Document:

EX-10.3 FORM OF LIMITED PARTNERSHIP

 

EXHIBIT 10.3

FORM OF LIMITED PARTNERSHIP AGREEMENT

OF

MOODY NATIONAL OPERATING PARTNERSHIP I, L.P.

A DELAWARE LIMITED PARTNERSHIP

                                   , 2008

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	ARTICLE 1 DEFINED TERMS	 	 	2	 
	 
	 	 	 	 	 	 
	ARTICLE 2 PARTNERSHIP FORMATION AND IDENTIFICATION	 	 	10	 
	2.1
	 	Formation	 	 	10	 
	2.2
	 	Name, Office and Registered Agent	 	 	10	 
	2.3
	 	Partners	 	 	11	 
	2.4
	 	Term and Dissolution	 	 	11	 
	2.5
	 	Filing of Certificate and Perfection of Limited Partnership	 	 	11	 
	2.6
	 	Certificates Describing Partnership Units and Special Partnership Units	 	 	12	 
	 
	 	 	 	 	 	 
	ARTICLE 3 BUSINESS OF THE PARTNERSHIP	 	 	12	 
	 
	 	 	 	 	 	 
	ARTICLE 4 CAPITAL CONTRIBUTIONS AND ACCOUNTS	 	 	12	 
	4.1
	 	Capital Contributions	 	 	12	 
	4.2
	 	Additional Capital Contributions and Issuances of Additional Partnership Interests	 	 	12	 
	4.3
	 	Additional Funding	 	 	14	 
	4.4
	 	Capital Accounts	 	 	14	 
	4.5
	 	Percentage Interests	 	 	15	 
	4.6
	 	No Interest On Contributions	 	 	15	 
	4.7
	 	Return Of Capital Contributions	 	 	15	 
	4.8
	 	No Third Party Beneficiary	 	 	15	 
	 
	 	 	 	 	 	 
	ARTICLE 5 PROFITS AND LOSSES; DISTRIBUTIONS	 	 	16	 
	5.1
	 	Allocation of Profit and Loss	 	 	16	 
	5.2
	 	Distribution of Cash	 	 	17	 
	5.3
	 	REIT Distribution Requirements	 	 	19	 
	5.4
	 	No Right to Distributions in Kind	 	 	19	 
	5.5
	 	Limitations on Return of Capital Contributions	 	 	19	 
	5.6
	 	Distributions Upon Liquidation	 	 	19	 
	5.7
	 	Substantial Economic Effect	 	 	19	 
	 
	 	 	 	 	 	 
	ARTICLE 6 RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER	 	 	20	 
	6.1
	 	Management of the Partnership	 	 	20	 
	6.2
	 	Delegation of Authority	 	 	22	 
	6.3
	 	Indemnification and Exculpation of Indemnitees	 	 	22	 
	6.4
	 	Liability of the General Partner	 	 	24	 
	6.5
	 	Reimbursement of General Partner	 	 	24	 
	6.6
	 	Outside Activities	 	 	25	 
	6.7
	 	Employment or Retention of Affiliates	 	 	25	 
	6.8
	 	General Partner Participation	 	 	25	 
	6.9
	 	Title to Partnership Assets	 	 	26	 
	6.10
	 	Miscellaneous	 	 	26	 
	6.11
	 	No Duplication of Fees or Expenses	 	 	26	 
	 
	 	 	 	 	 	 
	ARTICLE 7 CHANGES IN GENERAL PARTNER	 	 	26	 
	7.1
	 	Transfer of the General Partner’s Partnership Interest	 	 	26	 

 

 

	 	 	 	 	 	 	 
	7.2
	 	Admission of a Substitute or Additional General Partner	 	 	28	 
	7.3
	 	Effect of Bankruptcy, Withdrawal, Death or Dissolution of a General Partner	 	 	29	 
	7.4
	 	Removal of a General Partner	 	 	29	 
	 
	 	 	 	 	 	 
	ARTICLE 8 RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS	 	 	30	 
	8.1
	 	Management of the Partnership	 	 	30	 
	8.2
	 	Power of Attorney	 	 	30	 
	8.3
	 	Limitation on Liability of Limited Partners	 	 	30	 
	8.4
	 	Ownership by Limited Partner of Corporate General Partner or Affiliate	 	 	30	 
	8.5
	 	Redemption Right	 	 	31	 
	8.6
	 	Redemption of Special Partnership Units	 	 	32	 
	8.7
	 	Distribution Reinvestment Plan	 	 	33	 
	 
	 	 	 	 	 	 
	ARTICLE 9 TRANSFERS OF LIMITED PARTNERSHIP INTERESTS	 	 	34	 
	9.1
	 	Purchase for Investment	 	 	34	 
	9.2
	 	Restrictions on Transfer of Limited Partnership Interests	 	 	34	 
	9.3
	 	Admission of Substitute Limited Partner	 	 	35	 
	9.4
	 	Rights of Assignees of Partnership Interests	 	 	36	 
	9.5
	 	Effect of Bankruptcy, Death, Incompetence or Termination of a Limited Partner	 	 	36	 
	9.6
	 	Joint Ownership of Interests	 	 	37	 
	 
	 	 	 	 	 	 
	ARTICLE 10 BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS	 	 	37	 
	10.1
	 	Books and Records	 	 	37	 
	10.2
	 	Custody of Partnership Funds; Bank Accounts	 	 	37	 
	10.3
	 	Fiscal and Taxable Year	 	 	37	 
	10.4
	 	Annual Tax Information and Report	 	 	38	 
	10.5
	 	Tax Matters Partner; Tax Elections; Special Basis Adjustments	 	 	38	 
	10.6
	 	Reports to Limited Partners	 	 	38	 
	 
	 	 	 	 	 	 
	ARTICLE 11 AMENDMENT OF AGREEMENT; MERGER	 	 	39	 
	 
	 	 	 	 	 	 
	ARTICLE 12 GENERAL PROVISIONS	 	 	39	 
	12.1
	 	Notices	 	 	39	 
	12.2
	 	Survival of Rights	 	 	39	 
	12.3
	 	Additional Documents	 	 	39	 
	12.4
	 	Severability	 	 	40	 
	12.5
	 	Entire Agreement	 	 	40	 
	12.6
	 	Pronouns and Plurals	 	 	40	 
	12.7
	 	Headings	 	 	40	 
	12.8
	 	Counterparts	 	 	40	 
	12.9
	 	Governing Law	 	 	40	 
	 
	 	 	 	 	 	 
	EXHIBIT A  CONTRIBUTIONS AND INTEREST	 	 	A-1	 
	 
	 	 	 	 	 	 
	EXHIBIT B  NOTICE OF EXERCISE OF REDEMPTION RIGHT	 	 	B-1	 

ii

 

LIMITED PARTNERSHIP AGREEMENT

OF

MOODY NATIONAL OPERATING PARTNERSHIP I, L.P.

RECITALS

     This Limited Partnership Agreement (this “Agreement”) is entered into this ___th day of                     ,
2008, between Moody National REIT I, Inc., a Maryland corporation (the “General
Partner”), and the Limited Partners set forth on Exhibit A attached hereto. Capitalized
terms used herein but not otherwise defined shall have the meanings given them in Article 1.

AGREEMENT

     WHEREAS, the General Partner intends to qualify as a real estate investment trust under the
Internal Revenue Code of 1986, as amended;

     WHEREAS, Moody National Operating Partnership I., L.P. (the “Partnership”), was formed
on January 18, 2008 as a limited partnership under the laws of the State of Delaware, pursuant to a
Certificate of Limited Partnership filed with the Office of the Secretary of State of the State of
Delaware on January 18, 2008;

     WHEREAS, the General Partner desires to conduct its current and future business through the
Partnership;

     WHEREAS, in furtherance of the foregoing, the General Partner desires to contribute cash or
assets to the Partnership from time to time;

     WHEREAS, in exchange for the General Partner’s contribution of cash or assets, the parties
desire that the Partnership issue Partnership Units to the General Partner in accordance with the
terms of this Agreement;

     WHEREAS, the Limited Partners will contribute cash or certain of their property to the
Partnership in exchange for Partnership Units or Special Partnership Units in accordance with the
terms of this Agreement;

     WHEREAS, in furtherance of the Partnership’s business, the Partnership will acquire Properties
and other assets from time to time by means of the purchase or contribution of such Properties or
other assets to the Partnership by the owners thereof in exchange for Partnership Units; and

     WHEREAS, the parties hereto wish to establish herein their respective rights and obligations
in connection with all of the foregoing and certain other matters.

     NOW, THEREFORE, in consideration of the foregoing, of mutual covenants between the parties
hereto, and of other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

 

 

ARTICLE 1

DEFINED TERMS

     The following defined terms used in this Agreement shall have the meanings specified below:

     “Act” means the Delaware Revised Uniform Limited Partnership Act, as it may be amended
from time to time.

     “Additional Funds” has the meaning set forth in Section 4.3 hereof.

     “Additional Securities” means any additional REIT Shares (other than REIT Shares
issued in connection with a redemption pursuant to Section 8.5 hereof or REIT Shares issued
pursuant to a dividend reinvestment plan of the General Partner) or rights, options, warrants or
convertible or exchangeable securities containing the right to subscribe for or purchase REIT
Shares, as set forth in Section 4.2(a)(ii).

     “Administrative Expenses” means (i) all administrative and operating costs and
expenses incurred by the Partnership, (ii) those administrative costs and expenses of the General
Partner, including any salaries or other payments to directors, officers or employees of the
General Partner, and any accounting and legal expenses of the General Partner, which expenses, the
Partners have agreed, are expenses of the Partnership and not the General Partner, and (iii) to the
extent not included in clause (ii) above, REIT Expenses; provided, however, that
Administrative Expenses shall not include any administrative costs and expenses incurred by the
General Partner that are attributable to Properties or partnership interests in a Subsidiary
Partnership that are owned by the General Partner directly.

     “Advisor or Advisors” means the Person or Persons, if any, appointed, employed or
contracted with by the General Partner and responsible for directing or performing the day-to-day
business affairs of the General Partner, including any Person to whom such Advisor subcontracts
substantially all of such functions.

     “Advisory
Agreement” means the agreement between the General Partner, the Advisor and
the other parties named therein pursuant to which the Advisor will direct or perform the day-to-day
business affairs of the General Partner.

     “Affiliate” means, with respect to any Person, (i) any Person directly or indirectly,
owning, controlling or holding with the power to vote 10% of more of the outstanding voting
securities of such other Person; (ii) any Person 10% or more of whose outstanding voting securities
are directly or indirectly owned, controlled or held, with the power to vote, by such other Person;
(iii) any Person directly or indirectly controlling, controlled by or under common control with
such other Person; (iv) any executive officer, director, trustee or general partner of such other
Person; and (v) any legal entity for which such Person acts as an executive officer, director, trustee
or general partner.

     “Aggregate Share Ownership Limit” means not more than 9.8% in value of the aggregate
of the outstanding shares of stock of the General Partner of any class or series, including common
shares or preferred shares.

     “Agreed Value” means the fair market value of a Partner’s non-cash Capital
Contribution as of the date of contribution as agreed to by such Partner and the General Partner.
The names and addresses of the Partners, number of Partnership Units or Special Partnership Units
issued to each Partner, and the Agreed Value of non-cash Capital Contributions as of the date of
contribution are set forth on Exhibit A.

2

 

     “Agreement” means this Limited Partnership Agreement, as amended, modified
supplemented or restated from time to time, as the context requires.

     “Applicable Percentage” has the meaning provided in Section 8.5(b) hereof.

     “Articles of Incorporation” means the Articles of Incorporation of the General
Partner, as amended or restated from time to time, filed with the Maryland State Department of
Assessments and Taxation.

     “Capital Account” has the meaning provided in Section 4.4 hereof.

     “Capital Contribution” means the total amount of cash, cash equivalents, and the
Agreed Value of any Property or other asset (other than cash) contributed or agreed to be
contributed, as the context requires, to the Partnership by each Partner pursuant to the terms of
this Agreement. Any reference to the Capital Contribution of a Partner shall include the Capital
Contribution made by a predecessor holder of the Partnership Interest of such Partner.

     “Carrying Value” means, with respect to any asset of the Partnership, the asset’s
adjusted net basis for federal income tax purposes or, in the case of any asset contributed to the
Partnership, the fair market value of such asset at the time of contribution, reduced by any
amounts attributable to the inclusion of liabilities in basis pursuant to Section 752 of the Code,
except that the Carrying Values of all assets may, at the discretion of the General Partner, be
adjusted to equal their respective fair market values (as determined by the General Partner), in
accordance with the rules set forth in Regulations Section 1.704-1(b)(2)(iv)(f), as provided for in
Section 4.4. In the case of any asset of the Partnership that has a Carrying Value that differs
from its adjusted tax basis, the Carrying Value shall be adjusted by the amount of depreciation,
depletion and amortization calculated for purposes of the definition of Profit and Loss rather than
the amount of depreciation, depletion and amortization determined for federal income tax purposes.

     “Cash Amount” means an amount of cash per Partnership Unit equal to the lesser of (i)
the Value of the REIT Shares Amount on the date of receipt by the General Partner of a Notice of
Redemption or (ii) the applicable Redemption Price determined by the General Partner.

     “Certificate” means any instrument or document that is required under the laws of the
State of Delaware, or any other jurisdiction in which the Partnership conducts business, to be
signed and sworn to by the Partners of the Partnership (either by themselves or pursuant to the
power-of-attorney granted to the General Partner in Section 8.2 hereof) and filed for recording in
the appropriate public offices within the State of Delaware or such other jurisdiction to perfect
or maintain the Partnership as a limited partnership, to effect the admission, withdrawal, or
substitution of any Partner of the Partnership, or to protect the limited liability of the Limited
Partners as limited partners under the laws of the State of Delaware or such other jurisdiction.

     “Code” means the Internal Revenue Code of 1986, as amended, and as hereafter amended
from time to time. Reference to any particular provision of the Code shall mean that provision in
the Code at the date hereof and any successor provision of the Code.

     “Commission” means the U.S. Securities and Exchange Commission.

     “Common Share Ownership Limit” means not more than 9.8% (in value or in number of the
aggregate of the outstanding shares of stock of the General Partner of any class or series,
including common shares or preferred shares, whichever is more restrictive) of the aggregate of the
REIT Shares.

3

 

     “Conversion Factor” means 1.0, provided that in the event that the General Partner (i)
declares or pays a dividend on its outstanding REIT Shares in REIT Shares or makes a distribution
to all holders of its outstanding REIT Shares in REIT Shares, (ii) subdivides its outstanding REIT
Shares, or (iii) combines its outstanding REIT Shares into a smaller number of REIT Shares, the
Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the
numerator of which shall be the number of REIT Shares issued and outstanding on the record date for
such dividend, distribution, subdivision or combination (assuming for such purposes that such
dividend, distribution, subdivision or combination has occurred as of such time), and the
denominator of which shall be the actual number of REIT Shares (determined without the above
assumption) issued and outstanding on such date and, provided further, that in the event that an
entity other than an Affiliate of the General Partner shall become General Partner pursuant to any
merger, consolidation or combination of the General Partner with or into another entity (the
“Successor Entity”), the Conversion Factor shall be adjusted by multiplying the Conversion
Factor by the number of shares of the Successor Entity into which one REIT Share is converted
pursuant to such merger, consolidation or combination, determined as of the date of such merger,
consolidation or combination. Any adjustment to the Conversion Factor shall become effective
immediately after the effective date of such event retroactive to the record date, if any, for such
event; provided, however, that if the General Partner receives a Notice of Redemption after the
record date, but prior to the effective date of such dividend, distribution, subdivision or
combination, the Conversion Factor shall be determined as if the General Partner had received the
Notice of Redemption immediately prior to the record date for such dividend, distribution,
subdivision or combination.

     “Director” means a director of the General Partner.

     “Event of Bankruptcy” as to any Person means the filing of a petition for relief as to
such Person as debtor or bankrupt under the Bankruptcy Code of 1978 or similar provision of law of
any jurisdiction (except if such petition is contested by such Person and has been dismissed within
90 days); insolvency or bankruptcy of such Person as finally determined by a court proceeding;
filing by such Person of a petition or application to accomplish the same or for the appointment of
a receiver or a trustee for such Person or a substantial part of his assets; commencement of any
proceedings relating to such Person as a debtor under any other reorganization, arrangement,
insolvency, adjustment of debt or liquidation law of any jurisdiction, whether now in existence or
hereinafter in effect, either by such Person or by another, provided that if such proceeding is
commenced by another, such Person indicates his approval of such proceeding, consents thereto or
acquiesces therein, or such proceeding is contested by such Person and has not been finally
dismissed within 90 days.

     “Excepted Holder Limit” means the percentage limit of the outstanding shares of stock
of the General Partner of any class or series, including common shares or preferred shares,
established by the board of directors of the General Partner for a Person that is exempt from the
Aggregate Share Ownership Limit and the Common Share Ownership Limit.

     “General Partner” means Moody National REIT I, Inc., a Maryland corporation, and any
Person who becomes a substitute or additional General Partner as provided herein, and any of their
successors as General Partner.

     “General Partnership Interest” means a Partnership Interest held by the General
Partner that is a general partnership interest.

     “Indemnitee” means (i) any Person made a party to a proceeding by reason of its status
as the General Partner or a director, officer or employee of the General Partner or the
Partnership, and (ii) such other Persons (including Affiliates of the General Partner or the
Partnership) as the General Partner may designate from time to time, in its sole and absolute
discretion.

4

 

     “Independent Directors” means a Director who is not on the date of determination, and
within the last two years from the date of determination has not been, directly or indirectly
associated with the sponsor of the General Partner or the Advisor by virtue of (i) ownership of an
interest in the sponsor, the Advisor or any of their Affiliates, other than the General Partner,
(ii) employment by the sponsor, the Advisor or any of their Affiliates, (iii) service as an officer
or director of the sponsor, the Advisor or any of their Affiliates, other than as a Director, (iv)
performance of services, other than as a Director, for the General Partner, (v) service as a
director or trustee of more than three real estate investment trusts organized by the sponsor or
advised by the Advisor or (vi) maintenance of a material business or professional relationship with
the sponsor, the Advisor or any of their Affiliates. A business or professional relationship is
considered “material” if the aggregate gross revenue derived by the Director from the sponsor, the
Advisor and their Affiliates exceeds five percent of either the Director’s annual gross revenue
during either of the last two years or the Director’s net worth on a fair market value basis. An
indirect association with the sponsor or the Advisor shall include circumstances in which a
Director’s spouse, parent, child, sibling, mother- or father-in-law, son- or daughter-in-law or
brother- or sister-in-law is or has been associated with the sponsor, the Advisor, any of their
Affiliates or the General Partner.

     “Joint Venture” means any joint venture or general partnership arrangement in which
the Partnership is a co-venturer or general partner which are established to acquire one or more
Real Estate Assets.

     “Limited Partner” means any Person named as a Limited Partner on Exhibit A
attached hereto, and any Person who becomes a Substitute Limited Partner, in such Person’s capacity
as a Limited Partner in the Partnership.

     “Limited Partnership Interest” means the ownership interest of a Limited Partner in
the Partnership at any particular time, including the right of such Limited Partner to any and all
benefits to which such Limited Partner may be entitled as provided in this Agreement and in the
Act, together with the obligations of such Limited Partner to comply with all the provisions of
this Agreement and of such Act.

     “Listing” means the listing of the shares of the General Partner’s stock, previously
issued by the General Partner pursuant to an effective registration statement and such shares
currently registered with the Commission pursuant to an effective registration statement, on a
national securities exchange or the receipt by holders of shares of the General Partner’s stock of
securities that are listed on a national securities exchange in exchange for shares of the General
Partner’s stock. Upon such Listing, the shares shall be deemed “Listed”.

     “Loss” has the meaning provided in Section 5.1(i) hereof.

     “Minimum Limited Partnership Interest” means the lesser of (i) 1% or (ii) if the total
Capital Contributions to the Partnership exceeds $50 million, 1% divided by the ratio of the total
Capital Contributions to the Partnership to $50 million; provided, however, that the Minimum
Limited Partnership Interest shall not be less than 0.2% at any time.

     “Mortgages” means, in connection with any mortgage financing provided, invested in,
participated in or purchased by the Partnership, all of the notes, deeds of trust, mortgages,
security interests or other evidences of indebtedness or obligations, which are secured by or,
collateralized by, or applicable to any Real Estate Assets owned by the borrowers under such notes,
deeds of trust, mortgages, security interests or other evidences of indebtedness or obligations.

5

 

     “Net Sales Proceeds” means (i) in the case of a transaction described in clause (A)(i)
of the definition of Sale, the proceeds of any such transaction less the amount of selling expenses
incurred by or on behalf of the Partnership, including all real estate commissions, closings costs
and legal fees and expenses; (ii) in the case of a transaction described in clause (A)(ii) of the
definition of Sale, the proceeds of any such transaction less the amount of selling expenses
incurred by or on behalf of the Partnership, including any legal fees and expenses and other
selling expenses incurred in connection with such transaction; (iii) in the case of a transaction
described in clause (A)(iii) of the definition of Sale, the proceeds of any such transaction
actually distributed to the Partnership from the Joint Venture less the amount of any selling
expenses incurred by or on behalf of the Partnership (other than those paid by the Joint Venture);
(iv) in the case of a transaction described in clause (A)(iv) of the definition of Sale, the
proceeds of any such transaction (including the aggregate of all payment under a Mortgage on or in
satisfaction thereof other than regularly schedule interest payments) less the amount of selling
expenses incurred by or on behalf of the Partnership, including all commissions, closing costs and
legal fees and expenses; (v) in the case of a transaction described in clause (A)(v) of the
definition of Sale, the proceeds of any such transaction less the amount of selling expenses
incurred by or on behalf of the Partnership, including any legal fees and expenses and other
selling expenses incurred in connection with such transaction; and (vi) in the case of a
transaction described in clause (B) of the definition of Sale, the proceeds of such transaction or
series of transactions less all amounts generated thereby which are reinvested in one or more
assets as described in clause (B) of the definition of Sale within 180 days thereafter and less the
amount of any real estate commissions, closing costs, and legal fees and expenses and other selling
expenses incurred by or allocated to the Partnership in connection with such transaction or series
of transactions. Net Sale Proceeds shall also include any amounts that the General Partner
determines, in its discretion, to be economically equivalent to the proceeds of a Sale. Net Sales
Proceeds shall not include any reserves established by the Partnership in its sole discretion.

     “Nonrecourse Liability” shall have the meaning set forth in Regulations Sections
1.704-2(b)(3) and 1.752-1(a)(2).

     “Notice of Redemption” means the Notice of Exercise of Redemption Right substantially
in the form attached as Exhibit B hereto.

     “Offer” has the meaning set forth in Section 7.1(c)(ii) hereof.

     “Offering” means the initial offer and sale of REIT Shares to the public.

     “OP Unitholders” means all holders of Partnership Interests other than the Special OP
Unitholders.

     “Original Limited Partner” means the Limited Partners designated as “Original Limited
Partners” on Exhibit A hereto.

     “Partner” means any General Partner or Limited Partner.

     “Partner Nonrecourse Debt” shall have the meaning set forth in Regulations Section
1.704-2(b)(4).

     “Partner Nonrecourse Debt Minimum Gain” shall have the meaning set forth in
Regulations Section 1.704-2(i)(2).

     “Partner Nonrecourse Deductions” shall have the meaning set forth in Regulations
Sections 1.704-2(i)(1) and 1.704-2(i)(2).

6

 

     “Partnership” means Moody National Operating Parternship I, L.P., a Delaware limited
partnership.

     “Partnership Interest” means an ownership interest in the Partnership held by either a
Limited Partner or the General Partner and includes any and all benefits to which the holder of
such a Partnership Interest may be entitled as provided in this Agreement, together with all
obligations of such Person to comply with the terms and provisions of this Agreement.

     “Partnership Minimum Gain” shall have the meaning set forth in Regulations Sections
1.704-2(b)(2) and 1.704-2(d).

     “Partnership Record Date” means the record date established by the General Partner for
the distribution of cash pursuant to Section 5.2 hereof, which record date shall be the same as the
record date established by the General Partner for a distribution to its stockholders of some or
all of its portion of such distribution.

     “Partnership Unit” means a fractional, undivided share of the Partnership Interests of
all Partners issued hereunder excluding the Partnership Interests represented by Special
Partnership Units. The allocation of Partnership Units among the Partners shall be as set forth on
Exhibit A, as such Exhibit may be amended from time to time.

     “Percentage Interest” means the percentage ownership interest in the Partnership of
each Partner, as determined by dividing the Partnership Units owned by a Partner by the total
number of Partnership Units then outstanding. The Percentage Interest of each Partner shall be as
set forth on Exhibit A, as such Exhibit may be amended from time to time.

     “Person” means any individual, partnership, limited liability company, corporation,
joint venture, trust or other entity.

     “Profit” has the meaning provided in Section 5.1(i) hereof.

     “Property” means any Real Estate Asset or other investment in which the Partnership
holds an ownership interest.

     “Real Estate Assets” means unimproved and improved real property, real estate —
related assets and any direct or indirect interest therein, including, without limitation, fee or
leasehold interests, options, leases, partnership and joint venture interests, equity and debt
securities of entities that own real estate, first or second mortgages on real property, mezzanine
loans secured by junior liens on real property, preferred equity interests secured by a property
owner’s interest in real property and other contractual rights in real estate.

     “Redemption Price” means the Value of the REIT Shares Amount on the date of receipt by
the General Partner of a Notice of Redemption multiplied by any discount determined by the General
Partner, including but not limited to, any discount based upon the combined number of years that
the applicable Partner has held the Partnership Units offered for redemption.

     “Redemption Right” has the meaning provided in Section 8.5(a) hereof.

     “Regulations” means the Federal income tax regulations promulgated under the Code, as
amended and as hereafter amended from time to time. Reference to any particular provision of the

7

 

Regulations shall mean that provision of the Regulations on the date hereof and any successor
provision of the Regulations.

     “REIT” means a real estate investment trust under Sections 856 through 860 of the
Code.

     “REIT Expenses” means (i) costs and expenses relating to the formation and continuity
of existence and operation of the General Partner and any Subsidiaries thereof (which Subsidiaries
shall, for purposes hereof, be included within the definition of General Partner), including taxes,
fees and assessments associated therewith, any and all costs, expenses or fees payable to any
director, officer, or employee of the General Partner, (ii) costs and expenses relating to any
public offering and registration of securities by the General Partner and all statements, reports,
fees and expenses incidental thereto, including, without limitation, underwriting discounts and
selling commissions applicable to any such offering of securities, and any costs and expenses
associated with any claims made by any holders of such securities or any underwriters or placement
agents thereof, (iii) costs and expenses associated with any repurchase of any securities by the
General Partner, (iv) costs and expenses associated with the preparation and filing of any periodic
or other reports and communications by the General Partner under federal, state or local laws or
regulations, including filings with the Commission, (v) costs and expenses associated with
compliance by the General Partner with laws, rules and regulations promulgated by any regulatory
body, including the Commission and any securities exchange, (vi) costs and expenses associated with
any 401(k) plan, incentive plan, bonus plan or other plan providing for compensation for the
employees of the General Partner, (vii) costs and expenses incurred by the General Partner relating
to any issuing or redemption of Partnership Interests, and (viii) all other operating or
administrative costs of the General Partner incurred in the ordinary course of its business on
behalf of or in connection with the Partnership.

     “REIT Share” means a common share of beneficial interest in the General Partner (or
successor entity, as the case may be).

     “REIT Shares Amount” means a number of REIT Shares equal to the product of the number
of Partnership Units offered for exchange by a Tendering Party, multiplied by the Conversion Factor
as adjusted to and including the Specified Redemption Date; provided that in the event the General
Partner issues to all holders of REIT Shares rights, options, warrants or convertible or
exchangeable securities entitling the stockholders to subscribe for or purchase REIT Shares, or any
other securities or property (collectively, the “rights”), and the rights have not expired
at the Specified Redemption Date, then the REIT Shares Amount shall also include the rights
issuable to a holder of the REIT Shares Amount of REIT Shares on the record date fixed for purposes
of determining the holders of REIT Shares entitled to rights.

     “Related Party” means, with respect to any Person, any other Person whose ownership of
shares of the General Partner’s capital stock would be attributed to the first such Person under
Code Section 544 (as modified by Code Section 856(h)(1)(B)).

     “Sale” means (A) any transaction or series of transactions whereby: (i) the
Partnership directly or indirectly (except as described in other subsections of this definition)
sells, grants, transfers, conveys, or relinquishes its ownership of any Real Estate Asset or
portion thereof, including the lease of any Real Estate Asset consisting of the building only, and
including any event with respect to any Real Estate Asset which gives rise to a significant amount
of insurance proceeds or condemnation awards; (ii) the Partnership directly or indirectly (except
as described in other subsections of this definition) sells, grants, transfers, conveys, or
relinquishes its ownership of all or substantially all of the interest of the Partnership in any
Joint Venture; (iii) any Joint Venture directly or indirectly (except as described in other
subsections of this definition) in which the Partnership as a co-venturer or partner sells, grants,
transfers, conveys, or

8

 

relinquishes its ownership of any Real Estate Asset or portion thereof, including any event
with respect to any Real Estate Asset which gives rise to insurance claims or condemnation awards;
(iv) the Partnership directly or indirectly (except as described in other subsections of this
definition) sells, grants, conveys or relinquishes its interest in any Securities and Debt-related
Investment or portion thereof (including with respect to any Mortgage, all payments thereunder or
in satisfaction thereof other than regularly scheduled interest payments) of amounts owed pursuant
to such Mortgage and any event which gives rise to a significant among of insurance proceeds or
similar awards; or (v) the Partnership directly or indirectly (except as described in any other
subsections of this definition) sells, grants, transfers, conveys, or relinquishes its ownership of
any other Real Estate Asset, Mortgage or other investment owner by the Partnership, directly or
indirectly through one or more of its Affiliates, and any other investment made, directly or
indirectly through one of more of its Affiliates, not previously described in this definition of
any portion thereof, but (B) not including any transaction or series of transactions specified in
clause (A) (i) through (v) above in which the proceeds of such transaction or series of
transactions are reinvested by the Partnership in one or more such assets within 180 days
thereafter.

     “Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

     “Securities and Debt-related Investments” means any investments by the General Partner
or the Partnership in (i) real estate securities such as common stock, preferred stock and options
to acquire stock in REITs and other real estate companies and (ii) debt-related investments such as
(a) mortgage, mezzanine, bridge and other loans and (b) debt and derivative securities related to
real estate assets including mortgage-backed securities, collateralized debt obligations, debt
securities issued by real estate companies and credit default swaps

     “Service” means the United States Internal Revenue Service.

     “Special OP Unitholders” means the holders of Special Partnership Units.

     “Special Partnership Unit” means a unit of a series of Partnership Interests
designated as Special Partnership Units issued pursuant to Section 4.1. The number of Special
Partnership Units outstanding and the Special Percentage Interests in the Partnership represented
by such Special Partnership Units are set forth on Exhibit A, as such Exhibit may be
amended from time to time. A holder of a Special Partnership Unit shall have the same rights and
preferences as a holder of a Partnership Unit under this Agreement that is a Limited Partner except
as set forth in Sections 5.2(b), 7.1(c), 8.5 and 8.6.

     “Special Percentage Interest” shall mean the percentage ownership interest in the
Partnership of each Special OP Unitholder, as determined by dividing the Special Partnership Units
owned by each Special OP Unitholder by the total number of Special Partnership Units then
outstanding. The Special Percentage Interest of each Partner shall be as set forth on Exhibit
A, as such Exhibit may be amended from time to time.

     “Specified Redemption Date” means the first business day of the month that is at least
sixty (60) business days after the receipt by the General Partner of the Notice of Redemption.

     “Subsidiary” means, with respect to any Person, any corporation or other entity of
which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding
equity interests is owned, directly or indirectly, by such Person.

     “Subsidiary Partnership” means any partnership of which the partnership interests
therein are owned by the General Partner or a direct or indirect subsidiary of the General Partner.

9

 

     “Substitute Limited Partner” means any Person admitted to the Partnership as a Limited
Partner pursuant to Section 9.3 hereof.

     “Successor Entity” has the meaning provided in the definition of “Conversion Factor”
contained herein.

     “Survivor” has the meaning set forth in Section 7.1(d) hereof.

     “Target Final Balances” shall have the meaning set forth in Section 5.1(j) hereof.

     “Tax Matters Partner” has the meaning described in Section 10.5(a) hereof.

     “Termination Event” means the termination or nonrenewal of the Advisory Agreement (i)
in connection with a merger, sale of assets or transaction involving the General Partner pursuant
to which a majority of the directors of the General Partner then in office are replaced or removed,
(ii) by the Advisor for “good reason” (as defined in the Advisory Agreement) or (iii) by the
General Partner other than for “cause” (as defined in the Advisory Agreement).

     “Tendered Units” has the meaning provided in Section 8.5(a) hereof.

     “Tendering Party” has the meaning provided in Section 8.5(a) hereof.

     “Transaction” has the meaning set forth in Section 7.1(c) hereof.

     “Transfer” has the meaning set forth in Section 9.2(a) hereof.

     “Value” means the fair market value per share of REIT Shares which will equal: (i) if
REIT Shares are Listed, the average closing price per share for the previous thirty (30) business
days, (ii) if REIT Shares are not Listed, the most recent offering price per share or share
equivalent of REIT Shares, until December 31st of the year following the year in which the most
recently completed offering of REIT Shares has expired, and (iii) thereafter, such price per REIT
Share as the management of the General Partner determines in good faith.

ARTICLE 2

PARTNERSHIP FORMATION AND IDENTIFICATION

     2.1 Formation.

     The Partnership was formed as a limited partnership pursuant to the Act, and all other
pertinent laws of the State of Delaware, for the purposes and upon the terms and conditions set
forth in this Agreement.

     2.2 Name, Office and Registered Agent.

     The name of the Partnership is Moody National Operating Partnership I, L.P. The specified
office and place of business of the Partnership shall be 6363 Woodway, Suite 110, Houston, Texas
77057. The General Partner may at any time change the location of such office, provided the General
Partner gives notice to the Partners of any such change. The name and address of the Partnership’s
registered agent is Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, New
Castle County, Delaware 19808. The sole duty of the registered agent as such is to forward to the
Partnership any notice that is served on him as registered agent.

10

 

     2.3 Partners.

          (a) The General Partner of the Partnership is Moody National REIT I, Inc., a Maryland
corporation. Its principal place of business is the same as that of the Partnership.

          (b) The Limited Partners are those Persons identified as Limited Partners on Exhibit A
hereto, as amended from time to time.

     2.4 Term and Dissolution.

          (a) The term of the Partnership shall continue in full force and effect until December 31,
2038, except that the Partnership shall be dissolved upon the first to occur of any of the
following events:

               (i) the occurrence of an Event of Bankruptcy as to a General Partner or the dissolution,
death, removal or withdrawal of a General Partner unless the business of the Partnership is
continued pursuant to Section 7.3(b) hereof; provided that if a General Partner is on the date of
such occurrence a partnership, the dissolution of such General Partner as a result of the
dissolution, death, withdrawal, removal or Event of Bankruptcy of a partner in such partnership
shall not be an event of dissolution of the Partnership if the business of such General Partner is
continued by the remaining partner or partners, either alone or with additional partners, and such
General Partner and such partners comply with any other applicable requirements of this Agreement;

               (ii) the passage of ninety (90) days after the sale or other disposition of all or
substantially all of the assets of the Partnership (provided that if the Partnership receives an
installment obligation as consideration for such sale or other disposition, the Partnership shall
continue, unless sooner dissolved under the provisions of this Agreement, until such time as such
note or notes are paid in full);

               (iii) the exchange of all Limited Partnership Interests (other than any of such interests held
by the General Partner or Affiliates of the General Partner) for REIT Shares or the securities of
any other entity; or

               (iv) the election by the General Partner that the Partnership should be dissolved.

          (b) Upon dissolution of the Partnership (unless the business of the Partnership is continued
pursuant to Section 7.3(b) hereof), the General Partner (or its trustee, receiver, successor or
legal representative) shall amend or cancel any Certificate(s) and liquidate the Partnership’s
assets and apply and distribute the proceeds thereof in accordance with Section 5.6 hereof.
Notwithstanding the foregoing, the liquidating General Partner may either (i) defer liquidation of,
or withhold from distribution for a reasonable time, any assets of the Partnership (including those
necessary to satisfy the Partnership’s debts and obligations), or (ii) distribute the assets to the
Partners in kind.

     2.5 Filing of Certificate and Perfection of Limited Partnership.

     The General Partner shall execute, acknowledge, record and file at the expense of the
Partnership, any and all amendments to the Certificate(s) and all requisite fictitious name
statements and notices in such places and jurisdictions as may be necessary to cause the
Partnership to be treated as a limited partnership under, and otherwise to comply with, the laws of
each state or other jurisdiction in which the Partnership conducts business.

11

 

     2.6 Certificates Describing Partnership Units and Special Partnership Units.

     At the request of a Limited Partner, the General Partner, at its option, may issue (but in no
way is obligated to issue) a certificate summarizing the terms of such Limited Partner’s interest
in the Partnership, including the number of Partnership Units and Special Partnership Units owned
and the Percentage Interest and Special Percentage Interest represented by such Partnership Units
and Special Partnership Units as of the date of such certificate. Any such certificate (i) shall be
in form and substance as approved by the General Partner, (ii) shall not be negotiable and (iii)
shall bear a legend to the following effect:

     This certificate is not negotiable. The Partnership Units and Special
Partnership Units represented by this certificate are governed by and transferable
only in accordance with the provisions of the Limited Partnership Agreement of Moody
National Operating Partnership I, L.P., as amended from time to time.

ARTICLE 3

BUSINESS OF THE PARTNERSHIP

     The purpose and nature of the business to be conducted by the Partnership is (i) to conduct
any business that may be lawfully conducted by a limited partnership organized pursuant to the Act,
provided, however, that such business shall be limited to and conducted in such a manner as to
permit the General Partner at all times to qualify as a REIT, unless the General Partner otherwise
ceases to qualify as a REIT, and in a manner such that the General Partner will not be subject to
any taxes under Section 857 or 4981 of the Code, (ii) to enter into any partnership, joint venture
or other similar arrangement to engage in any of the foregoing or the ownership of interests in any
entity engaged in any of the foregoing and (iii) to do anything necessary or incidental to the
foregoing. In connection with the foregoing, and without limiting the General Partner’s right in
its sole and absolute discretion to qualify or cease qualifying as a REIT, the Partners acknowledge
that the General Partner intends to qualify as a REIT for federal income tax purposes and that,
upon such qualification, the avoidance of income and excise taxes on the General Partner inures to
the benefit of all the Partners and not solely to the General Partner. Notwithstanding the
foregoing, the Limited Partners agree that the General Partner may terminate its status as a REIT
under the Code at any time to the full extent permitted under the Articles of Incorporation. The
General Partner on behalf of the Partnership shall also be empowered to do any and all acts and
things necessary or prudent to ensure that the Partnership will not be classified as a “publicly
traded partnership” for purposes of Section 7704 of the Code.

ARTICLE 4

CAPITAL CONTRIBUTIONS AND ACCOUNTS

     4.1 Capital Contributions.

     The General Partner and the initial Limited Partners have made capital contributions to the
Partnership in exchange for the Partnership Interests set forth opposite their names on Exhibit
A, as such Exhibit may be amended from time to time.

     4.2 Additional Capital Contributions and Issuances of Additional Partnership
Interests.

     Except as provided in this Section 4.2 or in Section 4.3, the Partners shall have no right or
obligation to make any additional Capital Contributions or loans to the Partnership. The General
Partner may contribute additional capital to the Partnership, from time to time, and receive
additional Partnership Interests in respect thereof, in the manner contemplated in this Section
4.2.

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          (a) Issuances of Additional Partnership Interests.

               (i)
General. The General Partner is hereby authorized to cause the Partnership to issue
such additional Partnership Interests in the form of Partnership Units for any Partnership purpose
at any time or from time to time, including but not limited to Partnership Units issued in
connection with acquisitions of properties, to the Partners (including the General Partner) or to
other Persons for such consideration and on such terms and conditions as shall be established by
the General Partner in its sole and absolute discretion, all without the approval of any Limited
Partners. Any additional Partnership Interests issued thereby may be issued in one or more classes,
or one or more series of any of such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties, including rights, powers and
duties senior to Limited Partnership Interests, all as shall be determined by the General Partner
in its sole and absolute discretion and without the approval of any Limited Partner, subject to
Delaware law, including, without limitation, (i) the allocations of items of Partnership income,
gain, loss, deduction and credit to each such class or series of Partnership Interests; (ii) the
right of each such class or series of Partnership Interests to share in Partnership distributions;
and (iii) the rights of each such class or series of Partnership Interests upon dissolution and
liquidation of the Partnership; provided, however, that no additional Partnership Interests shall
be issued to the General Partner unless:

                    (1)(A) the additional Partnership Interests are issued in connection with an issuance of REIT
Shares of or other interests in the General Partner, which shares or interests have designations,
preferences and other rights, all such that the economic interests are substantially similar to the
designations, preferences and other rights of the additional Partnership Interests issued to the
General Partner by the Partnership in accordance with this Section 4.2 and (B) the General Partner
shall make a Capital Contribution to the Partnership in an amount equal to the proceeds raised in
connection with the issuance of such shares of stock of or other interests in the General Partner;

                    (2) the additional Partnership Interests are issued in exchange for property owned by the
General Partner with a fair market value, as determined by the General Partner, in good faith,
equal to the value of the Partnership Interests; or

                    (3) the additional Partnership Interests are issued to all Partners holding Partnership Units
in proportion to their respective Percentage Interests.

               Without limiting the foregoing, the General Partner is expressly authorized to cause the
Partnership to issue Partnership Units for less than fair market value, so long as the General
Partner concludes in good faith that such issuance is in the best interests of the General Partner
and the Partnership.

               (ii) Upon Issuance of Additional Securities. The General Partner shall not issue any
Additional Securities other than to all holders of REIT Shares, unless (A) the General Partner
shall cause the Partnership to issue to the General Partner, as the General Partner may designate,
Partnership Interests or rights, options, warrants or convertible or exchangeable securities of the
Partnership having designations, preferences and other rights, all such that the economic interests
are substantially similar to those of the Additional Securities, and (B) the General Partner
contributes the proceeds from the issuance of such Additional Securities and from any exercise of
rights contained in such Additional Securities, directly and through the General Partner, to the
Partnership; provided, however, that the General Partner is allowed to issue Additional Securities
in connection with an acquisition of a Property to be held directly by the General Partner, but if
and only if, such direct acquisition and issuance of Additional Securities have been approved and
determined to be in the best interests of the General Partner and the Partnership by a majority of
the Independent Directors. Without

13

 

limiting the foregoing, the General Partner is expressly authorized to issue Additional
Securities for less than fair market value, and to cause the Partnership to issue to the General
Partner corresponding Partnership Interests, so long as (x) the General Partner concludes in good
faith that such issuance is in the best interests of the General Partner and the Partnership,
including without limitation, the issuance of REIT Shares and corresponding Partnership Units
pursuant to an employee share purchase plan providing for employee purchases of REIT Shares at a
discount from fair market value or employee stock options that have an exercise price that is less
than the fair market value of the REIT Shares, either at the time of issuance or at the time of
exercise, and (y) the General Partner contributes all proceeds from such issuance to the
Partnership. For example, in the event the General Partner issues REIT Shares for a cash purchase
price and contributes all of the proceeds of such issuance to the Partnership as required
hereunder, the General Partner shall be issued a number of additional Partnership Units equal to
the product of (A) the number of such REIT Shares issued by the General Partner, the proceeds of
which were so contributed, multiplied by (B) a fraction, the numerator of which is 100%, and the
denominator of which is the Conversion Factor in effect on the date of such contribution.

          (b) Certain Deemed Contributions of Proceeds of Issuance of REIT Shares. In connection with any
and all issuances of REIT Shares, the General Partner shall make Capital Contributions to the
Partnership of the proceeds therefrom, provided that if the proceeds actually received and
contributed by the General Partner are less than the gross proceeds of such issuance as a result of
any underwriter’s discount or other expenses paid or incurred in connection with such issuance,
then the General Partner shall be deemed to have made Capital Contributions to the Partnership in
the aggregate amount of the gross proceeds of such issuance and the Partnership shall be deemed
simultaneously to have paid such offering expenses in accordance with Section 6.5 hereof and in
connection with the required issuance of additional Partnership Units to the General Partner for
such Capital Contributions pursuant to Section 4.2(a) hereof.

          (c) Minimum Limited Partnership Interest. In the event that either a redemption pursuant to
Section 8.5 hereof or additional Capital Contributions by the General Partner would result in the
Limited Partners, in the aggregate, owning less than the Minimum Limited Partnership Interest, the
General Partner and the Limited Partners (other than the Limited Partners that own only Special
Partnership Units) shall form another partnership and contribute sufficient Limited Partnership
Interests (other than Special Partnership Units) together with such other Limited Partners so that
the limited partners of such partnership own at least the Minimum Limited Partnership Interest.

     4.3 Additional Funding.

     If the General Partner determines that it is in the best interests of the Partnership to
provide for additional Partnership funds (“Additional Funds”) for any Partnership purpose,
the General Partner may (i) cause the Partnership to obtain such funds from outside borrowings or
(ii) elect to have the General Partner or any of its Affiliates provide such Additional Funds to
the Partnership through loans or otherwise, provided, however, that the Partnership may not borrow
money from its Affiliates, unless a majority of the Directors of the General Partner (including a
majority of Independent Directors) not otherwise interested in such transaction approve the
transaction as being fair, competitive, and commercially reasonable and no less favorable to the
Partnership than loans between unaffiliated parties under the same circumstances.

     4.4 Capital Accounts.

     A separate capital account (a “Capital Account”) shall be established and maintained
for each Partner in accordance with Regulations Section 1.704-1(b)(2)(iv). If (i) a new or existing
Partner acquires an additional Partnership Interest in exchange for more than a de minimis Capital
Contribution, (ii) the

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Partnership distributes to a Partner more than a de minimis amount of Partnership property or
money as consideration for a Partnership Interest, or (iii) the Partnership is liquidated within
the meaning of Regulation Section 1.704-1(b)(2)(ii)(g), the General Partner shall revalue the
Property of the Partnership to its fair market value (as determined by the General Partner, in its
sole and absolute discretion, and taking into account Section 7701(g) of the Code) in accordance
with Regulations Section 1.704-1(b)(2)(iv)(f). When the Partnership’s Property is revalued by the
General Partner, the Capital Accounts of the Partners shall be adjusted in accordance with
Regulations Sections 1.704-1(b)(2)(iv)(f) and (g), which generally require such Capital Accounts to
be adjusted to reflect the manner in which the unrealized gain or loss inherent in such Property
(that has not been reflected in the Capital Accounts previously) would be allocated among the
Partners pursuant to Section 5.1 if there were a taxable disposition of such Property for its fair
market value (as determined by the General Partner, in its sole and absolute discretion, and taking
into account Section 7701(g) of the Code) on the date of the revaluation.

     4.5 Percentage Interests.

     If the number of outstanding Partnership Units increases or decreases during a taxable year,
each Partner’s Percentage Interest shall be adjusted by the General Partner effective as of the
effective date of each such increase or decrease to a percentage equal to the number of Partnership
Units held by such Partner divided by the aggregate number of Partnership Units outstanding after
giving effect to such increase or decrease. If the Partners’ Percentage Interests are adjusted
pursuant to this Section 4.5, the Profits and Losses for the taxable year in which the adjustment
occurs shall be allocated between the part of the year ending on the day when the Partnership’s
Property is revalued by the General Partner and the part of the year beginning on the following day
either (i) as if the taxable year had ended on the date of the adjustment or (ii) based on the
number of days in each part. The General Partner, in its sole and absolute discretion, shall
determine which method shall be used to allocate Profits and Losses for the taxable year in which
the adjustment occurs. The allocation of Profits and Losses for the earlier part of the year shall
be based on the Percentage Interests before adjustment, and the allocation of Profits and Losses
for the later part shall be based on the adjusted Percentage Interests.

     4.6 No Interest on Contributions.

     No Partner shall be entitled to interest on its Capital Contribution.

     4.7 Return of Capital Contributions.

     No Partner shall be entitled to withdraw any part of its Capital Contribution or its Capital
Account or to receive any distribution from the Partnership, except as specifically provided in
this Agreement. Except as otherwise provided herein, there shall be no obligation to return to any
Partner or withdrawn Partner any part of such Partner’s Capital Contribution for so long as the
Partnership continues in existence.

     4.8 No Third Party Beneficiary.

     No creditor or other third party having dealings with the Partnership shall have the right to
enforce the right or obligation of any Partner to make Capital Contributions or loans or to pursue
any other right or remedy hereunder or at law or in equity, it being understood and agreed that the
provisions of this Agreement shall be solely for the benefit of, and may be enforced solely by, the
parties hereto and their respective successors and assigns. None of the rights or obligations of
the Partners herein set forth to make Capital Contributions or loans to the Partnership shall be
deemed an asset of the Partnership for any purpose by any creditor or other third party, nor may
such rights or obligations be sold, transferred or assigned by the Partnership or pledged or
encumbered by the Partnership to secure any debt or other

15

 

obligation of the Partnership or of any of the Partners. In addition, it is the intent of the
parties hereto that no distribution to any Limited Partner shall be deemed a return of money or
other Property in violation of the Act. However, if any court of competent jurisdiction holds that,
notwithstanding the provisions of this Agreement, any Limited Partner is obligated to return such
money or Property, such obligation shall be the obligation of such Limited Partner and not of the
General Partner. Without limiting the generality of the foregoing, a deficit Capital Account of a
Partner shall not be deemed to be a liability of such Partner nor an asset or Property of the
Partnership.

ARTICLE 5

PROFITS AND LOSSES; DISTRIBUTIONS

     5.1 Allocation of Profit and Loss.

          (a) General. Subject to any special allocations made pursuant to this Section 5.1, Profit and
Loss (or items thereof) of the Partnership for each fiscal year or other applicable period of the
Partnership shall be allocated to the Partners in accordance with their Percentage Interests.

          (b) Special Allocation with Respect to Sales. The items of Profit and Loss of the Partnership for
each fiscal year or other applicable period from Sales shall be allocated among the Partners in a
manner that will, as nearly as possible (after giving effect to the allocations under Section
5.1(a), 5.1(c) and 5.1(d), cause the Capital Account balance of each Partner at the end of such
fiscal year or other applicable period to equal (i) the amount of the hypothetical distribution
that such Partner would receive if the Partnership were liquidated on the last day of such period
and all assets of the Partnership, including cash, were sold for cash equal to their Carrying
Value, taking into account any adjustments thereto for such period, all liabilities of the
Partnership were satisfied in full in cash according to their terms (limited with respect to each
Nonrecourse Liability to the Carrying Value of the assets securing such liability) and Net Sales
Proceeds (after satisfaction of such liabilities) were distributed in full pursuant to Section
5.2(b)(i), minus (ii) the sum of such Partner’s share of Partnership Minimum Gain and Partner
Nonrecourse Debt Minimum Gain and the amount, if any and without duplication, that the Partner
would be obligated to contribute to the capital of the Partnership, all computed as of the date of
the hypothetical sale of assets.

          (c) Nonrecourse Deductions; Minimum Gain Chargeback. In the event there is a net decrease in
Partnership Minimum Gain during any fiscal year, the “minimum gain chargeback” described in
Regulations Section 1.704-2(f) and Regulations Section 1.704-2(g) shall apply. In the event there
is a net decrease in Partner Nonrecourse Debt Minimum Gain during any fiscal year, the “partner
minimum gain chargeback” described in Regulations Section 1.704-2(i)(4) shall apply.

          (d) Qualified Income Offset. This Section 5.1(d) incorporates the “qualified income offset” set
forth in Regulations Section 1.704-1(b)(2)(ii)(d) as if those provisions were fully set forth in
this Section 5.1(d).

          (e) Capital Account Deficits. Loss (or items of Loss) shall not be allocated to a Limited Partner
to the extent that such allocation would cause or increase a deficit in such Partner’s Capital
Account at the end of any fiscal year (after reduction to reflect the items described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of such Partner’s
shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, as determined in
accordance with Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5). Any Loss in excess of that
limitation shall be allocated to the General Partner. After the occurrence of an allocation of Loss
to the General Partner in

16

 

accordance with this Section 5.1(e), to the extent permitted by Regulations Section
1.704-1(b), Profit shall be allocated to such Partner in an amount necessary to offset the Loss
previously allocated to such Partner under this Section 5.1(e).

          (f) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year shall be allocated to
Partners pro rata in proportion to their Percentage Interests.

          (g) Partner Nonrecourse Deductions. The Partner Nonrecourse Deductions of the Partnership
(as determined under Regulations Section 1.704-2(i)(2)) shall be allocated each year to the Partner
that bears the economic risk of loss (within the meaning of Regulations Section 1.752-2) with
respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are
attributable.

          (h) Allocations Between Transferor and Transferee. If a Partner transfers any part or all of its
Partnership Interest, the distributive shares of the various items of Profit and Loss allocable
among the Partners during such fiscal year of the Partnership shall be allocated between the
transferor and the transferee Partner either (i) as if the Partnership’s fiscal year had ended on
the date of the transfer, or (ii) based on the number of days of such fiscal year that each was a
Partner without regard to the results of Partnership activities in the respective portions of such
fiscal year in which the transferor and the transferee were Partners. The General Partner, in its
sole and absolute discretion, shall determine which method shall be used to allocate the
distributive shares of the various items of Profit and Loss between the transferor and the
transferee Partner.

          (i) Definition of Profit and Loss. “Profit” and “Loss” and any items of income, gain, expense, or
loss referred to in this Agreement shall be determined in accordance with federal income tax
accounting principles, as modified by Regulations Section 1.704-1(b)(2)(iv), except that Profit and
Loss shall not include items of income, gain and expense that are specially allocated pursuant to
Sections 5.1(b), 5.1(c), 5.1(d) or 5.1(e). All allocations of Profit and Loss (and all items
contained therein) for federal income tax purposes shall be identical to all allocations of such
items set forth in this Section 5.1, except as otherwise required by Section 704(c) of the Code and
Regulations Section 1.704-1(b)(4). The General Partner shall have the authority to elect the method
to be used by the Partnership for allocating items of income, gain, and expense as required by
Section 704(c) of the Code including a method that may result in a Partner receiving a
disproportionately larger share of the Partnership tax depreciation deductions, and such election
shall be binding on all Partners.

          (j) Target Final Balances. The allocation provisions of this Agreement are intended to produce
final Capital Account balances that are at levels (“Target Final Balances”) that permit
liquidating distributions that are made in accordance with such final Capital Account balances to
be equal to the distributions that would occur under Section 5.2 hereof if liquidation proceeds
were distributed pursuant to Section 5.2. To the extent the allocation provisions of this Agreement
would not produce the Target Final Balances, the Partners agree to take such actions as are
necessary to amend such allocation provisions to produce such Target Final Balances. In furtherance
of the foregoing, the General Partner is expressly authorized and directed to make such allocations
of income, gain, loss and deduction (including items of gross income, gain, loss and deduction) in
the year of liquidation of the Partnership so as to cause the Capital Accounts of the Partners that
determine the amounts that are distributed to the Partners under Section 5.6 to be equal to the
Target Final Balances.

     5.2 Distribution of Cash.

          (a) The Partnership shall distribute cash on a quarterly (or, at the election of the General
Partner, more frequent) basis, in an amount determined by the General Partner in its sole and
absolute discretion, to the Partners who are Partners on the Partnership Record Date with
respect to such

17

 

quarter (or other distribution period) in accordance with Section 5.2(b); provided,
however, that if a new or existing Partner acquires an additional Partnership Interest in exchange
for a Capital Contribution on any date other than a Partnership Record Date, the cash distribution
attributable to such additional Partnership Interest relating to the Partnership Record Date next
following the issuance of such additional Partnership Interest shall be reduced in the proportion
equal to one minus (i) the number of days that such additional Partnership Interest is held by such
Partner bears to (ii) the number of days between such Partnership Record Date and the immediately
preceding Partnership Record Date.

          (b) Except for distributions pursuant to Section 5.6 of this Agreement in connection with the
dissolution and liquidation of the Partnership and subject to the provisions of Section 5.2(c),
5.2(d), 5.3 and 5.5 of this Agreement, distributions shall be made in accordance with the following
provisions:

               (i) all distributions of Net Sales Proceeds shall be made: (A) first, 100% to the OP
Unitholders in accordance with their respective Percentage Interests on the Partnership Record Date
until the OP Unitholders have received cumulative distributions under this Section 5.2(b) equal to
the aggregate Capital Contributions made by the OP Unitholders to the Partnership plus a
cumulative, noncompounded pre-tax rate of return thereon of 8.0% per annum, determined by taking
into account the dates on which all such Capital Contributions and distributions were made and (B)
second, (1) 85% to the OP Unitholders, in accordance with their respective Percentage Interests on
the Partnership Record Date and (2) 15% to the Special OP Unitholders in accordance with their
respective Special Percentage Interests on the Partnership Record Date; and

               (ii) all distributions of cash other than Net Sales Proceeds shall be made to the OP
Unitholders in accordance with their respective Percentage Interests on the Partnership Record
Date.

          (c) Notwithstanding any other provision of this Agreement, the General Partner is authorized
to take any action that it determines to be necessary or appropriate to cause the Partnership to
comply with any withholding requirements established under the Code or any other federal, state or
local law including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of the
Code. To the extent that the Partnership is required to withhold and pay over to any taxing
authority any amount resulting from the allocation or distribution of income to any Partner or
assignee (including by reason of Section 1446 of the Code), either (i) if the actual amount to be
distributed to the Partner equals or exceeds the amount required to be withheld by the Partnership,
the amount withheld shall be treated as a distribution of cash in the amount of such withholding to
such Partner, or (ii) if the actual amount to be distributed to the Partner is less than the amount
required to be withheld by the Partnership, the actual amount shall be treated as a distribution of
cash in the amount of such withholding and the additional amount required to be withheld shall be
treated as a loan (a “Partnership Loan”) from the Partnership to the Partner on the day the
Partnership pays over such amount to a taxing authority. A Partnership Loan shall be repaid through
withholding by the Partnership with respect to subsequent distributions to the applicable Partner
or assignee. In the event that a Limited Partner (a “Defaulting Limited Partner”) fails to
pay any amount owed to the Partnership with respect to the Partnership Loan within fifteen (15)
days after demand for payment thereof is made by the Partnership on the Limited Partner, the
General Partner, in its sole and absolute discretion, may elect to make the payment to the
Partnership on behalf of such Defaulting Limited Partner. In such event, on the date of payment,
the General Partner shall be deemed to have extended a loan (a “General Partner Loan”) to
the Defaulting Limited Partner in the amount of the payment made by the General Partner and shall
succeed to all rights and remedies of the Partnership against the Defaulting Limited Partner as to
that amount. Without limitation, the General Partner shall have the right to receive any
distributions that otherwise would be made by the Partnership to the
Defaulting Limited Partner until such time as the General Partner Loan has been paid in full,
and any such

18

 

distributions so received by the General Partner shall be treated as having been
received by the Defaulting Limited Partner and immediately paid to the General Partner.

          Any amounts treated as a Partnership Loan or a General Partner Loan pursuant to this Section
5.2(c) shall bear interest at the lesser of (i) the base rate on corporate loans at large United
States money center commercial banks, as published from time to time in The Wall Street Journal, or
(ii) the maximum lawful rate of interest on such obligation, such interest to accrue from the date
the Partnership or the General Partner, as applicable, is deemed to extend the loan until such loan
is repaid in full.

          (d) In no event may a Partner receive a distribution of cash with respect to a Partnership
Unit if such Partner is entitled to receive a cash distribution as the holder of record of a REIT
Share for which all or part of such Partnership Unit has been or will be exchanged.

     5.3 REIT Distribution Requirements.

     The General Partner shall use its commercially reasonable efforts to cause the Partnership to
distribute amounts sufficient to enable the General Partner to make stockholder distributions that
will allow the General Partner to (i) meet its distribution requirement for qualification as a REIT
as set forth in Section 857 of the Code and (ii) avoid any federal income or excise tax liability
imposed by the Code.

     5.4 No Right to Distributions in Kind.

     No Partner shall be entitled to demand Property other than cash in connection with any
distributions by the Partnership.

     5.5 Limitations on Return of Capital Contributions.

     Notwithstanding any of the provisions of this Article 5, no Partner shall have the right to
receive, and the General Partner shall not have the right to make, a distribution that includes a
return of all or part of a Partner’s Capital Contributions, unless after giving effect to the
return of a Capital Contribution, the sum of all Partnership liabilities, other than the
liabilities to a Partner for the return of his Capital Contribution, does not exceed the fair
market value of the Partnership’s assets.

     5.6 Distributions Upon Liquidation.

     Upon liquidation of the Partnership, after payment of, or adequate provision for, debts and
obligations of the Partnership, including any Partner loans, any remaining assets of the
Partnership shall be distributed to all Partners in accordance with Section 5.2(b). To the extent
deemed advisable by the General Partner, appropriate arrangements (including the use of a
liquidating trust) may be made to assure that adequate funds are available to pay any contingent
debts or obligations.

     5.7 Substantial Economic Effect.

     It is the intent of the Partners that the allocations of Profit and Loss under this Agreement
have substantial economic effect (or be consistent with the Partners’ interests in the Partnership
in the case of the allocation of losses attributable to nonrecourse debt) within the meaning of
Section 704(b) of the Code as interpreted by the Regulations promulgated pursuant thereto. Article
5 and other relevant provisions of this Agreement shall be interpreted in a manner consistent with
such intent.

19

 

ARTICLE 6

RIGHTS, OBLIGATIONS AND

POWERS OF THE GENERAL PARTNER

     6.1 Management of the Partnership.

          (a) Except as otherwise expressly provided in this Agreement, the General Partner shall have
full, complete and exclusive discretion to manage and control the business of the Partnership for
the purposes herein stated, and shall make all decisions affecting the business and assets of the
Partnership. Subject to the restrictions specifically contained in this Agreement, the powers of
the General Partner shall include, without limitation, the authority to take the following actions
on behalf of the Partnership:

               (i) to acquire, purchase, own, operate, lease and dispose of any real property and any other
property or assets including, but not limited to notes and mortgages and other real estate related
investments, that the General Partner determines are necessary or appropriate or in the best
interests of the business of the Partnership;

               (ii) to construct buildings and make other improvements on the properties owned or leased by
the Partnership;

               (iii) to authorize, issue, sell, redeem or otherwise purchase any Partnership Interests or any
securities (including secured and unsecured debt obligations of the Partnership, debt obligations
of the Partnership convertible into any class or series of Partnership Interests, or options,
rights, warrants or appreciation rights relating to any Partnership Interests) of the Partnership;

               (iv) to borrow or lend money for the Partnership, issue or receive evidences of indebtedness
in connection therewith, refinance, increase the amount of, modify, amend or change the terms of,
or extend the time for the payment of, any such indebtedness, and secure such indebtedness by
mortgage, deed of trust, pledge or other lien on the Partnership’s assets;

               (v) to pay, either directly or by reimbursement, for all operating costs and general
administrative expenses of the Partnership to third parties or to the General Partner or its
Affiliates as set forth in this Agreement;

               (vi) to guarantee or become a co-maker of indebtedness of the General Partner or any
Subsidiary thereof, refinance, increase the amount of, modify, amend or change the terms of, or
extend the time for the payment of, any such guarantee or indebtedness, and secure such guarantee
or indebtedness by mortgage, deed of trust, pledge or other lien on the Partnership’s assets;

               (vii) to use assets of the Partnership (including, without limitation, cash on hand) for any
purpose consistent with this Agreement, including, without limitation, payment, either directly or
by reimbursement, of all operating costs and general administrative expenses of the General
Partner, the Partnership or any Subsidiary of either, to third parties or to the General Partner as
set forth in this Agreement;

               (viii) to lease all or any portion of any of the Partnership’s assets, whether or not the
terms of such leases extend beyond the termination date of the Partnership and whether or not any
portion of the Partnership’s assets so leased are to be occupied by the lessee, or, in turn,
subleased in

20

 

whole or in part to others, for such consideration and on such terms as the General Partner
may determine;

               (ix) to prosecute, defend, arbitrate, or compromise any and all claims or liabilities in favor
of or against the Partnership, on such terms and in such manner as the General Partner may
reasonably determine, and similarly to prosecute, settle or defend litigation with respect to the
Partners, the Partnership, or the Partnership’s assets;

               (x) to file applications, communicate, and otherwise deal with any and all governmental
agencies having jurisdiction over, or in any way affecting, the Partnership’s assets or any other
aspect of the Partnership business;

               (xi) to make or revoke any election permitted or required of the Partnership by any taxing
authority;

               (xii) to maintain such insurance coverage for public liability, fire and casualty, and any and
all other insurance for the protection of the Partnership, for the conservation of Partnership
assets, or for any other purpose convenient or beneficial to the Partnership, in such amounts and
such types, as it shall determine from time to time;

               (xiii) to determine whether or not to apply any insurance proceeds for any Property to the
restoration of such Property or to distribute the same;

               (xiv) to establish one or more divisions of the Partnership, to hire and dismiss employees of
the Partnership or any division of the Partnership, and to retain legal counsel, accountants,
consultants, real estate brokers, and such other persons, as the General Partner may deem necessary
or appropriate in connection with the Partnership business and to pay therefor such remuneration as
the General Partner may deem reasonable and proper;

               (xv) to retain other services of any kind or nature in connection with the Partnership
business, and to pay therefor such remuneration as the General Partner may deem reasonable and
proper;

               (xvi) to negotiate and conclude agreements on behalf of the Partnership with respect to any of
the rights, powers and authority conferred upon the General Partner;

               (xvii) to maintain accurate accounting records and to file promptly all federal, state and
local income tax returns on behalf of the Partnership;

               (xviii) to distribute Partnership cash or other Partnership assets in accordance with this
Agreement;

               (xix) to form or acquire an interest in, and contribute Property to, any further limited or
general partnerships, joint ventures or other relationships that it deems desirable (including,
without limitation, the acquisition of interests in, and the contributions of Property to, its
Subsidiaries and any other Person in which it has an equity interest from time to time);

               (xx) to establish Partnership reserves for working capital, capital expenditures, contingent
liabilities, or any other valid Partnership purpose;

21

 

               (xxi) to merge, consolidate or combine the Partnership with or into another Person;

               (xxii) to do any and all acts and things necessary or prudent to ensure that the Partnership
will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Code;
and

               (xxiii) to take such other action, execute, acknowledge, swear to or deliver such other
documents and instruments, and perform any and all other acts that the General Partner deems
necessary or appropriate for the formation, continuation and conduct of the business and affairs of
the Partnership (including, without limitation, all actions consistent with allowing the General
Partner at all times to qualify as a REIT unless the General Partner voluntarily terminates its
REIT status) and to possess and enjoy all of the rights and powers of a general partner as provided
by the Act.

          (b) Except as otherwise provided herein, to the extent the duties of the General Partner
require expenditures of funds to be paid to third parties, the General Partner shall not have any
obligations hereunder except to the extent that Partnership funds are reasonably available to it
for the performance of such duties, and nothing herein contained shall be deemed to authorize or
require the General Partner, in its capacity as such, to expend its individual funds for payment to
third parties or to undertake any individual liability or obligation on behalf of the Partnership.

     6.2 Delegation of Authority.

     The General Partner may delegate any or all of its powers, rights and obligations hereunder,
and may appoint, employ, contract or otherwise deal with any Person for the transaction of the
business of the Partnership, which Person may, under supervision of the General Partner, perform
any acts or services for the Partnership as the General Partner may approve.

     6.3 Indemnification and Exculpation of Indemnitees.

          (a) The Partnership shall indemnify an Indemnitee from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including reasonable legal fees and expenses),
judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions,
suits or proceedings, civil, criminal, administrative or investigative, that relate to the
operations of the Partnership as set forth in this Agreement in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, unless it is established that:
(i) the act or omission of the Indemnitee was material to the matter giving rise to the proceeding
and either was committed in bad faith or was the result of active and deliberate dishonesty; (ii)
the Indemnitee actually received an improper personal benefit in money, Property or services; or
(iii) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that
the act or omission was unlawful. Any indemnification pursuant to this Section 6.3 shall be made
only out of the assets of the Partnership.

          (b) The Partnership shall reimburse an Indemnitee for reasonable expenses incurred by an
Indemnitee who is a party to a proceeding in advance of the final disposition of the proceeding
upon receipt by the Partnership of (i) a written affirmation by the Indemnitee of the Indemnitee’s
good faith belief that the standard of conduct necessary for indemnification by the Partnership as
authorized in this Section 6.3 has been met, and (ii) a written undertaking by or on behalf of the
Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct
has not been met.

          (c) The indemnification provided by this Section 6.3 shall be in addition to any other rights
to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any

22

 

vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who
has ceased to serve in such capacity.

          (d) The Partnership may purchase and maintain insurance, on behalf of the Indemnitees and such
other Persons as the General Partner shall determine, against any liability that may be asserted
against or expenses that may be incurred by such Person in connection with the Partnership’s
activities, regardless of whether the Partnership would have the power to indemnify such Person
against such liability under the provisions of this Agreement.

          (e) For purposes of this Section 6.3, the Partnership shall be deemed to have requested an
Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its
duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan
or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute fines within the meaning of
this Section 6.3; and actions taken or omitted by the Indemnitee with respect to an employee
benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the
interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Partnership.

          (f) In no event may an Indemnitee subject the Limited Partners to personal liability by reason
of the indemnification provisions set forth in this Agreement.

          (g) An Indemnitee shall not be denied indemnification in whole or in part under this Section
6.3 because the Indemnitee had an interest in the transaction with respect to which the
indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

          (h) The provisions of this Section 6.3 are for the benefit of the Indemnitees, their heirs,
successors, assigns and administrators and shall not be deemed to create any rights for the benefit
of any other Persons.

          (i) Notwithstanding the foregoing, the Partnership may not indemnify or hold harmless an
Indemnitee for any liability or loss unless all of the following conditions are met: (i) the
Indemnitee has determined, in good faith, that the course of conduct that caused the loss or
liability was in the best interests of the Partnership; (ii) the Indemnitee was acting on behalf of
or performing services for the Partnership; (iii) the liability or loss was not the result of (A)
negligence or misconduct, in the case that the Indemnitee is a director of the General Partner
(other than an Independent Director), the Advisor or an Affiliate of the Advisor or (B) gross
negligence or willful misconduct, in the case that the Indemnitee is an Independent Director; and
(iv) the indemnification or agreement to hold harmless is recoverable only out of net assets of the
Partnership. In addition, the Partnership shall not provide indemnification for any loss, liability
or expense arising from or out of an alleged violation of federal or state securities laws by such
party unless one or more of the following conditions are met: (i) there has been a successful
adjudication on the merits of each count involving alleged material securities law violations as to
the Indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the Indemnitee; or (iii) a court of competent jurisdiction approves a
settlement of the claims against the Indemnitee and finds that indemnification of the settlement
and the related costs should be made, and the court considering the request for indemnification has
been advised of the position of the Commission and of the published position of any state
securities regulatory authority in which Securities were offered or sold as to indemnification for
violations of securities laws.

23

 

     6.4 Liability of the General Partner.

          (a) Notwithstanding anything to the contrary set forth in this Agreement, the General Partner
shall not be liable for monetary damages to the Partnership or any Partners for losses sustained or
liabilities incurred as a result of errors in judgment or of any act or omission if the General
Partner acted in good faith. The General Partner shall not be in breach of any duty that the
General Partner may owe to the Limited Partners or the Partnership or any other Persons under this
Agreement or of any duty stated or implied by law or equity provided the General Partner, acting in
good faith, abides by the terms of this Agreement.

          (b) The Limited Partners expressly acknowledge that the General Partner is acting on behalf of
the Partnership, itself and its stockholders collectively, that the General Partner is under no
obligation to consider the separate interests of the Limited Partners (including, without
limitation, the tax consequences to Limited Partners or the tax consequences of some, but not all,
of the Limited Partners) in deciding whether to cause the Partnership to take (or decline to take)
any actions. In the event of a conflict between the interests of its stockholders on one hand and
the Limited Partners on the other, the General Partner shall endeavor in good faith to resolve the
conflict in a manner not adverse to either its stockholders or the Limited Partners; provided,
however, that for so long as the General Partner directly owns a controlling interest in the
Partnership, any such conflict that the General Partner, in its sole and absolute discretion,
determines cannot be resolved in a manner not adverse to either its stockholders or the Limited
Partner shall be resolved in favor of the stockholders. The General Partner shall not be liable for
monetary damages for losses sustained, liabilities incurred, or benefits not derived by Limited
Partners in connection with such decisions, provided that the General Partner has acted in good
faith.

          (c) Subject to its obligations and duties as General Partner set forth in Section 6.1 hereof,
the General Partner may exercise any of the powers granted to it under this Agreement and perform
any of the duties imposed upon it hereunder either directly or by or through its agents. The
General Partner shall not be responsible for any misconduct or negligence on the part of any such
agent appointed by it in good faith.

          (d) Notwithstanding any other provisions of this Agreement or the Act, any action of the
General Partner on behalf of the Partnership or any decision of the General Partner to refrain from
acting on behalf of the Partnership, undertaken in the good faith belief that such action or
omission is necessary or advisable in order (i) to protect the ability of the General Partner to
continue to qualify as a REIT or (ii) to prevent the General Partner from incurring any taxes under
Section 857, Section 4981, or any other provision of the Code, is expressly authorized under this
Agreement and is deemed approved by all of the Limited Partners.

          (e) Any amendment, modification or repeal of this Section 6.4 or any provision hereof shall be
prospective only and shall not in any way affect the limitations on the General Partner’s liability
to the Partnership and the Limited Partners under this Section 6.4 as in effect immediately prior
to such amendment, modification or repeal with respect to matters occurring, in whole or in part,
prior to such amendment, modification or repeal, regardless of when claims relating to such matters
may arise or be asserted.

     6.5 Reimbursement of General Partner.

          (a) Except as provided in this Section 6.5 and elsewhere in this Agreement (including the
provisions of Articles 5 and 6 regarding distributions, payments, and allocations to which it

24

 

may be entitled), the General Partner shall not be compensated for its services as general
partner of the Partnership.

          (b) The General Partner shall be reimbursed on a monthly basis, or such other basis as the
General Partner may determine in its sole and absolute discretion, for all Administrative Expenses
incurred by the General Partner. Reimbursement of Administrative Expenses shall be treated as an
expense of the Partnership and not as allocations of Partnership income or gain.

     6.6 Outside Activities.

     Subject to Section 6.8 hereof, the Articles of Incorporation and any agreements entered into
by the General Partner or its Affiliates with the Partnership or a Subsidiary, any officer,
director, employee, agent, trustee, Affiliate or stockholder of the General Partner, the General
Partner shall be entitled to and may have business interests and engage in business activities in
addition to those relating to the Partnership, including business interests and activities
substantially similar or identical to those of the Partnership. Neither the Partnership nor any of
the Limited Partners shall have any rights by virtue of this Agreement in any such business
ventures, interests or activities. None of the Limited Partners nor any other Person shall have any
rights by virtue of this Agreement or the partnership relationship established hereby in any such
business ventures, interests or activities, and the General Partner shall have no obligation
pursuant to this Agreement to offer any interest in any such business ventures, interests and
activities to the Partnership or any Limited Partner, even if such opportunity is of a character
which, if presented to the Partnership or any Limited Partner, could be taken by such Person.

     6.7 Employment or Retention of Affiliates.

          (a) Any Affiliate of the General Partner may be employed or retained by the Partnership and
may otherwise deal with the Partnership (whether as a buyer, lessor, lessee, manager, furnisher of
goods or services, broker, agent, lender or otherwise) and may receive from the Partnership any
compensation, price, or other payment therefor which the General Partner determines to be fair and
reasonable.

          (b) The Partnership may lend or contribute to its Subsidiaries or other Persons in which it
has an equity investment, and such Persons may borrow funds from the Partnership, on terms and
conditions established in the sole and absolute discretion of the General Partner. The foregoing
authority shall not create any right or benefit in favor of any Subsidiary or any other Person.

          (c) The Partnership may transfer assets to joint ventures, other partnerships, corporations or
other business entities in which it is or thereby becomes a participant upon such terms and subject
to such conditions as the General Partner deems are consistent with this Agreement, applicable law
and the REIT status of the General Partner.

          (d) Except as expressly permitted by this Agreement, neither the General Partner nor any of
its Affiliates shall sell, transfer or convey any Property to, or purchase any Property from, the
Partnership, directly or indirectly, except pursuant to transactions that are, in the General
Partner’s sole discretion, on terms that are fair and reasonable to the Partnership.

     6.8 General Partner Participation.

     The General Partner agrees that all business activities of the General Partner, including
activities pertaining to the acquisition, development or ownership of any Real Estate Asset or
other Property shall be conducted through the Partnership, a Subsidiary, a Subsidiary Partnership
or a taxable REIT subsidiary

25

 

(within the meaning of Section 856(1) of the Code); provided, however, that the General
Partner is allowed to make a direct acquisition, but if and only if, such acquisition is made in
connection with the issuance of Additional Securities, which direct acquisition and issuance have
been approved and determined to be in the best interests of the General Partner and the Partnership
by a majority of the Independent Directors.

     6.9 Title to Partnership Assets.

     Title to Partnership assets, whether real, personal or mixed and whether tangible or
intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner,
individually or collectively, shall have any ownership interest in such Partnership assets or any
portion thereof. Title to any or all of the Partnership assets may be held in the name of the
Partnership, the General Partner or one or more nominees, as the General Partner may determine,
including Affiliates of the General Partner. The General Partner hereby declares and warrants that
any Partnership assets for which legal title is held in the name of the General Partner or any
nominee or Affiliate of the General Partner shall be held by the General Partner for the use and
benefit of the Partnership in accordance with the provisions of this Agreement; provided, however,
that the General Partner shall use its best efforts to cause beneficial and record title to such
assets to be vested in the Partnership as soon as reasonably practicable. All Partnership assets
shall be recorded as the Property of the Partnership in its books and records, irrespective of the
name in which legal title to such Partnership assets is held.

     6.10 Miscellaneous.

     In the event the General Partner redeems any REIT Shares (other than REIT Shares redeemed in
accordance with the share redemption program of the General Partner through proceeds received from
the General Partner’s dividend reinvestment plan), then the General Partner shall cause the
Partnership to purchase from the General Partner a number of Partnership Units as determined based
on the application of the Conversion Factor on the same terms that the General Partner redeemed
such REIT Shares. Moreover, if the General Partner makes a cash tender offer or other offer to
acquire REIT Shares, then the General Partner shall cause the Partnership to make a corresponding
offer to the General Partner to acquire an equal number of Partnership Units held by the General
Partner. In the event any REIT Shares are redeemed by the General Partner pursuant to such offer,
the Partnership shall redeem an equivalent number of the General Partner’s Partnership Units for an
equivalent purchase price based on the application of the Conversion Factor.

     6.11 No Duplication of Fees or Expenses.

     The Partnership may not incur or be responsible for any fee or expense (in connection with the
Offering or otherwise) that would be duplicative of fees and expenses paid by the General Partner.

ARTICLE 7

CHANGES IN GENERAL PARTNER

     7.1 Transfer of the General Partner’s Partnership Interest.

          (a) The General Partner shall not transfer all or any portion of its General Partnership
Interest or withdraw as General Partner except as provided in, or in connection with a transaction
contemplated by, Section 7.1(c), (d) or (e).

          (b) The General Partner agrees that its Percentage Interest will at all times be, in the
aggregate, at least 0.1%.

26

 

          (c) Except as otherwise provided in Section 6.4(b) or Section 7.1(d) or (e) hereof, the
General Partner shall not engage in any merger, consolidation or other combination with or into
another Person or the sale of all or substantially all of its assets, (other than in connection
with a change in the General Partner’s state of incorporation or organizational form) in each case
which results in a change of control of the General Partner (a “Transaction”), unless:

               (i) the consent of Limited Partners holding more than 50% of the Percentage Interests and more
than 50% of the Special Percentage Interests of the Limited Partners is obtained;

               (ii) as a result of such Transaction all Limited Partners will receive (A) for each
Partnership Unit an amount of cash, securities, or other Property equal to the product of the
Conversion Factor and the greatest amount of cash, securities or other Property paid in the
Transaction to a holder of one REIT Share in consideration of one REIT Share, provided that if, in
connection with the Transaction, a purchase, tender or exchange offer (“Offer”) shall have
been made to and accepted by the holders of more than 50% of the outstanding REIT Shares, each
holder of Partnership Units shall be given the option to exchange its Partnership Units for the
greatest amount of cash, securities, or other Property which a Limited Partner holding Partnership
Units would have received had it (1) exercised its Redemption Right and (2) sold, tendered or
exchanged pursuant to the Offer the REIT Shares received upon exercise of the Redemption Right
immediately prior to the expiration of the Offer and (B) for each Special Partnership Unit an
amount of cash, securities or other Property (as applicable based upon the type of consideration
and the proportions thereof paid to holders of REIT Shares in the Transaction) equal to the fair
market value of such Special Partnership Unit at such time as determined in good faith by the
General Partner by reference to the value paid for the REIT Shares; or

               (iii) the General Partner is the surviving entity in the Transaction and either (A) the
holders of REIT Shares do not receive cash, securities, or other Property in the Transaction or (B)
all Limited Partners (other than the General Partner or any Subsidiary) receive (1) in exchange for
their Partnership Units, an amount of cash, securities, or other Property (expressed as an amount
per REIT Share) that is no less than the product of the Conversion Factor and the greatest amount
of cash, securities, or other Property (expressed as an amount per REIT Share) received in the
Transaction by any holder of REIT Shares and (2) in exchange for their Special Partnership Units,
an amount of cash, securities or other Property (as applicable based upon the type of consideration
and the proportions thereof paid to holders of REIT Shares in the Transaction) equal to the fair
market value of such Special Partnership Units at such time as determined in good faith by the
General Partner by reference to the value paid for the REIT Shares.

          (d) Notwithstanding Section 7.1(c), the General Partner may merge with or into or consolidate
with another entity if immediately after such merger or consolidation (i) substantially all of the
assets of the successor or surviving entity (the “Survivor”), other than Partnership Units
held by the General Partner, are contributed, directly or indirectly, to the Partnership as a
Capital Contribution in exchange for Partnership Units with a fair market value equal to the value
of the assets so contributed as determined by the Survivor in good faith and (ii) the Survivor
expressly agrees to assume all obligations of the General Partner, as appropriate, hereunder. Upon
such contribution and assumption, the Survivor shall have the right and duty to amend this
Agreement as set forth in this Section 7.1(d). The Survivor shall in good faith arrive at a new
method for the calculation of the Cash Amount, the REIT Shares Amount and Conversion Factor for a
Partnership Unit after any such merger or consolidation so as to approximate the existing method
for such calculation as closely as reasonably possible. Such calculation shall take into account,
among other things, the kind and amount of securities, cash and other Property that was receivable
upon such merger or consolidation by a holder of REIT Shares or options, warrants or other rights
relating thereto, and which a holder of Partnership Units could have acquired had such
Partnership Units been exchanged immediately prior to such merger or consolidation. Such
amendment to

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this Agreement shall provide for adjustment to such method of calculation, which shall
be as nearly equivalent as may be practicable to the adjustments provided for with respect to the
Conversion Factor. The Survivor also shall in good faith modify the definition of REIT Shares and
make such amendments to Sections 8.5 and 8.6 hereof so as to approximate the existing rights and
obligations set forth in Sections 8.5 and 8.6 as closely as reasonably possible. The above
provisions of this Section 7.1(d) shall similarly apply to successive mergers or consolidations
permitted hereunder.

          In respect of any transaction described in the preceding paragraph, the General Partner is
required to use its commercially reasonable efforts to structure such transaction to avoid causing
the Limited Partners to recognize a gain for Federal income tax purposes by virtue of the
occurrence of or their participation in such transaction, provided such efforts are consistent with
the exercise of the Board of Directors’ fiduciary duties to the stockholders of the General Partner
under applicable law.

          (e) Notwithstanding Section 7.1(c),

               (i) a General Partner may transfer all or any portion of its General Partnership Interest to
(A) a wholly-owned Subsidiary of such General Partner or (B) the owner of all of the ownership
interests of such General Partner, and following a transfer of all of its General Partnership
Interest, may withdraw as General Partner; and

               (ii) the General Partner may engage in a transaction not required by law or by the rules of
any national securities exchange on which the REIT Shares are listed to be submitted to the vote of
the holders of the REIT Shares.

     7.2 Admission of a Substitute or Additional General Partner.

     A Person shall be admitted as a substitute or additional General Partner of the Partnership
only if the following terms and conditions are satisfied:

          (a) the Person to be admitted as a substitute or additional General Partner shall have
accepted and agreed to be bound by all the terms and provisions of this Agreement by executing a
counterpart thereof and such other documents or instruments as may be required or appropriate in
order to effect the admission of such Person as a General Partner, and a certificate evidencing the
admission of such Person as a General Partner shall have been filed for recordation and all other
actions required by Section 2.5 hereof in connection with such admission shall have been performed;

          (b) if the Person to be admitted as a substitute or additional General Partner is a
corporation or a partnership it shall have provided the Partnership with evidence satisfactory to
counsel for the Partnership of such Person’s authority to become a General Partner and to be bound
by the terms and provisions of this Agreement; and

          (c) counsel for the Partnership shall have rendered an opinion (relying on such opinions from
other counsel as may be necessary) that (x) the admission of the Person to be admitted as a
substitute or additional General Partner is in conformity with the Act and (y) none of the actions
taken in connection with the admission of such Person as a substitute or additional General Partner
will cause (i) the Partnership to be classified other than as a partnership for federal tax
purposes, or (ii) the loss of any Limited Partner’s limited liability.

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     7.3 Effect of Bankruptcy, Withdrawal, Death or Dissolution of a General Partner.

          (a) Upon the occurrence of an Event of Bankruptcy as to a General Partner (and its removal
pursuant to Section 7.4(a) hereof) or the death, withdrawal, removal or dissolution of a General
Partner (except that, if a General Partner is on the date of such occurrence a partnership, the
withdrawal, death, dissolution, Event of Bankruptcy as to, or removal of a partner in, such
partnership shall be deemed not to be a dissolution of such General Partner if the business of such
General Partner is continued by the remaining partner or partners), the Partnership shall be
dissolved and terminated unless the Partnership is continued pursuant to Section 7.3(b) hereof. The
merger of the General Partner with or into any entity that is admitted as a substitute or successor
General Partner pursuant to Section 7.2 hereof shall not be deemed to be the withdrawal,
dissolution or removal of the General Partner.

          (b) Following the occurrence of an Event of Bankruptcy as to a General Partner (and its
removal pursuant to Section 7.4(a) hereof) or the death, withdrawal, removal or dissolution of a
General Partner (except that, if a General Partner is, on the date of such occurrence, a
partnership, the withdrawal of, death, dissolution, Event of Bankruptcy as to, or removal of a
partner in, such partnership shall be deemed not to be a dissolution of such General Partner if the
business of such General Partner is continued by the remaining partner or partners), the Limited
Partners, within ninety (90) days after such occurrence, may elect to continue the business of the
Partnership for the balance of the term specified in Section 2.4 hereof by selecting, subject to
Section 7.2 hereof and any other provisions of this Agreement, a substitute General Partner by
consent of a majority in interest of the Limited Partners. If the Limited Partners elect to
continue the business of the Partnership and admit a substitute General Partner, the relationship
with the Partners and of any Person who has acquired an interest of a Partner in the Partnership
shall be governed by this Agreement.

     7.4 Removal of a General Partner.

          (a) Upon the occurrence of an Event of Bankruptcy as to, or the dissolution of, a General
Partner, such General Partner shall be deemed to be removed automatically; provided, however, that
if a General Partner is on the date of such occurrence a partnership, the withdrawal, death or
dissolution of, Event of Bankruptcy as to, or removal of, a partner in, such partnership shall be
deemed not to be a dissolution of the General Partner if the business of such General Partner is
continued by the remaining partner or partners. The Limited Partners may not remove the General
Partner, with or without cause.

          (b) If a General Partner has been removed pursuant to this Section 7.4 and the Partnership is
continued pursuant to Section 7.3 hereof, such General Partner shall promptly transfer and assign
its General Partnership Interest in the Partnership to the substitute General Partner approved by a
majority in interest of the Limited Partners in accordance with Section 7.3(b) hereof and otherwise
be admitted to the Partnership in accordance with Section 7.2 hereof. At the time of assignment,
the removed General Partner shall be entitled to receive from the substitute General Partner the
fair market value of the General Partnership Interest of such removed General Partner as reduced by
any damages caused to the Partnership by such General Partner. Such fair market value shall be
determined by an appraiser mutually agreed upon by the General Partner and a majority in interest
of the Limited Partners within ten (10) days following the removal of the General Partner. In the
event that the parties are unable to agree upon an appraiser, the removed General Partner and a
majority in interest of the Limited Partners each shall select an appraiser. Each such appraiser
shall complete an appraisal of the fair market value of the removed General Partner’s General
Partnership Interest within thirty (30) days of the General Partner’s removal, and the fair market
value of the removed General Partner’s General Partnership Interest shall be the average of the two
appraisals; provided, however, that if the higher appraisal exceeds the lower appraisal
by more than 20% of the amount of the lower appraisal, the two appraisers, no later than forty
(40) days

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after the removal of the General Partner, shall select a third appraiser who shall
complete an appraisal of the fair market value of the removed General Partner’s General Partnership
Interest no later than sixty (60) days after the removal of the General Partner. In such case, the
fair market value of the removed General Partner’s General Partnership Interest shall be the
average of the two appraisals closest in value.

          (c) The General Partnership Interest of a removed General Partner, during the time after
default until transfer under Section 7.4(b), shall be converted to that of a special Limited
Partner; provided, however, such removed General Partner shall not have any rights to participate
in the management and affairs of the Partnership, and shall not be entitled to any portion of the
income, expense, profit, gain or loss allocations or cash distributions allocable or payable, as
the case may be, to the Limited Partners. Instead, such removed General Partner shall receive and
be entitled only to retain distributions or allocations of such items that it would have been
entitled to receive in its capacity as General Partner, until the transfer is effective pursuant to
Section 7.4(b).

          (d) All Partners shall have given and hereby do give such consents, shall take such actions
and shall execute such documents as shall be legally necessary, desirable and sufficient to effect
all the foregoing provisions of this Section.

ARTICLE 8

RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS

     8.1 Management of the Partnership.

     The Limited Partners shall not participate in the management or control of Partnership
business nor shall they transact any business for the Partnership, nor shall they have the power to
sign for or bind the Partnership, such powers being vested solely and exclusively in the General
Partner.

     8.2 Power of Attorney.

     Each Limited Partner hereby irrevocably appoints the General Partner its true and lawful
attorney-in-fact, who may act for each Limited Partner and in its name, place and stead, and for
its use and benefit, to sign, acknowledge, swear to, deliver, file or record, at the appropriate
public offices, any and all documents, certificates, and instruments as may be deemed necessary or
desirable by the General Partner to carry out fully the provisions of this Agreement and the Act in
accordance with their terms, which power of attorney is coupled with an interest and shall survive
the death, dissolution or legal incapacity of the Limited Partner, or the transfer by the Limited
Partner of any part or all of its Partnership Interest.

     8.3 Limitation on Liability of Limited Partners.

     No Limited Partner shall be liable for any debts, liabilities, contracts or obligations of the
Partnership. A Limited Partner shall be liable to the Partnership only to make payments of its
Capital Contribution, if any, as and when due hereunder. After its Capital Contribution is fully
paid, no Limited Partner shall, except as otherwise required by the Act, be required to make any
further Capital Contributions or other payments or lend any funds to the Partnership.

     8.4 Ownership by Limited Partner of Corporate General Partner or Affiliate.

     No Limited Partner shall at any time, either directly or indirectly, own any stock or other
interest in the General Partner or in any Affiliate thereof, if such ownership by itself or in
conjunction with other
stock or other interests owned by other Limited Partners would, in the opinion of counsel for the

30

 

Partnership, jeopardize the classification of the Partnership as a partnership for federal tax
purposes. The General Partner shall be entitled to make such reasonable inquiry of the Limited
Partners as is required to establish compliance by the Limited Partners with the provisions of this
Section.

     8.5 Redemption Right.

          (a) Subject to Sections 8.5(b), 8.5(c), 8.5(d), 8.5(e) and 8.5(f) and the provisions of any
agreements between the Partnership and one or more Limited Partners with respect to Partnership
Units held by them, each Limited Partner, other than the General Partner, shall, after holding
their Partnership Units for at least one year, have the right (subject to the terms and conditions
set forth herein) to require the Partnership to redeem (a “Redemption”) all or a portion of
the Partnership Units held by such Limited Partner in exchange (a “Redemption Right”) for
REIT Shares issuable on, or the Cash Amount payable on, or a combination thereof having an
equivalent value to the REIT Shares issuable on, or the Cash Amount payable on, the Specified
Redemption Date, as determined by the General Partner in its sole discretion, provided that such
Partnership Units (the “Tendered Units”) shall have been outstanding for at least one year.
Any Redemption Right shall be exercised pursuant to a Notice of Redemption delivered to the
Partnership (with a copy to the General Partner) by the Limited Partner exercising the Redemption
Right (the “Tendering Party”). No Limited Partner may deliver more than two Notices of
Redemption during each calendar year. A Limited Partner may not exercise the Redemption Right for
less than 1,000 Partnership Units or, if such Limited Partner holds less than 1,000 Partnership
Units, all of the Partnership Units held by such Partner. The Tendering Party shall have no right,
with respect to any Partnership Units so redeemed, to receive any distribution paid with respect to
Partnership Units if the record date for such distribution is on or after the Specified Redemption
Date.

          (b) If the General Partner elects to redeem Tendered Units for REIT Shares rather than cash,
then the Partnership shall direct the General Partner to issue and deliver such REIT Shares to the
Tendering Party pursuant to the terms set forth in this Section 8.5(b), in which case, (i) the
General Partner, acting as a distinct legal entity, shall assume directly the obligation with
respect thereto and shall satisfy the Tendering Party’s exercise of its Redemption Right, and (ii)
such transaction shall be treated, for federal income tax purposes, as a transfer by the Tendering
Party of such Tendered Units to the General Partner in exchange for REIT Shares. The percentage of
the Tendered Units tendered for Redemption by the Tendering Party for which the General Partner
elects to issue REIT Shares (rather than cash) is referred to as the “Applicable
Percentage.” In making such election to acquire Tendered Units, the Partnership shall act in a
fair, equitable and reasonable manner that neither prefers one group or class of Limited Partners
over another nor discriminates against a group or class of Limited Partners. If the Partnership
elects to redeem any number of Tendered Units for REIT Shares, rather than cash, on the Specified
Redemption Date, the Tendering Party shall sell such number of the Tendered Units to the General
Partner in exchange for a number of REIT Shares equal to the product of the REIT Shares Amount and
the Applicable Percentage. The product of the Applicable Percentage and the REIT Shares Amount, if
applicable, shall be delivered by the General Partner as duly authorized, validly issued, fully
paid and accessible REIT Shares free of any pledge, lien, encumbrance or restriction, other than
the Aggregate Share Ownership Limit and other restrictions provided in the Article of
Incorporation, the bylaws of the General Partner, the Securities Act and relevant state securities
or “blue sky” laws. Notwithstanding the provisions of Section 8.5(a) and this Section 8.5(b), the
Tendering Parties shall have no rights under this Agreement that would otherwise be prohibited
under the Articles of Incorporation.

          (c) In connection with an exercise of Redemption Rights pursuant to this Section 8.5, the
Tendering Party shall submit the following to the General Partner, in addition to the Notice of
Redemption:

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               (1) A written affidavit, dated the same date as the Notice of Redemption, (a) disclosing the
actual and constructive ownership, as determined for purposes of Code Sections 856(a)(6) and
856(h), of REIT Shares by (i) such Tendering Party and (ii) any Related Party and (b) representing
that, after giving effect to the Redemption, neither the Tendering Party nor any Related Party will
own REIT Shares in excess of the Aggregate Share Ownership Limit (or, if applicable the Excepted
Holder Limit);

               (2) A written representation that neither the Tendering Party nor any Related Party has any
intention to acquire any additional REIT Shares prior to the closing of the Redemption on the
Specified Redemption Date;

               (3) An undertaking to certify, at and as a condition to the closing of the Redemption on the
Specified Redemption Date, that either (a) the actual and constructive ownership of REIT Shares by
the Tendering Party and any Related Party remain unchanged from that disclosed in the affidavit
required by Section 8.5(c)(1) or (b) after giving effect to the Redemption, neither the Tendering
Party nor any Related Party shall own REIT Shares in violation of the Aggregate Share Ownership
Limit (or, if applicable, the Excepted Holder Limit); and

               (4) Any other documents as the General Partner may reasonably require in connection with the
issuance of REIT Shares upon the exercise of the Redemption Right.

          (d) Any Cash Amount to be paid to a Tendering Party pursuant to this Section 8.5 shall be paid
on the Specified Redemption Date; provided, however, that the General Partner may elect to cause
the Specified Redemption Date to be delayed for up to an additional 180 days to the extent required
for the General Partner to cause additional REIT Shares to be issued to provide financing to be
used to make such payment of the Cash Amount. Notwithstanding the foregoing, the General Partner
agrees to use its best efforts to cause the closing of the acquisition of Tendered Units hereunder
to occur as quickly as reasonably possible.

          (e) Notwithstanding any other provision of this Agreement, the General Partner shall place
appropriate restrictions on the ability of the Limited Partners to exercise their Redemption Rights
to prevent, among other things, (a) any person from owning shares in excess of the Common Share
Ownership Limit, the Aggregate Share Ownership Limit and the Excepted Holder Limit, (b) the General
Partner’s common stock from being owned by less than 100 persons, (c) the General Partner from
being “closely held” within the meaning of section 856(h) of the Code, and (d) to ensure that the
Partnership does not constitute a “publicly traded partnership” under section 7704 of the Code. If
and when the General Partner determines that imposing such restrictions is necessary, the General
Partner shall give prompt written notice thereof (a “Restriction Notice”) to each of the
Limited Partners holding Partnership Units, which notice shall be accompanied by a copy of an
opinion of counsel to the Partnership which states that, in the opinion of such counsel,
restrictions are necessary in order to avoid having the Partnership be treated as a “publicly
traded partnership” under section 7704 of the Code.

          (f) A redemption fee may be charged in connection with an exercise of Redemption Rights
pursuant to this Section 8.5.

     8.6 Redemption of Special Partnership Units.

     Upon the earliest to occur of (a) the termination or nonrenewal of the Advisory Agreement for
“cause” (as defined in the Advisory Agreement), (b) a Termination Event, or (c) the Listing, the
Special Partnership Units will be redeemed.

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          (a) Redemption of Special Partnership Units Upon Termination or Nonrenewal of the Advisory
Agreement for Cause. If the Advisory Agreement is terminated or not renewed by the General Partner
for “cause” (as defined in the Advisory Agreement), all of the Special Partnership Units shall be
redeemed by the Partnership for $1 within thirty (30) days after the termination or nonrenewal of
the Advisory Agreement.

          (b) Redemption of Special Partnership Units upon a Termination Event or the Listing. Upon the
occurrence of a Termination Event or the Listing, the Special Partnership Units shall be redeemed
for an aggregate amount equal to the Net Sales Proceeds that would have been distributed to the
Special OP Unitholders under Section 5.2(b)(i)(B)(2) if all assets of the Partnership had been sold
for their fair market value and all liabilities of the Partnership had been satisfied in full
according to their terms. Such redemption shall occur no later than thirty (30) days after the date
of a Termination Event and no later than 240 days after the Listing. In determining the fair market
value of the assets of the Partnership, (i) in connection with a Termination Event, the General
Partner shall obtain an appraisal of the assets of the Partnership (excluding any assets which may
be readily marked to market) and (ii) in connection with the Listing, the General Partner shall
make such determination (a) taking into account, in the event of a Listing on a national securities
exchange only, the market value of the General Partner’s listed shares based upon the average
closing price, or average of bid and asked prices, as the case may be, during a period of thirty
(30) days during which such shares are traded beginning one hundred and twenty (120) days after the
Listing or (b) taking into account the value of the General Partner’s shares based upon the initial
public offering price in the event of an underwritten public offering. Payment to Special OP
Unitholders upon a Termination Event or a Listing shall consist of cash, shares or a non-interest
bearing promissory note, as determined in the sole discretion of the Special OP Unitholders, that
will be repaid using the net proceeds of each sale of an asset or assets of the Partnership in
connection with or following the occurrence of the Termination Event or Listing. However, any such
payments, whether in the form of cash, shares or under a promissory note, may not be made in
connection with a Termination Event until either (a) the closing of asset sales that result in
aggregate, cumulative distributions to the OP Unitholders of the Partnership from operating income,
sales proceeds and other sources in an amount equal to their Capital Contributions to the
Partnership plus an 8.0% cumulative non-compounded annual pre-tax return thereon, or (b) a Listing
(each a “Subsequent Liquidity Event.”). In addition, the amount of cash, shares or the
promissory note issued in connection with a Termination Event will be subject to reduction as of
the date of the Subsequent Liquidity Event by an amount that will ensure that, in connection with
the Subsequent Liquidity Event, the Special OP Unit Holder does not receive in excess of 15% of the
distributions that are made or are deemed to be made by the Partnership after the OP Unitholders
have received or are deemed to have received aggregate, cumulative distributions equal to their
Capital Contributions to the Partnership plus a 8.0% cumulative non-compounded annual pre-tax
return thereon.

     8.7 Distribution Reinvestment Plan.

     OP Unitholders may have the opportunity to join the General Partner’s distribution
reinvestment plan by completing an enrollment form which is available upon request. A copy of the
General Partner’s distribution reinvestment plan is also available upon request. The shares of the
General Partner’s common stock which may be issued under the General Partner’s distribution
reinvestment plan are offered only by a prospectus.

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ARTICLE 9

TRANSFERS OF LIMITED PARTNERSHIP INTERESTS

     9.1 Purchase for Investment.

          (a) Each Limited Partner hereby represents and warrants to the General Partner and to the
Partnership that the acquisition of his Partnership Interest is made as a principal for his account
for investment purposes only and not with a view to the resale or distribution of such Partnership
Interest.

          (b) Each Limited Partner agrees that he will not sell, assign or otherwise transfer his
Partnership Interest or any fraction thereof, whether voluntarily or by operation of law or at
judicial sale or otherwise, to any Person who does not make the representations and warranties to
the General Partner set forth in Section 9.1(a) above and similarly agree not to sell, assign or
transfer such Partnership Interest or fraction thereof to any Person who does not similarly
represent, warrant and agree.

     9.2 Restrictions on Transfer of Limited Partnership Interests.

          (a) Subject to the provisions of 9.2(b) and (c), no Limited Partner may offer, sell, assign,
hypothecate, pledge or otherwise transfer all or any portion of his Limited Partnership Interest,
or any of such Limited Partner’s economic rights as a Limited Partner, whether voluntarily or by
operation of law or at judicial sale or otherwise (collectively, a “Transfer”) without the
consent of the General Partner, which consent may be granted or withheld in its sole and absolute
discretion. Any such purported transfer undertaken without such consent shall be considered to be
null and void ab initio and shall not be given effect. The General Partner may require, as a
condition of any Transfer to which it consents, that the transferor assume all costs incurred by
the Partnership in connection therewith.

          (b) No Limited Partner may withdraw from the Partnership other than as a result of a permitted
Transfer (i.e., a Transfer consented to as contemplated by clause (a) above or clause (c) below or
a Transfer pursuant to Section 9.5 below) of all of its Partnership Interest pursuant to this
Article 9 or pursuant to a redemption of all of its Partnership Units pursuant to Section 8.5 or
pursuant to the redemption of the Limited Partner’s Special Partnership Units pursuant to Section
8.6. Upon the permitted Transfer or redemption of all of a Limited Partner’s Partnership Interest,
such Limited Partner shall cease to be a Limited Partner.

          (c) Notwithstanding Section 9.2(a) and subject to Sections 9.2(d), (e) and (f) below, a
Limited Partner may Transfer, without the consent of the General Partner, all or a portion of its
Partnership Interest to (i) a parent or parent’s spouse, natural or adopted descendant or
descendants, spouse of such descendant, or brother or sister, or a trust created by such Limited
Partner for the benefit of such Limited Partner and/or any such person(s), of which trust such
Limited Partner or any such person(s) is a trustee, (ii) a corporation controlled by a Person or
Persons named in (i) above, or (iii) if the Limited Partner is an entity, its beneficial owners.

          (d) No Limited Partner may effect a Transfer of its Limited Partnership Interest, in whole or
in part, if, in the opinion of legal counsel for the Partnership, such proposed Transfer would
require the registration of the Limited Partnership Interest under the Securities Act or would
otherwise violate any applicable federal or state securities or blue sky law (including investment
suitability standards).

          (e) No Transfer by a Limited Partner of its Partnership Interest, in whole or in part, may be
made to any Person if (i) in the opinion of the General Partner based on the advice of legal

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counsel for the Partnership, if appropriate, the transfer would result in the Partnership’s
being treated as an association taxable as a corporation (other than a qualified REIT subsidiary
within the meaning of Section 856(i) of the Code), (ii) in the opinion of the General Partner based
on the advice of legal counsel for the Partnership, if appropriate, it would adversely affect the
ability of the General Partner to continue to qualify as a REIT or subject the General Partner to
any additional taxes under Section 857 or Section 4981 of the Code, (iii) such transfer is
effectuated through an “established securities market” or a “secondary market (or the substantial
equivalent thereof)” within the meaning of Section 7704 of the Code, (iv) such Transfer would cause
the General Partner to own 10% or more of the ownership interests of any tenant of a Property held
by the partnership within the meaning of Section 856(d)(2)(B) of the Code, or (v) such Transfer
would result in the General Partner being “closely held” within the meaning of Section 856(h) of
the Code.

          (f) No transfer by a Limited Partner of any Partnership Interest may be made to a lender to
the Partnership or any Person who is related (within the meaning of Regulations Section 1.752-4(b))
to any lender to the Partnership whose loan constitutes a Nonrecourse Liability, without the
consent of the General Partner, which may be withheld in its sole and absolute discretion, provided
that as a condition to such consent the lender will be required to enter into an arrangement with
the Partnership and the General Partner to exchange or redeem for the Cash Amount any Partnership
Units in which a security interest is held simultaneously with the time at which such lender would
be deemed to be a Partner in the Partnership for purposes of allocating liabilities to such lender
under Section 752 of the Code.

          (g) Any Transfer in contravention of any of the provisions of this Article 9 shall be void and
ineffectual and shall not be binding upon, or recognized by, the Partnership.

          (h) Prior to the consummation of any Transfer under this Article 9, the transferor and/or the
transferee shall deliver to the General Partner such opinions, certificates and other documents as
the General Partner shall request in connection with such Transfer.

     9.3 Admission of Substitute Limited Partner.

          (a) Subject to the other provisions of this Article 9, an assignee of the Limited Partnership
Interest of a Limited Partner (which shall be understood to include any purchaser, transferee,
donee, or other recipient of any disposition of such Limited Partnership Interest) shall be deemed
admitted as a Limited Partner of the Partnership only with the consent of the General Partner and
upon the satisfactory completion of the following:

               (i) The assignee shall have accepted and agreed to be bound by the terms and provisions of
this Agreement by executing a counterpart or an amendment thereof, including a revised Exhibit
A, and such other documents or instruments as the General Partner may require in order to
effect the admission of such Person as a Limited Partner.

               (ii) To the extent required, an amended Certificate evidencing the admission of such Person as
a Limited Partner shall have been signed, acknowledged and filed for record in accordance with the
Act.

               (iii) The assignee shall have delivered a letter containing the representation set forth in
Section 9.1(a) hereof and the agreement set forth in Section 9.1(b) hereof.

               (iv) If the assignee is a corporation, partnership or trust, the assignee shall have provided
the General Partner with evidence satisfactory to counsel for the Partnership of the assignee’s
authority to become a Limited Partner under the terms and provisions of this Agreement.

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               (v) The assignee shall have executed a power of attorney containing the terms and provisions
set forth in Section 8.2 hereof.

               (vi) The assignee shall have paid all legal fees and other expenses of the Partnership and the
General Partner and filing and publication costs in connection with its substitution as a Limited
Partner.

               (vii) The assignee has obtained the prior written consent of the General Partner to its
admission as a Substitute Limited Partner, which consent may be given or denied in the exercise of
the General Partner’s sole and absolute discretion.

          (b) For the purpose of allocating Profits and Losses and distributing cash received by the
Partnership, a Substitute Limited Partner shall be treated as having become, and appearing in the
records of the Partnership as, a Partner upon the filing of the Certificate described in Section
9.3(a)(ii) hereof or, if no such filing is required, the later of the date specified in the
transfer documents or the date on which the General Partner has received all necessary instruments
of transfer and substitution.

          (c) The General Partner shall cooperate with the Person seeking to become a Substitute Limited
Partner by preparing the documentation required by this Section and making all official filings and
publications. The Partnership shall take all such action as promptly as practicable after the
satisfaction of the conditions in this Article 9 to the admission of such Person as a Limited
Partner of the Partnership.

     9.4 Rights of Assignees of Partnership Interests.

          (a) Subject to the provisions of Sections 9.1 and 9.2 hereof, except as required by operation
of law, the Partnership shall not be obligated for any purposes whatsoever to recognize the
assignment by any Limited Partner of its Partnership Interest until the Partnership has received
notice thereof.

          (b) Any Person who is the assignee of all or any portion of a Limited Partner’s Limited
Partnership Interest, but does not become a Substitute Limited Partner and desires to make a
further assignment of such Limited Partnership Interest, shall be subject to all the provisions of
this Article 9 to the same extent and in the same manner as any Limited Partner desiring to make an
assignment of its Limited Partnership Interest.

     9.5 Effect of Bankruptcy, Death, Incompetence or Termination of a Limited Partner.

     The occurrence of an Event of Bankruptcy as to a Limited Partner, the death of a Limited
Partner or a final adjudication that a Limited Partner is incompetent (which term shall include,
but not be limited to, insanity) shall not cause the termination or dissolution of the Partnership,
and the business of the Partnership shall continue if an order for relief in a bankruptcy
proceeding is entered against a Limited Partner, the trustee or receiver of his estate or, if he
dies, his executor, administrator or trustee, or, if he is finally adjudicated incompetent, his
committee, guardian or conservator, shall have the rights of such Limited Partner for the purpose
of settling or managing his estate property and such power as the bankrupt, deceased or incompetent
Limited Partner possessed to assign all or any part of his Partnership
Interest and to join with the assignee in satisfying conditions precedent to the admission of
the assignee as a Substitute Limited Partner.

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     9.6 Joint Ownership of Interests.

     A Partnership Interest may be acquired by two individuals as joint tenants with right of
survivorship, provided that such individuals either are married or are related and share the same
home as tenants in common. The written consent or vote of both owners of any such jointly held
Partnership Interest shall be required to constitute the action of the owners of such Partnership
Interest; provided, however, that the written consent of only one joint owner will be required if
the Partnership has been provided with evidence satisfactory to the counsel for the Partnership
that the actions of a single joint owner can bind both owners under the applicable laws of the
state of residence of such joint owners. Upon the death of one owner of a Partnership Interest held
in a joint tenancy with a right of survivorship, the Partnership Interest shall become owned solely
by the survivor as a Limited Partner and not as an assignee. The Partnership need not recognize the
death of one of the owners of a jointly-held Partnership Interest until it shall have received
notice of such death. Upon notice to the General Partner from either owner, the General Partner
shall cause the Partnership Interest to be divided into two equal Partnership Interests, which
shall thereafter be owned separately by each of the former owners.

ARTICLE 10

BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS

     10.1 Books and Records.

     At all times during the continuance of the Partnership, the Partners shall keep or cause to be
kept at the Partnership’s specified office true and complete books of account in accordance with
generally accepted accounting principles, including: (a) a current list of the full name and last
known business address of each Partner, (b) a copy of the Certificate of Limited Partnership and
all Certificates of amendment thereto, (c) copies of the Partnership’s federal, state and local
income tax returns and reports, (d) copies of this Agreement and amendments thereto and any
financial statements of the Partnership for the three most recent years and (e) all documents and
information required under the Act. Any Partner or its duly authorized representative, upon paying
the costs of collection, duplication and mailing, shall be entitled to inspect or copy such records
during ordinary business hours.

     10.2 Custody of Partnership Funds; Bank Accounts.

          (a) All funds of the Partnership not otherwise invested shall be deposited in one or more
accounts maintained in such banking or brokerage institutions as the General Partner shall
determine, and withdrawals shall be made only on such signature or signatures as the General
Partner may, from time to time, determine.

          (b) All deposits and other funds not needed in the operation of the business of the
Partnership may be invested by the General Partner in investment grade instruments (or investment
companies whose portfolio consists primarily thereof), government obligations, certificates of
deposit, bankers’ acceptances and municipal notes and bonds. The funds of the Partnership shall not
be commingled with the funds of any other Person except for such commingling as may necessarily
result from an investment in those investment companies permitted by this Section 10.2(b).

     10.3 Fiscal and Taxable Year.

     The fiscal and taxable year of the Partnership shall be the calendar year.

37

 

     10.4 Annual Tax Information and Report.

     Within seventy-five (75) days after the end of each fiscal year of the Partnership, the
General Partner shall furnish to each person who was a Limited Partner at any time during such year
the tax information necessary to file such Limited Partner’s individual tax returns as shall be
reasonably required by law.

     10.5 Tax Matters Partner; Tax Elections; Special Basis Adjustments.

          (a) The General Partner shall be the Tax Matters Partner of the Partnership within the meaning
of Section 6231(a)(7) of the Code. As Tax Matters Partner, the General Partner shall have the right
and obligation to take all actions authorized and required, respectively, by the Code for the Tax
Matters Partner. The General Partner shall have the right to retain professional assistance in
respect of any audit of the Partnership by the Service and all out-of-pocket expenses and fees
incurred by the General Partner on behalf of the Partnership as Tax Matters Partner shall
constitute Partnership expenses. In the event the General Partner receives notice of a final
Partnership adjustment under Section 6223(a)(2) of the Code, the General Partner shall either (i)
file a court petition for judicial review of such final adjustment within the period provided under
Section 6226(a) of the Code, a copy of which petition shall be mailed to all Limited Partners on
the date such petition is filed, or (ii) mail a written notice to all Limited Partners, within such
period, that describes the General Partner’s reasons for determining not to file such a petition.

          (b) All elections required or permitted to be made by the Partnership under the Code or any
applicable state or local tax law shall be made by the General Partner in its sole and absolute
discretion.

          (c) In the event of a transfer of all or any part of the Partnership Interest of any Partner,
the Partnership, at the option of the General Partner, may elect pursuant to Section 754 of the
Code to adjust the basis of the Partnership’s assets. Notwithstanding anything contained in Article
5 of this Agreement, any adjustments made pursuant to Section 754 of the Code shall affect only the
successor in interest to the transferring Partner and in no event shall be taken into account in
establishing, maintaining or computing Capital Accounts for the other Partners for any purpose
under this Agreement. Each Partner will furnish the Partnership with all information necessary to
give effect to such election.

     10.6 Reports to Limited Partners.

          (a) As soon as practicable after the close of each fiscal quarter (other than the last quarter
of the fiscal year), the General Partner shall cause to be mailed to each Limited Partner a
quarterly report containing financial statements of the Partnership, or of the General Partner if
such statements are prepared solely on a consolidated basis with the General Partner, for such
fiscal quarter, presented in accordance with generally accepted accounting principles. As soon as
practicable after the close of each fiscal year, the General Partner shall cause to be mailed to
each Limited Partner an annual report containing financial statements of the Partnership, or of the
General Partner if such statements are prepared solely on a consolidated basis with the General
Partner, for such fiscal year, presented in accordance with generally accepted accounting
principles. The annual financial statements shall be audited by accountants selected by the General
Partner.

          (b) Any Partner shall further have the right to a private audit of the books and records of
the Partnership at the expense of such Partner, provided such audit is made for Partnership
purposes and is made during normal business hours.

38

 

ARTICLE 11

AMENDMENT OF AGREEMENT; MERGER

     The General Partner’s consent shall be required for any amendment to this Agreement. The
General Partner, without the consent of the Limited Partners, may amend this Agreement in any
respect or merge or consolidate the Partnership with or into any other partnership or business
entity (as defined in Section 17-211 of the Act) in a transaction pursuant to Section 7.1(c), (d)
or (e) hereof; provided, however, that the following amendments and any other merger or
consolidation of the Partnership shall require (i) the consent of Limited Partners holding more
than 50% of the Percentage Interests of the Limited Partners and (ii) in the case of any of the
following (b), (c) or (d), the consent of Limited Partners holding more than 50% of the Special
Percentage Interests of the Limited Partners:

          (a) any amendment affecting the operation of the Conversion Factor or the Redemption Right
(except as provided in Section 8.5(d) or 7.1(d) hereof) in a manner adverse to the Limited
Partners;

          (b) any amendment that would adversely affect the rights of the Limited Partners to receive
the distributions payable to them hereunder, other than with respect to the issuance of additional
Partnership Units pursuant to Section 4.2 hereof;

          (c) any amendment that would alter the Partnership’s allocations of Profit and Loss to the
Limited Partners, other than with respect to the issuance of additional Partnership Units pursuant
to Section 4.2 hereof; or

          (d) any amendment that would impose on the Limited Partners any obligation to make additional
Capital Contributions to the Partnership.

ARTICLE 12

GENERAL PROVISIONS

     12.1 Notices.

     All communications required or permitted under this Agreement shall be in writing and shall be
deemed to have been given when delivered personally or upon deposit in the United States mail,
registered, postage prepaid return receipt requested, to the Partners at the addresses set forth in
Exhibit A attached hereto; provided, however, that any Partner may specify a different
address by notifying the General Partner in writing of such different address. Notices to the
Partnership shall be delivered at or mailed to its specified office.

     12.2 Survival of Rights.

     Subject to the provisions hereof limiting transfers, this Agreement shall be binding upon and
inure to the benefit of the Partners and the Partnership and their respective legal
representatives, successors, transferees and assigns.

     12.3 Additional Documents.

     Each Partner agrees to perform all further acts and execute, swear to, acknowledge and deliver
all further documents which may be reasonable, necessary, appropriate or desirable to carry out the
provisions of this Agreement or the Act.

39

 

     12.4 Severability.

     If any provision of this Agreement shall be declared illegal, invalid, or unenforceable in any
jurisdiction, then such provision shall be deemed to be severable from this Agreement (to the
extent permitted by law) and in any event such illegality, invalidity or unenforceability shall not
affect the remainder hereof.

     12.5 Entire Agreement.

     This Agreement and exhibits attached hereto constitute the entire Agreement of the Partners
and supersede all prior written agreements and prior and contemporaneous oral agreements,
understandings and negotiations with respect to the subject matter hereof.

     12.6 Pronouns and Plurals.

     When the context in which words are used in the Agreement indicates that such is the intent,
words in the singular number shall include the plural and the masculine gender shall include the
neuter or female gender as the context may require.

     12.7 Headings.

     The Article headings or sections in this Agreement are for convenience only and shall not be
used in construing the scope of this Agreement or any particular Article.

     12.8 Counterparts.

     This Agreement may be executed in several counterparts, each of which shall be deemed to be an
original copy and all of which together shall constitute one and the same instrument binding on all
parties hereto, notwithstanding that all parties shall not have signed the same counterpart.

     12.9 Governing Law.

     This Agreement shall be governed by and construed in accordance with the laws of the State of
Delaware; provided, however, that any cause of action for violation of federal or state securities
laws shall not be governed by this Section 12.9.

[Remainder
of Page Intentionally Left Blank]

40

 

     IN WITNESS WHEREOF, the parties hereto have hereunder affixed their signatures to this
Agreement of Limited Partnership, all as of the    th day of       ,
2008.

	 	 	 	 	 
	 	GENERAL PARTNER:

Moody National REIT I, Inc.

 	 
	 	By:  	 	 
	 	 	Brett C. Moody, President 	 

	 	 	 	 	 	 	 	 	 
	 	 	LIMITED PARTNERS:	 	 
	  
	 	 	 	 	 	 	 	 
	 	 	Moody National LPOP I, LLC	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	 	 	 
	 	 	Name:	 	 	 	 
	 	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Moody OP Holdings I, LLC	 	 
	 	 	By:	 	Moody National REIT Sponsor, LLC,	 	 
	 	 	 	 	its Sole Member	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	Moody National REIT Sponsor SM, LLC	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Brett C. Moody, Member	 	 

 

 

EXHIBIT A

CONTRIBUTIONS AND INTEREST

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Special	 	 	 	 	 	 	Special	 
	 	 	 	 	Cash	 	 	 	 	 	 	Partnership	 	 	Partnership	 	 	Percentage	 	 	Percentage	 
	Partner	 	Address	 	Contribution	 	 	Contribution	 	 	Units	 	 	Units	 	 	Interest	 	 	Interest	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	GENERAL PARTNER:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Moody
National REIT
I, Inc.
	 	6363 Woodway
Drive, Suite 110

Houston, Texas 77057
	 	$	1,000	 	 	 	 	 	 	 	100	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	ORIGINAL LIMITED
PARTNERS::
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Moody National LPOP I, LLC
	 	6363 Woodway
Drive, Suite 110

Houston, Texas 77057
	 	$	1,000	 	 	 	 	 	 	 	100	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Moody OP
Holdings I,
LLC
	 	6363 Woodway
Drive, Suite 110

Houston, Texas 77057
	 	$	1,000	 	 	 	 	 	 	 	 	 	 	 	100	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Totals
	 	 	 	$	3,000	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

 

 

EXHIBIT B

NOTICE OF EXERCISE OF REDEMPTION RIGHT

     In accordance with Section 8.5 of the Limited Partnership Agreement (the “Agreement”) of Moody
National Operating Partnership I, L.P., the undersigned hereby irrevocably (i) presents for
redemption                      Partnership Units in Moody National Operating Partnership I, L.P.
in accordance with the terms of the Agreement and the Redemption Right referred to in Section 8.5
thereof, (ii) surrenders such Partnership Units and all right, title and interest therein, and
(iii) directs that the Cash Amount or REIT Shares Amount (as defined in the Agreement) as
determined by the General Partner deliverable upon exercise of the Redemption Right be delivered to
the address specified below, and if REIT Shares (as defined in the Agreement) are to be delivered,
such REIT Shares be registered or placed in the name(s) and at the address(es) specified below.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dated:
	 	 	 	,	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	,	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	(Name of Limited Partner)	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	(Signature of Limited Partner)	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	(Mailing Address)	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	(City)
	 	 	(State)
	(Zip Code)	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Signature Guaranteed by:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 
	If REIT Shares are to be issued, issue to:	 
	 
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	Social Security or Tax I.D. Number:Ex-10.1 Credit Agreement

 

Exhibit 10.1

 

 

Credit Agreement

among

Sanderson Farms, Inc.

and

Bank of Montreal,

Individually and as Agent

Regions Bank,

AgFirst Farm Credit Bank,

as Co-Documentation Agent

U.S. Bank National Association,

as Syndication Agent

and

The From Time to Time Banks Parties Hereto

May 1, 2008

 

 

[BMO Capital Markets, as Sole Lead Arranger and Sole Book Runner]

 

 

Sanderson Farms, Inc.

Credit Agreement

Table of Contents

	 	 	 	 	 	 	 
	Section	 	Heading	 	Page
	Section 1.

	 	The Credits
	 	 	1	 
	Section 1.1.

	 	The Revolving Credit
	 	 	1	 
	Section 1.2.

	 	The Revolving Notes
	 	 	2	 
	Section 1.3.

	 	Swing Loans
	 	 	2	 
	Section 1.4.

	 	Interest Rates
	 	 	4	 
	              (a)

	 	Domestic Rate
	 	 	4	 
	              (b)

	 	Eurodollar Rate
	 	 	5	 
	              (c)

	 	Default Rate
	 	 	5	 
	Section 1.5.

	 	Manner of Borrowing and Rate Selection
	 	 	5	 
	Section 1.6.

	 	Letters of Credit
	 	 	6	 
	Section 1.7.

	 	Reimbursement Obligation
	 	 	9	 
	Section 1.8.

	 	Participation in L/Cs
	 	 	9	 
	 
	 	 	 	 	 	 
	Section 2.

	 	Fees, Prepayments and Terminations
	 	 	10	 
	Section 2.1.

	 	Commitment Fee
	 	 	10	 
	Section 2.2.

	 	Agent’s Fee
	 	 	10	 
	Section 2.3.

	 	Optional Prepayments
	 	 	10	 
	Section 2.4.

	 	Mandatory Prepayments
	 	 	11	 
	Section 2.5.

	 	Terminations
	 	 	11	 
	 
	 	 	 	 	 	 
	Section 3.

	 	Place and Application of Payments
	 	 	11	 
	 
	 	 	 	 	 	 
	Section 4.

	 	Definitions
	 	 	12	 
	 
	 	 	 	 	 	 
	Section 5.

	 	Representations and Warranties
	 	 	21	 
	Section 5.1.

	 	Organization and Qualification
	 	 	21	 
	Section 5.2.

	 	Financial Reports
	 	 	21	 
	Section 5.3.

	 	Litigation; Tax Returns; Approvals
	 	 	21	 
	Section 5.4.

	 	Regulation U
	 	 	22	 
	Section 5.5.

	 	No Default
	 	 	22	 
	Section 5.6.

	 	ERISA
	 	 	22	 
	Section 5.7.

	 	Compliance with Laws
	 	 	22	 
	Section 5.8.

	 	Security Interests and Indebtedness
	 	 	22	 
	Section 5.9.

	 	Subsidiaries
	 	 	22	 
	Section 5.10.

	 	Accurate Information
	 	 	23	 
	Section 5.11.

	 	Enforceability
	 	 	23	 

-i-

 

	 	 	 	 	 	 	 
	Section	 	Heading	 	Page
	Section 6.

	 	Conditions Precedent
	 	 	23	 
	Section 6.1.

	 	General
	 	 	23	 
	Section 6.2.

	 	Initial Extension of Credit
	 	 	23	 
	Section 6.3.

	 	Each Extension of Credit
	 	 	24	 
	Section 6.4.

	 	Legal Matters
	 	 	25	 
	Section 6.5.

	 	Closing Fee
	 	 	25	 
	 
	 	 	 	 	 	 
	Section 7.

	 	Covenants
	 	 	25	 
	Section 7.1.

	 	Maintenance of Property
	 	 	25	 
	Section 7.2.

	 	Taxes
	 	 	25	 
	Section 7.3.

	 	Maintenance of Insurance
	 	 	26	 
	Section 7.4.

	 	Financial Reports
	 	 	26	 
	Section 7.5.

	 	Inspection
	 	 	27	 
	Section 7.6.

	 	Consolidation and Merger
	 	 	27	 
	Section 7.7.

	 	Transactions with Affiliates
	 	 	27	 
	Section 7.8.

	 	Material Subsidiaries
	 	 	27	 
	Section 7.9.

	 	Consolidated Tangible Net Worth
	 	 	27	 
	Section 7.10.

	 	Consolidated Indebtedness for Borrowed Money to Total Capitalization	 	 	28	 
	Section 7.11.

	 	Consolidated Current Ratio
	 	 	28	 
	Section 7.12.

	 	Capital Expenditures
	 	 	28	 
	Section 7.13.

	 	Liens
	 	 	28	 
	Section 7.14.

	 	Investments, Loans, Advances and Acquisitions
	 	 	30	 
	Section 7.15.

	 	Sale of Tangible Fixed Assets
	 	 	31	 
	Section 7.16.

	 	Notice of Suit or Adverse Change in Business or Default
	 	 	31	 
	Section 7.17.

	 	ERISA
	 	 	31	 
	Section 7.18.

	 	Use of Proceeds
	 	 	32	 
	Section 7.19.

	 	Compliance with Laws, etc
	 	 	32	 
	Section 7.20.

	 	Environmental Covenant
	 	 	32	 
	 
	 	 	 	 	 	 
	Section 8.

	 	Events of Default and Remedies
	 	 	32	 
	Section 8.1.

	 	Definitions
	 	 	32	 
	Section 8.2.

	 	Remedies for Non-Bankruptcy Defaults
	 	 	34	 
	Section 8.3.

	 	Remedies for Bankruptcy Defaults
	 	 	34	 
	 
	 	 	 	 	 	 
	Section 9.

	 	Change in Circumstances Regarding Eurodollar Loans
	 	 	35	 
	Section 9.1.

	 	Change of Law
	 	 	35	 
	Section 9.2.

	 	Unavailability of Deposits or Inability to Ascertain the Adjusted
Eurodollar Rate
	 	 	35	 
	Section 9.3.

	 	Taxes, Increased Costs and Reduced Return
	 	 	36	 
	Section 9.4.

	 	Funding Indemnity
	 	 	37	 
	Section 9.5.

	 	Lending Branch
	 	 	37	 
	Section 9.6.

	 	Discretion of Bank as to Manner of Funding
	 	 	38	 

-ii-

 

	 	 	 	 	 	 	 
	Section	 	Heading	 	Page
	Section 10.

	 	The Agent
	 	 	38	 
	Section 10.1.

	 	Appointment and Authorization of Agent
	 	 	38	 
	Section 10.2.

	 	Agent and its Affiliates
	 	 	38	 
	Section 10.3.

	 	Action by Agent
	 	 	39	 
	Section 10.4.

	 	Consultation with Experts
	 	 	39	 
	Section 10.5.

	 	Liability of Agent; Credit Decision
	 	 	39	 
	Section 10.6.

	 	Indemnity
	 	 	40	 
	Section 10.7.

	 	Resignation of Agent and Successor Agent
	 	 	40	 
	Section 10.8.

	 	L/C Issuer and Swing Line Bank.
	 	 	40	 
	Section 10.9.

	 	Designation of Additional Agents
	 	 	40	 
	 
	 	 	 	 	 	 
	Section 11.

	 	Miscellaneous
	 	 	41	 
	Section 11.1.

	 	Amendments and Waivers
	 	 	41	 
	Section 11.2.

	 	Waiver of Rights
	 	 	41	 
	Section 11.3.

	 	Several Obligations
	 	 	41	 
	Section 11.4.

	 	Non-Business Day
	 	 	42	 
	Section 11.5.

	 	Survival of Indemnities
	 	 	42	 
	Section 11.6.

	 	Documentary Taxes
	 	 	42	 
	Section 11.7.

	 	Representations
	 	 	42	 
	Section 11.8.

	 	Notices
	 	 	42	 
	Section 11.9.

	 	Costs and Expenses; Environmental Indemnity
	 	 	42	 
	Section 11.10.

	 	Counterparts
	 	 	43	 
	Section 11.11.

	 	Successors and Assigns; Governing Law; Entire Agreement
	 	 	44	 
	Section 11.12.

	 	No Joint Venture
	 	 	44	 
	Section 11.13.

	 	Severability
	 	 	44	 
	Section 11.14.

	 	Table of Contents and Headings
	 	 	44	 
	Section 11.15.

	 	Sharing of Payments
	 	 	44	 
	Section 11.16.

	 	Participants
	 	 	44	 
	Section 11.17.

	 	Assignments
	 	 	45	 
	Section 11.18.

	 	Confidentiality
	 	 	47	 
	Section 11.19.

	 	Waiver of Jury Trial
	 	 	48	 
	Section 11.20.

	 	USA Patriot Act
	 	 	48	 
	 
	 	 	 	 	 	 
	Signature Page

	 	 	 	 	1	 

Exhibit A      Revolving Credit Note

Exhibit B      Swing Note

Exhibit C      Letter of Credit Agreement

Exhibit D      Guaranty Agreement

Exhibit E      Compliance Certificate

Exhibit F      Environmental Disclosure

Exhibit G      Schedule of Subsidiaries

Exhibit H      Litigation; Tax Returns; Approval

-iii-

 

Exhibit I      Assignment and Acceptance

Schedule 1      Commitments

-iv-

 

Sanderson Farms, Inc.

Credit Agreement

Bank of Montreal, as Agent

Chicago, Illinois

The from time to time lenders parties hereto

Ladies and Gentlemen:

     The undersigned, Sanderson Farms, Inc., a Mississippi corporation
(the “Company”), applies to you for your several commitments, subject to all the terms and
conditions hereof and on the basis of the representations and warranties hereinafter set forth, to
make a revolving credit (the “Revolving Credit”) and a swing line (the “Swing Line”) available to
the Company, all as more fully hereinafter set forth. Bank of Montreal in its individual capacity
is sometimes referred to herein as “BMO,” and in its capacity as Agent for the Banks (as
hereinafter defined) is hereinafter in such capacity called the “Agent.”

Section 1. The Credits.

     Section 1.1. The Revolving Credit. (a) Subject to all of the terms and conditions hereof, the
Banks agree, severally and not jointly, to extend a Revolving Credit to the Company which may be
utilized by the Company in the form of loans (individually a “Revolving Credit Loan” and
collectively the “Revolving Credit Loans”) and L/Cs (as hereinafter defined). The aggregate
principal amount of all Revolving Credit Loans, Swing Loans (as hereinafter defined) and
Reimbursement Obligations (as hereinafter defined) at any time outstanding plus the maximum amount
available to be drawn under all L/Cs outstanding from time to time shall not exceed the sum of the
Banks’ Revolving Credit Commitments (as hereinafter defined) in effect from time to time during the
term of this Agreement. The Revolving Credit shall be available to the Company, and may be availed
of by the Company from time to time, be repaid and used again, during the period from the date
hereof to and including May 1, 2013 (the “Revolving Credit Termination Date”).

     (b) At any time not earlier than October 1, 2009 and not later than January 1, 2010 (such
period and each such period thereafter is referred to as an “Extension Request Period”), the
Company may request that the Banks extend the then scheduled Revolving Credit Termination Date to
the date one year from such Revolving Credit Termination Date and make any changes in the terms and
conditions of the Loan Documents desired by the Company. Pursuant to any such request and no later
than the April 1 immediately following such Extension Request Period the Banks may propose, by
written notice to the Company, an extension of this Agreement to such later date on such terms and
conditions as the Banks may then require. If the extension of this Agreement to such later date is
acceptable to the Company on the terms and conditions proposed by the Banks, the Company shall
notify the Banks of its acceptance or rejection no later than the April 16 immediately following
such April 1, and upon the Company’s

 

 

acceptance of such terms and conditions such later date will become the Revolving Credit
Termination Date hereunder and this Agreement shall otherwise be amended in the manner described in
the Banks’ notice proposing the extension of this Agreement upon the Agent’s receipt of (i)
resolutions of the Company’s Board of Directors authorizing such extension and (ii) an opinion of
counsel to the Company in form and substance acceptable to the Banks. The Company may request a
further extension of the Revolving Credit Termination Date during each subsequent Extension Request
Period and pursuant to any such requests the Banks may further offer to extend the Revolving Credit
Termination Date by April 1 preceding any such later scheduled Revolving Credit Termination Date in
the same manner as set forth above for the initial Revolving Credit Termination Date.

     (c) Loans under the Revolving Credit may be Eurodollar Loans or Domestic Rate Loans. All
Revolving Credit Loans shall be made from each Bank in proportion to its Commitment Percentage (as
hereinafter defined). Each Domestic Rate Loan shall be in an amount not less than $1,000,000 or
such greater amount which is an integral multiple of $100,000 and each Eurodollar Loan shall be in
an amount not less than $3,000,000 or such greater amount which is an integral multiple of
$500,000.

     Section 1.2. The Revolving Notes. All Revolving Credit Loans made by each Bank under its
Revolving Credit Commitment shall be evidenced by a single Revolving Credit Note of the Company
substantially in the form of Exhibit A hereto (individually, a “Revolving Note” and together, the
“Revolving Notes”) payable to the order of such Bank in the principal amount of such Revolving
Credit Commitment, but the aggregate principal amount of indebtedness evidenced by such Revolving
Note at any time shall be, and the same is to be determined by, the aggregate principal amount of
all Revolving Credit Loans made by such Bank to the Company pursuant hereto on or prior to the date
of determination less the aggregate amount of principal repayments on such Revolving Credit Loans
received by or on behalf of such Bank on or prior to such date of determination. Each Revolving
Note shall be dated as of the execution date of this Agreement, shall be delivered concurrently
herewith, and shall be expressed to mature on the Revolving Credit Termination Date and to bear
interest as provided in Section 1.4 hereof. Each Bank shall record on its books or records or on a
schedule to its Revolving Note the amount of each Revolving Credit Loan made by it hereunder,
whether each Revolving Credit Loan is a Domestic Rate Loan or Eurodollar Loan, and, with respect to
Eurodollar Loans, the interest rate and Interest Period applicable thereto, and all payments of
principal and interest and the principal balance from time to time outstanding, provided that prior
to any transfer or assignment of such Revolving Note all such amounts shall be recorded on the
schedule to such Revolving Note. The record thereof, whether shown on such books or records or on
the schedule to the Revolving Note, shall be prima facie evidence as to all such amounts; provided,
however, that the failure of any Bank to record, or any mistake in recording, any of the foregoing
shall not limit or otherwise affect the obligation of the Company to repay all Revolving Credit
Loans made hereunder together with accrued interest thereon.

     Section 1.3. Swing Loans. (a) Generally. Subject to the terms and conditions hereof, as part
of the Revolving Credit, the Swing Line Bank may, in its discretion, make loans in U.S. Dollars to
the Company under the Swing Line (individually a “Swing Loan” and collectively the “Swing Loans”)
which shall not in the aggregate at any time outstanding exceed

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the Swing Line Sublimit. Swing Loans may be availed of from time to time and borrowings thereunder may be repaid
and used again during the period ending on the Revolving Credit Termination Date. Each Swing Loan
shall be in a minimum amount of $250,000 or such greater amount which is an integral multiple of
$100,000.

     All Swing Loans made by the Swing Line Bank under the Swing Line shall be evidenced by a Swing
Note of the Company (the “Swing Note”) payable to the order of the Swing Line Bank in the amount of
its Swingline Sub-Limit, the Swing Note to be in the form attached hereto as Exhibit B. Without
regard to the face principal amount of the Swing Note, the actual principal amount at any time
outstanding and owing by the Company on account thereof during the period ending on the Revolving
Credit Termination Date shall be the sum of all advances then or theretofore made thereon less all
principal payments actually received thereon during such period.

     (b) Interest on Swing Loans. Each Swing Loan shall bear interest until maturity (whether by
acceleration or otherwise) at a rate per annum equal to (i) the sum of the Domestic Rate plus the
Applicable Margin for Domestic Rate Loans under the Revolving Credit as from time to time in effect
(computed on the basis of a year of 365 or 366 days, as the case may be, for the actual number of
days elapsed) or (ii) the Swing Line Bank’s Quoted Rate (computed on the basis of a year of 360
days for the actual number of days elapsed). Interest on each Swing Loan bearing interest at the
Domestic Rate shall be payable quarterly in arrears on the last day of each calendar quarter and at
maturity (whether by acceleration or otherwise), and interest on each Swing Loan bearing interest
at the Swing Line Bank’s Quoted Rate shall be due and payable by the Company on each Interest
Period and at maturity (whether by acceleration or otherwise). If any Swing Loan is not paid when
due it shall bear interest at a rate per annum (computed on the basis of a year of 365 or 366 days,
as the case may be, for the actual number of days elapsed) determined by adding the Applicable
Margin to the Domestic Rate as in effect from time to time plus 1.5%. Interest on all Swing Loans
after maturity shall be due and payable upon demand.

     (c) Requests for Swing Loans. The Company shall give the Agent prior notice (which may be
written or oral) (i) no later than 2:00 p.m. (Chicago time) on the date upon which the Company
requests that any Swing Loan bearing interest at the Domestic Rate plus the Applicable Margin be
made, and (ii) no later than 12:00 noon (Chicago time) on the date upon which the Company requests
that any Swing Loan bearing interest at the Swing Line Bank’s Quoted Rate be made, and such notice
shall include the amount and date of such Swing Loan, and, if applicable, the Interest Period
requested therefor. The Agent shall promptly advise the Swing Line Bank of any such notice
received from the Company. After receiving such notice, the Swing Line Bank shall in its
discretion quote an interest rate to the Company at which the Swing Line Bank would be willing to
make such Swing Loan available to the Company for the Interest Period so requested (the rate so
quoted for a given Interest Period being herein referred to as “Swing Line Bank’s Quoted Rate”).
The Company acknowledges and agrees that the interest rate quote is given for immediate and
irrevocable acceptance. If the Company does not so immediately accept the Swing Line Bank’s Quoted
Rate for the full amount requested by the Company for such Swing Loan, the Swing Line Bank’s Quoted
Rate shall be deemed immediately withdrawn and such Swing Loan shall bear interest at the rate per
annum determined by adding the Applicable Margin for Domestic Rate Loans under the Revolving

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Credit to the Domestic Rate as from time to time in effect. Subject to the terms and conditions
hereof, the proceeds of each Swing Loan extended to the Company shall be deposited or otherwise
wire transferred to the Company’s Designated Disbursement Account or as the Company, the Agent, and
the Swing Line Bank may otherwise agree. Anything contained in the foregoing to the contrary
notwithstanding, the undertaking of the Swing Line Bank to make Swing Loans shall be subject to all
of the terms and conditions of this Agreement (provided that the Swing Line Bank shall be entitled
to assume that the conditions precedent to an advance of any Swing Loan have been satisfied unless
notified to the contrary by the Agent or the Required Banks).

     (d) Refunding Loans. In its sole and absolute discretion, the Swing Line Bank may at any
time, on behalf of the Company (which hereby irrevocably authorizes the Swing Line Bank to act on
its behalf for such purpose) and with notice to the Company and the Agent, request each Bank to
make a Revolving Credit Loan in the form of a Domestic Rate Loan in an amount equal to such Bank’s
Commitment Percentage of the amount of the Swing Loans outstanding on the date such notice is
given. Unless an Event of Default described in Section 8.1(j) or 8.1(k) exists with respect to the
Company, regardless of the existence of any other Event of Default, each Bank shall make the
proceeds of its requested Revolving Credit Loan available to the Agent for the account of the Swing
Line Bank), in immediately available funds, at the Agent’s office in Chicago, Illinois (or such
other location designated by the Agent), before 3:00 p.m. (Chicago time) on the Business Day
following the date such notice is given. The Agent shall promptly remit the proceeds of such
Borrowing to the Swing Line Bank to repay the outstanding Swing Loans.

     (e) Participations. If any Bank refuses or otherwise fails to make a Revolving Credit Loan
when requested by the Swing Line Bank pursuant to Section 1.3(d) above (because an Event of Default
described in Section 8.1(j) or 8.1(k) exists with respect to the Company or otherwise), such Bank
will, by the time and in the manner such Revolving Credit Loan was to have been funded to the Swing
Line Bank, purchase from the Swing Line Bank an undivided participating interest in the outstanding
Swing Loans in an amount equal to its Commitment Percentage of the aggregate principal amount of
Swing Loans that were to have been repaid with such Revolving Credit Loans. Each Bank that so
purchases a participation in a Swing Loan shall thereafter be entitled to receive its Commitment
Percentage of each payment of principal received on the Swing Loan and of interest received thereon
accruing from the date such Bank funded to the Swing Line Bank its participation in such Loan. The
several obligations of the Banks under this Section shall be absolute, irrevocable, and
unconditional under any and all circumstances whatsoever and shall not be subject to any set-off,
counterclaim or defense to payment which any Bank may have or have had against the Company, any
other Bank, or any other Person whatsoever. Without limiting the generality of the foregoing, such
obligations shall not be affected by any Potential Default or Event of Default which may then be
continuing hereunder or by any reduction or termination of the Commitments of any Bank, and each
payment made by a Bank under this Section shall be made without any offset, abatement, withholding,
or reduction whatsoever.

     Section 1.4. Interest Rates. (a) Domestic Rate. Each Domestic Rate Loan shall bear interest
(computed on the basis of a year of 365 or 366 days, as the case may be, and actual

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days elapsed) on the unpaid principal amount thereof from the date such Loan is made until maturity
(whether by acceleration, upon prepayment or otherwise) at a rate per annum equal to the sum of the
Applicable Margin plus the Domestic Rate from time to time in effect, payable quarterly in arrears
on the last day of each calendar quarter, commencing on June 30, 2008, and at maturity (whether by
acceleration, upon prepayment or otherwise).

     (b) Eurodollar Rate. Each Eurodollar Loan shall bear interest (computed on the basis of a
year of 360 days and actual days elapsed) on the unpaid principal amount thereof from the date such
Loan is made or created until the last day of the Interest Period applicable thereto or, if
earlier, until maturity (whether by acceleration or otherwise) at a rate per annum equal to the sum
of the Applicable Margin plus the Adjusted Eurodollar Rate, payable on the last day of each
Interest Period applicable thereto and at maturity (whether by acceleration or otherwise) and, with
respect to any Eurodollar Loan with an Interest Period in excess of three months, on the date
occurring every date which is three months after the date such Loan is made or created; provided
that if on the last day of the Interest Period applicable to any Eurodollar Loan the Company does
not pay such Loan, such Loan shall automatically become a Domestic Rate Loan as of the day
immediately following the last day of the Interest Period applicable thereto.

     (c) Default Rate. During the existence of any Event of Default, all Revolving Credit Loans
and Reimbursement Obligations outstanding hereunder shall bear interest (computed on the basis of a
year of 365 or 366 days, as the case may be, and actual days elapsed) payable on demand, at a rate
per annum equal to:

     (i) with respect to any Domestic Rate Loan, the sum of 1.5% plus the Applicable Margin
plus the Domestic Rate from time to time in effect; and

     (ii) with respect to any Eurodollar Loan, the sum of 1.5% plus the rate of interest in
effect thereon at the time of such default until the end of the Interest Period then
applicable thereto, and, thereafter, at a rate per annum equal to the sum of 1.5% plus the
Applicable Margin plus the Domestic Rate from time to time in effect.

     Section 1.5. Manner of Borrowing and Rate Selection. (a) Except as otherwise provided in
Section 1.3(c) hereof and in Section 1.7 hereof, the Company shall give telephonic, telex or
telecopy notice to the Agent (which notice, if telephonic, shall be promptly confirmed in writing)
no later than (i) 11:00 a.m. (Chicago time) on the date the Banks are requested to make each
Domestic Rate Loan and (ii) 11:00 a.m. (Chicago time) on the date at least three (3) Business Days
prior to the date of (x) each Eurodollar Loan which the Banks are requested to make and (y) the
conversion of any Domestic Rate Loan into a Eurodollar Loan. Each such notice shall specify the
date of the Loan requested (which shall be a Business Day), the amount of such Loan or the amount
to be converted, as the case may be, whether the Loan is to be made available by means of a
Domestic Rate Loan or Eurodollar Loan and, with respect to Eurodollar Loans, the Interest Period
applicable thereto; provided, that in no event shall the principal amount of any requested
Revolving Credit Loan plus the aggregate principal amount of all Revolving Credit Loans and Swing
Loans outstanding hereunder exceed the amounts specified in Section 1.1(c) hereof. Upon notice to
the Company by the Agent or Required Banks, no Borrowing of Eurodollar Loans shall be advanced,
continued, or created by conversion if any Event of Default

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or Potential Default then exists. The Company agrees that the Agent may rely on any such
telephonic, telex or telecopy notice given by any person who the Agent reasonably believes is the
chief executive officer, the chief accounting officer, the chief financial officer or the corporate
cashier of the Company without the necessity of independent investigation and in the event any
notice by such means conflicts with the written confirmation, such notice shall govern if any Bank
has acted in good faith reliance thereon. The Agent shall, on the day any such notice is received
by it, give prompt telephonic, telex or telecopy (if telephonic, to be confirmed in writing within
one Business Day) notice of the receipt of notice from the Company hereunder to each of the Banks,
and, if such notice requests the Banks to make or effect by conversion any Eurodollar Loans, the
Agent shall confirm to the Company by telephonic, telex or telecopy means, which confirmation shall
be conclusive and binding on the Company in the absence of manifest error, the Interest Period and
the interest rate applicable thereto promptly after such rate is determined by the Agent.

     (b) Subject to the provisions of Section 6 hereof, the proceeds of each Loan shall be made
available to the Company at the principal office of the Agent in Chicago, Illinois, in immediately
available funds, on the date such Loan is requested to be made by crediting the Company’s general
operating account maintained with the Agent in Chicago, Illinois. Not later than 3:00 p.m. Chicago
time, on the date specified for any Loan to be made hereunder, each Bank shall make its Commitment
Percentage of such Loan available to the Company in immediately available funds at the principal
office of the Agent.

     (c) Unless the Agent shall have been notified by a Bank prior to the date of a Loan to be made
by such Bank (which notice shall be effective upon receipt) that such Bank does not intend to make
the proceeds of such Loan available to the Agent, the Agent may assume that such Bank has made such
proceeds available to the Agent on such date and the Agent may in reliance upon such assumption
(but shall not be required to) make available to the Company a corresponding amount. If such
corresponding amount is not in fact made available to the Agent by such Bank, the Agent shall be
entitled to receive such amount on demand from such Bank (or, if such Bank fails to pay such amount
forthwith upon such demand, to recover such amount, together with interest thereon at the rate
otherwise applicable thereto under Section 1.4 hereof, from the Company) together with interest
thereon in respect of each day during the period commencing on the date such amount was made
available to the Company and ending on the date the Agent recovers such amount, at a rate per annum
equal to the effective rate charged to the Agent for overnight Federal funds transactions with
member banks of the Federal Reserve System for each day, as determined by the Agent (or, in the
case of a day which is not a Business Day, then for the preceding Business Day) (the “Fed Funds
Rate”). Nothing in this Section 1.5(c) shall be deemed to permit any Bank to breach its
obligations to make Loans under the Revolving Credit or to limit the Company’s claims against any
Bank for such breach.

     Section 1.6. Letters of Credit. (a) Subject to all the terms and conditions hereof,
satisfaction of all conditions precedent to borrowing under this Agreement and so long as no
Potential Default or Event of Default is in existence, at the Company’s request, the L/C Issuer
shall issue, at any time before the Revolving Credit Termination Date, letters of credit (an “L/C”
and collectively the “L/Cs”) for the account of the Company subject to availability under the
Revolving Credit, and the Banks hereby agree to participate therein as more fully described in

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Section 1.8 hereof. Each L/C shall be issued pursuant to an application for letter of credit
(collectively the “L/C Agreements” and individually an “L/C Agreement”) in the form of Exhibit C
hereto, shall conform to the general requirements of the Bank for the issuance of letters of credit
as to form and substance, shall be in U.S. Dollars and shall be a letter of credit which the L/C
Issuer may lawfully issue. The L/Cs shall consist of standby and commercial letters of credit in
an aggregate face amount not to exceed $10,000,000. Each L/C shall have an expiry date not more
than one year from the date of issuance thereof (but in no event later than 30 days prior to the
Revolving Credit Termination Date). The amount available to be drawn under each L/C issued and
outstanding pursuant hereto shall be deducted from the credit otherwise available under the
Revolving Credit but shall not reduce the Revolving Credit Commitments of the Banks hereunder. In
consideration of the issuance of L/Cs the Company agrees to pay the applicable L/C Issuer for the
pro rata benefit of the Banks a fee (the “L/C Participation Fee”) in the amount of the rate per
annum (computed on the basis of a 360 day year and actual days elapsed) equal to the Applicable
Margin as in effect from time to time for Eurodollar Loans of the undrawn amount for each standby
L/C issued for the account of the Company hereunder, payable quarterly in arrears on the
last day of each March, June, September and December commencing June 30, 2008, and on the Revolving
Credit Termination Date. The Company shall also pay the L/C Issuers a fronting fee in the amount
of one-eighth of one percent (0.125%) of the face amount of each standby L/C issued hereunder,
payable on the date of issuance of each such standby L/C hereunder and on the date of each
extension, if any, of the expiry date of each such standby L/C and the relevant L/C Issuer’s usual
and customary fees with respect to each trade letter of credit issued hereunder, payable upon
negotiation thereof. In addition, the Company shall pay to the relevant L/C Issuer for its own
account such L/C Issuer’s standard charges for letters of credit with respect to each L/C.

     (b) Upon satisfaction of all conditions precedent to the initial Loan hereunder, without any
further action on the part of the Company, the Existing L/C Issuer, the Agent or any Bank, (i) each
of the letters of credit (the “Existing L/Cs”) previously issued by the Existing L/C Issuer for the
account of the Company under the Existing Agreement shall be deemed for all purposes of this
Agreement to be an L/C issued hereunder, (ii) each application and agreement for a letter of credit
pursuant to which each Existing L/C was issued shall be deemed for all purposes of this Agreement
to be an L/C Agreement, and (iii) all of the Company’s indebtedness, obligations and liabilities to
the Existing L/C Issuer with respect to the Existing L/Cs shall be deemed to be Reimbursement
Obligations of the Company for all purposes of this Agreement.

     (c) Notwithstanding anything contained in any L/C Agreement to the contrary: (i) the Company
shall pay fees in connection with each L/C as set forth in Section 1.6(a) hereof, (ii) prior to the
occurrence and continuance of an Event of Default, unless required by Section 2.4 hereof, the Agent
will not call for the funding by the Company of any amount under an L/C issued for the Company’s
account, or for any other form of additional collateral security for the Company’s obligations in
connection with such L/C under the L/C Agreements, and (iii) prior to the occurrence and
continuance of an Event of Default or the Revolving Credit Termination Date, unless required by
Section 2.4 hereof, the Agent will not call for the funding by the Company of an L/C issued for its
account prior to being presented with a draft drawn thereunder (or, in the event the draft is a
time draft, prior to its due date). If an L/C Issuer issues any L/C with an expiration date that
is automatically extended unless such L/C Issuer gives

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notice that the expiration date will not so extend beyond its then scheduled expiration date, such L/C Issuer will
give such notice of non-renewal before the time necessary to prevent such automatic extension if
before such required notice date (i) the expiration date of such L/C if so extended would be after
the Revolving Credit Termination Date, (ii) the Revolving Credit Commitments have been terminated,
(iii) an Event of Default or Potential Default has occurred and is continuing or (iv) the renewal
term for such L/C would exceed one year from the renewal date.

     (d) The Agent shall give prompt telecopy notice to each Bank of each issuance of, or amendment
to, an L/C specifying the effective date of the L/C or amendment, the amount, the beneficiary, and
the expiration date of the L/C, in each case as established originally or through the relevant
amendment, as applicable, the account party or parties for the L/C, each Bank’s pro rata
participation in such L/C and whether the Agent has classified the L/C as a commercial,
performance, or financial letter of credit for regulatory reporting purposes.

     (e) The Banks shall, ratably in accordance with their respective Commitment Percentages,
indemnify the L/C Issuers (to the extent not reimbursed by the Company) against any cost, expense
(including reasonable counsel fees and disbursements), claim, demand, action, loss or liability
(except such as result from such L/C Issuer’s gross negligence or willful misconduct) that the L/C
Issuers may suffer or incur in connection with any L/C. The obligations of the Banks under this
Section 1.6(e) and all other parts of this Section 1.6 shall survive termination of this Agreement
and of all L/C Agreements, and all drafts or other documents presented in connection with drawings
thereunder.

     (f) Obligations Absolute. The Company’s obligation to reimburse the Reimbursement Obligations
as provided in Section 1.7 shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Agreement and the relevant L/C Agreement under any
and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of
any L/C or this Agreement, or any term or provision therein, (ii) any draft or other document
presented under a L/C proving to be forged, fraudulent or invalid in any respect or any statement
therein being untrue or inaccurate in any respect, (iii) payment by an L/C Issuer under a L/C
against presentation of a draft or other document that does not strictly comply with the terms of
such L/C, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the
foregoing, that might, but for the provisions of this Section, constitute a legal or equitable
discharge of, or provide a right of setoff against, the Company’s obligations hereunder. None of
the Agent, the Banks, or the L/C Issuers shall have any liability or responsibility by reason of or
in connection with the issuance or transfer of any L/C or any payment or failure to make any
payment thereunder (irrespective of any of the circumstances referred to in the preceding
sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any
draft, notice or other communication under or relating to any L/C (including any document required
to make a drawing thereunder), any error in interpretation of technical terms or any consequence
arising from causes beyond the control of the L/C Issuers; provided that the foregoing shall not be
construed to excuse the L/C Issuers from liability to the Company to the extent of any direct
damages (as opposed to consequential damages, claims in respect of which are hereby waived by the
Company to the extent permitted by applicable law) suffered by the Company that are caused by such
L/C Issuer’s failure to exercise care when

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determining whether drafts and other documents presented
under a L/C comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful
misconduct on the part of an L/C Issuer (as finally determined by a court of competent
jurisdiction), such L/C Issuer shall be deemed to have exercised care in each such determination.
In furtherance of the foregoing and without limiting the generality thereof, the parties agree
that, with respect to documents presented which appear on their face to be in substantial
compliance with the terms of a L/C, the relevant L/C Issuer may, in its sole discretion, either
accept and make payment upon such documents without responsibility for further investigation,
regardless of any notice or information to the contrary, or refuse to accept and make payment upon
such documents if such documents are not in strict compliance with the terms of such L/C.

     Section 1.7. Reimbursement Obligation. The Company is obligated, and hereby unconditionally
agrees, to pay in immediately available funds to the Agent for the account of the L/C Issuers and
the Banks who are participating in L/Cs pursuant to Section 1.8 hereof the face amount of each
draft drawn, presented and paid by an L/C Issuer under the terms of an L/C issued by such L/C
Issuer hereunder (the obligation of the Company under this Section 1.7 with respect to any L/C is a
“Reimbursement Obligation”). If at any time the Company fails to pay any Reimbursement Obligation
when due, the Company shall be deemed to have automatically requested a Domestic Rate Loan from the
Banks hereunder, as of the maturity date of such Reimbursement Obligation, the proceeds of which
Loan shall be used to repay such Reimbursement Obligation. Such Loan shall only be made if the
conditions precedent contained in Section 6.3 hereof are satisfied or, if they are not satisfied,
upon approval by all of the Banks, and shall be subject to availability under the Revolving Credit.
If such Loan is not made by the Banks for any reason, the unpaid amount of such Reimbursement
Obligation shall be due and payable to the Agent for the pro rata benefit of the Banks upon demand
and shall bear interest at the rate of interest specified in Section 1.4(c)(i) hereof.

     Section 1.8. Participation in L/Cs. Each of the Banks will acquire a risk participation in
each L/C upon the issuance thereof, ratably in accordance with its Commitment Percentage. In the
event any Reimbursement Obligation is not immediately paid by the Company pursuant to Section 1.7
hereof, or if any L/C Issuer is required at any time to return to the Company or to a trustee,
receiver, liquidator, custodian or other Person any portion of any payment of any Reimbursement
Obligation, each Bank will pay to such L/C Issuer funds in an amount equal to such Bank’s
Commitment Percentage of such Reimbursement Obligation. At the election of all of the Banks, such
funding by the Banks of the unpaid Reimbursement Obligations shall be treated as additional
Revolving Credit Loans to the Company hereunder rather than a purchase of participations by the
Banks in the related L/C held by the applicable L/C Issuer. The obligation of the Banks to the L/C
Issuers under this Section 1.8 shall be absolute and unconditional and shall not be affected or
impaired by any Event of Default or Potential Default which may then be continuing hereunder. The
Agent shall notify each Bank by telephone of its Commitment Percentage of such unpaid Reimbursement
Obligation. If such notice has been given to each Bank by 12:00 Noon, Chicago time, each Bank
agrees to pay the relevant L/C Issuer in immediately available and freely transferable funds on the
same Business Day its Commitment Percentage of such Reimbursement Obligation. Funds shall be so
made available at the account designated by the Agent in such notice to the Banks. Upon the
election by the Banks to treat such funding as additional Revolving Credit Loans hereunder and
payment by each Bank, such

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Loans shall bear interest in accordance with Section 1.4(a) hereof. the
Agent shall share with each Bank on a pro rata basis relative to its Commitment Percentage a portion of each payment of a
Reimbursement Obligation (whether of principal or interest) and any L/C Participation Fee payable
by the Company. Any such amount shall be promptly remitted to the Banks when and as received by
the Agent from the Company.

Section 2. Fees, Prepayments and Terminations.

     Section 2.1. Commitment Fee. For the period from the date hereof to and including the
Revolving Credit Termination Date or such earlier date on which the Revolving Credit is terminated
in whole pursuant to Section 2.5 hereof, the Company shall pay to the Agent for the account of the
Banks a commitment fee with respect to the Revolving Credit at the rate equal to the Applicable
Margin in effect as of the time such fee is payable on the average daily unused amount of the
Banks’ Revolving Credit Commitments hereunder in effect from time to time (but without reduction on
account of any outstanding Swing Loans), all such fees to be payable quarterly in arrears on the
last day of each calendar quarter (commencing on June 30, 2008), unless the Revolving Credit is
terminated in whole pursuant to Section 2.5 hereof on an earlier date, in which event the
commitment fee for the final period shall be paid on the date of such earlier termination in whole,
and all such fees to be computed on the basis of a year of 360 days and the actual number of days
elapsed.

     Section 2.2. Agent’s Fee. The Company shall pay to and for the sole account of the Agent fees
in an amount and payable at such times as the Company and the Agent may agree upon in writing,
including without limitation the fees provided for in the letter agreement dated as of April 29,
2008, from the Company to the Agent. Such fee payments shall be in addition to any fees and
charges the Agent may be entitled to receive under Section 10 hereunder or under the other Loan
Documents.

     Section 2.3. Optional Prepayments. (a) The Company shall have the privilege of prepaying
without premium or penalty and in whole or in part (but if in part, then in a minimum principal
amount of $1,000,000 or such greater amount which is an integral multiple of $100,000) any Domestic
Rate Loan at any time upon prior telex or telephonic notice to the Agent on or before 12:00 noon on
the same Business Day.

     (b) The Company may prepay any Eurodollar Loan, subject to Section 9.4 hereof, which
prepayment may be made in whole or in part (but, if in part, then in an amount not less than
$3,000,000 or such greater amount which is an integral multiple of $500,000) upon three Business
Days’ prior notice to the Agent (which notice shall be irrevocable once given, must be received by
the Agent no later than 11:00 a.m., Chicago time on the third Business Day preceding the date of
such prepayment and shall specify the principal amount to be prepaid); provided, however, that
after giving effect to any such prepayment the outstanding principal amount of any such Eurodollar
Loan prepaid in part shall not be less than $3,000,000. Any such prepayment shall be effected by
payment of the principal amount to be prepaid and accrued interest thereon to the prepayment date,
plus any amount certified by any Bank to be payable under Section 9.4 hereof with respect to such
prepayment.

-10-

 

     (c) Any amount prepaid under the Revolving Credit may, subject to the terms and conditions of
this Agreement, be borrowed, repaid and borrowed again.

     (d) The Company may not voluntarily prepay any Swing Loan bearing interest at an Swing Line
Bank’s Quoted Rate before its scheduled maturity date.

     Section 2.4. Mandatory Prepayments. The Company shall not permit the sum of the principal
amount of all Revolving Credit Loans, Swing Loans, L/Cs and unpaid Reimbursement Obligations at any
time outstanding to exceed the Banks’ Revolving Credit Commitments. The Company will make such
payments on any outstanding Loans and, if necessary, deposit with the Agent cash collateral for any
then outstanding L/Cs, which are necessary to cure any such excess within 2 Business Days after
written notice from any Bank of the occurrence thereof without any further notice or demand from
the Agent or any of the Banks, all of which are expressly waived by the Company. Any amount repaid
under the Revolving Credit may, subject to the terms and conditions of this Agreement, be borrowed,
repaid and borrowed again.

     Section 2.5. Terminations. The Company shall have the right at any time upon 5 Business
Days’ (or such shorter period to which the Agent may agree) prior written notice to the Banks to
terminate the Revolving Credit without penalty in whole or in part (but only in a minimum principal
amount of $1,000,000 or such greater amount which is an integral multiple of $1,000,000); provided,
however, that the Company may not terminate any portion of the Revolving Credit which represents
outstanding Revolving Credit Loans, Swing Loans, L/Cs or Reimbursement Obligations. Each
termination the Revolving Credit shall automatically terminate each Bank’s Revolving Credit
Commitment by its Commitment Percentage of such termination. Any termination of the Revolving
Credit pursuant to this Section may not be reinstated.

Section 3. Place and Application of Payments.

     All payments of principal and interest made by the Company in respect of the Notes,
Reimbursement Obligations and all fees payable by the Company hereunder, shall be made to the Agent
at its principal office in Chicago, Illinois and in immediately available funds, prior to 12:00
noon on the date of such payment. Any payments received after 12:00 noon Chicago time (or after
such later time as the Banks may otherwise direct) shall be deemed received upon the following
Business Day. The Agent shall remit to each Bank its proportionate share of each payment of
principal, interest and fees, received by the Agent, on the same Business Day on which such payment
is received before 12:00 noon, Chicago time, or is deemed to have been received by the Agent. In
the event the Agent does not remit any amount to any Bank when required by the preceding sentence,
the Agent shall pay to such Bank interest on such amount until paid at a rate per annum equal to
the Fed Funds Rate. The Company hereby authorizes the Agent to automatically debit its general
operating account with the Agent or one of its Affiliates for any principal, interest and fees when
due under the Notes or this Agreement and to transfer the amount so debited from such account to
the Agent for application as herein provided, but the Agent shall give prompt telephonic notice
thereof to the Company.

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Section 4. Definitions.

     The terms hereinafter set forth when used herein shall have the following meanings:

     “Adjusted Eurodollar Rate” means a rate per annum determined pursuant to the following
formula:

	 	 	 	 	 
	Adjusted Eurodollar Rate

	 	=
	 	Eurodollar Rate
	 

	 	 	 	100% — Reserve Percentage

     “Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the
Agent.

     “Affiliate” shall mean any person, company or business entity under common control or having
shareholders owning at least ten percent (10%) of each thereof, whether such common control be
direct or indirect. All of the Company’s officers, shareholders who own, directly or indirectly,
more than 5% of the shares of the Company, directors, joint ventures, Subsidiaries and partners
shall be deemed to be the Company’s Affiliates for purposes of this Agreement.

     “Agent” is defined in the first paragraph of this Agreement.

     “Agreement” shall mean this Credit Agreement as supplemented and amended from time to time.

     “Anniversary Date” shall mean July 31 in each calendar year during the term of this Agreement.

     “Applicable Margin” with respect to Domestic Rate Loans, Eurodollar Loans, the L/C
Participation Fee payable pursuant to Section 1.6(a) hereof and the commitment fee payable under
Section 2.1 hereof, shall each mean the rate specified for such obligation below in Levels I, II,
III and IV for the range of Leverage Ratio specified for each Level:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Level I	 	Level II	 	Level III	 	Level IV
	Leverage Ratio
	 	 	<25	%	 	> 25% and <35%	 	> 35% and <45%	 	 	>45	%
	Eurodollar Loans
and L/C
Participation Fee
	 	 	1.25	%	 	 	1.50	%	 	 	1.75	%	 	 	2.00	%
	Domestic Rate Loans
	 	 	0.00	%	 	 	0.00	%	 	 	0.00	%	 	 	0.00	%
	Commitment Fee
	 	 	0.15	%	 	 	0.20	%	 	 	0.20	%	 	 	0.25	%

     Not later than ten (10) Business Days after receipt by the Banks of the Compliance Certificate
called for by Section 7.4(c) hereof for the applicable fiscal quarter, the Agent shall determine
the Leverage Ratio for the applicable period and shall promptly notify the Company of

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such determination and of any change in the Applicable Margins resulting therefrom. Any such
change in the Applicable Margins shall be effective as of the date the Agent so notifies the
Company with respect to all Loans outstanding and L/C Participation Fees and commitment fees
payable, on such date, and such new Applicable Margins shall continue in effect until the effective
date of the next quarterly redetermination in accordance with this Section. Each determination of
the Leverage Ratio and Applicable Margins by the Agent in accordance with this Section shall be
conclusive and binding on the Company absent manifest error. From the date hereof until the
Applicable Margins are first adjusted pursuant hereto, the Applicable Margins shall be those set
forth in Level I above.

     “Approved Fund” means any Fund that is administered or managed by (a) a Bank, (b) an Affiliate
of a Bank or (c) an entity or an Affiliate of an entity that administers or manages a Bank.

     “Assignment and Acceptance” means an assignment and acceptance entered into by a Bank and an
Eligible Assignee (with the consent of any party whose consent is required by Section 11.17
hereof), and accepted by the Agent, in substantially the form of Exhibit I or any other form
approved by the Agent.

     “Bank” and “Banks” means and includes BMO Capital Markets Financing, Inc. and the other
financial institutions from time to time party to this Agreement, including each assignee Bank
pursuant to Section 11.17 hereof, and unless the context otherwise requires, the Swing Line Bank.

     “Business Day” shall mean any day except Saturday or Sunday on which banks are open for
business in Chicago, Illinois and, with respect to Eurodollar Loans, dealing in United States
dollar deposits in London, England and Nassau, Bahamas.

     “Capitalized Lease” shall mean any lease or obligation for rentals which is required to be
capitalized on a consolidated balance sheet of the Company and its Subsidiaries in accordance with
generally accepted accounting principles.

     “CERCLA” shall mean the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended from time to time.

     “CERCLIS” shall mean the CERCLA data base created and maintained by the United States
Environmental Protection Agency pursuant to CERCLA.

     “Change in Law” shall have the meaning specified in Section 9.3 hereof.

     “Change of Control” means any of (a) the acquisition by any “person” or “group” (as such terms
are used in sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) at any
time of beneficial ownership of a majority of the voting power in the elections of directors, other
than acquisitions of such interests by the estate of Joe Franklin Sanderson, deceased, the direct
lineal descendents of Joe Franklin Sanderson, deceased, the direct lineal descendants of Dewey
Sanderson, deceased, their spouses, any trusts for the benefit of any of the

-13-

 

foregoing, and any employee stock ownership plan established by the Company, (b) the failure
of individuals who are members of the board of directors (or similar governing body) of the Company
on April ___, 2008 (together with any new or replacement directors whose initial nomination for
election was approved by a majority of the directors who were either directors on such date or
previously so approved) to constitute a majority of the board of directors (or similar governing
body) of the Company, or (c) any “Change of Control” (or words of like import), as defined in any
agreement or indenture relating to any issue of Indebtedness for Borrowed Money in an aggregate
principal amount in excess of $10,000,000 of the Company shall occur.

     “Commitment” shall mean a Revolving Credit Commitment of any Bank, and “Commitments” shall
mean the Revolving Credit Commitment of a Bank or Banks.

     “Commitment Percentage” means, for each Bank, the percentage of the Revolving Credit
Commitments represented by such Bank’s Revolving Credit Commitment or, if the Revolving Credit
Commitments have been terminated, the percentage held by such Bank (including through participation
interests in Reimbursement Obligations) of the aggregate principal amount of all Revolving Credit
Loans, L/Cs and Reimbursement Obligations then outstanding.

     “Company” shall have the meaning specified in the first paragraph of this Agreement.

     “Consolidated Current Ratio” shall mean the ratio of the current assets of the Company and its
Subsidiaries to the current liabilities of the Company and its Subsidiaries, all as determined and
computed according to generally accepted accounting principles (as defined herein) consistently
applied; provided, however, that the current portion of Consolidated Deferred Income Taxes and the
current portion of all Loans and Reimbursement Obligations outstanding under this Agreement shall
be excluded from the determination of the current liabilities of the Company and its Subsidiaries.

     “Consolidated Deferred Income Taxes” shall mean, for any period, all deferred federal, state
or other income taxes of the Company and its Subsidiaries for such period as shown on the most
recent financial statements of the Company.

     “Consolidated Indebtedness for Borrowed Money” shall mean, with respect to the Company, all
Indebtedness for Borrowed Money (as defined herein) of the Company and its Subsidiaries determined
on a consolidated basis in accordance with generally accepted accounting principles consistently
applied.

     “Consolidated Net Income” for any period shall mean net income of the Company and its
Subsidiaries as determined and computed on a consolidated basis according to generally accepted
accounting principles (as defined herein), consistently applied.

     “Consolidated Net Worth” shall mean as of any time the same is to be determined the aggregate
of capital (including without limitation redeemable preferred stock), surplus (exclusive of any
surplus arising by virtue of any appraisal or revaluation of any assets) and retained earnings of
the Company and its Subsidiaries as determined on a consolidated basis in

-14-

 

accordance with generally accepted accounting principles (as defined herein) consistently
applied.

     “Consolidated Tangible Net Worth” shall mean Consolidated Net Worth less the amount of all
Intangible Assets of the Company and its Subsidiaries determined on a consolidated basis in
accordance with generally accepted accounting principles, consistently applied.

     “Domestic Rate” means for any day the rate of interest announced by Bank of Montreal from time
to time as its prime commercial rate or its equivalent, for U.S. Dollar loans to borrowers located
in the United States, in effect on such day, with any change in the Domestic Rate resulting from a
change in said prime commercial rate to be effective as of the date of the relevant change in said
prime commercial rate (the “Prime Rate”), provided that if the rate per annum determined by adding
0.5% to the rate at which the Agent would offer to sell federal funds in the interbank market
therefor on or about 10:00 a.m. (Chicago time) on any day (the “Adjusted Fed Funds Rate”) shall be
higher than the Agent’s Prime Rate on such day, the Domestic Rate for such day and for any
immediately succeeding day(s) which is not a Business Day shall be such Adjusted Fed Funds Rate.
The determination of the Adjusted Fed Funds Rate by the Agent shall be final and conclusive
provided the Agent has acted in good faith in connection therewith.

     “Domestic Rate Loan” means a Revolving Credit Loan which bears interest as provided in Section
1.4(a) hereof.

     “Economic Development Bonds” means any industrial revenue bonds, economic development bonds or
other similar notes, debentures or instruments issued by or on behalf of a governmental entity,
unit or authority for the benefit of the Company or a Subsidiary for the purpose of financing or
refinancing Property (including by means of a sale and leaseback or similar transaction involving
Property of the Company or a Subsidiary).

     “Eligible Assignee” means (a) a Bank, (b) an Affiliate of a Bank, (c) an Approved Fund, and
(d) any other Person (other than a natural person) approved by (i) the Agent, (ii) in the case of
any assignment of a Commitment, the L/C Issuers, and (iii) unless an Event of Default has occurred
and is continuing, the Company (each such approval not to be unreasonably withheld or delayed);
provided that notwithstanding the foregoing, “Eligible Assignee” shall not include the Borrower or
any Subsidiary or any of the Borrower’s or such Subsidiary’s Affiliates or Subsidiaries.

     “Environmental Laws” shall means all applicable federal, state and local environmental, health
and safety statutes and regulations.

     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

     “Eurodollar Loan” means a Revolving Credit Loan which bears interest as provided in Section
1.4(b) hereof.

-15-

 

     “Eurodollar Rate” shall mean for each Interest Period applicable to a Eurodollar Loan, (a) the
LIBOR Index Rate for such Interest Period, if such rate is available, and (b) if the LIBOR Index
Rate cannot be determined, the arithmetic average of the rates of interest per annum (rounded
upwards, if necessary, to nearest 1/100 of 1%) at which deposits in U.S. dollars in immediately
available funds are offered to the Agent at 11:00 a.m. (London, England time) two (2) Business Days
before the beginning of such Interest Period by three (3) or more major banks in the interbank
eurodollar market for a period equal to such Interest Period and in an amount equal or comparable
to the principal amount of the Eurodollar Loan scheduled to be made by the Agent during such
Interest Period.

     “Event of Default” shall mean any event or condition identified as such in Section 8.1 hereof.

     “Existing Agreement” shall mean the Credit Agreement dated as of November 17, 2005, as
amended, among the Company, Harris N.A., individually and as agent thereunder, SunTrust Bank,
AmSouth Bank, U.S. Bank National Association, Regions Bank, ING Capital LLC and Trustmark National
Bank (the “Existing Lenders”).

     “Existing L/C Issuer” means Harris N.A.

     “Existing L/Cs” is defined in Section 1.6(b)

     “Fed Funds Rate” shall have the meaning specified in Section 1.5(c) hereof.

     “Fund” means any Person (other than a natural person) that is (or will be) engaged in making,
purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in
the ordinary course of its business.

     “generally accepted accounting principles” shall mean generally accepted accounting principles
consistently applied and maintained throughout the period indicated and consistent with the latest
audited consolidated financial statements delivered to the Banks pursuant to Section 7.4.

     “Guarantor Subsidiaries” shall mean collectively Sanderson Farms, Inc. (Foods Division),
Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and any
Material Subsidiary which has complied with Section 7.8 hereof, so long as each such corporation is
a party to the Subsidiary Guaranty, and “Guarantor Subsidiary” shall mean any of the Guarantor
Subsidiaries.

     “Indebtedness for Borrowed Money” of any Person shall mean the aggregate principal amount,
without duplication and without giving effect to intercompany transactions that would be eliminated
in preparing consolidated financial statements of the Company and its Subsidiaries in accordance
with generally accepted accounting principles, consistently applied, of:

     (a) all indebtedness, obligations and liabilities of such Person with respect to
borrowed money;

-16-

 

     (b) all guaranties, endorsements and other contingent obligations of such Person with
respect to indebtedness arising from money borrowed by others;

     (c) all reimbursement and other obligations with respect to letters of credit that have
been funded and all indebtedness, obligations and liabilities with respect to bankers’
acceptances;

     (d) the amount shown on such Person’s balance sheet with respect to Capitalized Leases;
and

     (e) all indebtedness, obligations and liabilities representing the deferred purchase
price of property, except for trade payables on ordinary business terms;

provided that for purposes of determining compliance with the financial covenants contained in
Sections 7.9, 7.10 and 7.11 of this Agreement, the term “Indebtedness for Borrowed Money” shall not
include indebtedness relating to the Economic Development Bonds so long as the Company or a
Subsidiary of the Company is the holder of such Economic Development Bonds.

     “Intangible Assets” shall mean amortizable loan costs, business acquisition costs, license
agreements, trademarks, trade names, patents, capitalized research and development, proprietary
products (the results of past research and development treated as long term assets and excluded
from inventory), goodwill and all other assets which would be classified as intangible assets (all
determined in accordance with generally accepted accounting principles consistently applied).

     “Interest Period” shall mean (a) with respect to any Eurodollar Loan, the period used for the
computation of interest commencing on the date the relevant Eurodollar Loan is made, continued or
effected by conversion and concluding on the date one, two, three or six months thereafter as
selected by the Company in its notice as provided herein, and (b) with respect to any Swing Loan at
the Swing Line Bank’s Quoted Rate, the period used for the computation of interest commencing on
the date the relevant Swing Loan is made and concluding on the date 1 to 10 days thereafter as
selected by the Company in its notice as provided herein, provided that all of the foregoing
provisions relating to Interest Periods are subject to the following:

     (i) if any Interest Period would otherwise end on a day which is not a Business Day,
that Interest Period shall be extended to the next succeeding Business Day, unless in the
case of an Interest Period for a Eurodollar Loan the result of such extension would be to
carry such Interest Period into another calendar month in which event such Interest Period
shall end on the immediately preceding Business Day;

     (ii) no Interest Period may extend beyond the Revolving Credit Termination Date;

     (iii) the interest rate to be applicable to each Eurodollar Loan or Swing Loan at the
Swing Line Bank’s Quoted Rate for each Interest Period shall apply from and including the
first day of such Interest Period to but excluding the last day thereof; and

-17-

 

     (iv) no Interest Period may be selected if after giving effect thereto the Company will
be unable to make a principal payment scheduled to be made during such Interest Period
without paying part of a Eurodollar Loan on a date other than the last day of the Interest
Period applicable thereto.

For purposes of determining an Interest Period, a month means a period starting on one day in a
calendar month and ending on a numerically corresponding day in the next calendar month, provided,
however, if an Interest Period begins on the last day of a month or if there is no numerically
corresponding day in the month in which an Interest Period is to end, then such Interest Period
shall end on the last Business Day of such month.

     “L/C” and “L/Cs” shall have the meanings specified in Section 1.6(a) hereof.

     “L/C Agreement” and “L/C Agreements” shall have the meanings specified in Section 1.6(a)
hereof.

     “L/C Issuer ” means (i) the Existing L/C Issuer with respect to Existing L/Cs and (ii) Bank of
Montreal for any L/Cs issued under this Agreement, each in their capacity as the issuer of Letters
of Credit hereunder, and their successors in such capacity as provided in Section 1.6(h) hereof.

     “L/C Participation Fee” shall have the meaning specified in Section 1.6(a) hereof.

     “Leverage Ratio” shall have the meaning specified in Section 7.10 hereof.

     “LIBOR Index Rate” shall mean, for any Interest Period applicable to a Eurodollar Loan, the
rate per annum (rounded upwards, if necessary, to the next higher one hundred-thousandth of a
percentage point) for deposits in U.S. Dollars for a period equal to such Interest Period, which
appears on the LIBOR01 Page as of 11:00 a.m. (London, England time) on the day two Business Days
before the commencement of such Interest Period.

     “LIBOR01 Page” shall mean the display designated as “Renters LIBOR01 Page” on the Telerate
Service (or such other page as may replace LIBOR01 Page on that service or such other service as
may be nominated by the British Bankers’ Association as the information vendor for the purpose of
displaying British Bankers’ Association Interest Settlement Rates for U.S. Dollar deposits).

     “Loan” shall mean a Revolving Credit Loan or a Swing Loan and “Loans” shall mean any two or
more Revolving Credit Loans or Swing Loans.

     “Loan Documents” shall mean this Agreement and any and all exhibits hereto, the Notes, the L/C
Agreements and the Subsidiary Guaranty.

     “Long Term Indebtedness for Borrowed Money” shall mean Indebtedness for Borrowed Money which
would be classified as long term indebtedness in accordance with generally accepted accounting
principles, consistently applied.

-18-

 

     “Material Subsidiary” shall mean each Subsidiary whose assets have a book value in excess of
5% of the aggregate book value of the total assets of the Company and its Subsidiaries on a
consolidated basis in accordance with generally accepted accounting principles, consistently
applied.

     “Net Proceeds of Stock” shall mean an amount (but not less than zero) equal to the change in
the Company’s Consolidated Tangible Net Worth resulting from any transaction in which the Company
or any Subsidiary issues shares of its capital stock, determined on a pro forma basis in accordance
with generally accepted accounting principles consistently applied.

     “Note” shall mean either a Revolving Note or the Swing Note, and “Notes” shall mean any two or
more Revolving Notes or the Swing Note.

     “Person” shall mean and include any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, institution, entity, party
or government (whether national, federal, state, county, city, municipal, or otherwise, including,
without limitation, any instrumentality, division, agency, body or department thereof).

     “PBGC” shall mean the Pension Benefit Guaranty Corporation.

     “Plan” shall mean any employee benefit plan covering any officers or employees of the Company
or any Subsidiary, any benefits of which are, or are required to be, guaranteed by the PBGC.

     “Potential Default” shall mean any event or condition specified in Section 8.1(a)(ii), (d),
(e), (g), (h), (i) and (k) which, with the lapse of time, or giving of notice, or both, would
constitute an Event of Default.

     “Property” shall mean all assets and properties of any nature whatsoever, whether real or
personal, tangible or intangible.

     “Reimbursement Obligation” shall have the meaning set forth in Section 1.7 hereof.

     “Required Banks” shall mean any Bank or Banks which in the aggregate hold more than 50% of the
aggregate unpaid principal balance of the Loans, L/Cs and Reimbursement Obligations or, if no Loans
L/Cs and Reimbursement Obligations are outstanding hereunder, any Bank or Banks in the aggregate
having more than 50% of the Revolving Credit Commitments.

     “Reserve Percentage” means the daily arithmetic average maximum rate at which reserves
(including, without limitation, any supplemental, marginal and emergency reserves) are imposed on
member banks of the Federal Reserve System during the applicable Interest Period by the Board of
Governors of the Federal Reserve System (or any successor) under Regulation D on “eurocurrency
liabilities” (as such term is defined in Regulation D), subject to any amendments of such reserve
requirement by such Board or its successor, taking into account any transitional adjustments
thereto. For purposes of this definition, the Eurodollar Loans shall be

-19-

 

deemed to be Eurocurrency liabilities as defined in Regulation D without benefit or credit for
any prorations, exemptions or offsets under Regulation D.

     “Revolving Credit” shall have the meaning specified in the first paragraph of this Agreement.

     “Revolving Credit Commitment” means, as to any Bank, the obligation of such Bank to make Loans
and to participate in Swing Loans and L/Cs issued for the account of the Company hereunder in an
aggregate principal or face amount at any one time outstanding not to exceed the amount set forth
opposite such Bank’s name on Schedule 1 attached hereto and made a part hereof, as the same may be
reduced or modified at any time or from time to time pursuant to the terms hereof. The Company and
the Banks acknowledge and agree that the Revolving Credit Commitments of the Banks aggregate
$300,000,000 on the date hereof.

     “Revolving Credit Loan” and “Revolving Credit Loans” shall have the meanings specified in
Section 1.1(a) hereof.

     “Revolving Credit Termination Date” shall have the meaning set forth in Section 1.1(a) hereof.

     “Revolving Note” or “Revolving Notes” shall have the meanings specified in Section 1.2 hereof.

     “Subsidiary” shall mean any corporation or other entity at least a majority of the outstanding
voting stock (or equivalent) of which is at the time owned directly or indirectly by the Company
and/or its Subsidiaries.

     “Subsidiary Guaranty” shall mean the Guaranty Agreement of the Guarantor Subsidiaries in the
form of Exhibit D hereto.

     “Swing Line” shall have the meaning specified in the first paragraph hereof.

     “Swing Line Bank” means BMO Capital Markets Financing, Inc., acting in its capacity as the
Lender of Swing Loans hereunder, or any successor Lender acting in such capacity appointed pursuant
to Section 11.17 hereof.

     “Swing Line Lender’s Quoted Rate” is defined in Section 1.3(c) hereof.

     “Swing Line Sublimit” means $10,000,000, as reduced pursuant to the terms hereof.

     “Swing Loan” and “Swing Loans” each is defined in Section 1.3 hereof.

     “Swing Note” shall have the meaning specified in Section 1.3(a) hereof.

     “Total Capitalization” shall mean the sum of (a) the outstanding principal amount of
Consolidated Indebtedness for Borrowed Money, plus (b) Consolidated Tangible Net Worth.

-20-

 

Section 5. Representations and Warranties.

     The Company represents and warrants to the Banks as follows:

     Section 5.1. Organization and Qualification. The Company is duly organized and validly
existing under the laws of the State of Mississippi, has full and adequate corporate power to carry
on its business as now conducted, is duly licensed or qualified in all jurisdictions wherein the
failure to be so licensed or qualified would have a material adverse effect on the condition,
financial or otherwise, of the Company and its Subsidiaries taken as a whole, has full corporate
right, power and authority to enter into this Agreement and the other Loan Documents to which it is
a party, to make the borrowings herein provided for and encumber its assets as collateral security
therefor, to execute and issue the Notes in evidence thereof, and to perform its obligations under
the Loan Documents; and the Company’s execution of this Agreement does not, nor does the
performance or observance by the Company of any of the matters or things provided for in this
Agreement and the other Loan Documents, contravene any provision of law or any charter or by-law
provision or any covenant, indenture or agreement of or judgment, order or decree applicable to or
affecting the Company or any of its Property.

     Section 5.2. Financial Reports. The Company has heretofore delivered to the Agent a copy of
the annual audit report as of October 31, 2007, of the Company and its Subsidiaries and unaudited
financial statements of the Company and its Subsidiaries as of, and for the four-month period
ending February 29, 2008. Such financial statements have been prepared in accordance with
generally accepted accounting principles (except that such unaudited financial statements may omit
any footnotes), on a basis consistent, except as otherwise noted therein, with that of the previous
fiscal year or period and fairly reflect the financial position of the Company as of the dates
thereof, and the results of its operations for the periods covered thereby, and as of the
respective dates of such financial statements the Company and its Subsidiaries had no significant
known contingent liabilities required to be disclosed in financial statements or notes thereto
under generally accepted accounting principles other than as indicated on said financial statements
or notes thereto or otherwise disclosed in writing to the Banks prior to the execution of this
Agreement. Since said date of October 31, 2007, there has been no material adverse change in the
condition, financial or otherwise, of the Company and its Subsidiaries taken as a whole, except
those affecting business and/or the poultry industry generally and those disclosed in the Company’s
reports under the Securities and Exchange Act of 1934 filed prior to the date of this Agreement or
in writing to the Banks prior to the date of this Agreement.

     Section 5.3. Litigation; Tax Returns; Approvals. Except as otherwise disclosed on Exhibit H,
there is no known litigation, labor controversy or governmental proceeding pending, nor to the best
knowledge of the Company threatened, against the Company or any Subsidiary which can reasonably be
expected to result in any material adverse change in the properties, business or operations of the
Company and its Subsidiaries taken as a whole. All United States federal income tax returns for
the Company and its Subsidiaries required to be filed have been filed on a timely basis (taking
into account any extensions duly obtained therefor), and all amounts required to be paid as shown
by said returns have been paid. Except as disclosed on Exhibit H, (a) there are no pending or, to
the best of the Company’s knowledge, threatened objections to or controversies in respect of the
United States federal income tax returns of the

-21-

 

Company and its Subsidiaries for any fiscal year except such objection or controversies that are
being contested in good faith by appropriate proceedings and adequate reserves have been provided
therefor in accordance with generally accepted accounting principles consistently applied, and (b)
no authorization, consent, license, exemption or filing or registration with any court or
governmental department, agency or instrumentality, is or will be necessary to the valid execution,
delivery or performance by the Company or any Subsidiary of the Loan Documents, except those as may
have been obtained.

     Section 5.4. Regulation U. Neither the Company nor any Subsidiary is engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System) and no part of the proceeds
of any Loan or other extension of credit hereunder will be used to purchase or carry any margin
stock or to extend credit to others for such a purpose.

     Section 5.5. No Default. No Potential Default or Event of Default is existing under this
Agreement.

     Section 5.6. ERISA. As of the date of this Agreement neither the Company nor any Subsidiary
sponsors, maintains or participates in any Plan.

     Section 5.7. Compliance with Laws. The Company and its Subsidiaries are in compliance with
the requirements of all federal, state and local laws, rules and regulations applicable to or
pertaining to their Property or business operations (including, without limitation, the
Occupational Safety and Health Act of 1970, the Americans with Disabilities Act of 1990, and laws
and regulations establishing quality criteria and standards for air, water, land and toxic or
hazardous wastes and substances), where any such non-compliance, individually or in the aggregate,
could reasonably be expected to have a material adverse effect on the business, operations,
Property, assets or condition (financial or otherwise) of the Company and its Subsidiaries taken as
a whole.

     Section 5.8. Security Interests and Indebtedness. There are no security interests, liens or
encumbrances on any of the assets or Property of the Company or any Subsidiary except the security
interests, liens and charges which are now existing and those which are permitted by Section 7.13
of this Agreement.

     Section 5.9. Subsidiaries. As of the date hereof, the Company’s only Subsidiaries are
identified on Exhibit G hereof. Each of the Company’s Subsidiaries is duly organized and validly
existing under the laws of the state or country of its incorporation, has full and adequate
corporate power to carry on its business as now conducted, is duly licensed or qualified to do
business in all jurisdictions wherein the failure to be so licensed or qualified would have a
material adverse effect on the condition, financial or otherwise, of the Company and its
Subsidiaries taken as a whole and has, except as set forth in the opinions delivered in
satisfaction of Section 6.4 hereof, full corporate right, power and authority to enter into the
Loan Documents executed and delivered by it and to perform its obligations under the Loan
Documents.

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     Section 5.10. Accurate Information. Taken as a whole, the written information, exhibits and
reports furnished by the Company and its Subsidiaries to the Banks in connection with the
negotiation and performance of the Loan Documents and the Company’s reports under the Securities
and Exchange Act of 1934, filed after October 31, 2007 and before the date of this Agreement do not
contain any material misstatement of a material fact or omit to state a material fact necessary to
make the statements contained therein not misleading in light of the circumstances in which made.

     Section 5.11. Enforceability. This Agreement and the other Loan Documents, when executed and
delivered by the Company and the Guarantor Subsidiaries, and assuming the due execution and
delivery by the other parties thereto, will be the legal, valid and binding agreements of the
Company and the Guarantor Subsidiaries, enforceable against them in accordance with their terms,
except (a) as may be limited by (i) bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium or other similar laws or judicial decisions for the relief of debtors or the limitation
of creditors’ rights generally; and (ii) any equitable principles relating to or limiting the
rights of creditors generally or any equitable remedy which may be granted to cure any defaults,
and (b) as set forth in the opinions referred to in Section 5.9.

Section 6. Conditions Precedent.

     The obligation of the Banks to make any Loan or issue any L/C pursuant hereto shall be subject
to the following conditions precedent:

     Section 6.1. General. The Agent shall have received the notice of borrowings and the Notes
hereinabove provided for.

     Section 6.2. Initial Extension of Credit. Prior to the initial Loan or L/C (whichever shall
come first) hereunder, the Company shall have delivered to the Agent for the benefit of the Banks
in sufficient counterparts or copies for distribution to the Banks:

     (a) this Agreement;

     (b) the Revolving Notes and the Swing Note;

     (c) a fully executed Guaranty Agreement substantially in the form of Exhibit D hereto,
from the Guarantor Subsidiaries;

     (d) a pay-off letter from the lenders under the Existing Agreement setting forth, among
other things, the total amount of indebtedness outstanding and owing to them (or outstanding
letters of credit issued for the account of the Company or any Subsidiary), which pay-off
letter shall be in form and substance acceptable to the Agent;

     (e) a good standing certificate or certificate of existence for the Company and each
Guarantor Subsidiary, dated no earlier than thirty days (30) days prior to the date hereof,
from the office of the secretary of state of the states of their respective incorporation;

-23-

 

     (f) copies of the Articles of Incorporation, as restated, and all amendments thereto,
of the Company and each Guarantor Subsidiary certified by the office of the secretary of
state of their respective states of incorporation as of a date no earlier than thirty days
(30) days prior to the date hereof;

     (g) copies of the By-Laws, as restated, and all amendments thereto, of the Company and
each Guarantor Subsidiary, certified as true, correct and complete on the date hereof by the
Treasurer of the Company and each Guarantor Subsidiary, respectively;

     (h) copies, certified by the Treasurer of the Company and each Guarantor Subsidiary, of
resolutions regarding the transactions contemplated by this Agreement, duly adopted by the
Board of Directors of the Company and each Guarantor Subsidiary, respectively, and
satisfactory in form and substance to all of the Banks; and

     (i) an incumbency signature certificate for the Company and each Guarantor Subsidiary
satisfactory in form and substance to all of the Banks.

     Section 6.3. Each Extension of Credit. As of the time of the making of each Loan and issuing
each L/C, hereunder (including the initial Loan and L/C):

     (a) each of the representations and warranties set forth in Section 5 hereof shall have
been true and correct in all material respects on the date of this Agreement; and each of
the representations and warranties set forth in Section 5.1, the second sentence of Section
5.2 (substituting, for the financial statements referred to in the first sentence of that
Section, the latest audited financial statements delivered to the Banks pursuant to Section
7.4(b) hereof and the latest monthly financial statements delivered pursuant to Section
7.4(a) for the last month in each fiscal quarter of the Company after such latest audited
financial statements), Section 5.3, Section 5.4, Section 5.5, Section 5.7, Section 5.8, the
last sentence of Section 5.9, Section 5.10, and Section 5.11, shall be and remain true and
correct as of the time of the making of such Loan or issuing such L/C, as the case may be,
as if made again as of such time;

     (b) after giving effect to the Company’s application of the proceeds of the Loan
hereunder, no Potential Default or Event of Default shall have occurred and be continuing;

     (c) with respect to each requested Loan and L/C, after giving effect to the requested
extension of credit and to each Loan that has been made and each L/C and Reimbursement
Obligation outstanding hereunder, the aggregate principal amount of all Loans, L/Cs and
Reimbursement Obligations then outstanding shall not exceed the sum of the Banks’ Revolving
Credit Commitments then in effect; and

-24-

 

     (d) no statute, rule or regulation shall have been adopted by a jurisdiction in which a
Guarantor Subsidiary is incorporated and no judicial decision of an appellate court of such
a jurisdiction shall have been published to the effect in any such case that
guaranty agreements such as the Subsidiary Guaranty are beyond the corporate power of
corporations subject to the laws of such jurisdiction, and neither the Company nor any
Guarantor Subsidiary shall have repudiated, disavowed or purported to terminate, repudiate
or disavow any Guarantor Subsidiary’s obligations under the Subsidiary Guaranty, unless in
any such case all of the Guarantor Subsidiaries shall have been merged into the Company
within 60 days of any such event.

and the request by the Company for any Loan or L/C pursuant hereto shall be and constitute a
warranty to the foregoing effects (other than as to the matters set forth in subsection (d) above).

     Section 6.4. Legal Matters. Legal matters incident to the execution and delivery of the Loan
Documents shall be reasonably satisfactory to each of the Banks and their legal counsel; and prior
to the initial Loan hereunder, the Agent shall have received the favorable written opinion of Wise,
Carter, Child & Caraway, PA, counsel for the Company and the Guarantor Subsidiaries, substantially
in form and substance satisfactory to each of the Banks and their respective legal counsel.

     Section 6.5. Closing Fee. The Agent shall have received for the pro rata benefit of the Banks
the fees agreed to between the Company and the Agent.

Section 7. Covenants.

     It is understood and agreed that so long as credit is in use or available under this
Agreement, any L/C is outstanding hereunder or any amount remains unpaid on any Note or
Reimbursement Obligation, except to the extent compliance in any case or cases is waived in writing
by the Required Banks:

     Section 7.1. Maintenance of Property. The Company will, and will cause each Subsidiary to,
keep and maintain all of the material Properties necessary or useful in their business taken as a
whole in good condition, and make all necessary renewals, replacements, additions, betterments and
improvements thereto; provided, however, that nothing in this Section shall prevent the Company or
any Subsidiary from discontinuing the operating and maintenance of any of its Properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of its business and not
disadvantageous in any material respect to the Banks as holders of the Notes.

     Section 7.2. Taxes. The Company will, and will cause each Subsidiary to, duly pay and
discharge all material taxes, rates, assessments, fees and governmental charges upon or against the
Company or any Subsidiary or against its Properties in each case before the same becomes delinquent
and before penalties accrue thereon unless and to the extent that the same is being contested in
good faith and by appropriate proceedings and adequate reserves, determined in accordance with
generally accepted accounting principles consistently applied, have been established with respect
thereto.

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     Section 7.3. Maintenance of Insurance. The Company will, and will cause each Subsidiary to,
maintain insurance with insurers recognized as financially sound and reputable by
prudent business persons in such forms and amounts and against such risks as the Company reasonably
believes is prudent and normal within the industry. The Company shall, at the Agent’s request,
provide copies to the Agent of all insurance policies and other materials related thereto
maintained by the Company and its Subsidiaries. The Company shall furnish each Bank as soon as
available, and in any event no later than each Anniversary Date, a summary of its insurance
coverage which summary shall be reasonably satisfactory in form and substance to the Banks.

     Section 7.4. Financial Reports. The Company will, and will cause each Subsidiary to, maintain
a system of accounting in accordance with sound accounting practice and will furnish promptly to
the Banks and their duly authorized representatives such information respecting the business and
financial condition of the Company and its Subsidiaries as may from time to time be reasonably
requested and, without any request, will furnish each Bank:

     (a) as soon as available, and in any event within 40 days after the close of each
monthly fiscal period of the Company, a copy of consolidated balance sheets and consolidated
profit and loss statements for the Company and its Subsidiaries (for such monthly period and
the year to date) for such period of the Company and for the corresponding periods of the
preceding fiscal year, all in reasonable detail, prepared by the Company and accompanied by
a certificate of the chief financial officer, chief executive officer or chief accounting
officer of the Company to the effect that said financial statements were prepared in
conformity with generally accepted accounting principles and, in his opinion, are fairly and
accurately stated;

     (b) as soon as available, and in any event within 90 days after the close of each
fiscal year of the Company, a copy of the audit report for such year and accompanying
financial statements, including consolidated balance sheets, reconciliations of change in
stockholders’ equity, profit and loss statements and statements of cash flows for the
Company and its Subsidiaries showing in comparative form the figures for the previous fiscal
year of the Company, all in reasonable detail, accompanied by the unqualified opinion of
Ernst & Young or other independent public accountants of nationally recognized standing
selected by the Company and reasonably satisfactory to the Required Banks;

     (c) within 45 days after the last day of every fiscal quarter, a Compliance Certificate
in the form of Exhibit E attached hereto, prepared and signed by the chief financial
officer, chief executive officer or chief accounting officer of the Company;

     (d) as soon as available but in any event no later than November 30 of each year, a
consolidated budget for the Company and its Subsidiaries for such fiscal year showing the
Company’s and its Subsidiaries’ projected consolidated profits and losses, and a
consolidated budget for the Company and its Subsidiaries for such fiscal year showing the
Company’s and its Subsidiaries’ projected consolidated capital expenditures, all in
reasonable detail; and

-26-

 

     (e) as soon as available but in any event within 10 days of the filing thereof, copies
of all 10-K, 10-Q and 8-K filings and all shareholder proxy materials filed by the Company
or any Subsidiary with the Securities and Exchange Commission.

     Section 7.5. Inspection. The Company shall, and shall cause each Subsidiary to, permit the
Banks, by their representatives and agents, to reasonably inspect any of the Properties, corporate
books and financial records of the Company and each Subsidiary, to reasonably examine and make
copies of the books of accounts and other financial records of the Company and its Subsidiaries and
to discuss the affairs, finances and accounts of the Company and its Subsidiaries with, and to be
advised as to the same by, its officers at such reasonable times during normal business hours and
reasonable intervals as the Banks may request. The Company shall pay to the Banks from time to
time upon demand an amount (but not to exceed $3,000 for each inspection) sufficient to compensate
the Banks for their reasonable out-of-pocket fees, charges and expenses in connection with any such
inspection of the Company and the Subsidiaries, provided that so long as no Event of Default shall
have occurred and be continuing, the Company shall be required to pay for only one such inspection
per year.

     Section 7.6. Consolidation and Merger. The Company will not, and will not permit any
Subsidiary to, consolidate with or merge into any Person, or permit any other Person to merge into
it, or acquire (in a transaction analogous in purpose or effect to a consolidation or merger) all
or substantially all of the Property or capital stock of any other Person except (a) as permitted
by Section 7.14(d) hereof, (b) any Subsidiary may consolidate with or merge into or with any other
Subsidiary, and (c) any Subsidiary may merge into the Company.

     Section 7.7. Transactions with Affiliates. The Company will not, and will not permit any
Subsidiary to, enter into any material transaction, including without limitation, the purchase,
sale, lease or exchange of any Property, or the rendering of any service, with any Affiliate of the
Company except in the ordinary course of and pursuant to the reasonable requirements of the
Company’s or such Subsidiary’s business and upon fair and reasonable terms no less favorable to the
Company or such Subsidiary than would be obtained in a comparable arm’s-length transaction with a
Person not an Affiliate of the Company; provided however that the foregoing shall not prevent any
transactions between any Guarantor Subsidiary and any other Guarantor Subsidiary or the Company on
any terms mutually acceptable to them.

     Section 7.8. Material Subsidiaries. The Company shall cause each Material Subsidiary, whether
now existing or hereafter created or acquired, to execute and deliver to the Agent for the benefit
of the Banks, within 30 days of becoming a Material Subsidiary, a guaranty substantially in the
form of the Subsidiary Guaranty, together with items described in Sections 6.2(c), (d), (e), (f)
and (g) and 6.4 of this Agreement (each dated as of the date of the Subsidiary Guaranty to which it
relates) with respect to such Material Subsidiary and such guaranty.

     Section 7.9. Consolidated Tangible Net Worth. The Company will maintain at all times
Consolidated Tangible Net Worth during each fiscal year of the Company in an amount not less than
$275,000,000 (commencing with the fiscal quarter ending January 31, 2008) increasing on the last
day of each fiscal quarter ending thereafter by an amount equal to (a) 100% of any Net Proceeds of
Stock issued during such quarter plus (b) 60% of an amount (but not less than zero)

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equal to (i) the Company’s Consolidated Net Income for such fiscal quarter, minus (ii) the lesser
of (x) $3,000,000 and (y) the aggregate amount of all dividends declared during such fiscal quarter
rounded to the next highest $100,000.

     Section 7.10. Consolidated Indebtedness for Borrowed Money to Total Capitalization. The
Company will not permit the ratio of its Consolidated Indebtedness for Borrowed Money to its Total
Capitalization (the “Leverage Ratio”), expressed as a percentage, at any time to exceed the
percentage indicated below during each fiscal year of the Company specified below:

	 	 	 
	Fiscal Year Ending	Maximum Permitted Leverage Ratio
	October 31, 2008

	 	50%
	October 31, 2009
	 	55%
	October 31, 2010 and each fiscal 

year ending thereafter
	 	50%

     Section 7.11. Consolidated Current Ratio. The Company shall maintain at all times a
Consolidated Current Ratio of not less than 2.0 to 1.

     Section 7.12. Capital Expenditures. (a) The Company will not, and will not permit any
Subsidiary to, be obligated to spend during any fiscal year for capital expenditures (as defined
and classified in accordance with generally accepted accounting principles consistently applied,
including without limitation any such capital expenditures in respect of Capitalized Leases but
excluding any acquisition permitted by Section 7.14(d) which might constitute such a capital
expenditure and the capital expenditures permitted by clause (b) below) an aggregate amount for the
Company and its Subsidiaries in excess of $35,000,000 each fiscal year of the Company plus
$7,500,000 (the “Carryover Amount”) permitted to be spent in the preceding fiscal year but not
actually spent therein (the “Maximum Carryover Amount to the Next Fiscal Year”). For purposes of
this Section, any capital expenditures made in any fiscal year shall be applied first to the
Carryover Amount, if any, available during such fiscal year.

     (b) The Company will not, and will not permit any Subsidiary to, be obligated to spend capital
expenditures (as defined and classified in accordance with general accepted accounting principles
consistently applied) in connection with the construction of a poultry processing complex in
Kinston, North Carolina, in excess of $145,475,000 during the term of this Agreement.

     Section 7.13. Liens. The Company will not, and will not permit any Subsidiary to, pledge,
mortgage or otherwise encumber or subject to or permit to exist upon, or be subjected to any lien,
charge or security interest of any kind (including any conditional sale or other title retention
agreement and any lease in the nature thereof) on, any of its Properties of any kind or character
at any time owned by the Company or any Subsidiary, other than:

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     (a) liens, pledges or deposits for worker’s compensation, unemployment insurance, old
age benefits or social security obligations, taxes, assessments, statutory obligations or
other similar charges, good faith deposits made in connection with tenders, contracts or
leases to which the Company or a Subsidiary is a party or other deposits required to be made
in the ordinary course of business, provided in each case the obligation secured is not
overdue or, if overdue, is being contested in good faith by appropriate proceedings and
adequate reserves have been provided therefor in accordance with generally accepted
accounting principles and that the obligation is not for borrowed money, customer advances
or trade payables;

     (b) the pledge of assets for the purpose of securing an appeal or stay or discharge in
the course of any legal proceedings, provided that the aggregate amount of liabilities of
the Company or a Subsidiary so secured by a pledge of property permitted under this
subsection (b) including interest and penalties thereon, if any, shall not be in excess of
$5,000,000 at any one time outstanding;

     (c) liens, pledges, mortgages, security interests or other charges existing on the date
hereof and disclosed in financial statements (or notes thereto) referred to in Section 5.2
hereof;

     (d) liens for property taxes and assessments or governmental charges or levies which
are not yet due and payable;

     (e) liens incidental to the conduct of business or the ownership of Properties and
assets (including warehousemen’s liens, mechanic’s liens, grower liens and attorneys’ liens
and statutory landlords’ liens) or other liens of like general nature incurred in the
ordinary course of business and not in connection with the borrowing of money, provided in
each case, the obligation secured is not overdue or, if overdue, is being contested in good
faith by appropriate actions or proceedings and for which adequate reserves, determined in
accordance with generally accepted accounting principles, have been established;

     (f) minor survey exceptions or minor encumbrances, easements or reservations, or rights
of others for rights-of-way, utilities and other similar purposes, or zoning or other
restrictions as to the use of real properties, which are necessary for the conduct of the
activities of the Company and its Subsidiaries or which customarily exist on properties of
corporations engaged in similar activities and similarly situated and which do not in any
event materially impair the operation of the business of the Company and its Subsidiaries
taken as a whole;

     (g) liens created solely for the purpose of securing indebtedness arising out of a
capital lease in connection with an aircraft rental provided that such lien shall not extend
to or cover other Property of the Company or the Guarantor Subsidiaries; and

     (h) additional pledges, mortgages, encumbrances, liens, charges and security interests
(including any conditional sale or other title retention agreement and any lease

-29-

 

in the nature thereof) on fixed assets (classified in accordance with generally accepted
accounting principles, consistently applied) having an aggregate book value at the end of
the fiscal quarter immediately preceding the fiscal quarter in which the latest of such
mortgages, liens, or encumbrances are created of no more than $5,000,000 at any one time.

     Section 7.14. Investments, Loans, Advances and Acquisitions. The Company will not, and will
not permit any Subsidiary to, make or retain any investment (whether through the purchase of stock,
obligations, capital contributions or otherwise) in or make any loan or advance to, any other
Person, or acquire substantially as an entirety the Property or business of any other Person, other
than:

     (a) investments in certificates of deposit having a maturity of two years or less
issued by any Bank or any other commercial bank having a long-term rating at the time of
investment of at least AA by Standard & Poor’s Ratings Services Group, a division of The
McGraw-Hill Companies, Inc. (“S&P”) or Aa by Moody’s Investor Services, Inc. (“Moody’s”) and
a short-term rating at the time of investment of A-1 from S&P or P-1 from Moody’s;

     (b) investments in commercial paper rated at the time of investment P-1 by Moody’s or
A-1 by S&P maturing within 270 days of the date of issuance thereof;

     (c) investments shown on the financial statements referred to in Section 5.2 in
existing Subsidiaries;

     (d) acquisitions of the Property or business of any Person, provided (i) that no
Potential Default or Event of Default shall then exist after giving effect to such
acquisition and no change of the voting control or management of the Company shall result
therefrom; (ii) that the aggregate purchase price (including the principal amount of
obligations assumed by the Company or a Subsidiary) paid in any single acquisition shall not
exceed $25,000,000 and (iii) that the aggregate purchase price (determined as described
above) paid in all such acquisitions made prior to the Revolving Credit Termination Date
shall not exceed $35,000,000;

     (e) marketable full faith and credit obligations of the United States of America or of
any agency thereof for which the full faith and credit of the United States of America has
been pledged;

     (f) repurchase, reverse repurchase and security lending agreements collateralized by
securities of the type described in subsection (e), provided that the Company or Subsidiary,
as the case may be, which is a party to such arrangement shall hold (individually or through
an agent or bailee) all securities relating thereto during the entire term of each such
arrangement;

     (g) municipal debt securities commonly known as “lower floaters” or “variable rate
demand notes” so long as (i) such securities provide that the owner thereof

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may require that such securities be bought from it upon 7 days notice by such owner, and
(ii) such securities shall have a long-term rating at the time of investment of at least AA
by S&P or Aa by Moody’s and a short-term rating at the time of investment of A-1 from S&P or
P-1 from Moody’s;

     (h) investments in an aggregate principal amount of up to $1,000,000 and not otherwise
permitted by this Section, in certificates of deposit in any commercial bank;

     (i) investments in and loans and advances to the Company or any Subsidiary by the
Company or any other Subsidiary; and

     (j) a loan in a principal amount not to exceed $500,000 to the Company’s employees’
stock ownership plan.

     Section 7.15. Sale of Tangible Fixed Assets. The Company will not, and will not permit any
Subsidiary to, sell, lease, assign, transfer or otherwise dispose of tangible fixed assets (as
classified in accordance with generally accepted accounting principles, consistently applied) if
the book value of the Property sold, leased, assigned, transferred or otherwise disposed of in the
latest such transaction, together with the Property sold, leased, assigned, transferred or
otherwise disposed of in all other such transactions after the date of this Agreement, would exceed
15% of the book value of all of the Company’s and its subsidiaries’ tangible assets (determined in
accordance with generally accepted accounting principles, consistently applied) at the time of the
latest such transaction, except for (a) sales of obsolete or worn-out equipment in the ordinary
course of business, (b) transfer of such assets between any Subsidiary and the Company or any other
Subsidiary, to each of which this Section shall not apply, and (c) the transfer of Property in
connection with the issuance of Economic Development Bonds which (i) are held by the Company or a
Subsidiary of the Company or (ii) have an aggregate principal amount not to exceed $10,000,000
during the term of this Agreement.

     Section 7.16. Notice of Suit or Adverse Change in Business or Default. The Company shall give
written notice to the Agent within five (5) Business Days after the Company learns of, or forms a
belief as to the existence of, any of the following:

     (a) any proceeding(s) being instituted or threatened in writing to be instituted
against the Company or any Subsidiary in any federal, state, local or foreign court or
before any commission or other regulatory body (federal, state, local or foreign) that is
material to the Company and its Subsidiaries taken as a whole;

     (b) any material adverse change in the business, Property or condition, financial or
otherwise, of the Company and its Subsidiaries taken as a whole, except those affecting
business and/or the poultry industry generally; and

     (c) the occurrence of any Potential Default or Event of Default.

     Section 7.17. ERISA. The Company will, and will cause each Subsidiary to, promptly pay and
discharge all obligations and liabilities arising under ERISA of a character which if

-31-

 

unpaid or unperformed is likely to result in the imposition of a lien against any material portion
of the Property of the Company and its Subsidiaries taken as a whole and will promptly notify the
Agent, upon the Company becoming aware, of (a) the occurrence of any reportable event (as defined
in ERISA) which might result in the termination by the PBGC of any Plan, (b) receipt of any notice
from PBGC of its intention to seek termination of any such Plan or appointment of a trustee
therefor, and (c) its intention to terminate or withdraw from any Plan. The Company will not, and
will not permit any Subsidiary to, terminate any such Plan or withdraw therefrom unless it shall be
in compliance with all of the terms and conditions of this Agreement after giving effect to any
liability to PBGC resulting from such termination or withdrawal.

     Section 7.18. Use of Proceeds. The Company shall use the proceeds of each Loan and other
extensions of credit hereunder only to repay all of the Company’s indebtedness under the Existing
Agreement and for working capital and general corporate purposes of the Company and the
Subsidiaries, including the construction of a new poultry processing complex located in Kinston,
North Carolina.

     Section 7.19. Compliance with Laws, etc. The Company will, and will cause each of its
Subsidiaries to, comply in all material respects with all applicable laws, rules, regulations and
orders, such compliance to include (without limitation) the maintenance and preservation of its
corporate existence and qualification as a foreign corporation, except where the failure to so
comply or to be so qualified would not have a material adverse effect on the condition, financial
or otherwise, of the Company and its Subsidiaries taken as a whole.

     Section 7.20. Environmental Covenant. The Company will, and will cause each of its
Subsidiaries to, except as disclosed on Exhibit F attached hereto, use and operate all of its
facilities and Properties in compliance with all Environmental Laws, keep all necessary material
permits, approvals, certificates, licenses and other authorizations relating to environmental
matters in effect and remain in material compliance therewith, and handle all hazardous materials
in material compliance with all applicable Environmental Laws, except, as to each of the foregoing,
where the failure to do so would not have a material adverse effect on the Company and its
Subsidiaries taken as a whole.

Section 8. Events of Default and Remedies.

     Section 8.1. Definitions. Any one or more of the following shall constitute an Event of
Default:

     (a) (i) Default in the payment when due of any principal of or interest on any Note or
Reimbursement Obligation, whether at the stated maturity thereof or as required by Section
2.4 hereof or at any other time provided in this Agreement, or (ii) default in the payment
of any fee or other amount payable by the Company pursuant to this Agreement within 5
Business Days after the Company receives an invoice therefor;

     (b) Default in the observance or performance of any covenant set forth in Section 7.18
hereof;

-32-

 

     (c) Default in the observance or performance of any covenant set forth in Sections 7.5,
7.6, 7.8, 7.9, 7.10, 7.11, 7.12, 7.13, 7.14, 7.15, 7.16 and 7.19 hereof; or

     (d) Default in the observance or performance of any covenant set forth in Section 7.4
hereof and the continuation thereof for 3 Business Days after notice thereof to the Company
by any Bank;

     (e) Default in the observance or performance of any other covenant, condition,
agreement or provision hereof or any of the other Loan Documents and such default shall
continue for 30 days after written notice thereof to the Company by any Bank;

     (f) Default shall occur under any evidence of Indebtedness for Borrowed Money in an
aggregate principal amount exceeding $10,000,000 issued or assumed or guaranteed by the
Company or any Subsidiary, or under any mortgage, agreement or other similar instrument
under which the same may be issued or secured and such default shall continue for a period
of time sufficient to permit the acceleration of maturity of the indebtedness evidenced
thereby or outstanding or secured thereunder;

     (g) Any representation or warranty made by the Company or any Subsidiary herein or in
any Loan Document or in any written statement or certificate furnished by it pursuant hereto
or thereto after the date of this Agreement, proves untrue in any material respect as of the
date made or deemed made pursuant to the terms hereof and any such breach which is capable
of being cured shall not be remedied within 30 days after written notice thereof to the
Company by any Bank;

     (h) Any judgment or judgments, writ or writs, or warrant or warrants of attachment, or
any similar process or processes which order the payment of money in excess of $10,000,000
over and above any insurance proceeds payable with respect thereto or have a material
adverse effect on the ability of the Company and its Subsidiaries taken as a whole to
continue to conduct their business in the ordinary course, shall be entered or filed against
the Company or any Subsidiary or against any of their respective Property or assets and
remain unstayed and undischarged for a period of 30 days from the date of its entry;

     (i) Any reportable event (as defined in ERISA) which constitutes grounds for the
termination of any Plan or for the appointment by the appropriate United States District
Court of a trustee to administer or liquidate any such Plan, shall have occurred and be
continuing thirty (30) days after written notice to such effect shall have been given to the
Company by any Bank; or any such Plan shall be terminated in a manner that can reasonably be
expected to result in liability under ERISA that is material to the Company and its
Subsidiaries taken as a whole; or a trustee shall be appointed by the appropriate United
States District Court to administer any such Plan, or the PBGC shall institute proceedings
to administer or terminate any such Plan, and any such administration or termination could
reasonably be expected to have a material adverse effect on the Company and its Subsidiaries
taken as a whole;

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     (j) The Company or any Guarantor Subsidiary shall (i) have entered involuntarily
against it an order for relief under the Bankruptcy Code of 1978, as amended, (ii) admit in
writing its inability to pay, or not pay, its debts generally as they become due or suspend
payment of its obligations, (iii) make an assignment for the benefit of creditors, (iv)
apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian,
trustee, conservator, liquidator or similar official for it or any substantial part of its
property, (v) file a petition seeking relief or institute any proceeding seeking to have
entered against it an order for relief under the Bankruptcy Code of 1978, as amended, to
adjudicate it insolvent, or seeking dissolution, winding up, liquidation, reorganization,
arrangement, marshalling of assets, adjustment or composition of it or its debts under any
law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to
file an answer or other pleading denying the material allegations of any such proceeding
filed against it, or (vi) fail to contest in good faith any appointment or proceeding
described in Section 8.1(k) hereof;

     (k) A custodian, receiver, trustee, conservator, liquidator or similar official shall
be appointed for the Company or any Guarantor Subsidiary or any substantial part of the
Property of the Company and its Subsidiaries taken as a whole, or a proceeding described in
Section 8.1(j)(v) shall be instituted against the Company or any Guarantor Subsidiary and
such appointment continues undischarged or any such proceeding continues undismissed or
unstayed for a period of 60 days; or

     (l) a Change of Control shall occur.

     Section 8.2. Remedies for Non-Bankruptcy Defaults. When any Event of Default, other than an
Event of Default described in subsections (j) and (k) of Section 8.1 hereof, has occurred and is
continuing, the Agent, if directed by the Required Banks, shall give notice to the Company and take
any or all of the following actions: (a) terminate the remaining Commitments and on the date (which
may be the date thereof) stated in such notice, (b) declare the principal of and the accrued
interest on the Notes and all Reimbursement Obligations to be forthwith due and payable and
thereupon the Notes and all Reimbursement Obligations, including both principal and interest, shall
be and become immediately due and payable without further demand, presentment, protest or notice of
any kind, and (c) take any action or exercise any remedy under any of the Loan Documents or
exercise any other action, right, power or remedy permitted by law. Any Bank may exercise the
right of set-off with regard to any deposit accounts or other accounts maintained by the Company
with any of the Banks, and the Company’s indebtedness hereunder shall be satisfied to the extent of
any amount set-off against such indebtedness.

     Section 8.3. Remedies for Bankruptcy Defaults. When any Event of Default described in
subsections (j) or (k) of Section 8.1 hereof has occurred and is continuing, then the Notes and all
Reimbursement Obligations shall immediately become due and payable without presentment, demand,
protest or notice of any kind, and the obligation of the Banks to extend further credit pursuant to
any of the terms hereof shall immediately terminate.

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Section 9. Change in Circumstances Regarding Eurodollar Loans.

     Section 9.1. Change of Law. Notwithstanding any other provisions of this Agreement or any
Note, if at any time after the date hereof with respect to Eurodollar Loans, any Bank shall
determine in good faith that any change in applicable law or regulation or in the interpretation
thereof makes it unlawful for such Bank to make or continue to maintain any Eurodollar Loan or to
give effect to its obligations with respect thereto as contemplated hereby, such Bank shall
promptly give notice thereof to the Company to such effect, and such Bank’s obligation to make or
relend any such affected Eurodollar Loans under this Agreement shall terminate until it is no
longer unlawful for such Bank to make or maintain such affected Loan. In the event of such a
determination, the Company shall prepay the outstanding principal amount of any such affected
Eurodollar Loan made to it, together with all interest accrued thereon and all other amounts due
and payable to the Banks under Section 9.4 of this Agreement, on the earlier of the last day of the
Interest Period applicable thereto and the first day on which such Bank has given the Company not
less than one (1) Business Day’s prior written notice that it is illegal for such Bank to have such
Loans outstanding; provided, however, the Company shall then be permitted to elect to borrow the
principal amount of such affected Eurodollar Loan by means of another type of Loan available
hereunder, subject to all of the terms and conditions of this Agreement. In the event that
Eurodollar Loans shall be unavailable as provided in this Section, the Banks and the Company shall
negotiate in good faith to make available to the Company, on mutually acceptable terms, Loans
bearing interest at a rate per annum determined with reference to the rates quoted to the Agent in
the secondary market by three certificate of deposit dealers of recognized standing for the
purchase at face value of the Agents’ certificates of deposit in an amount and for an interest
period equal to an amount and interest period of the requested Loans, adjusted for reserves and
FDIC insurance assessments (the “Adjusted CD Rate”).

     Section 9.2. Unavailability of Deposits or Inability to Ascertain the Adjusted Eurodollar
Rate. Notwithstanding any other provision of this Agreement or any Note to the contrary, if prior
to the commencement of any Interest Period any Bank shall reasonably determine (i) that deposits in
the amount of any Eurodollar Loan scheduled to be outstanding are not available to it in the
relevant market or (ii) by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Adjusted Eurodollar Rate, then the Agent shall
promptly give telephonic or telex notice thereof to the Company and the Banks (such notice to be
confirmed in writing), and the obligation of the Banks to make any such Eurodollar Loan in such
amount and for such Interest Period shall terminate until the Company shall thereafter request a
Eurodollar Loan and deposits in such amount and for the Interest Period selected by the Company
shall again be readily available in the relevant market and adequate and reasonable means exist for
ascertaining the Adjusted Eurodollar Rate. Upon the giving of such notice, the Company may elect
to either (i) pay or prepay, as the case may be, such affected Loan or (ii) reborrow such affected
Loan as another type of Loan or Portion available hereunder, subject to all terms and conditions of
this Agreement. In the event that Eurodollar Loans are unavailable pursuant to this Section, the
Banks and the Company shall negotiate in good faith for Loans bearing interest at a rate per annum
based on the Adjusted CD Rate to be made available to the Company.

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     Section 9.3. Taxes, Increased Costs and Reduced Return. (a) With respect to any outstanding
Eurodollar Loans, if any Bank shall determine in good faith that any change in any applicable law,
treaty, regulation or guideline (including, without limitation, Regulation D of the Board of
Governors of the Federal Reserve System) or any new law, treaty, regulation or guideline, or any
interpretation of any of the foregoing by any governmental authority charged with the
administration thereof or any central bank or other fiscal, monetary or other authority having
jurisdiction over such Bank or its lending branch or the Eurodollar Loans contemplated by this
Agreement (whether or not having the force of law) (“Change in Law”) shall:

     (i) impose, modify or deem applicable any reserve, special deposit or similar
requirements against assets held by, or deposits in or for the account of, or Eurodollar
Loans by, or any other acquisition of funds or disbursements by, such Bank (other than
reserves included in the determination of the Adjusted Eurodollar Rate);

     (ii) subject such Bank, any Eurodollar Loan or any Note to any tax (including, without
limitation, any United States interest equalization tax or similar tax however named
applicable to the acquisition or holding of debt obligations and any interest or penalties
with respect thereto), duty, charge, stamp tax, fee deduction or withholding in respect of
this Agreement, any Eurodollar Loan or any Note except such taxes as may be measured by the
overall net income of such Bank or its lending branch and imposed by the jurisdiction, or
any political subdivision or taxing authority thereof, in which such Bank’s principal
executive office or its lending branch is located or in which the Bank has nexus;

     (iii) change the basis of taxation of payments of principal and interest due from the
Company to such Bank hereunder or under any Note (other than by a change in taxation of the
overall net income of such Bank); or

     (iv) impose on such Bank any penalty with respect to the foregoing or any other
condition regarding this Agreement, its disbursement, any Eurodollar Loan or any Note;

and such Bank shall determine in good faith that the result of any of the foregoing is to increase
the cost (whether by incurring a cost or adding to a cost) to such Bank of making or maintaining
any Eurodollar Loan hereunder or to reduce the amount of principal or interest received by such
Bank, then, within fifteen (15) days after demand by such Bank (with a copy to the Agent), the
Company shall pay to such Bank from time to time as specified by such Bank such additional amounts
as such Bank shall determine are sufficient to compensate and indemnify it for such increased cost
or reduced amount.

     (b) If, after the date hereof, any Bank or the Agent shall have determined in good faith that
the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change
therein (including, without limitation, any revision in the Final Risk-Based Capital Guidelines of
the Board of Governors of the Federal Reserve System (12 CFR Part 208, Appendix A; 12 CFR Part 225,
Appendix A) or of the Office of the Comptroller of the Currency (12 CFR Part 3, Appendix A), or in
any other applicable capital rules heretofore adopted and

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issued by any governmental authority), or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its Lending Office) with
any request or directive regarding capital adequacy (whether or not having the force of law) of any
such authority, central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Bank’s capital, or on the capital of any corporation controlling such Bank,
in each case as a consequence of its obligations hereunder to a level below that which such Bank
would have achieved but for such adoption, change or compliance (taking into consideration such
Bank’s policies with respect to capital adequacy) by an amount deemed by such Bank to be material,
then from time to time, within fifteen (15) days after demand by such Bank (with a copy to the
Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate
such Bank for such reduction.

     (c) If any Bank makes such a claim for compensation, it shall provide to the Company a
certificate setting forth such increased cost or reduced amount as a result of any event mentioned
herein specifying such Change in Law, and such certificate shall be conclusive and binding on the
Company as to the amount thereof except in the case of manifest error. Upon the imposition of any
such cost, the Company may prepay any affected Loan, subject to the provisions of Sections 2.3 and
9.4 hereof.

     Section 9.4. Funding Indemnity. (a) In the event any Bank shall incur any loss, cost, expense
or premium (including, without limitation, any loss of profit and any loss, cost, expense or
premium incurred by reason of the liquidation or re-employment of deposits or other funds acquired
by such Bank to fund or maintain any Eurodollar Loan or the relending or reinvesting of such
deposits or amounts paid such Bank) as a result of:

     (i) any payment or prepayment of a Eurodollar Loan on a date other than the last day of
the then applicable Interest Period; or

     (ii) any failure by the Company to borrow any Eurodollar Loan on the date specified in
the notice given pursuant to Section 1.5 hereof;

then, upon the demand of such Bank, the Company shall pay, within fifteen (15) days after demand by
such Bank (with a copy to the Agent), to such Bank such amount as will reimburse such Bank for such
loss, cost or expense.

     (b) If any Bank makes a claim for compensation under this Section 9.4, it shall provide to the
Company a certificate setting forth the amount of such loss, cost or expense in reasonable detail
and such certificate shall be conclusive and binding on the Company as to the amount thereof except
in the case of manifest error.

     Section 9.5. Lending Branch. Each Bank may, at its option, elect to make, fund or maintain
its Eurodollar Loans hereunder at the branch or office specified opposite its signature on the
signature page hereof or such other of its branches or offices as such Bank may from time to time
elect, subject to the provisions of Section 1.5(b) hereof.

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     Section 9.6. Discretion of Bank as to Manner of Funding. Notwithstanding any provision of
this Agreement to the contrary, each Bank which is match-funding its Eurodollar Loans shall be
entitled to fund and maintain its funding of all or any part of its Loans in any manner it sees
fit, it being understood however, that for the purposes of this Agreement all determinations
hereunder shall be made as if the Banks which are match-funding their Eurodollar Loans had actually
funded and maintained each Eurodollar Loan during each Interest Period for such Loan through the
purchase of deposits in the relevant interbank market having a maturity corresponding to such
Interest Period and bearing an interest rate equal to the Adjusted Eurodollar Rate for such
Interest Period.

Section 10. The Agent.

     Section 10.1. Appointment and Authorization of Agent. Each Bank and the L/C Issuer hereby
appoints Bank of Montreal as the Agent under the Loan Documents and hereby authorizes the Agent to
take such action as Agent on its behalf and to exercise such powers under the Loan Documents as are
delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental
thereto. The Banks and L/C Issuers expressly agree that the Agent is not acting as a fiduciary of
the Banks or the L/C Issuers in respect of the Loan Documents, the Company or otherwise, and
nothing herein or in any of the other Loan Documents shall result in any duties or obligations on
the Agent or any of the Banks or L/C Issuers except as expressly set forth herein.

     Section 10.2. Agent and its Affiliates. The Agent shall have the same rights and powers under
this Agreement and the other Loan Documents as any other Bank and may exercise or refrain from
exercising such rights and power as though it were not the Agent, and the Agent and its affiliates
may accept deposits from, lend money to, and generally engage in any kind of business with the
Company or any Affiliate of the Company as if it were not the Agent under the Loan Documents. The
term “Bank” as used herein and in all other Loan Documents, unless the context otherwise clearly
requires, includes the Agent in its individual capacity as a Bank (if applicable).

     Section 10.3. Action by Agent. If the Agent receives from the Company a written notice of an
Event of Default pursuant to Section 7.16 hereof, the Agent shall promptly give each of the Banks
and L/C Issuers written notice thereof. The obligations of the Agent under the Loan Documents are
only those expressly set forth therein. Without limiting the generality of the foregoing, the
Agent shall not be required to take any action hereunder with respect to any Potential Default or
Event of Default, except as expressly provided in Sections 8.2. Unless and until the Required
Banks give such direction, the Agent may (but shall not be obligated to) take or refrain from
taking such actions as it deems appropriate and in the best interest of all the Banks and L/C
Issuers. In no event, however, shall the Agent be required to take any action in violation of
applicable law or of any provision of any Loan Document, and the Agent shall in all cases be fully
justified in failing or refusing to act hereunder or under any other Loan Document unless it first
receives any further assurances of its indemnification from the Banks that it may require,
including prepayment of any related expenses and any other protection it requires against any and
all costs, expense, and liability which may be incurred by it by reason of taking or continuing to
take any such action. The Agent shall be entitled to assume that no Potential

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Default or Event of Default exists unless notified in writing to the contrary by a Bank, an L/C
Issuer, or the Company. In all cases in which the Loan Documents do not require the Agent to take
specific action, the Agent shall be fully justified in using its discretion in failing to take or
in taking any action thereunder. Any instructions of the Required Banks, or of any other group of
Banks called for under the specific provisions of the Loan Documents, shall be binding upon all the
Banks and the holders of the Obligations.

     Section 10.4. Consultation with Experts. The Agent may consult with legal counsel,
independent public accountants, and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the advice of such
counsel, accountants or experts.

     Section 10.5. Liability of Agent; Credit Decision. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or not taken by it in
connection with the Loan Documents: (i) with the consent or at the request of the Required Banks
or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Agent nor
any of its directors, officers, agents or employees shall be responsible for or have any duty to
ascertain, inquire into or verify: (i) any statement, warranty or representation made in
connection with this Agreement, any other Loan Document or any Credit Event; (ii) the performance
or observance of any of the covenants or agreements of the Company or any Subsidiary contained
herein or in any other Loan Document; (iii) the satisfaction of any condition specified in Section
6 hereof, except receipt of items required to be delivered to the Agent; or (iv) the validity,
effectiveness, genuineness, enforceability, perfection, value, worth or collectibility hereof or of
any other Loan Document or of any other documents or writing furnished in connection with any Loan
Document; and the Agent makes no representation of any kind or character with respect to any such
matter mentioned in this sentence. The Agent may execute any of its duties under any of the Loan
Documents by or through employees, agents, and attorneys-in-fact and shall not be answerable to the
Banks, the L/C Issuers, the Company, or any other Person for the default or misconduct of any such
agents or attorneys-in-fact selected with reasonable care. The Agent shall not incur any liability
by acting in reliance upon any notice, consent, certificate, other document or statement (whether
written or oral) believed by it to be genuine or to be sent by the proper party or parties. In
particular and without limiting any of the foregoing, the Agent shall have no responsibility for
confirming the accuracy of any compliance certificate or other document or instrument received by
it under the Loan Documents. The Agent may treat the payee of any Obligation as the holder thereof
until written notice of transfer shall have been filed with the Agent signed by such payee in form
satisfactory to the Agent. Each Bank and L/C Issuer acknowledges that it has independently and
without reliance on the Agent or any other Bank or L/C Issuer, and based upon such information,
investigations and inquiries as it deems appropriate, made its own credit analysis and decision to
extend credit to the Company in the manner set forth in the Loan Documents. It shall be the
responsibility of each Bank and L/C Issuer to keep itself informed as to the creditworthiness of
the Company and its Subsidiaries, and the Agent shall have no liability to any Bank or L/C Issuer
with respect thereto.

     Section 10.6. Indemnity. The Banks shall ratably, in accordance with their respective
Commitment Percentage, indemnify and hold the Agent, and its directors, officers, employees,
agents, and representatives harmless from and against any liabilities, losses, costs or expenses

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suffered or incurred by it under any Loan Document or in connection with the transactions
contemplated thereby, regardless of when asserted or arising, except to the extent they are
promptly reimbursed for the same by the Company and except to the extent that any event giving rise
to a claim was caused by the gross negligence or willful misconduct of the party seeking to be
indemnified. The obligations of the Banks under this Section shall survive termination of this
Agreement. The Agent shall be entitled to offset amounts received for the account of a Bank under
this Agreement against unpaid amounts due from such Bank to the Agent hereunder (whether as
fundings of participations, indemnities or otherwise), but shall not be entitled to offset against
amounts owed to the Agent by any Bank arising outside of this Agreement and the other Loan
Documents.

     Section 10.7. Resignation of Agent and Successor Agent. The Agent may resign at any time by
giving written notice thereof to the Banks, the L/C Issuer, and the Company. Upon any such
resignation of the Agent, the Required Banks shall have the right to appoint a successor Agent. If
no successor Agent shall have been so appointed by the Required Banks, and shall have accepted such
appointment, within 30 days after the retiring Agent’s giving of notice of resignation then the
retiring Agent may, on behalf of the Banks, appoint a successor Agent, which may be any Bank
hereunder or any commercial bank, or an Affiliate of a commercial bank, having an office in the
United States of America and having a combined capital and surplus of at least $250,000,000 and be
approved by the Company (which approval shall not be unreasonably withheld). Upon the acceptance
of its appointment as the Agent hereunder, such successor Agent shall thereupon succeed to and
become vested with all the rights and duties of the retiring Agent under the Loan Documents, and
the retiring Agent shall be discharged from its duties and obligations thereunder. After any
retiring Agent’s resignation hereunder as Agent, the provisions of this Section 10 and all
protective provisions of the other Loan Documents shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent, but no successor Agent shall in any event be
liable or responsible for any actions of its predecessor. If the Agent resigns and no successor is
appointed, the rights and obligations of such Agent shall be automatically assumed by the Required
Banks and the Company shall be directed to make all payments due each Bank and L/C Issuer hereunder
directly to such Bank or L/C Issuer.

     Section 10.8. L/C Issuer and Swing Line Bank. Each L/C Issuer shall act on behalf of the
Banks with respect to any L/Cs issued by it and the documents associated therewith, and the Swing
Line Bank shall act on behalf of the Banks with respect to the Swing Loans made hereunder. The L/C
Issuers and the Swing Line Bank shall each have all of the benefits and immunities (i) provided to
the Agent in this Section 10 with respect to any acts taken or omissions suffered by any L/C Issuer
in connection with L/Cs issued by it or proposed to be issued by it and the Agreements pertaining
to such L/Cs or by the Swing Line Bank in connection with Swing Loans made or to be made hereunder
as fully as if the term “Agent”, as used in this Section 10, included the L/C Issuers and the Swing
Line Bank with respect to such acts or omissions and (ii) as additionally provided in this
Agreement with respect to such L/C Issuer or Swing Line Bank, as applicable.

     Section 10.9. Designation of Additional Agents. The Agent shall have the continuing right,
for purposes hereof, at any time and from time to time to designate one or more of the Banks
(and/or its or their Affiliates) as “syndication agents,” “documentation agents,” “book

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runners,” “lead arrangers,” “arrangers,” or other designations for purposes hereto, but such
designation shall have no substantive effect, and such Banks and their Affiliates shall have no
additional powers, duties or responsibilities as a result thereof.

Section 11. Miscellaneous.

     Section 11.1. Amendments and Waivers. Any provision of this Agreement or the other Loan
Documents may be amended or waived if, but only if, such amendment or waiver is in writing and is
signed by (a) the Company, (b) the Required Banks, and (c) if the rights or duties of the Agent,
the relevant L/C Issuer, or the Swing Line Bank are affected thereby, the Agent, such L/C Issuer,
or the Swing Line Bank, as applicable; provided that:

     (i) no amendment or waiver pursuant to this Section 11.1 shall (A) increase any
Commitment of any Bank without the consent of such Bank or (B) reduce the amount of or
postpone the date for any scheduled payment of any principal of or interest on any Loan or
of any Reimbursement Obligation or of any fee payable hereunder without the consent of the
Bank to which such payment is owing or which has committed to make such Loan or L/C (or
participate therein) hereunder; and

     (ii) no amendment or waiver pursuant to this Section 11.1 shall, unless signed by each
Bank, extend the Revolving Credit Termination Date, change the definition of Required Banks,
change the provisions of this Section 11.1, release any material guarantor, or affect the
number of Banks required to take any action hereunder or under any other Loan Document.

     Section 11.2. Waiver of Rights. No delay or failure on the part of the Agent or any Bank or
on the part of the holder or holders of any Note in the exercise of any power or right shall
operate as a waiver thereof, nor as an acquiescence in any Potential Default or Event of Default,
nor shall any single or partial exercise of any power or right preclude any other or further
exercise thereof, or the exercise of any other power or right, and the rights and remedies
hereunder of the Agent, the Banks and of the holder or holders of any Notes are cumulative to, and
not exclusive of, any rights or remedies which any of them would otherwise have.

     Section 11.3. Several Obligations. The commitments of each of the Banks hereunder shall be
the several obligations of each Bank and the failure on the part of any one or more of the Banks to
perform hereunder shall not affect the obligation of the other Banks hereunder, provided that
nothing herein contained shall relieve any Bank from any liability for its failure to so perform.
In the event that any one or more of the Banks shall fail to perform its commitment hereunder, all
payments thereafter received by the Agent on the principal of Loans or Reimbursement Obligations
hereunder shall be distributed by the Agent to the Banks making such additional Loans or
Reimbursement Obligations ratably as among them in accordance with the principal amount of
additional Loans or Reimbursement Obligations made by them until such additional Loans or
Reimbursement Obligations shall have been fully paid and satisfied, and all payments on account of
interest shall be applied as among all the Banks ratably in accordance with the amount of interest
owing to each of the Banks as of the date of the receipt of such interest payment.

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     Section 11.4. Non-Business Day. (a) If any payment of principal or interest on any Domestic
Rate Loan shall fall due on a day which is not a Business Day, interest at the rate such Loan bears
for the period prior to maturity shall continue to accrue on such principal from the stated due
date thereof to and including the next succeeding Business Day on which the same is payable.

     (b) If any payment of principal or interest on any Eurodollar Loan or Swing Loan at the Swing
Line Bank’s Quoted Rate shall fall due on a day which is not a Business Day, the payment date
thereof shall be extended to the next date which is a Business Day and the Interest Period for such
Loan shall be accordingly extended, unless as a result thereof any payment date would fall in the
next calendar month, in which case such payment date shall be the next preceding Business Day.

     Section 11.5. Survival of Indemnities. All indemnities and other provisions relative to
reimbursement to the Banks and L/C Issuers of amounts sufficient to protect the yield of the Banks
and L/C Issuers with respect to the Loans and L/Cs, including, but not limited to, Sections 9.3,
9.4, and 11.9 hereof, shall survive the termination of this Agreement and the other Loan Documents
and the payment of the Notes.

     Section 11.6. Documentary Taxes. Although the Company is of the opinion that no documentary
or similar taxes are payable in respect to this Agreement or the Notes, the Company agrees that it
will pay such taxes, including interest and penalties, in the event any such taxes are assessed
irrespective of when such assessment is made and whether or not any credit is then in use or
available hereunder.

     Section 11.7. Representations. All representations and warranties made herein or in
certificates given pursuant hereto shall survive the execution and delivery of this Agreement and
of the Notes, and shall continue in full force and effect with respect to the date as of which they
were made and as reaffirmed on the date of each borrowing (as and to the extent provided in Section
6.3 hereof) and as long as any credit is in use or available hereunder.

     Section 11.8. Notices. Unless otherwise expressly provided herein, all communications
provided for herein shall be in writing or by telex and shall be deemed to have been given or made
when served personally, when an answer back is received in the case of notice by telex or 2 days
after the date when deposited in the United States mail (registered, if to the Company) addressed
if to the Company to 225 North 13th Avenue, Laurel, Mississippi 39440, Attention: Chief Financial
Officer; if to the Agent at 115 South LaSalle Street, Chicago, Illinois 60603, Attention: Food
Group; and if to any of the Banks, at the address for such Bank or L/C Issuer set forth under its
signature hereon; or at such other address as shall be designated by any party hereto in a written
notice to each other party pursuant to this Section 11.8.

     Section 11.9. Costs and Expenses; Environmental Indemnity. (a) The Company agrees to pay on
demand all customary and reasonable out-of-pocket costs and expenses of the Agent in connection
with the negotiation, preparation, execution and delivery of this Agreement, the Notes and the
other instruments and documents to be delivered hereunder or in connection with the transactions
contemplated hereby (unless otherwise expressly limited herein), including the

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reasonable fees and expenses of Chapman and Cutler LLP, special counsel to the Agent; all
reasonable out-of-pocket costs and expenses of the Agent and the reasonable out-of-pocket costs and
expenses of each Bank and L/C Issuer (including in each case reasonable attorneys’ fees and
expenses) incurred in connection with any consents or waivers hereunder or amendments hereto in
each case requested by the Company, and all reasonable out-of-pocket costs and expenses (including
reasonable attorneys’ fees and expenses), if any, incurred by the Agent, the L/C Issuers, the Banks
or any other holders of a Note in connection with the enforcement against the Company or any
Guarantor Subsidiary of this Agreement or the Notes and the other instruments and documents to be
delivered hereunder.

     (b) Without limiting the generality of the foregoing, the Company unconditionally agrees to
indemnify, defend and hold harmless, the Agent, each L/C Issuer and each Bank, and covenants not to
sue for any claim for contribution against, the Agent, any L/C Issuer or any Bank for any damages,
costs, loss or expense, including without limitation, response, remedial or removal costs, arising
out of any of the following: (i) any presence, release, threatened release or disposal of any
hazardous or toxic substance or petroleum by the Company or any Subsidiary or otherwise occurring
on or with respect to their respective Property, (ii) the operation or violation of any
Environmental Law, whether federal, state, or local, and any regulations promulgated thereunder, by
the Company or any Subsidiary or otherwise occurring on or with respect to their respective
Property, (iii) any claim for personal injury or property damage in connection with the Company or
any Subsidiary or otherwise occurring on or with respect to their respective Property, and (iv) the
inaccuracy or breach of any environmental representation, warranty or covenant by the Company made
herein or in any loan agreement, promissory note, mortgage, deed of trust, security agreement or
any other instrument or document evidencing or securing any indebtedness, obligations or
liabilities of the Company owing to the Agent, L/C Issuer or any Bank or setting forth terms and
conditions applicable thereto or otherwise relating thereto; provided, however, the foregoing
provisions shall not apply to damages arising from the Agent’s, such L/C Issuer’s or such Bank’s
willful misconduct or gross negligence. This indemnification shall survive the payment and
satisfaction of all indebtedness, obligations and liabilities of the Company owing to the Agent,
the L/C Issuers and the Banks and the termination of this Agreement, and shall remain in force
beyond the expiration of any applicable statute of limitations and payment or satisfaction in full
of any single claim under this indemnification. This indemnification shall be binding upon the
successors and assigns of the Company and shall inure to the benefit of Agent, the L/C Issuers and
the Banks and their respective directors, officers, employees, agents, and collateral trustees, and
their successors and assigns.

     (c) The provisions of this Section 11.9 shall survive payment of the Notes and Reimbursement
Obligations and the termination of the L/C Issuers’ and Banks’ Commitments hereunder.

     Section 11.10. Counterparts. This Agreement may be executed in any number of counterparts and
all such counterparts taken together shall be deemed to constitute one and the same instrument.
One or more of the Banks may execute a separate counterpart of this Agreement which has also been
executed by the Company, and this Agreement shall become effective as and when all of the Banks
have executed this Agreement or a counterpart thereof and lodged the same with the Agent.

-43-

 

     Section 11.11. Successors and Assigns; Governing Law; Entire Agreement. This Agreement shall
be binding upon each of the Company and the Banks and their respective successors and assigns, and
shall inure to the benefit of the Company and each of the Banks and the benefit of their respective
successors and assigns, including any subsequent holder of any Note. This Agreement and the rights
and duties of the parties hereto shall be construed and determined in accordance with the laws of
the State of Illinois, without regard to Illinois conflict of laws principles. This Agreement
constitutes the entire understanding of the parties with respect to the subject matter hereof and
any prior agreements, whether written or oral, with respect thereto are superseded hereby. The
Company may not assign any of its rights or obligations hereunder without the written consent of
all of the Banks. The Banks may assign their rights under the Loan Documents only in accordance
with Sections 11.16 and 11.17 hereof.

     Section 11.12. No Joint Venture. Nothing contained in this Agreement shall be deemed to
create a partnership or joint venture among the parties hereto.

     Section 11.13. Severability. In the event that any term or provision hereof is determined to
be unenforceable or illegal, it shall be deemed severed herefrom to the extent of the illegality
and/or unenforceability and all other provisions hereof shall remain in full force and effect.

     Section 11.14. Table of Contents and Headings. The table of contents and section headings in
this Agreement are for reference only and shall not affect the construction of any provision
hereof.

     Section 11.15. Sharing of Payments. Each Bank agrees with each other Bank that if such Bank
shall receive and retain any payment, whether by set-off or application of deposit balances or
otherwise (“Set-Off”), on any Loan, Reimbursement Obligation or other amount outstanding under this
Agreement in excess of its ratable share of payments on all Loans, Reimbursement Obligations and
other amounts then outstanding to the Banks, then such Bank shall purchase for cash at face value,
but without recourse, ratably from each of the other Banks such amount of the Loans and
Reimbursement Obligations held by each such other Bank (or interest therein) as shall be necessary
to cause such Bank to share such excess payment ratably with all the other Banks; provided,
however, that if any such purchase is made by any Bank, and if such excess payment or part thereof
is thereafter recovered from such purchasing Bank, the related purchases from the other Banks shall
be rescinded ratably and the purchase price restored as to the portion of such excess payment so
recovered, but without interest. Each Bank’s ratable share of any such Set-Off shall be determined
by the proportion that the aggregate principal amount of Loans and Reimbursement Obligations then
due and payable to such Bank bears to the total aggregate principal amount of Loans and
Reimbursement Obligations then due and payable to all the Banks.

     Section 11.16. Participants. Each Bank shall have the right at its own cost to grant
participations (to be evidenced by one or more agreements or certificates of participation) in the
Loans made and Reimbursement Obligations and/or Commitments held by such Bank at any time and from
time to time to one or more other Persons; provided that no such participation shall relieve any
Bank of any of its obligations under this Agreement, and, provided, further that no such
participant shall have any rights under this Agreement except as provided in this Section,

-44-

 

and the Agent shall have no obligation or responsibility to such participant. Any agreement
pursuant to which such participation is granted shall provide (a) that the granting Bank shall
retain the sole right and responsibility to enforce the obligations of the Company under this
Agreement and the other Loan Documents including, without limitation, the right to approve any
amendment, modification or waiver of any provision of the Loan Documents, except that such
agreement may provide that such Bank will not agree to any modification, amendment or waiver of the
Loan Documents that would reduce the amount of or postpone any fixed date for payment of any
indebtedness, obligation or liability in which such participant has an interest and (b) that the
participant agrees to be bound by Section 11.18 of this Agreement to the same extent as if it were
a Bank. Any party to which such a participation has been granted shall have the benefits of
Section 9.3 and Section 9.4 hereof. The Company authorizes each Bank to disclose to any
participant or prospective participant under this Section, if such person has agreed in writing to
be bound by Section 11.18 below to the same extent as if it were a Bank, any financial or other
information pertaining to the Company or any Subsidiary.

     Section 11.17. Assignments. (a) Any Bank may at any time assign to one or more Eligible
Assignees all or a portion of such Bank’s rights and obligations under this Agreement (including
all or a portion of its Commitment and the Loans at the time owing to it); provided that any such
assignment shall be subject to the following conditions:

     (i) Minimum Amounts. (A) In the case of an assignment of the entire remaining amount of the
assigning Bank’s Commitment and the Loans and participation interest in Reimbursement Obligations
at the time owing to it or in the case of an assignment to a Bank, an Affiliate of a Bank or an
Approved Fund, no minimum amount need be assigned; and (B) in any case not described in subsection
(a)(i)(A) of this Section, the aggregate amount of the Commitment (which for this purpose includes
Loans and participation interest in L/C Obligations outstanding thereunder) or, if the applicable
Commitment is not then in effect, the principal outstanding balance of the Loans and participation
interest in L/C Obligations of the assigning Bank subject to each such assignment (determined as of
the date the Assignment and Acceptance with respect to such assignment is delivered to the Agent
or, if “Effective Date” is specified in the Assignment and Acceptance, as of the Effective Date)
shall not be less than $5,000,000, unless each of the Agent and, so long as no Event of Default has
occurred and is continuing, the Company otherwise consents (each such consent not to be
unreasonably withheld or delayed);

     (ii) Proportionate Amounts. Each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Bank’s rights and obligations under this Agreement with
respect to the Loan or the Commitment assigned.

     (iii) Required Consents. No consent shall be required for any assignment except to the extent
required by Section 11.17(a)(i)(B) and, in addition:

     (a) the consent of the Company (such consent not to be unreasonably withheld or
delayed) shall be required unless (x) an Event of Default has occurred and is continuing at
the time of such assignment or (y) such assignment is to a Bank, an Affiliate of a Bank or
an Approved Fund;

-45-

 

     (b) the consent of the Agent (such consent not to be unreasonably withheld or delayed)
shall be required for assignments in respect of the Revolving Credit if such assignment is
to a Person that is not a Bank with a Commitment in respect of such facility, an Affiliate
of such Bank or an Approved Fund with respect to such Bank;

     (c) the consent of the relevant L/C Issuer (such consent not to be unreasonably
withheld or delayed) shall be required for any assignment that increases the obligation of
the assignee to participate in exposure under one or more applicable L/Cs (whether or not
then outstanding); and

     (d) the consent of the Swing Line Bank (such consent not to be unreasonably withheld or
delayed) shall be required for any assignment that increases the obligation of the assignee
to participate in exposure under one or more Swing Loans (whether or not then outstanding).

     (iv) Assignment and Acceptance. The parties to each assignment shall execute and deliver to
the Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500,
and the assignee, if it is not a Bank, shall deliver to the Agent an Administrative Questionnaire.

     (v) No Assignment to Company or Affiliate. No such assignment shall be made to the Company or
any of its Affiliates or Subsidiaries.

     (vi) No Assignment to Natural Persons. No such assignment shall be made to a natural person.

Subject to acceptance and recording thereof by the Agent pursuant to Section 11.17(b) hereof, from
and after the effective date specified in each Assignment and Acceptance, the assignee thereunder
shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment
and Acceptance, have the rights and obligations of a Bank under this Agreement, and the assigning
Bank thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Bank’s rights and obligations under this Agreement, such
Bank shall cease to be a party hereto) but shall continue to be entitled to the benefits of
Sections 11.5 and 11.9 with respect to facts and circumstances occurring prior to the effective
date of such assignment. Any assignment or transfer by a Bank of rights or obligations under this
Agreement that does not comply with this Section shall be treated for purposes of this Agreement as
a sale by such Bank of a participation in such rights and obligations in accordance with Section
11.16 hereof.

     (b) Register. The Agent, acting solely for this purpose as an agent of the Company, shall
maintain at one of its offices in Chicago, Illinois, a copy of each Assignment and Acceptance
delivered to it and a register for the recordation of the names and addresses of the Banks, and the
Commitments of, and principal amounts of the Loans owing to, each Bank pursuant to the terms hereof
from time to time (the “Register”). The entries in the Register shall be conclusive, and the
Company, the Agent, and the Banks may treat each Person whose name is

-46-

 

recorded in the Register pursuant to the terms hereof as a Bank hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection
by the Company and any Bank, at any reasonable time and from time to time upon reasonable prior
notice.

     (c) Any Bank may at any time pledge or grant a security interest in all or any portion of its
rights under this Agreement to secure obligations of such Bank, including any such pledge or grant
to a Federal Reserve Bank, and this Section shall not apply to any such pledge or grant of a
security interest; provided that no such pledge or grant of a security interest shall release a
Bank from any of its obligations hereunder or substitute any such pledgee or secured party for such
Bank as a party hereto; provided further, however, the right of any such pledgee or grantee (other
than any Federal Reserve Bank) to further transfer all or any portion of the rights pledged or
granted to it, whether by means of foreclosure or otherwise, shall be at all times subject to the
terms of this Agreement.

     (d) Notwithstanding anything to the contrary herein, if at any time the Swing Line Bank
assigns all of its Commitments and Loans pursuant to subsection (a) above, the Swing Line Bank may
terminate the Swing Line. In the event of such termination of the Swing Line, the Company shall be
entitled to appoint another Bank to act as the successor Swing Line Bank hereunder (with such
Bank’s consent); provided, however, that the failure of the Company to appoint a successor shall
not affect the resignation of the Swing Line Bank. If the Swing Line Bank terminates the Swing
Line, it shall retain all of the rights of the Swing Line Bank provided hereunder with respect to
Swing Loans made by it and outstanding as of the effective date of such termination, including the
right to require Banks to make Loans or fund participations in outstanding Swing Loans pursuant to
Section 1.3 hereof.

     Section 11.18. Confidentiality. Each Bank will keep confidential any non-public information
concerning the Company and its Subsidiaries furnished by the Company (which is designated by the
Company as confidential at the time such information is furnished to the Bank or is actually known
by such Bank to be confidential) or obtained by such Bank through its inspections and audits
pursuant to Section 7.5 hereof or any Security Document and known by such Bank to be confidential,
except that any Bank may disclose such information (i) to regulatory authorities having
jurisdiction, (ii) pursuant to subpoena or other legal process, (iii) to such Bank’s counsel and
auditors in connection with matters concerning this Agreement, (iv) to such Bank’s consultants in
connection with negotiations concerning this Agreement or the other Loan Documents and (v) to
prospective participants or assignees in the Loans and participants and assignees in the Loans,
provided that any Persons described in clauses (iv) and (v) shall first agree in writing to be
bound to comply with the terms of this Section to the same extent as if it were a Bank. In the
situations described above (except where the Company is a party), each Bank shall notify the
Company as promptly as practicable of the receipt of a request for such disclosure and furnish it
with a copy of such subpoena or other legal process (to the extent such Bank is legally permitted
to do so). The provisions of this Section shall survive the payment of the Loans and Reimbursement
Obligations and the termination of this Agreement.

-47-

 

     Section 11.19. Waiver of Jury Trial. The Company, the Agent and each Bank hereby
irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or
relative to any Loan Document or the transactions contemplated thereby.

       Section 11.20. USA Patriot Act. Each Bank that is subject to the requirements of
the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”)
hereby notifies the Company that pursuant to the requirements of the Act, it is required to obtain,
verify, and record information that identifies the Company, which information includes the name and
address of the Company and other information that will allow such Bank to identify the Company in
accordance with the Act.

-48-

 

     Upon your acceptance hereof in the manner hereinafter set forth, this Agreement shall be a
contract between us for the purposes hereinabove set forth.

     Dated as of May 1, 2008.

	 	 	 	 	 
	 	Sanderson Farms, Inc.

 	 
	 	By  	/s/ D.
Michael Cockrell	 
	 	 	Its Treasurer & Chief Financial
Officer	 
	 	 	 	 
	 

     Accepted and Agreed to as of the day and year last above written.

	 	 	 	 	 
	 	Bank of Montreal, as Agent and an L/C Issuer

 	 
	 	By  	/s/ David
J. Bechstein	 
	 	 	Its Vice President 	 
	 	 	 	 
	 

	 	 	 	 	 
	 

	 	Address:
	 	115 South LaSalle Street
	 

	 	 	 	Chicago, Illinois 60603
	 

	 	Attention:
	 	Food Group

	 	 	 	 	 
	 	Harris N.A., as an L/C Issuer

 	 
	 	By  	/s/ David
J. Bechstein	 
	 	 	Its Vice President	 
	 	 	 	 
	 

	 	 	 	 	 
	 

	 	Address:
	 	111 West Monroe Street
	 

	 	 	 	Chicago, Illinois 60603
	 

	 	Attention:
	 	Food Group

S-1

 

	 	 	 	 	 
	 	“Lenders”

BMO Capital Markets Financing, Inc.

 	 
	 	By  	/s/ David
J. Bechstein	 
	 	 	Its Vice President	 
	 	 	 	 
	 

	 	 	 	 	 
	 

	 	Address:
	 	115 South LaSalle Street
	 

	 	 	 	Chicago, Illinois 60603
	 

	 	Attention:
	 	Food Group

S-2

 

	 	 	 	 	 
	 	U.S. Bank National Association

 	 
	 	By  	/s/ Elizabeth
L. Hund	 
	 	 	Its Senior Vice President	 
	 	 	 	 
	 

	 	 	 	 	 
	 

	 	Address:
	 	950 17th Street, 7th Floor
	 

	 	 	 	Denver, Colorado 80202
	 

	 	Attention:
	 	_______________

S-3

 

	 	 	 	 	 
	 	Regions Bank

 	 
	 	By  	/s/ Stanley
A. Herren	 
	 	 	Its Vice President	 
	 	 	 	 
	 

	 	 	 	 	 
	 

	 	Address:
	 	210 East Capital Street
	 

	 	 	 	4th Floor
	 

	 	 	 	Jackson, Mississippi 39201
	 

	 	Attention:
	 	Stanley A. Herren

S-4

 

	 	 	 	 	 
	 	ING Capital LLC

 	 
	 	By  	/s/ William
B. Redmond	 
	 	 	Its Managing Director	 
	 	 	 	 
	 

	 	 	 	 	 
	 

	 	Address:
	 	__________________
	 

	 	 	 	__________________
	 

	 	Attention:
	 	__________________

S-5

 

	 	 	 	 	 
	 	Trustmark National Bank

 	 
	 	By  	/s/ William
H. Edwards	 
	 	 	Its First Vice President	 
	 	 	 	 
	 

	 	 	 	 	 
	 

	 	Address:
	 	248 East Capitol Street
	 

	 	 	 	Jackson, Mississippi
	 

	 	Attention:
	 	William H. Edwards

S-6

 

	 	 	 	 	 
	 	Farm Credit Bank of Texas

 	 
	 	By  	/s/ Isaac
E. Bennett	 
	 	 	Its Vice President	 
	 	 	 	 
	 

	 	 	 	 	 
	 

	 	Address:
	 	4801 Plaza on the Lake Drive
	 

	 	 	 	Austin, TX 78746
	 

	 	Attention:
	 	Isaac E. Bennett

S-7

 

	 	 	 	 	 
	 	AgFirst Farm Credit Bank

 	 
	 	By  	/s/ J.
Randal Musselwhite	 
	 	 	Its Vice President	 
	 	 	 	 
	 

	 	 	 	 	 
	 

	 	Address:
	 	1401 Hampton Street
	 

	 	 	 	Columbia, South Carolina 29201
	 

	 	Attention:
	 	Randy Musselwhite

S-8

 

	 	 	 	 	 
	 	GreenStone Farm Credit Services, ACA

 	 
	 	By  	/s/ Alfred
S. Compton, Jr.	 
	 	 	Its Vice President/Managing
Director	 
	 	 	 	 
	 

	 	 	 	 	 
	 

	 	Address:
	 	P.O. Box 22067
	 

	 	 	 	Lansing, MI 48909
	 

	 	Attention:
	 	Al Compton

S-9

 

	 	 	 	 	 
	 	Farm Credit Services of America, PCA

 	 
	 	By  	/s/ Bruce
P. Rouse	 
	 	 	Its Vice President	 
	 	 	 	 
	 

	 	 	 	 	 
	 

	 	Address:
	 	5015 S. 118th St.
	 

	 	 	 	Omaha, NE 68137
	 

	 	Attention:
	 	Bruce P. Rouse

S-10

 

Exhibit A

Sanderson Farms, Inc.

Revolving Credit Note

May 1, 2008

     For Value Received, the undersigned, Sanderson
Farms, Inc., a Mississippi corporation (the “Company”) promises to pay to the
order of ____________ (the “Lender”) on the Revolving Credit Termination Date (as
defined in the Credit Agreement referred to below) at the principal office of Bank of Montreal in
Chicago, Illinois, the principal sum of ____________ or, if less, the aggregate unpaid
principal amount of all Revolving Credit Loans made by the Lender to the Company under the
Revolving Credit provided for under the Credit Agreement hereinafter mentioned and remaining unpaid
on the Revolving Credit Termination Date together with interest on the principal amount of each
Revolving Credit Loan from time to time outstanding hereunder at the rates, and payable in the
manner and on the dates, specified in said Credit Agreement.

     The Lender shall record on its books or records or on the schedule to this Note which is a
part hereof the principal amount of each Revolving Credit Loan made under the Revolving Credit, all
payments of principal and interest and the principal balances from time to time outstanding;
provided that prior to the transfer of this Note all such amounts shall be recorded on the schedule
attached to this Note. The record thereof, whether shown on such books or records or on the
schedule to this Note, shall be prima facie evidence as to all such amounts; provided, however,
that the failure of the Lender to record, or any mistake in recording, any of the foregoing shall
not limit or otherwise affect the obligation of the Company to repay all Revolving Credit Loans
made under the Revolving Credit, together with accrued interest thereon.

     This Note is one of the Revolving Notes referred to in and issued under that certain Credit
Agreement dated as of May 1, 2008, among the Company, Bank of Montreal, as Agent, and the banks
named therein, as amended from time to time (the “Credit Agreement”), and this Note and the holder
hereof are entitled to all of the benefits and security provided for thereby or referred to
therein. Payment of this Note has been guaranteed pursuant to that certain Guaranty Agreement
dated as of May 1, 2008, from the Guarantor Subsidiaries to the Banks, to which reference is hereby
made for a statement of the terms thereof. All defined terms used in this Note, except terms
otherwise defined herein, shall have the same meaning as such terms have in said Credit Agreement.

     Prepayments may be made on any Revolving Credit Loan evidenced hereby and this Note (and the
Revolving Credit Loans evidenced hereby) may be declared due prior to the expressed maturity
thereof, all in the events, on the terms and in the manner as provided for in said Credit
Agreement.

 

 

     The Company hereby waives presentment for payment and demand.

     This Note is governed by and shall be construed in accordance with the internal laws of the
State of Illinois.

	 	 	 	 	 
	 	Sanderson Farms, Inc.

 	 
	 	By:  	 	 
	 	 	Its 	 
	 	 	 	 

-2-

 

Exhibit B

Sanderson Farms, Inc.

Swing Note

	 	 	 
	$10,000,000

	 	May 1, 2008

     For Value Received, the undersigned, Sanderson Farms, Inc., a
Mississippi corporation (the “Company”), promises to pay to the order of BMO Capital Markets
Financing, Inc. (the “Bank”), at the principal office of Bank of Montreal in Chicago, Illinois, the
aggregate unpaid principal amount of all Swing Loans made by the Bank to the Company under the
Credit Agreement hereinafter mentioned in the amounts and payable in the manner and on the dates
specified in said Credit Agreement, together with interest on the principal amount of each Swing
Loan from time to time outstanding hereunder at the rates, and payable in the manner and on the
dates specified in said Credit Agreement.

     This Note is the Swing Note referred to in and issued under that certain Credit Agreement
dated as of May 1, 2008, among the Company, Bank of Montreal, as Agent, and the banks named
therein, as amended from time to time (the “Credit Agreement”), and this Note and the holder hereof
are entitled to all of the benefits and security provided for thereby or referred to therein.
Payment of this Note has been guaranteed pursuant to that certain Guaranty Agreement dated as of
May 1, 2008, from the Guarantor Subsidiaries to the Banks, to which reference is hereby made for a
statement of the terms thereof. All defined terms used in this Note, except terms otherwise
defined herein, shall have the same meaning as such terms have in said Credit Agreement.

     Prepayments may be made on any Swing Loan evidenced hereby and this Note (and the Swing Loans
evidenced hereby) may be declared due prior to the expressed maturity thereof, all in the events,
on the terms and in the manner as provided for in said Credit Agreement.

     The Company hereby waives presentment for payment and demand.

     This Note is governed by and shall be construed in accordance with the internal laws of the
State of Illinois.

	 	 	 	 	 
	 	Sanderson Farms, Inc.

 	 
	 	By:  	 	 
	 	 	Its 	 
	 	 	 	 

 

 

	 	 	 	 	 

Exhibit D

Sanderson Farms, Inc.

Guaranty Agreement

Bank of Montreal

Chicago, Illinois

The Banks and L/C Issuers from time to time parties to the Credit Agreement (as hereinafter
defined)

Ladies and Gentlemen:

     Reference is made to that certain Credit Agreement dated as of May 1, 2008 (such Credit
Agreement, as the same may be modified or amended from time to time, being hereinafter referred to
as the “Credit Agreement”) by and among Sanderson Farms, Inc., a Mississippi corporation (the
“Company”), and Bank of Montreal, individually and in its capacity as agent thereunder (“BMO”), and
the lenders and letter of credit issuers from time to time parties thereto (all of said lenders
being referred to collectively as the “Banks” and individually as a “Bank”, and such letter of
credit issuers being referred to collectively as “L/C Issuers” and individually as an “L/C Issuer”;
and said BMO as agent for the Banks and L/C Issuers under the Credit Agreement being hereinafter
referred to in such capacity as the “Agent”; the Banks, the L/C Issuers and the Agent being
referred to collectively as the “Guaranteed Creditors” and individually as a “Guaranteed
Creditor”), pursuant to which said Banks agree to make available to the Company a Revolving Credit,
with all loans thereunder to be evidenced by the Revolving Notes of the Company and pursuant to
which BMO agrees to make available to the Company a Swingline with all loans thereunder to be
evidenced by the Swing Note of the Company (all such Revolving Notes and the Swing Note being
hereinafter referred to collectively as the “Notes” and individually as a “Note”). In addition the
Company may request the L/C Issuers to issue letters of credit for the Company’s account and the
other Banks will acquire risk participations in such letters of credit and all obligations of the
Company with request thereto (the “Reimbursement Obligations”). All of the Company’s indebtedness,
obligations and liabilities to the Guaranteed Creditors under the Credit Agreement and the other
Loan Documents, including, without limitation, all such indebtedness, obligations and liabilities
evidenced by the Notes and the Reimbursement Obligations, and all extensions or renewals of any of
the foregoing, are hereinafter collectively referred to as the “Indebtedness”. All defined terms
used herein shall have the meanings set forth in the Credit Agreement unless expressly defined
herein.

     The undersigned are wholly-owned subsidiaries of the Company. As an inducement to each of you
to accept and enter into said Credit Agreement, and in consideration of credit extended and to be
extended by the Guaranteed Creditors to the Company under said Credit Agreement, the undersigned
(hereinafter collectively referred to as the “Guarantors”), acknowledging that the Guaranteed
Creditors have informed the Company that said credit would

 

 

not be extended but for this guarantee, hereby jointly and severally guarantee the full and
prompt payment to each Guaranteed Creditor at maturity (whether by acceleration, lapse of time or
otherwise) and at all times thereafter of principal of and interest on all Indebtedness of the
Company under the Credit Agreement, and all extensions or renewals of all or any part thereof and
all other indebtedness, liabilities and obligations of the Company to the Guaranteed Creditors
under the Credit Agreement. Notwithstanding anything in this Guaranty to the contrary, the right
of recovery against each Guarantor under this Guaranty shall not exceed $1.00 less than the lowest
amount which would render such Guarantor’s obligations under this Guaranty void or voidable under
applicable law, including fraudulent conveyance law.

     The undersigned further jointly and severally acknowledge and agree with the Guaranteed
Creditors that this Guaranty and the undertaking of the Guarantors in connection therewith shall be
on and subject to the following terms and conditions:

     1. This Guaranty of payment by the Guarantors shall be a continuing, absolute and
unconditional guaranty and shall remain in full force and effect until all Indebtedness of
the Company to the Guaranteed Creditors shall be fully paid and satisfied and all
commitments of the Guaranteed Creditors under the Credit Agreement to extend credit to or
for the account of the Company shall have terminated. The dissolution, liquidation or
insolvency (howsoever evidenced) of, or the institution of bankruptcy or receivership
proceedings against any one or more of the Guarantors or the Company shall not terminate
this Guaranty.

     2. The obligations and liabilities of the Guarantors, or any of them, hereunder shall
not be affected or impaired by any irregularity, invalidity or unenforceability of or in any
of the Notes or of any agreement, instrument or other document evidencing or creating or
providing for the same.

     3. The obligations and liabilities of the Guarantors, or any of them, hereunder shall
not be affected or impaired by (and the Guaranteed Creditors are hereby expressly authorized
to make from time to time without notice to the Guarantors) any sale, pledge, surrender,
compromise, settlement, release, renewal, extension, indulgence, amendment, alteration,
substitution, exchange, change in, modification or other disposition of any of the Credit
Agreement, the Notes, any other Loan Documents (as defined in the Credit Agreement), any
other guaranty thereof, or of any security or collateral therefor.

     4. The obligations and liabilities of the Guarantors or any of them hereunder shall not
be affected or impaired by any acceptance by the Guaranteed Creditors, or any of them, of
any security or collateral for, or other guarantors upon any of the Indebtedness or by any
failure, neglect, omission, delay or partial action on the part of the Guaranteed Creditors,
or any of them, in the administration of the Indebtedness or to realize upon or protect any
of the Indebtedness or any security or collateral therefor, or to exercise any lien upon or
right of appropriation of any moneys, credits or property of the Company possessed by any of
the Guaranteed Creditors toward the liquidation of the Indebtedness or by any application of
payments or credits thereon or by any other

-2-

 

circumstances whatsoever (with or without notice to or the knowledge of the Guarantors, or
any of them) which may in any manner or to any extent vary the risk of the Guarantors, or
any of them, hereunder or may otherwise constitute a legal or equitable discharge of a
surety or guarantor; it being the purpose and intent that this guaranty of payment and the
obligations and liability of the Guarantors hereunder shall be absolute and unconditional
under any and all circumstances and shall not be discharged except by payment and
performance as herein provided.

     5. In order to hold the Guarantors, or any of them, liable hereunder, there shall be no
obligation on the part of any Guaranteed Creditor, at any time, to resort for payment to any
person directly liable in respect of the Indebtedness or to any other guaranty, or to any
other person, their properties or estates, or to resort to any collateral, security,
property, liens or other rights or remedies whatsoever, and the Guaranteed Creditors shall
have the right to enforce this guaranty of payment irrespective of whether or not other
proceedings or steps are pending seeking resort to or realization upon or from any of the
foregoing. The Guarantors jointly and severally agree to pay all reasonable out-of-pocket
expenses, including court costs and reasonable attorneys’ fees, paid or incurred by the
Guaranteed Creditors or any of them in endeavoring to collect on the Indebtedness or any
part thereof and in enforcing this Guaranty.

     6. The granting of credit to the Company by any Guaranteed Creditor from time to time
in addition to the Indebtedness under the Credit Agreement without notice to the Guarantors,
or any of them, is hereby authorized and shall in no way affect or impair the obligations
and liability of the Guarantors, or any of them, hereunder.

     7. The payment by any Guarantor of any amount or amounts under this guaranty of payment
shall not entitle it, either at law, in equity or otherwise, to any right, title or interest
(whether by way of subrogation or otherwise) in and to any of the Indebtedness, or in and to
any security or collateral therefor, or in or to any amounts at any time paid or payable
under or pursuant to any guaranty by any other person of all or part of Indebtedness, or in
and to any amounts theretofore, then or thereafter paid or applicable to the payment of the
Indebtedness, howsoever such payment or payments may arise, until all of the Indebtedness
has been fully paid and all obligations of the Guaranteed Creditors to extend credit to or
for the benefit of the Company shall have terminated or expired.

     8. This Guaranty Agreement may be enforced by the Guaranteed Creditors acting jointly,
or it may be enforced by any Guaranteed Creditor acting alone or separately with respect to
the Indebtedness which it holds. Any Guaranteed Creditor may, without any notice to the
Guarantors, sell, assign or transfer, to the extent permitted in the Credit Agreement, the
Indebtedness held by it, or any part thereof, or grant participations therein; and in that
event, each and every immediate and successive assignee, transferee or holder of or
participant in all or any part of the Indebtedness shall, to the extent permitted in the
Credit Agreement, have the right to enforce this Guaranty, by suit or otherwise, for the
benefit of such assignee, transferee, holder or participant as fully as if such assignee,
transferee, holder or participant were herein by name

-3-

 

specifically given such rights, powers and benefits; but each Guaranteed Creditor shall have
an unimpaired right to enforce this Guaranty Agreement for its own benefit or for the
benefit of any such participant as to so much of the Indebtedness that it has not sold,
assigned or transferred.

     9. If any payment applied by any Guaranteed Creditor to any of the Indebtedness is
thereafter set aside, recovered, rescinded or required to be returned for any reason
(including, without limitation, the bankruptcy, insolvency or reorganization of the Company
or any other obligor), the Indebtedness to which such payment was applied shall for the
purposes of this Guaranty be deemed to have continued in existence, notwithstanding such
application, and this Guaranty shall be enforceable as to such of the Indebtedness as fully
as if such application had never been made.

     10. This Guaranty Agreement shall be construed according to the internal laws of the
state of Illinois, in which State it shall be performed by the Guarantors. This Guaranty
Agreement and every part hereof shall be binding upon the Guarantors jointly and severally
and upon their respective legal representatives, successors and assigns of each and all of
the undersigned, and shall inure to the benefit of the Guaranteed Creditors and their
respective successors, legal representatives and assigns.

     11. This writing is intended by the parties to be a complete and final expression of
this Guaranty Agreement and is also intended as a complete and exclusive statement of the
terms of that agreement. No course of dealing, course of performance or trade usage, and no
parole evidence of any nature, shall be used to supplement or modify any terms hereof, nor
are there any conditions to the full effectiveness of this Guaranty Agreement.

     12. Each Guarantor and, by their acceptance of this Guaranty, each Guaranteed
Creditor hereby irrevocably waives any and all right to trial by jury in any legal
proceeding arising out of or relative to this Guaranty or the transactions contemplated
hereby.

-4-

 

     Dated as of this 1st day of May, 2008.

	 	 	 
	Attest:

	 	Sanderson Farms, Inc. (Foods Division) 
	 
	 

	 	By 
	 

	 	 
	 

	 	
	 
	 	 
	Attest:

	 	Sanderson Farms, Inc. (Production Division)
	 
	 

	 	By 
	 

	 	 
	 

	 	
	 
	 	 
	Attest:

	 	Sanderson Farms, Inc. (Processing Division)
	 
	 

	 	By 
	 

	 	 
	 

	 	 
	 

	 	 

-5-

 

Exhibit E

Compliance Certificate

     This Compliance Certificate is furnished to Bank of Montreal, as agent (the “Agent”), pursuant
to that certain Credit Agreement dated as of May 1, 2008, by and among Sanderson Farms, Inc., a
Mississippi corporation (the “Company”), the Agent and the other Bank parties thereto (the
“Agreement”). Unless otherwise defined herein, the terms used in this Compliance Certificate have
the meanings ascribed thereto in the Agreement.

     The Undersigned Hereby Certifies That:

     1. I am the duly acting chief ___officer of the Company, acting herein in
such capacity;

     2. I have reviewed the terms of the Agreement and I have made, or have caused to be
made under my supervision, a detailed review of the transactions and conditions of the
Company during the accounting period covered by the attached financial statements sufficient
for me to provide this Certificate;

     3. The examinations described in paragraph 2 did not disclose, and I have no knowledge
of, the existence of any condition or event which constitutes a Potential Default or Event
of Default during or at the end of the accounting period covered by the attached financial
statements or as of the date of this Certificate, except as set forth below; and

     4. Schedule 1 attached hereto sets forth financial data and computations evidencing the
Company’s compliance with certain covenants of the Agreement, all of which data and
computations are true, complete and correct to the best of my knowledge, information and
belief.

     Described below (or on the attached sheet) are the exceptions, if any, to paragraph 3 by
listing, in detail, the nature of the condition or event, the period during which it has existed
and the action which the Company has taken, is taking or proposes to take with respect to each such
condition or event:

 

 

 

 

     The foregoing certifications, together with the computations set forth in Schedule 1 hereto
and the financial statements delivered with this Certificate in support hereof, are made and
delivered this ___ day of _________, 20_.

___________________________,

as Chief _________ Officer of Sanderson

Farms, Inc.

-2-

 

Schedule 1

to Compliance Certificate

Sanderson Farms, Inc.

Compliance Calculations for

Credit Agreement Dated as of May 1, 2008

Calculations as of the last day of the fiscal quarter ended __________, 20__

Section 7.9 Consolidated Tangible Net Worth

	 	 	 	 	 
	(a)

	 	Prior Fiscal Quarter’s Required

Minimum Amount
	 	$___
	 
	 	 	 	 
	(b)

	 	Consolidated Net Income for
Current Fiscal Quarter
to “as of” date
	 	$___
	 
	 	 	 	 
	(c)

	 	Dividends declared during Current Fiscal Quarter
	 	$___
	 
	 	 	 	 
	(d)

	 	Adjustment (lesser of $3,000,000 and line (c))
	 	$___
	 
	 	 	 	 
	(e)

	 	(b) — (d)*
	 	$___
	 
	 	 	 	 
	(f)

	 	60% of (e)
	 	$___
	 
	 	 	 	 
	(g)

	 	Net Proceeds of Stock for
Current Fiscal Quarter
to “as of” date
	 	$___
	 
	 	 	 	 
	(h)

	 	Current Fiscal Quarter’s

Required Minimum Amount

(a) + (f) + (g)
	 	$___
	 
	 	 	 	 
	(i)

	 	Current Fiscal Year Consolidated

Tangible Net Worth
	 	$___
	 
	 	 	 	 
	 

	 	Compliance Yes ___ No ___	 	 

* But not less than $0.

 

 

Section 7.10 Leverage Ratio

	 	 	 	 	 
	(a)

	 	Consolidated Indebtedness for Borrowed Money
	 	$___
	 
	 	 	 	 
	(b)

	 	Consolidated Indebtedness for Borrowed Money
	 	$___
	 

	 	Consolidated Tangible Net Worth
	 	$___
	 

	 	    Total
	 	$___
	 

	 	        (a)/(b)
	 	___*

*Required to not exceed the percentage set forth in Section 7.10.

Compliance            Yes _____ No _____

Section 7.11 Consolidated Current Ratio

	 	 	 	 	 
	(a)

	 	Consolidated Current Assets
	 	$___
	(b)

	 	Consolidated Current Liabilities
	 	$___
	(c)

	 	Consolidated Deferred Taxes
	 	$___
	(d)

	 	Consolidated Current Liabilities minus Consolidated Deferred	 	 
	 

	 	    Taxes [(b)-(c)]
	 	$___
	 

	 	        (a)/(d)
	 	___*

* Required to be not less than 2.0 to 1.

Compliance            Yes _____ No _____

Section 7.12(a) Capital Expenditures

	 	 	 	 	 
	(a)

	 	Maximum Amount Allowed
	 	$___
	(b)

	 	Expenditures Year-to-date
	 	$___
	 

	 	        (a)-(b)
	 	___*

Compliance            Yes _____ No _____

-2-

 

Section 7.12(b) Capital Expenditures

	 	 	 	 	 	 	 
	(a)

	 	Maximum Amount Allowed
	 	$	145,475,000	 
	(b)

	 	Expenditures Year-to-date
	 	$	___	 
	 

	 	    (a)-(b)
	 	 	___*	 

Compliance            Yes _____ No _____

-3-

 

Exhibit F

Environmental Disclosure

None

 

 

Exhibit G

Schedule of Subsidiaries

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	State of	 	 	Percentage of	 
	 	 	Name	 	 	Incorporation	 	 	Ownership	 
	1.
	 	Sanderson Farms, Inc.
	 	Mississippi	 	 	100	%
	 
	 	(Foods Division)	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	2.
	 	Sanderson Farms, Inc.
	 	Mississippi	 	 	100	%
	 
	 	(Production Division)	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	3.
	 	Sanderson Farms, Inc.
	 	Mississippi	 	 	100	%
	 
	 	(Processing Division)	 	 	 	 	 	 	 	 

 

 

Exhibit H

Litigation; Tax Returns; Approvals

     On June 6, 2006, Annie Collins, a former employee of the processing division subsidiary, on
behalf of herself and as representative of “a class of individuals who are similarly situated and
who have suffered the same or similar damages” filed a complaint against the Company’s processing
and production subsidiaries in the United States District Court for the Eastern District of
Louisiana.

     Plaintiffs allege that the Company’s subsidiaries violated the Fair Labor Standards Act by
failing to pay plaintiffs and other hourly employees for the time spent donning and doffing
protective and sanitary clothing and performing other alleged compensable activities, and that
“Sanderson automatically deducted thirty minutes from each worker’s workday for a meal break
regardless of the actual time spent on break.” Plaintiffs also allege that they were not paid
overtime wages at the legal rate. Plaintiffs seek unpaid wages, liquidated damages and injunctive
relief.

     On July 31, 2006, following various procedural motions, the Company filed its Answer to the
plaintiffs’ Complaint.

     On July 20, 2006, ten current and former employees of the processing division subsidiary filed
an action in the United States District Court for the Eastern District of Louisiana nearly
identical to the one described above. Approximately 3,700 individuals purportedly have given their
consent to be a party plaintiff to both this action and the action described above. Since the
filing of these two complaints, six other substantially similar lawsuits were filed in United
States District Courts for the Jackson and Hattiesburg divisions of the Southern District of
Mississippi. Unlike the two suits referenced above filed in Louisiana (which suits were
consolidated into one action), these complaints are specific to individual processing locations of
the processing division subsidiary of the Company.

     On March 26, 2007, the parties to the consolidated Louisiana action filed a Joint Motion for
Preliminary Approval of Collection Action Settlement and Appointment of Plaintiff’s Counsel as
Class Counsel. Although not a party to the Louisiana matter, the plaintiffs in the Mississippi
suits agreed to be bound by the settlement reached in the Louisiana suit, and the Mississippi suits
have been stayed pending approval of the settlement motion before the Louisiana Court. On April
11, 2007, the Court denied the joint motion on two grounds: (1) The motion was premature because no
motion to certify a collective action had been filed in the case, and (2) certain contingencies
contained in the settlement agreement gave rise to concerns about whether the settlement agreement
was in accordance with the Fair Labor Standards Act. The parties filed a Joint Motion for
Reconsideration of this order of the Court, which was granted in part and denied in part by order
dated May 3, 2007. In the order, the Court stated it would permit notice to the class to proceed.
The Court also stated that if certain contingencies agreed to by the parties in the settlement
agreement concerning class participation were met, it would

 

 

consider the reasonableness of the proposed settlement at a fairness hearing. The parties
agreed to proceed in this manner, and the Court authorized the distribution of notice to the class.
At the joint request of the parties, the Court extended the August 1, 2007 deadline for class
members to opt into the lawsuits to September 14, 2007. On November 15, 2007, following the
completion of notice to the class, the Company voided the settlement agreement because the
contingencies in the agreement concerning class participation were not met. The Court held a
settlement conference with the parties on December 5, 2007. At that conference, the parties agreed
to a new tentative settlement on terms substantially similar to the earlier settlement, but
proportionate to the participation elected by the plaintiff group. The parties agreed to an
abbreviated notice period, and are seeking Court approval in order to finalize the settlement
agreement. Even if approved, the settlement will still be subject to a fairness hearing to be held
at the end of the notice period. In the Mississippi cases, the Company is seeking an extension of
the stay currently in effect pending the Court’s approval of the settlement.

-2-

 

Exhibit I

Assignment and Acceptance

Dated _____________, _____

     Reference is made to the Credit Agreement dated as of May 1, 2008 (as extended, renewed,
amended or restated from time to time, the “Credit Agreement”) among Sanderson Farms, Inc., the
Banks and L/C Issuers parties thereto, and Bank of Montreal, as Agent (the “Agent”). Terms defined
in the Credit Agreement are used herein with the same meaning.

     __________________
(the “Assignor”) and __________________ (the “Assignee”) agree
as follows:

     1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby
purchases and assumes from the Assignor, the amount and specified percentage interest shown
on Annex I hereto of the Assignor’s rights and obligations under the Credit Agreement as of
the Effective Date (as defined below), including, without limitation, the Assignor’s
Commitments as in effect on the Effective Date and the Loans, if any, owing to the Assignor
on the Effective Date and the Assignor’s Revolver Percentage of any outstanding
Reimbursement Obligations.

     2. The Assignor (i) represents and warrants that it is the legal and beneficial owner
of the interest being assigned by it hereunder and that such interest is free and clear of
any adverse claim, lien, or encumbrance of any kind; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other instrument or document furnished pursuant thereto; and (iii) makes no
representation or warranty and assumes no responsibility with respect to the financial
condition of the Company or any Subsidiary or the performance or observance by the Company
or any Subsidiary of any of their respective obligations under the Credit Agreement or any
other instrument or document furnished pursuant thereto.

     3. The Assignee (i) confirms that it has received a copy of the Credit Agreement,
together with copies of the most recent financial statements delivered to the Banks pursuant
to Section 7.4(a) and (b) thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this Assignment and
Acceptance; (ii) agrees that it will, independently and without reliance upon the Agent, the
Assignor or any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement; (iii) appoints and authorizes the Agent to take such
action as Agent on its behalf and to exercise such powers under the Credit Agreement and the
other Loan Documents as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; (iv) agrees that it will perform in accordance
with their terms all of the

 

 

obligations which by the terms of the Credit Agreement are required to be performed by
it as a Bank; and (v) specifies as its lending office (and address for notices) the offices
set forth on its Administrative Questionnaire.

     4. As consideration for the assignment and sale contemplated in Annex I hereof, the
Assignee shall pay to the Assignor on the Effective Date in Federal funds the amount agreed
upon between them. It is understood that commitment and/or letter of credit fees accrued to
the Effective Date with respect to the interest assigned hereby are for the account of the
Assignor and such fees accruing from and including the Effective Date are for the account of
the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any
amount under the Credit Agreement which is for the account of the other party hereto, it
shall receive the same for the account of such other party to the extent of such other
party’s interest therein and shall promptly pay the same to such other party.

     5.
The effective date for this Assignment and Acceptance shall be
_______________
(the “Effective Date”). Following the execution of this Assignment and Acceptance, it will
be delivered to the Agent for acceptance and recording by the Agent and, if required, the
Company.

     6. Upon such acceptance and recording, as of the Effective Date, (i) the Assignee shall
be a party to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Bank thereunder and (ii) the Assignor
shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and
be released from its obligations under the Credit Agreement.

     7. Upon such acceptance and recording, from and after the Effective Date, the Agent
shall make all payments under the Credit Agreement in respect of the interest assigned
hereby (including, without limitation, all payments of principal, interest and commitment
fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all
appropriate adjustments in payments under the Credit Agreement for periods prior to the
Effective Date directly between themselves.

-2-

 

     8. This Assignment and Acceptance shall be governed by, and construed in accordance
with, the laws of the State of Illinois.

	 	 	 	 	 
	 	[Assignor Bank]

 	 
	 	By:  	 	 
	 	 	Name 	 
	 	 	Title 	 
	 

	 	 	 	 	 
	 	[Assignee Bank]

 	 
	 	By:  	 	 
	 	 	Name 	 
	 	 	Title 	 
	 

Accepted and consented this

___ day of ____________

Sanderson Farms, Inc.

	 	 	 	 	 
	 	 	 
	By:  	 	 	 
	 	Name  	 	 
	 	Title 	 	 
	 

Accepted and consented to by the Administrative

Agent and L/C Issuer this ___ day of _______________

Bank of Montreal,

as Agent and L/C Issuer

	 	 	 	 	 
	 	 	 
	By:  	 	 	 
	 	Name  	 	 
	 	Title 	 	 

-3-

 

Annex I

to Assignment and Acceptance

     The assignee hereby purchases and assumes from the assignor the following interest in and to
all of the Assignor’s rights and obligations under the Credit Agreement as of the effective date.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Aggregate	 	 	Amount
of	 	 	 	 
	 	 	Commitment/Loans	 	 	Commitment/Loans	 	 	Percentage
Assigned	 
	Facility Assigned	 	For All Banks	 	 	Assigned	 	 	of Commitment/Loans	 
	Revolving Credit
	 	$		 	 	$		 	 	 		%

 

 

Schedule 1

Commitments

	 	 	 
	Name of Lender	 	Commitment
	BMO Capital Markets Financing, Inc.

	 	$50,000,000
	U.S. Bank National Association
	 	$48,000,000
	Regions Bank
	 	$48,000,000
	AgFirst Farm Credit Bank
	 	$48,000,000
	ING Capital LLC
	 	$28,000,000
	Trustmark National Bank
	 	$28,000,000
	GreenStone Farm Credit Services, ACA
	 	$20,000,000
	Farm Credit Bank of Texas
	 	$15,000,000
	Farm Credit Services of America, PCA
	 	$15,000,000
	Total
	 	$300,000,000

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