disposition of any Registrable Securities covered by such Registration
Statement or Prospectus until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by clause (ix) of such paragraph
(a), or until it is advised in writing by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any additional
or supplemental filings which are incorporated by reference in such Prospectus,
and, if so directed by the Company, such Holder will deliver to the Company (at
the Company's expense, except as hereinafter provided in this paragraph (c)) all
copies, other than permanent file copies, then in such Holder's possession of
any Prospectus covering such Registrable Securities. If the Company shall have
given any such notice during a period when a Demand Registration is in effect,
the 30-day period described in paragraph (a) of Section 2.1 shall be extended by
the number of days from and including the date of the giving of such notice to
and including the date when each Holder of Registrable Securities covered by
such Registration Statement shall have received the copies of the supplemented
or amended Prospectus contemplated by clause (ix) of such paragraph (a) or shall
have been advised in writing by the Company that the use of the applicable
Prospectus may be resumed. Each Holder of Registrable Securities agrees that
such Holder will, as expeditiously as possible, notify the Company at any time
when a Prospectus relating to a Registration Statement covering such Holder's
Registrable Securities is required to be delivered under the Securities Act, of
the happening of any event of the kind described in subclause (F) of clause
(iii) of paragraph (a) of this Section 2.3 as a result of any information
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provided by such Holder for inclusion in such Prospectus included in such
Registration Statement and, at the request of the Company, as expeditiously as
possible prepare and furnish to it such information as may be necessary so that,
after incorporation into a supplement or amendment of such Prospectus as
thereafter delivered to the purchasers of such Registrable Securities, the
information provided by such Holder shall not include an untrue statement of a
material fact or a misstatement of a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading and, in such event the expenses of
delivery to the Company of copies of any Prospectus in such Holder's possession
will be at the expense of the Holder giving such notice pursuant to this
sentence.
2.4 Registration Expenses.
All expenses incident to the Company's performance of or compliance with
its obligations under this Agreement with respect to any Demand Registration,
including without limitation all (i) registration and filing fees, (ii) fees and
expenses of compliance with securities or blue sky laws (including reasonable
fees and disbursements of counsel in connection with blue sky qualifications or
registrations (or the obtaining of exemptions therefrom) of the Registrable
Securities)), (iii) printing expenses (including expenses of printing
Prospectuses), (iv) messenger and delivery expenses, (v) internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), (vi) reasonable fees and
disbursements of its counsel and its independent certified public accountants
(including the expenses of any "comfort" letters required by or incident to such
performance or compliance), (vii) securities act liability insurance (if the
Company elects to obtain such insurance), (viii) reasonable fees and expenses of
any special experts retained by the Company in connection with any registration
hereunder, and (ix) reasonable fees and expenses of other Persons retained by
the Company (all such expenses being herein referred to as "Registration
Expenses"), shall be borne by the Company. The following costs and expenses
shall be excluded from the term "Registration Expenses": (1) all underwriting
discounts and commissions, (2) all applicable transfer taxes, if any, (3) the
fees and disbursements of counsel retained by the selling Holders, (4) certain
specified registration costs and expenses as provided in the last sentence of
paragraph (c) of Section 2.3 hereof, and (5) except as provided in the first
sentence of this Section 2.4, all other costs, fees and expenses incurred by any
Holder in connection with the exercise of its registration rights hereunder (all
of the amounts set forth in this sentence to be borne by the selling Holders of
any Registrable Securities pro rata on the basis of the total number of
Registrable Securities being registered by such Holders). Notwithstanding
anything to the contrary contained herein, if a request for any Demand
Registration is withdrawn by the selling Holders (other than a withdrawal made
by the selling Holders during a delay of filing or effectiveness or withdrawal
or requirement not to sell pursuant to a Company notice under Section 2.1(c)),
the Holders of the Registrable Securities which were or were to be registered
under such Demand Registration shall be responsible for all Registration
Expenses.
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2.5 Indemnification.
(a) Indemnification by the Company. In the event of any registration of
any Registrable Securities under the Securities Act pursuant to Section 2.1
hereof, the Company will, and hereby does, indemnify and hold harmless, to the
extent permitted by law, the Holder of any Registrable Securities covered by
such Registration Statement, and if applicable its directors, officers and
agents or general and limited partners (and the directors, officer and agents
thereof), each other Person who participates as an underwriter, if any, in the
offering or sale of such securities and each other Person, if any, who controls
such Holder or any such underwriter within the meaning of the Securities Act,
against any and all losses, claims, damages or liabilities, joint or several,
and reasonable out-of-pocket expenses (including any amounts paid in any
settlement effected with the Company's consent) to which such Holder or any such
director, officer, agent, general or limited partner, underwriter or controlling
Person may become subject under the Securities Act, common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement under which such securities were registered under the
Securities Act or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary Prospectus, together with the
documents incorporated by reference therein (as amended or supplemented if the
Company shall have filed with the SEC any amendment thereof or supplement
thereto), if used prior to the effective date of such Registration Statement, or
contained in the Prospectus, together with the documents incorporated by
reference therein (as amended or supplemented if the Company shall have filed
with the SEC any amendment thereof or supplement thereto), or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and the Company will
reimburse such Holder and each such director, officer, agent, general or limited
partner, underwriter and controlling Person for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, liability, action or proceeding; provided, however, that
the Company shall not be liable to any such Holder or any such director,
officer, agent, general or limited partner, underwriter or controlling Person in
any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made in such Registration Statement or amendments thereof or supplement
thereto or in any such preliminary, final or summary Prospectus in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of
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any such Holder or any such director, officer, agent, general or limited
partner, underwriter or controlling Person, for use in the preparation thereof;
and provided further, that the Company will not be liable to any Person who
participates as an underwriter in any underwritten offering or sale of
Registrable Securities, or to any Person who is a selling Holder in any
non-underwritten offering or sale of Registrable Securities, or any other
Person, if any, who controls such underwriter or Holder within the meaning of
the Securities Act, under the indemnity agreement in this paragraph (a) of
Section 2.5 with respect to any preliminary Prospectus or the final Prospectus
(including any amended or supplemented preliminary or final Prospectus), as the
case may be, to the extent that any such loss, claim, damage or liability of
such underwriter, Holder or controlling Person results from the fact that such
underwriter or Holder sold Registrable Securities to a person to whom there was
not sent or given, at or prior to the written confirmation of such sale, a copy
of the final Prospectus or of the final Prospectus as then amended or
supplemented, whichever is most recent, if the Company had previously furnished
copies thereof to such underwriter or Holder and such final Prospectus, as then
amended or supplemented, had corrected any such misstatement or omission. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Holder or any such director, officer, agent,
general or limited partner, underwriter or controlling Person and shall survive
the transfer of such securities by such underwriter or Holder.
(b) Indemnification by the Selling Holders. In consideration of the
Company's including any Registrable Securities in any Registration Statement
filed in accordance with Section 2.1 hereof, the Holder of such Registrable
Securities and any underwriter shall be deemed to have agreed to indemnify and
hold harmless (in the same manner and to the same extent as set forth in
paragraph (a) of this Section 2.5) the Company and its directors, officers and
agents and each person controlling the Company within the meaning of the
Securities Act and all other prospective selling Holders and if applicable their
directors, officers, agents, general and limited partners and respective
controlling Persons with respect to any statement or alleged statement in or
omission or alleged omission from such Registration Statement, any preliminary,
final or summary Prospectus contained therein, or any amendment or supplement,
if such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company or its representatives by or on behalf of such Holder or underwriter for
use in the preparation of such Registration Statement, preliminary, final or
summary Prospectus or amendment or supplement. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Company or any of the prospective sellers or any of their respective
directors, officers, agents, general or limited partners or controlling Persons
and shall survive the transfer of such Holder.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party
hereunder of written notice of the commencement of any action or proceeding with
respect to which a claim for indemnification may be made pursuant to this
Section 2.5, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of the
commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein (i) shall not relieve the
indemnifying party of its obligations under the preceding paragraphs of this
Section 2.5, except to the extent that the failure results in the forfeiture by
the indemnifying party of substantial rights (ii) will not, in any event,
relieve the indemnifying party from any obligation to any indemnified party
other than the indemnification obligation provided in paragraph (a) or (b)
above. If any such claim or action shall be brought against an indemnified
12
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein, and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel of its choosing; provided, however, that if, in
any indemnified party's reasonable judgment, a conflict of interest between the
indemnified party and the indemnifying party exists in respect of such claim,
then such indemnified party shall have the right to participate in the defense
of such claim and to employ counsel reasonably satisfactory to the indemnifying
party at the indemnifying party's reasonable expense to represent such
indemnified party; provided, however, that if the indemnified party or parties
in such instance is a Holder(s), then one such firm of attorneys shall be
selected by a majority of the indemnified parties based upon their respective
percentage ownership of Registrable Securities covered by such Registration
Statement; and provided further, that if, in the reasonable judgment of any
indemnified party, a conflict of interest between such indemnified party and any
other indemnified parties exists in respect of such claim, each such indemnified
party shall be entitled to one additional counsel reasonably satisfactory to the
indemnifying party and the indemnifying party shall be obligated to pay the
reasonable fees and expenses of such additional counsel or counsels. Once the
indemnifying party has assumed the defense of any claim, no indemnified party
will consent to entry of any judgment or enter into any settlement without the
indemnifying party's consent to such judgment or settlement.
(d) Other Indemnification. Indemnification similar to that specified in
the preceding paragraphs of this Section 2.5 (with appropriate modifications)
shall be given by the Company and each selling Holder of Registrable Securities
with respect to any required registration or other qualification of securities
under any state securities and "blue sky" laws.
(e) Contribution. If the indemnification provided for in this Section 2.5
is unavailable or insufficient to hold harmless an indemnified party under
paragraphs (a) or (b) of Section 2.5 of this Agreement, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of the losses, claims, or damages or liabilities referred to in
paragraphs (a) or (b) of Section 2.5 in such proportion as is appropriate to
reflect the relative benefits received by and the relative fault of the
indemnifying party on the one hand and the indemnified party on the other hand
in connection with statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault 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 indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statements or omission. The Company agrees, and
the Holders (in consideration of the Company's including any Registrable
Securities in any Registration Statement filed in accordance with Section 2.1
hereof) and any underwriter shall be deemed to have agreed, that it would not be
13
just and equitable if contributions pursuant to this paragraph (e) of Section
2.5 were to be determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the first sentence of this paragraph (e) of Section 2.5. The amount paid
by an indemnified party as a result of the losses, claims, and damages or
liabilities referred to in the first sentence of this paragraph (e) of Section
2.5 shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any
action or claim (which shall be limited as provided in paragraph (c) of Section
2.5 if the indemnifying party has assumed the defense of any such action in
accordance with the provisions thereof) which is the subject of this paragraph
(e) of Section 2.5. 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 who was not guilty of such fraudulent
misrepresentation. Notwithstanding anything contained in this paragraph (e) of
Section 2.5 to the contrary, with respect to the offering to which the losses,
claims, damages or liabilities of the indemnified parties relate, (i) no Holder
who is an indemnifying party shall be required pursuant to this paragraph (e) of
Section 2.5 to contribute any amount in excess of the proceeds received by such
Holder from the sale of Registrable Securities and (ii) no underwriter who is an
indemnifying party shall be required to contribute any amount in excess of the
discounts and commissions received by such underwriter.
2.6 Rule 144; Nasdaq Listing.
The Company shall file the reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder, and shall take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Securities without registration under the Securities Act within
the limitations of the exemptions provided by Rule 144 (as it currently exists
or as it may be amended, or any successor rule thereto) under the Securities
Act. Upon the request of any Holder, the Company shall deliver to such Holder a
written statement stating whether it has complied with such information and
requirements. The Company will use reasonable best efforts to maintain the
listing of the Common Stock (including the Registrable Securities) on the Nasdaq
National Market System or, at the option of the Company, a national securities
exchange (including without limitation the New York Stock Exchange).
2.7 Underwritten Registrations.
(a) Selection of Underwriters. If any of the Registrable Securities
covered by any Demand Registration are to be sold in an underwritten offering,
the underwriter or underwriters and managing underwriter or managing
underwriters that will administer the offering shall be selected by the Holders
of a majority of the Registrable Securities included in such offering; provided,
however, that such underwriters and managing underwriters and the terms material
to the Company of any underwriting agreement and other underwriting arrangements
shall be subject to the prior written approval of the Company, which approval
shall not be unreasonably withheld.
14
(b) Agreements of Selling Holders. No Holder shall sell any of its
Registrable Securities in any underwritten offering pursuant to a registration
hereunder unless such Holder (i) agrees to sell such Registrable Securities on
the basis provided in any underwriting agreement or other underwriting
arrangements approved by the Persons entitled hereunder to approve such
agreements or arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting agreements or other
underwriting arrangements. In connection with any Registration Statement in
which a Holder of Registrable Securities is participating, each such Holder will
furnish to the Company in writing such information and affidavits with respect
to such Holders as the Company reasonably requests for use in connection with
any such Registration Statement or Prospectus.
(c) Underwriting Agreement. If requested by the underwriters for any
underwritten offering of Registrable Securities on behalf of a Holder of
Registrable Securities pursuant to a registration requested under Section 2.1,
the Company will enter into an underwriting agreement with such underwriters for
such offering, such agreement to contain such representations and warranties by
the Company and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including,
without limitation, indemnities to the effect and to the extent provided in
Section 2.5. Each Holder of Registrable Securities on whose behalf Registrable
Securities are to be distributed by such underwriters shall be a party to any
such underwriting agreement, and the representations and warranties by, and the
other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such Holder of
Registrable Securities. Such Holder of Registrable Securities shall not be
required by the Company to make any representations or warranties to or
agreements with the Company or the underwriters other than reasonable
representations, warranties or agreements regarding such Holder, such Holder's
Registrable Securities and such Holder's intended method or methods of
disposition and any other representation required by law.
2.8 Holdback Agreements.
(a) Restrictions on Public Sales by Holders. To the extent not
inconsistent with applicable law, each Holder of Registrable Securities whose
securities are covered by a Registration Statement filed pursuant to Section 2.1
hereof who is timely notified in writing by the managing underwriter or
underwriters in an underwritten public offering of such proposed offering shall
not effect (other than as part of such underwritten offering) any public sale or
distribution (including a sale pursuant to Rule 144) of any issue being
registered, or any securities of the Company similar to any such issue, or any
securities of the
15
Company convertible into or exchangeable or exercisable for any such issue or
any similar issue, during the 10-day period prior to the effective date of the
applicable Registration Statement, or during the period beginning on such
effective date and ending 90 days after such date, except as part of such
registration.
(b) Restrictions on Public Sales by the Company. The Company shall not
effect any public sale or distribution of any issue of the same class or series
as Registrable Securities being registered in an underwritten offering (other
than pursuant to an employee stock option, stock purchase, stock bonus or
similar plan, pursuant to a merger, exchange offer or other transaction
comparable to or of the type specified in Rule 145(a) under the Securities Act),
or any securities of the Company similar to any such issue or any securities of
the Company convertible into or exchangeable or exercisable for any such issue,
during the 10-day period prior to the effective date of the applicable
Registration Statement, or during the period beginning on such effective date
and ending 30 days after such effective date, except as part of such
registration.
2.9 Termination Agreement.
Simultaneously with the execution and delivery of this Agreement, and as a
condition thereto, the Company will execute and deliver, and the Investors will
cause Carroll's Foods to execute and deliver, a Termination Agreement in the
form attached as Exhibit A hereto.
2.10 Controlling Agreements.
Simultaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering the Termination Agreement, as
contemplated by Section 2.9, and also an Escrow Agreement and an Agreement with
Shareholders, each as contemplated by the Acquisition Agreement. The terms of
such other agreements, to the extent of any conflict with the terms herein,
shall control and govern over the terms of this Agreement.
2.11 Adjustments.
References to shares of Common Stock herein are subject to adjustment in
the event of any stock split, combination, subdivision, exchange or stock
dividend with respect to the Common Stock (for instance, upon a 2-for-1 stock
split, the 500,000 share minimum stated in Section 2.1(b) would become a
1,000,000 share minimum), it being understood that the Company will not effect
or permit to occur any such event which would materially adversely affect the
ability of the Holders of Registrable Securities to include such Registrable
Securities in any registration under Section 2.1 or the marketability of such
Registrable Securities under any such registration.
16
ARTICLE III.
MISCELLANEOUS
3.1 Amendment and Waivers. This Agreement may be amended, and the Company
or a Holder may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company or the Holder shall
have obtained the written consent to such amendment, action or omission to act,
of the Company and the Holders of at least a majority of the Registrable
Securities then outstanding (and, in the case of any amendment, action or
omission to act that adversely affects any Holder or group of Holders
differently from any of the other Holders, the written consent of such Holder or
a majority of the Registrable Securities held by such group of Holders). Holders
shall be bound from and after the date of receipt of a written notice from the
Company setting forth such amendment or waiver by any consent authorized by this
Section 3.1, whether or not the certificates representing such Registrable
Securities shall have been marked to indicate such consent.
3.2 Successors, Assigns and Transferees. This Agreement may not be
transferred or assigned by the Company or by any Holder, other than by operation
of law; provided, however, that a Holder or Holders may transfer or assign its
rights with respect to any Registrable Securities under this Agreement to an
investment bank which (A) has agreed in writing to be bound by the terms of this
Agreement, (B) by such transfer then acquires from such Holder or Holders at
least 500,000 Registrable Securities and (C) is receiving such shares for the
purpose of effecting between such Holder or Holders and such investment bank a
"collar" transaction or other substantially similar derivative security or other
such transaction. This Agreement shall be binding upon and shall inure to the
benefit of the Holders and the Company and their permitted successors, assigns
and transferees.
3.3 Integration. Subject to Section 2.10, this Agreement and the documents
referred to herein or delivered pursuant hereto that form a part hereof contain
the entire understanding of the parties thereto with respect to its subject
matter; there are no restrictions, agreements, promises, rights,
representations, warranties, covenants or undertakings with respect to the
subject matter hereof other than those expressly set forth herein; and this
Agreement supersedes all prior agreements and understandings of the parties
hereto with respect to its subject matter.
3.4 Notices. All notices and other communications provided for hereunder
shall be in writing and shall be sent by first class mail, telex, telecopier or
hand delivery,
if to the Company, to:
Smithfield Foods, Inc.
200 Commerce Street
Smithfield, Virginia 23430
Attention: Secretary
Telecopier: (757) 365-3017
Telephone Confirmation: (757) 365-3004
17
with copies to:
McGuire, Woods, Battle & Boothe LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219
Attention: Sam Young Garrett
Telecopier: (804) 775-1061
Telephone Confirmation: (804) 775-4384
If to any Holders, to:
Jeffrey S. Matthews
Carroll M. Baggett
James O. Matthews
Post Office Box 707
Warsaw, North Carolina 28398
with a copy to:
Ward and Smith, P.A.
1001 College Court
P. O. Box 867
New Bern, North Carolina 28563-0867
Attention: J. Troy Smith, Jr.
Telecopier: (252) 636-2121
Telephone Confirmation: (252) 633-1000
All such notices and communications shall be deemed to have been given or
made (i) when delivered by hand or by Federal Express or any other nationally
recognized courier service, (ii) seven days after being deposited in the mail,
postage prepaid, (iii) when telexed answer-back received or (iv) when
telecopied, receipt acknowledged.
3.5 Termination. This Agreement will terminate upon the earlier to occur
of (i) the first date that there are no Holders or fewer than 500,000
Registrable Securities or (ii) the seventh anniversary of the date hereof.
3.6 Descriptive Headings. The headings in this Agreement are for
convenience of reference only and shall not limit, expand or otherwise affect
the meaning of the terms contained herein.
18
3.7 Severability. In the event that any one or more of the provisions,
paragraphs, words, clauses, phrases or sentences 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, paragraph, word, clause, phrase or
sentence in every other respect and of the remaining provisions, paragraphs,
words, clauses, phrases or sentences hereof shall not be in any way impaired, it
being intended that all rights, powers and privileges of the Company and the
Holders shall be enforceable to the fullest extent permitted by law.
3.8 Governing Law. This Agreement shall be governed by the internal law of
the Commonwealth of Virginia, without regard to principles of conflicts of law.
3.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same instrument.
Any party's execution and delivery of this Agreement may be evidenced by
physical delivery or by telecopier, facsimile or other written communication
thereof to the other parties.
19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
SMITHFIELD FOODS, INC.
By: /S/ Richard J. M. Poulson
-------------------------
Name: Richard J. M. Poulson
Title: Vice President
INVESTORS:
/s/ Jeffrey S. Matthews
-----------------------
Jeffrey S. Matthews
/s/ Carroll M. Baggett
----------------------
Carroll M. Baggett
/s/ James O. Matthews
---------------------
James O. Matthews
20
EXHIBIT A
FORM OF TERMINATION AGREEMENT
Reference is made to the Subscription Agreement between the parties hereto
dated as of September 13, 1992 (the "1992 Registration Rights Agreement"), and
to the Registration Rights Agreement, dated as of May 7, 1999, which Smithfield
Foods, Inc., a Virginia corporation, and each of Jeffrey S. Matthews, Carroll M.
Baggett and James O. Matthews (such individuals being all the shareholders of
Carroll's Foods, Inc.) propose to enter into today, replacing and superseding
the 1992 Registration Rights Agreement.
The parties hereto, being also the parties to the 1992 Registration Rights
Agreement, hereby agree to terminate immediately the 1992 Registration Rights
Agreement, which shall be of no further force or effect.
Dated: May 7, 1999
SMITHFIELD FOODS, INC.
By: __________________________
Name:
Title:
CARROLL'S FOODS, INC.
By: __________________________
Name:
Title: