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                                                                    Exhibit 10.1


                            PSF GROUP HOLDINGS, INC.
                           1999 EQUITY INCENTIVE PLAN

                                   SECTION 1

                              PURPOSE AND DURATION

      1.1   Effective Date. This Plan permits the grant of Nonqualified Stock
Options, Incentive Stock Options, SARs, Restricted Stock, Performance Units and
Performance Shares. This Plan shall be effective on the date of its adoption by
the Board of Directors.

      1.2   Purpose of this Plan. This Plan is intended to attract, motivate,
and retain (a) employees of the Company and its Affiliates. This Plan also is
designed to further the growth and financial success of the Company and its
Affiliates by aligning the interests of the Participants, through the ownership
of Shares and through other incentives, with the interests of the Company's
stockholders.

                                    SECTION 2

                                   DEFINITIONS

      The following words and phrases shall have the following meanings unless a
different meaning is plainly required by the context:

      "1934 Act" means the Securities Exchange Act of 1934, as amended.
Reference to a specific section of the 1934 Act or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing or superseding such section or regulation.

      "Affiliate" means any corporation or any other entity (including, but not
limited to, any partnership, limited liability company, trust, association and
joint venture) that, directly or indirectly, controls, or is controlled by, or
is under common control with the Company.

      "Affiliated SAR" means an SAR that is granted in connection with a related
Option, and that automatically will be deemed to be exercised at the same time
that the related Option is exercised.

      "Award" means, individually or collectively, a grant under this Plan of
Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock,
Performance Units or Performance Shares.

      "Award Agreement" means the written agreement setting forth the terms and
provisions applicable to each Award granted under this Plan.


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      "Board" or "Board of Directors" means the Board of Directors of the
Company.

      "Board Member" means any individual who is a member of the Board of
Directors of the Company.

      "Change in Control" shall have the meaning assigned to such term in
Section 12.2.

      "Code" means the Internal Revenue Code of 1986, as amended. Reference to a
specific section of the Code or regulation thereunder shall include such section
or regulation, any valid regulation promulgated under such section, and any
comparable provision of any future legislation or regulation amending,
supplementing or superseding such section or regulation.

      "Committee" means the committee appointed by the Board (pursuant to
Section 3.1) to administer this Plan.

      "Company" means PSF Group Holdings, Inc., a Delaware corporation, and any
successor thereto. With respect to the definitions of the Performance Goals, the
Committee in its sole discretion may determine that "Company" means Premium
Standard Farms, Inc., and its consolidated subsidiaries.

      "Consultant" means any consultant, independent contractor or other person
who provides significant services to the Company or its Affiliates, but who is
neither an Employee nor a Board Member.

      "Disability" means a permanent and total disability within the meaning of
Code section 22(e)(3), provided that in the case of Awards other than Incentive
Stock Options, the Committee in its sole discretion may determine whether a
permanent and total disability exists in accordance with uniform and
non-discriminatory standards adopted by the Committee from time to time.

      "Earnings Per Share" means as to any Fiscal Year, the Company's Net Income
divided by a weighted average number of Shares outstanding and dilutive
equivalent Shares deemed outstanding.

      "Employee" means any employee of the Company or of an Affiliate, whether
such employee is so employed at the time this Plan is adopted or becomes so
employed subsequent to the adoption of this Plan.

      "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended. Reference to a specific section of ERISA or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing or superseding such section or regulation.


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      "Exercise Price" means the price at which a Share may be purchased by a
Participant pursuant to the exercise of an Option.

      "Fair Market Value" means, as of any given date, the mean between the
highest and lowest reported sales prices of the Shares on the New York Stock
Exchange Composite Tape or, if not listed on such exchange, on any other
national securities exchange on which the Shares are listed or on the Nasdaq
Stock Market. If there is no regular public trading market for such Shares, the
Fair Market Value of the Shares shall be determined by an independent third
party engaged by the Company.

      "Fiscal Year" means the fiscal year of the Company.

      "Freestanding SAR" means a SAR that is granted independently of any
Option.

      "Grant Date" means, with respect to an Award, the date that the Award was
granted.

      "Incentive Stock Option" means an Option to purchase Shares which is
designated as an Incentive Stock Option and is intended to meet the requirements
of section 422 of the Code.

      "Individual MBOs" means as to a Participant, the objective and measurable
goals set by a "management by objectives" process and approved by the Committee
(in its sole discretion).

      "Initial Public Offering" means the effective date of a registration
statement filed by the Company with the Securities and Exchange Commission for a
public offering and sale of securities of the Company covering the Company's
first underwritten public offering of common stock resulting in increase in
stockholder equity of the Company of at least $50,000,000.

      "Mature Shares" means shares of the common stock of the Company held more
than six months by the Participants.

      "Net Income" means as to any Fiscal Year, the income after taxes of the
Company for the Fiscal Year determined in accordance with generally accepted
accounting principles; provided, however, that the Committee shall determine
whether any significant item(s) shall be included or excluded from the
calculation of Net Income with respect to one or more Participants and, if the
Committee intends an Award to qualify as "performance-based compensation" under
Section 162(m) of the Code, the Committee shall make such determination prior to
the latest date permissible under Section 162(m) of the Code.

      "Nonemployee Board Member" means a Board Member who is not an employee of
the Company or of any Affiliate.

      "Nonqualified Stock Option" means an Option to purchase Shares which is
not an Incentive Stock Option.


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      "Option" means an Incentive Stock Option or a Nonqualified Stock Option.

      "Participant" means an Employee, Consultant or Nonemployee Board Member
who has an outstanding Award.

      "Performance Goals" means the goal(s) (or combined goal(s)) determined by
the Committee (in its sole discretion) to be applicable to a Participant with
respect to an Award. As determined by the Committee, the Performance Goals
applicable to an Award may provide for a targeted level or levels of achievement
using predetermined measurements, including, for example, one or more of the
following measures: (a) Earnings Per Share, (b) Individual MBOs, (c) Net Income,
(d) Plan Measurement Cash Flow, (e) Return on Designated Assets, (f) Return on
Revenues, and (g) Satisfaction MBOs. The Performance Goals may differ from
Participant to Participant and from Award to Award.

      "Performance Period" shall have the meaning assigned to such term in
Section 8.3.

      "Performance Share" means an Award granted to a Participant pursuant to
Section 8.

      "Performance Unit" means an Award granted to a Participant pursuant to
Section 8.

      "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock are subject to restrictions and, therefore, the
Shares are subject to a substantial risk of forfeiture. As provided in Section
7, such restrictions may be based on the passage of time, the achievement of
target levels of performance or the occurrence of other events as determined by
the Committee in its sole discretion.

      "Plan" means the Premium Standard Farms, Inc., 1999 Equity Incentive Plan,
as set forth in this instrument and as hereafter amended from time to time.

      "Plan Management Cash Flow" means as to any Fiscal Year, the income before
interest, taxes, depreciation, amortization, expenses related to employee
incentive plans, and other specific expenses, all as determined by the
Committee; and if the Committee intends for an Award to qualify as
"performance-based compensation" under Section 162(m) of the Code, the Committee
shall make such determination prior to the latest date permissible under Section
162(m) of the Code.

      "Restricted Stock" means an Award granted to a Participant pursuant to
Section 7.

      "Retirement" means, in the case of an Employee, a Termination of Service
by reason of the Employee's retirement pursuant to any retirement program
instituted by the Company or any Affiliate employer or as otherwise agreed to by
the Employer or the applicable Affiliate employer. With respect to a Consultant,
no Termination of Service shall be deemed to be on account of "Retirement."


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      "Return on Designated Assets" means as to any Fiscal Year, the Net Income
of the Company, divided by the average of beginning and ending designated
corporate assets.

      "Return on Revenues" means as to any Fiscal Year, the percentage equal to
the Company's Net Income divided by the Company's or the business unit's annual
revenue.

      "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, and any
future regulation amending, supplementing or superseding such regulation.

      "Satisfaction MBOs" means as to any Participant, the objective and
measurable individual goals set by a "management by objectives" process and
approved by the Committee, which goals relate to the satisfaction of external or
internal requirements.

      "Section 16 Person" means a person who, with respect to the Shares, is
subject to section 16 of the 1934 Act.

      "Shares" means either shares of Class A Common Stock or Class B Common
Stock of the Company, as determined by the Board of Directors of the Company in
its sole discretion and, further, that any of use of "common stock" in this Plan
shall mean either Class A Common Stock or Class B Common Stock, as determined by
the Board of Directors of the Company in its sole discretion.

      "Stock Appreciation Right" or "SAR" means an Award, granted alone or in
connection with a related Option, that is designated as a SAR pursuant to
Section 6.

      "Subsidiary" means any corporation in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

      "Tandem SAR" means an SAR that is granted in connection with a related
Option, the exercise of which shall require forfeiture of the right to purchase
an equal number of Shares under the related Option (and when a Share is
purchased under the Option, the SAR shall be canceled to the same extent).

      "Termination of Service" means (a) in the case of an Employee, a cessation
of the employee-employer relationship between an employee and the Company or an
Affiliate for any reason, including, but not limited to, a cessation by
resignation, discharge, death, Disability, Retirement or the disaffiliation of
an Affiliate, but excluding any such cessation where there is a simultaneous
reemployment by the Company or an Affiliate, and (b) in the case of a
Consultant, a cessation of the service relationship between the Consultant and
the Company or an Affiliate for any reason, including, but not limited to, a
cessation by resignation, discharge, death,


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Disability, or the disaffiliation of an Affiliate, but excluding any such
cessation where there is a simultaneous reengagement of the Consultant by the
Company or an Affiliate.

                                   SECTION 3

                                 ADMINISTRATION

      3.1   The Committee. This Plan shall be administered by the Committee. The
Committee shall consist of not less than two (2) Board Members, all of whom are
Nonemployee Board Members. The members of the Committee shall be appointed from
time to time by, and shall serve at the pleasure of, the Board of Directors.

      3.2   Authority of the Committee. It shall be the duty of the Committee to
administer this Plan in accordance with its provisions. The Committee shall have
all powers and discretion necessary or appropriate to administer this Plan and
to control its operation, including, but not limited to, the power to (a)
determine which Participants shall be granted Awards, (b) prescribe the terms
and conditions of the Awards, (c) interpret this Plan and the Awards, (d) adopt
rules for the administration, interpretation and application of this Plan as are
consistent therewith, and (e) interpret, amend or revoke any such rules.

      3.3   Delegation by the Committee. The Committee, in its sole discretion
and on such terms and conditions as it may provide, may delegate all or any part
of its authority and powers under this Plan to one or more Board Members or
officers of the Company; provided, however, that the Committee may not delegate
its authority and powers in any way which would jeopardize this Plan's
qualification under Rule 16b-3.

      3.4   Decisions Binding. All determinations and decisions made by the
Committee, the Board and any delegate of the Committee pursuant to Section 3.3
shall be final, conclusive, and binding on all persons, and shall be given the
maximum deference permitted by law.

                                   SECTION 4

                           SHARES SUBJECT TO THIS PLAN

      4.1   Number of Shares. Subject to adjustment as provided in Section 4.3,
the total number of Shares available for grant under this Plan shall not exceed
15,000. Shares granted under this Plan may be either authorized but unissued
Shares or treasury Shares, or any combination thereof.

      4.2   Lapsed Awards. If an Award is settled in cash, or is canceled,
terminates, expires or lapses for any reason (with the exception of the
termination of a Tandem SAR upon exercise of the related Option, or the
termination of a related Option upon exercise of the corresponding


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Tandem SAR), any Shares subject to such Award thereafter shall be available to
be the subject of an Award.

      4.3   Adjustments in Awards and Authorized Shares. In the event of any
merger, reorganization, consolidation, recapitalization, separation,
liquidation, stock dividend, stock split, Share combination, or other change in
the corporate structure of the Company affecting the Shares, the Committee shall
adjust the number and class of Shares which may be delivered under this Plan,
the number, class and price of Shares subject to outstanding Awards, and the
numerical limits of Sections 4.1, 5.1, 6.1, 7.1 and 8.1, in such manner as the
Committee (in its sole discretion) shall determine to be advisable or
appropriate to prevent the dilution or diminution of such Awards.
Notwithstanding the preceding, the number of Shares subject to any Award always
shall be a whole number.

      4.4   Repurchase Option. The Committee may, in its sole discretion,
include in the terms of any Award Agreement, that the Company shall have the
option to repurchase Shares of any Participant acquired pursuant to any Award
granted under the Plan upon the Termination of Service of such Participant upon
such terms as the Committee shall state in the Award.

      4.5   Buy-Out Provision. The Committee may at any time offer on behalf of
the Company to buy out, for a payment in cash or Shares, an Award previously
granted, based on such terms and conditions as the Committee, in its sole
discretion, shall establish and communicate to the Participants at the time such
offer is made.

      4.6   Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Award as it
may deem advisable or appropriate in its sole discretion, including, but not
limited to, restrictions related to applicable Federal securities laws, the
requirements of any national securities exchange or system upon which Shares are
then listed or traded, and any blue sky or state securities laws.

      4.7   Adjustments upon Merger or Asset Sale. In the event of a merger of
the Company with or into another corporation, or the sale of substantially all
of the assets of the Company, the Board of Directors, in its discretion, may
require the successor corporation to either (i) assume each outstanding Award or
(ii) substitute an equivalent award by the successor corporation or a Parent or
Subsidiary of the successor corporation. If an Award is not assumed or
substituted in the event of a merger or sale of assets, the Award shall fully
vest and become immediately exercisable and the Committee shall notify the
Participant that the Award shall be exercisable for a period of twenty-five (25)
days from the date of such notice, and the Award shall terminate upon the
expiration of such period unless exercised. For the purposes of this paragraph,
the Award shall be considered assumed if, following the merger or sale of
assets, the Award confers the right to purchase or receive, for each Share
subject to the Award immediately prior to the merger or sale of assets, equal
consideration (whether stock, cash, or other securities or property) as received
in the merger or sale of assets by holders of each Share of common stock held on
the effective date of the transaction (and if holders of Shares were offered a
choice of


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consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets was not solely common stock of the successor
corporation or its Parent, the Committee may, with the consent of the successor
corporation, provide for the consideration to be received upon the exercise of
the Award, for each Share subject to the award, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of common stock in the merger or sale of
assets.

      4.8   Lock-up Agreement. In addition to any other restrictions on
transfer, a Participant shall not, without the prior written consent of the
Board in its discretion, sell, offer to sell, encumber or otherwise dispose of
any Shares acquired pursuant to the Plan for at least one hundred eighty (180)
days after (a) the closing of the Initial Public Offering or (b) in the event
that subsequent to such Initial Public Offering the Shares are not listed and
traded upon a recognized securities exchange or quoted on a recognized national
market system, the closing of each offering of securities of the Company
registered under the Securities Act subsequent to such Initial Public Offering
through and including the offering after which the Shares are listed and traded
upon such exchange or system. Each Participant will, if requested by the
Company, enter into a separate agreement to the effect of this Section 4.8.

                                    SECTION 5

                                  STOCK OPTIONS

      5.1   Grant of Options. Subject to the terms and provisions of this Plan,
Options may be granted to Participants at any time and from time to time as
determined by the Committee in its sole discretion. The Committee, in its sole
discretion, shall determine the number of Shares subject to each Option;
provided, however, that during any Fiscal Year, no Participant shall be granted
Options covering more than 3,000 Shares. The Committee may grant Incentive Stock
Options, Nonqualified Stock Options, or any combination thereof.

      5.2   Award Agreement. Each Option shall be evidenced by an Award
Agreement that shall specify the Exercise Price, the expiration date of the
Option, the number of Shares to which the Option pertains, any conditions to
exercise of the Option and such other terms and conditions as the Committee, in
its sole discretion, shall determine. The Award Agreement also shall specify
whether the Option is intended to be an Incentive Stock Option or a Nonqualified
Stock Option.

      5.3   Exercise Price. Subject to the provisions of this Section 5.3, the
Exercise Price for each Option shall be determined by the Committee in its sole
discretion.

            5.3.1 Nonqualified Stock Options. In the case of a Nonqualified
      Stock Option, the Exercise Price may be less or more than the Fair Market
      Value of a Share on the Grant Date.


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            5.3.2 Incentive Stock Options. In the case of an Incentive Stock
      Option, the Exercise Price shall be not less than one hundred percent
      (100%) of the Fair Market Value of a Share on the Grant Date; provided,
      however, that if on the Grant Date, the Employee (together with persons
      whose stock ownership is attributed to the Employee pursuant to section
      424(d) of the Code) owns stock possessing more than 10% of the total
      combined voting power of all classes of stock of the Company or any of its
      Subsidiaries, the Exercise Price shall be not less than one hundred ten
      percent (110%) of the Fair Market Value of a Share on the Grant Date.

            5.3.3 Substitute Options. Notwithstanding the provisions of Sections
      5.3.1 and 5.3.2, in the event that the Company or an Affiliate consummates
      a transaction described in section 424(a) of the Code (e.g., the
      acquisition of property or stock from an unrelated corporation), persons
      who become Participants on account of such transaction may be granted
      Options in substitution for options granted by such former employer or
      recipient of services. If such substitute Options are granted, the
      Committee, in its sole discretion and consistent with section 424(a) of
      the Code, may determine that such substitute Options shall have an
      exercise price less than one hundred (100%) of the Fair Market Value of
      the Shares on the Grant Date.

      5.4   Expiration of Options.

            5.4.1 Expiration Dates. Except as provided in Section 5.7 regarding
      Incentive Stock Options, each Option shall terminate upon the earlier of
      the first to occur of the following events:

                  (a)   The date(s) for termination of the Option set forth in
            the Award Agreement;

                  (b)   The date determined under Section 5.8; or

                  (c)   The expiration of ten (10) years from the Grant Date.

            5.4.2 Committee Discretion. Subject to the limits of Section 5.4.1,
      the Committee, in its sole discretion, (a) shall provide in each Award
      Agreement when each Option expires and becomes unexercisable, and (b) may,
      after an Option is granted, extend the maximum term of the Option (subject
      to Section 5.7 regarding Incentive Stock Options).

      5.5   Exercisability of Options. Options granted under this Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall determine in its sole discretion. After an Option is
granted, the Committee, in its sole discretion, may accelerate the
exercisability of the Option. If the Committee provides that any Option is


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exercisable only in installments, the Committee may at any time waive such
installment exercise provisions, in whole or in part, based on such factors as
the Committee may determine.

      5.6   Payment. Options shall be exercised by the Participant's delivery of
a written notice of exercise to the Secretary of the Company (or its designee),
setting forth the number of Shares with respect to which the Option is to be
exercised, accompanied by full payment for the Shares.

      Upon the exercise of any Option, the Exercise Price shall be payable to
the Company in full in cash or its equivalent.

      As soon as practicable after receipt of a written notification of exercise
and full payment for the Shares purchased, the Company shall deliver to the
Participant (or the Participant's designated broker), Share certificates (which
may be in book entry form) representing such Shares.

      5.7   Certain Additional Provisions for Incentive Stock Options.

            5.7.1 Exercisability. The aggregate Fair Market Value (determined on
      the Grant Date(s)) of the Shares with respect to which Incentive Stock
      Options are exercisable for the first time by any Employee during any
      calendar year (under all plans of the Company and its Subsidiaries) shall
      not exceed $100,000.

            5.7.2 Company and Subsidiaries Only. Incentive Stock Options may be
      granted only to persons who are employees of the Company or a Subsidiary
      on the Grant Date.

            5.7.3 Expiration. No Incentive Stock Option may be exercised after
      the expiration of ten (10) years from the Grant Date; provided, however,
      that if the Option is granted to an Employee who, together with persons
      whose stock ownership is attributed to the Employee pursuant to section
      424(d) of the Code, owns stock possessing more than 10% of the total
      combined voting power of all classes of stock of the Company or any of its
      Subsidiaries, the Option may not be exercised after the expiration of five
      (5) years from the Grant Date.

      5.8   Termination of Service. Other than as provided in any specific Award
Agreement, no Incentive Stock Option or Nonqualified Stock Option may be
exercised after a Participant's Termination of Service either by the Company
with cause or by the Participant's resignation with or without cause (all of
which shall be determined solely by the Committee) other than by Disability,
death or Retirement. Upon a Participant's Termination of Service by the Company
without cause (which shall be determined by the Committee) other than by
Disability, death or Retirement, no Incentive Stock Option or Nonqualified Stock
Option may be exercised after the ninety day anniversary of such Termination of
Service. No Incentive Stock


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Option or Nonqualified Stock Option may be exercised more than one year after
the Participant's Termination of Service as a result of a Disability, death or
Retirement.

      5.9   Restriction on Option Transfer. No Incentive Stock Option or
Nonqualified Stock Option may be transferred except that the Committee may
permit a transfer, upon the Participant's death, to beneficiaries designated by
the Participant as provided in Section 9.6.

                                   SECTION 6

                            STOCK APPRECIATION RIGHTS

      6.1   Grant of SARs. Subject to the terms and conditions of this Plan, an
SAR may be granted to Participants at any time and from time to time as shall be
determined by the Committee, in its sole discretion. The Committee may grant
Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination thereof.

            6.1.1 Number of Shares. The Committee shall have complete discretion
      to determine the number of SARs granted to any Participant, provided that
      during any Fiscal Year, no Participant shall be granted SARs covering more
      than 3,000 Shares.

            6.1.2 Exercise Price and Other Terms. The Committee, subject to the
      provisions of this Plan, shall have complete discretion to determine the
      terms and conditions of SARs granted under this Plan; provided, however,
      that the exercise price of a Freestanding SAR shall be not less than one
      hundred percent (100%) of the Fair Market Value of a Share on the Grant
      Date. The exercise price of Tandem or Affiliated SARs shall equal the
      Exercise Price of the related Option.

      6.2   Exercise of Tandem SARs. Tandem SARs may be exercised for all or
part of the Shares subject to the related Option upon the surrender of the right
to exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable. With respect to a Tandem SAR granted in connection with an
Incentive Stock Option: (a) the Tandem SAR shall expire no later than the
expiration of the underlying Incentive Stock Option; (b) the value of the payout
with respect to the Tandem SAR shall be for no more than one hundred percent
(100%) of the difference between the Exercise Price of the underlying Incentive
Stock Option and the Fair Market Value of the Shares subject to the underlying
Incentive Stock Option at the time the Tandem SAR is exercised; and (c) the
Tandem SAR shall be exercisable only when the Fair Market Value of the Shares
subject to the Incentive Stock Option exceeds the Exercise Price of the
Incentive Stock Option.

      6.3   Exercise of Affiliated SARs. An Affiliated SAR shall be deemed to be
exercised upon the exercise of the related Option. The deemed exercise of an
Affiliated SAR shall not necessitate a reduction in the number of Shares subject
to the related Option.


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      6.4   Exercise of Freestanding SARs. Freestanding SARs shall be
exercisable on such terms and conditions as the Committee, in its sole
discretion, shall determine.

      6.5   SAR Agreement. Each SAR grant shall be evidenced by an Award
Agreement that shall specify the exercise price, the term of the SAR, the
conditions of exercise, and such other terms and conditions as the Committee, in
its sole discretion, shall determine.

      6.6   Expiration of SARs. An SAR granted under this Plan shall expire upon
the date determined by the Committee, in its sole discretion, as set forth in
the Award Agreement. Notwithstanding the foregoing, the terms and provisions of
Section 5.4 also shall apply to SARs.

      6.7   Payment of SAR Amount. Upon exercise of an SAR, a Participant shall
be entitled to receive payment from the Company in an amount determined by
multiplying:

                  (a)   The positive difference between the Fair Market Value of
            a Share on the date of exercise over the Exercise Price; by

                  (b)   The number of Shares with respect to which the SAR is
            exercised.

      At the sole discretion of the Committee, the payment upon SAR exercise may
be in cash, in Shares of equivalent value, or in any combination thereof.

                                   SECTION 7

                                RESTRICTED STOCK

      7.1   Grant of Restricted Stock. Subject to the terms and provisions of
this Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Committee, in its sole
discretion, shall determine. The Committee, in its sole discretion, shall
determine the number of Shares to be granted to each Participant; provided,
however, that during any Fiscal Year, no Participant shall receive more than
3,000 Shares of Restricted Stock.

      7.2   Restricted Stock Agreement. Each Award of Restricted Stock shall be
evidenced by an Award Agreement that shall specify the Period of Restriction,
the number of Shares granted, and such other terms and conditions as the
Committee, in its sole discretion, shall determine. Unless the Committee, in its
sole discretion, determines otherwise, Shares of Restricted Stock shall be held
by the Company as escrow agent until the end of the applicable Period of
Restriction.

      7.3   Transferability. Except as otherwise determined by the Committee, in
its sole discretion, Shares of Restricted Stock may not be sold, transferred,
gifted, bequeathed, pledged,


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assigned, or otherwise alienated or hypothecated, voluntarily or involuntarily,
until the end of the applicable Period of Restriction.

      7.4   Other Restrictions. The Committee, in its sole discretion, may
impose such other restrictions on Shares of Restricted Stock as it may deem
advisable or appropriate in accordance with this Section 7.4.

            7.4.1 General Restrictions. The Committee may set restrictions based
      upon (a) the achievement of specific performance objectives (Company-wide,
      divisional or individual), (b) applicable Federal or state securities
      laws, or (c) any other basis determined by the Committee in its sole
      discretion.

            7.4.2 Section 162(m) Performance Restrictions. For purposes of
      qualifying grants of Restricted Stock as "performance-based compensation"
      under Section 162(m) of the Code, the Committee, in its sole discretion,
      may set restrictions based upon the achievement of Performance Goals. The
      Performance Goals shall be set by the Committee on or before the latest
      date permissible to enable the Restricted Stock to qualify as
      "performance-based compensation" under Section 162(m) of the Code. In
      granting Restricted Stock that is intended to qualify under Code Section
      162(m), the Committee shall follow any procedures determined by it in its
      sole discretion from time to time to be necessary, advisable or
      appropriate to ensure qualification of the Restricted Stock under Code
      Section 162(m) (e.g., in determining the Performance Goals).

            7.4.3 Legend on Certificates. The Committee, in its sole discretion,
      may legend the certificates representing Restricted Stock to give
      appropriate notice of such restrictions. For example, the Committee may
      determine that some or all certificates representing Shares of Restricted
      Stock shall bear the following legend:

           "THE SALE OR OTHER TRANSFER OF THE SHARES OF STOCK REPRESENTED BY
           THIS CERTIFICATE, WHETHER VOLUNTARY, INVOLUNTARY, OR BY OPERATION OF
           LAW, IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN
           THE PREMIUM STANDARD FARMS, INC. 1999 EQUITY INCENTIVE PLAN, AND IN A
           RESTRICTED STOCK AGREEMENT. A COPY OF THIS PLAN AND SUCH RESTRICTED
           STOCK AGREEMENT MAY BE OBTAINED FROM THE SECRETARY OF PREMIUM
           STANDARD FARMS, INC."

      7.5   Removal of Restrictions. Except as otherwise provided in this
Section 7, Shares of Restricted Stock covered by each Restricted Stock grant
made under this Plan shall be released from escrow as soon as practicable after
the end of the applicable Period of Restriction. The Committee, in its sole
discretion, may accelerate the time at which any restrictions shall lapse and
remove any restrictions. After the end of the applicable Period of Restriction,
the


                                      -13-
<PAGE>   14
Participant shall be entitled to have any legend or legends under Section 7.4.3
removed from his or her Share certificate, and the Shares shall be freely
transferable by the Participant.

      7.6   Voting Rights. During the Period of Restriction, Participants
holding Shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those Shares, unless the applicable Award Agreement
provides otherwise.

      7.7   Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock shall be entitled to receive all
dividends and other distributions paid with respect to such Shares unless
otherwise provided in the applicable Award Agreement. If any such dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid.

      7.8   Return of Restricted Stock to Company. On the date set forth in the
applicable Award Agreement, the Restricted Stock for which restrictions have not
lapsed shall revert to the Company and thereafter shall be available for grant
under this Plan.

                                   SECTION 8

                    PERFORMANCE UNITS AND PERFORMANCE SHARES

      8.1   Grant of Performance Units/Shares. Performance Units and Performance
Shares may be granted to Participants at any time and from time to time, as
shall be determined by the Committee, in its sole discretion. The Committee
shall have complete discretion in determining the number of Performance Units
and Performance Shares granted to each Participant; provided, however, that
during any Fiscal Year, (a) no Participant shall receive Performance Units
having an initial value greater than $500,000, and (b) no Participant shall
receive more than 3,000 Performance Shares.

      8.2   Value of Performance Units/Shares. Each Performance Unit shall have
an initial value that is established by the Committee on or before the Grant
Date. Each Performance Share shall have an initial value equal to the Fair
Market Value of a Share on the Grant Date.

      8.3   Performance Objectives and Other Terms. The Committee shall set
performance objectives in its sole discretion which, depending on the extent to
which they are met, will determine the number or value of Performance Units or
Performance Shares, or both, that will be paid out to the Participants. The time
period during which the performance objectives must be met shall be called the
"Performance Period". Each Award of Performance Units or Performance Shares
shall be evidenced by an Award Agreement that shall specify the Performance
Period, and such other terms and conditions as the Committee, in its sole
discretion, shall determine.


                                      -14-
<PAGE>   15
            8.3.1 General Performance Objectives. The Committee may set
      performance objectives based upon (a) the achievement of Company-wide,
      divisional or individual goals, (b) applicable Federal or state securities
      laws, or (c) any other basis determined by the Committee in its
      discretion.

            8.3.2 Section 162(m) Performance Objectives. For purposes of
      qualifying grants of Performance Units or Performance Shares as
      "performance-based compensation" under Section 162(m) of the Code, the
      Committee, in its sole discretion, may determine that the performance
      objectives applicable to Performance Units or Performance Shares, as the
      case may be, shall be based on the achievement of Performance Goals. The
      Performance Goals shall be set by the Committee on or before the latest
      date permissible to enable the Performance Units or Performance Shares, as
      the case may be, to qualify as "performance-based compensation" under
      Section 162(m) of the Code. In granting Performance Units or Performance
      Shares which are intended to qualify under Code Section 162(m), the
      Committee shall follow any procedures determined by it from time to time
      to be necessary or appropriate in its sole discretion to ensure
      qualification of the Performance Units or Performance Shares, as the case
      may be, under Code Section 162(m) (e.g., in determining the Performance
      Goals).

      8.4   Earning of Performance Units/Shares. After the applicable
Performance Period has ended, the holder of Performance Units or Performance
Shares shall be entitled to receive a payout of the number of Performance Units
or Performance Shares, as the case may be, earned by the Participant over the
Performance Period, to be determined as a function of the extent to which the
corresponding performance objectives have been achieved. After the grant of a
Performance Unit or Performance Share, the Committee, in its sole discretion,
may reduce or waive any performance objectives for such Performance Unit or
Performance Share.

      8.5   Form and Timing of Payment of Performance Units/Shares. Payment of
earned Performance Units or Performance Shares shall be made as soon as
practicable after the end of the applicable Performance Period. The Committee,
in its sole discretion, may pay earned Performance Units or Performance Shares
in the form of cash, in Shares (which have an aggregate Fair Market Value equal
to the value of the earned Performance Units or Performance Shares, as the case
may be, at the end of the applicable Performance Period), or in any combination
thereof.

      8.6   Cancellation of Performance Units/Shares. On the earlier of the date
set forth in the Award Agreement or the Participant's Termination of Service
(other than by death, Disability or, with respect to an Employee, Retirement),
all unearned or unvested Performance Units or Performance Shares shall be
forfeited to the Company, and thereafter shall be available for grant under this
Plan. In the event of a Participant's death, Disability or, with respect to an
Employee, Retirement, prior to the end of a Performance Period, the Committee
shall reduce his or her


                                      -15-
<PAGE>   16
Performance Units or Performance Shares proportionately based on the date of
such Termination of Service.

                                    SECTION 9

                                  MISCELLANEOUS

      9.1   Deferrals. The Committee, in its sole discretion, may permit a
Participant to defer receipt of the payment of cash or the delivery of Shares
that would otherwise be due to such Participant under an Award. Any such
deferral election shall be subject to such rules and procedures as shall be
determined by the Committee in its sole discretion.

      9.2   No Effect on Employment or Service. Nothing in this Plan shall
interfere with or limit in any way the right of the Company to terminate any
Participant's employment or service at any time, with or without cause. For
purposes of this Plan, transfer of employment of a Participant between the
Company and any of its Affiliates (or between Affiliates) shall not be deemed a
Termination of Service. Employment or secure relationship with the Company and
its Affiliates is on an at-will basis only, unless otherwise provided by an
applicable employment or service agreement between the Participant and the
Company or its Affiliate, as the case may be.

      9.3   Participation. No Participant shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected to
receive a future Award.

      9.4   Indemnification. Each person who is or shall have been a member of
the Committee, or of the Board, shall be indemnified and held harmless by the
Company against and from (a) any loss, cost, liability or expense (including
attorneys' fees) that may be imposed upon or reasonably incurred by him or her
in connection with or resulting from any claim, action, suit or proceeding to
which he or she may be a party or in which he or she may be involved by reason
of any action taken or failure to act under this Plan or any Award Agreement,
and (b) from any and all amounts paid by him or her in settlement thereof, with
the Company's prior written approval, or paid by him or her in satisfaction of
any judgment in any such claim, action, suit or proceeding against him or her;
provided, however, that he or she shall give the Company an opportunity, at its
own expense, to handle and defend the same before he or she undertakes to handle
and defend it on his or her own behalf. The foregoing right of indemnification
shall not be exclusive of any other rights of indemnification to which such
persons may be entitled under the Company's Certificate of Incorporation or
Bylaws, by contract, as a matter of law or otherwise, or under any power that
the Company may have to indemnify them or hold them harmless.

      9.5   Successors. All obligations of the Company under this Plan, with
respect to Awards granted hereunder, shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation or otherwise, of all or substantially
all of the business or assets of the Company.


                                      -16-
<PAGE>   17
      9.6   Beneficiary Designations. If permitted by the Committee, a
Participant under this Plan may name a beneficiary or beneficiaries to whom any
vested but unpaid Award shall be paid in the event of the Participant's death.
Each such designation shall revoke all prior designations by the Participant and
shall be effective only if given in a form and manner acceptable to the
Committee. In the absence of any such designation, any vested benefits remaining
unpaid at the Participant's death shall be paid to the Participant's estate and,
subject to the terms of this Plan and of the applicable Award Agreement, any
unexercised vested Award may be exercised by the administrator or executor of
the Participant's estate.

      9.7   Transferability of Awards. Except as provided otherwise in the Award
Agreement, Awards granted under this Plan may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated.

      9.8   No Rights as Stockholder. Except to the limited extent provided in
Sections 7.6 and 7.7, no Participant (nor any beneficiary thereof) shall have
any of the rights or privileges of a stockholder of the Company with respect to
any Shares issuable pursuant to an Award (or the exercise thereof), unless and
until certificates representing such Shares shall have been issued, recorded on
the records of the Company or its transfer agents or registrars, and delivered
to the Participant (or his or her beneficiary).

                                   SECTION 10

                      AMENDMENT, TERMINATION, AND DURATION

      10.1  Amendment, Suspension, or Termination. The Board, in its sole
discretion, may amend or terminate this Plan, or any part thereof, at any time
and for any reason; provided, however, that if and to the extent required by law
or to maintain this Plan's qualification under Rule 16b-3, the Code, or the
rules of any national securities exchange (if applicable), any such amendment
shall be subject to stockholder approval. The amendment, suspension or
termination of this Plan shall not, without the consent of the Participant,
alter or impair any rights or obligations under any Award theretofore granted to
such Participant. No Award may be granted during any period of suspension or
after termination of this Plan.

      10.2  Duration of this Plan. This Plan shall become effective on the date
specified herein, and subject to Section 10.1 (regarding the Board's right to
amend or terminate this Plan), shall remain in effect thereafter; provided,
however, that without further stockholder approval, no Incentive Stock Option
may be granted under this Plan after the tenth (10th) anniversary of the
effective date of this Plan.


                                      -17-
<PAGE>   18
                                   SECTION 11

                                 TAX WITHHOLDING

      11.1  Withholding Requirements. Prior to the delivery of any Shares or
cash pursuant to an Award (or the exercise thereof), the Company shall have the
power and the right to deduct or withhold from any amounts due to the
Participant from the Company, or require a Participant to remit to the Company,
an amount sufficient to satisfy Federal, state and local taxes (including the
Participant's FICA obligation) required to be withheld with respect to such
Award (or the exercise thereof).

      11.2  Withholding Arrangements. The Committee, in its sole discretion and
pursuant to such procedures as it may specify from time to time, may permit a
Participant to satisfy such tax withholding obligation, in whole or in part, by
delivering to the Company Mature Shares then owned by the Participant having a
Fair Market Value equal to the amount required to be withheld. The amount of the
withholding requirement shall be deemed to include any amount that the Committee
agrees may be withheld at the time any such election is made, not to exceed the
amount determined by using the maximum federal, state or local marginal income
tax rates applicable to the Participant with respect to the Award on the date
that the amount of tax to be withheld is to be determined. The Fair Market Value
of the Mature Shares to be withheld or delivered shall be determined as of the
date that the taxes are required to be withheld.

                                    SECTION 12

                                CHANGE IN CONTROL

      12.1  Change in Control. In the event of a Change in Control of the
Company, all Awards granted under this Plan that then are outstanding and not
then exercisable or are subject to restrictions, shall, unless otherwise
provided for in the Award Agreements applicable thereto, become immediately
exercisable, and all restrictions shall be removed, as of the first date that
the Change in Control has been deemed to have occurred, and shall remain as such
for the remaining life of the Award as provided herein and within the provisions
of the related Award Agreements.

Notwithstanding the preceding sentence, in the event that the Committee is
advised by the Company's independent auditors that the effect of the preceding
sentence would be to preclude the ability of the Company to account for an
acquisition or merger transaction as a pooling of interests, the Committee may
declare the preceding sentence to be inoperable to such extent as the Committee,
in its sole discretion, deems advisable. Notwithstanding the preceding sentence,
in the event that the Committee is advised by the Company's independent auditors
that the effect of the preceding sentence would be to preclude the ability of
the Company to account for a transaction as a pooling of interests, the
Committee may declare the preceding sentence to be inoperable to such extent as
the Committee, in its sole discretion, deems advisable.


                                      -18-
<PAGE>   19
      12.2  Definition. For purposes of Section 12.1 above, a Change in Control
of the Company shall be deemed to have occurred if the conditions set forth in
any one or more of the following shall have been satisfied, unless such
condition shall have received prior approval of a majority vote of the
Continuing Directors, as defined below, indicating that Section 12.1 shall not
apply thereto:

                  (a)   any "person", as such term is used in Sections 13(d) and
            14(d) of the 1934 Act (other than the Company, any trustee or other
            fiduciary holding securities under an employee benefit plan of the
            Company or any corporation owned, directly or indirectly, by the
            stockholders of the Company in substantially the same proportions as
            their ownership of stock of the Company), is or becomes the
            "beneficial owner" (as defined in Rule 13(d)(3) under the Exchange
            Act), directly or indirectly, of securities of the Company
            representing thirty percent (30%) or more of the combined voting
            power of the Company's then outstanding securities;

                  (b)   during any period of two consecutive years (not
            including any period prior to the Effective Date of this Plan),
            individuals ("Existing Directors") who at the beginning of such
            period constitute the Board of Directors, and any new board member
            (an "Approved Director") (other than a board member designated by a
            person who has entered into an agreement with the Company to effect
            a transaction described in paragraph (a), (b) or (c) of this Section
            12.2) whose election by the Board of Directors or nomination for
            election by the Company's shareholders was approved by a vote of a
            least two-thirds (2/3) of the board members then still in office who
            either were board members at the beginning of the period or whose
            election or nomination for election previously was so approved
            (Existing Directors together with Approved Directors constituting
            "Continuing Directors"), cease for any reason to constitute at least
            a majority of the Board of Directors; or

                  (c)   the stockholders of the Company approve a merger or
            consolidation of the Company with any other person, other than (i) a
            merger or consolidation which would result in the voting securities
            of the Company outstanding immediately prior thereto continuing to
            represent (either by remaining outstanding or by being converted
            into voting securities for the surviving entity) more than fifty
            percent (50%) of the combined voting power of the voting securities
            of the Company or such surviving entity outstanding immediately
            after such merger or consolidation, or (ii) a merger in which no
            "person" (as defined in Section 12.2(a)) acquires more than thirty
            percent (30%) of the combined voting power of the Company's then
            outstanding securities; or


                                      -19-
<PAGE>   20
                  (d)   the stockholders of the Company approve a plan of
            complete liquidation of the Company or an agreement for the sale or
            disposition by the Company of all or substantially all of the
            Company's assets (or any transaction having a similar effect).

                                   SECTION 13

                               LEGAL CONSTRUCTION

      13.1  Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.

      13.2  Severability. In the event any provision of this Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of this Plan, and this Plan shall be construed and enforced
as if the illegal or invalid provision had not been included.

      13.3  Requirements of Law. The grant of Awards and the issuance of Shares
under this Plan shall be subject to all applicable laws, rules and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required from time to time.

      13.4  Securities Law Compliance. With respect to Section 16 Persons,
Awards under this Plan are intended to comply with all applicable conditions of
Rule 16b-3. To the extent any provision of this Plan, Award Agreement or action
by the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable or appropriate by the Committee in
its sole discretion.

      13.5  Governing Law. This Plan and all Award Agreements shall be construed
in accordance with and governed by the laws of the State of Delaware (excluding
its conflict of laws provisions).

      13.6  Captions. Captions are provided herein for convenience of reference
only, and shall not serve as a basis for interpretation or construction of this
Plan.

                                                        Adopted December 1, 1999


                                      -20-